Securities Fraud

Securities Fraud: FINRA Bars Ex-UBS Broker, Imprisoned Former LPL Financial Broker Faces SEC Charges, and SEC Refiles Unregistered Securities Fraud Case

Published on: April 27, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Former UBS Broker is Barred form the Securities Industry

Ronald Broadstone, an ex-UBS (UBS) broker, has agreed to be barred from the securities industry. The Financial Industry Regulatory Authority is the one that brought the ban, accusing him of misusing and misappropriating customer monies, settling a customer case without telling his firm, and taking part in unauthorized trading.

According to the self-regulatory organization, Broadstone’s attorney testified that the former broker would not respond to more questions. His refusal to speak violated FINRA rule 8210.

FINRA Files Complaint Against Ex-Broker Over Variable Annuity Sales to Elderly Customers

Published on: April 26, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has put out a disciplinary complaint against Walter Marino. The former broker worked for Legend Equities Corp. in Palm Beach Gardens, Florida at the time he allegedly facilitated variable annuities sales that were unsuitable for two of his older clients. According to the regulator, Marino recommended exchanges of non-qualified VAs to the customers without having reasonable grounds to guide them toward these investments.

FINRA said that Marino earned about $60K in commissions. Meantime, the customers lost over $82K because of surrender charges they were forced to pay and they did not benefit financially. Not only that but because Marino didn’t apply the tax-free exchange provision of the Internal Revenue Code, the customers ended up with substantial tax liabilities.

Now, the regulator wants Marino to disgorge his ill-gotten gains and pay the customers full restitution for the variable annuity fraud.

SEC Charges Texas Oil and Gas Promoter With Securities Fraud

Published on: April 19, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission is charging Matthew Fox and his Wayne Energy LLC with securities fraud. The regulator brought its Texas securities case in federal district court in the city of Sherman.

According to the Commission’s complaint, Fox raised about $950K for a joint venture that was supposedly involved in reworking and recompleting an oil and gas well. However, contends the SEC, Fox raised the funds by recycling offering documents from another oil and gas company that he previously ran (that company failed) rather than customizing the paperwork to this new venture and its specific risks.

Prior to setting up Wayne Energy in 2015, Fox had run Frisco Exploratory Company and it is the latter’s offering documents that he used. The Commission claims that the offering documents made a false statement, which was that Wayne Energy would not commingle its own money with the joint venture’s funds. The documents also falsely stated that the oil and gas company was licensed as an operator with the Texas Railroad Commission.

SEC Investigates Statim Holdings After Hedge Fund Investors Are Promised They Won’t Lose Any Money

Published on: April 17, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Bloomberg reports that according to sources, the US Securities and Exchange Commission has launched a probe into Statim Holdings. Inc., an Atlanta, Georgia-based financial firm, after the latter told investors in its main hedge fund that there was no risk of financial losses for investing. The regulator’s investigation comes in the wake of a state probe by the Georgia Securities Division. Statim is helmed by Joseph A. Meyer.

Meyer told investors in the Arjun fund’s main share class that they would never sustain financial losses. However, they have to commit their funds for a decade or lose 50% of their principal should they decide for early redemption.

The hedge fund manger has said that he uses a computerized system that he designed and he invests the bulk of clients’ funds in Treasury bonds. In 2015 Bloomberg News placed Arjun at number eight in its list of hedge funds that had assets ranging from $250M and $1B. BarclaysHedge has given 17 awards to Arjun.

Securities Fraud: Ex-Broker Gets Prison Sentence for $1.2M Elder Financial Fraud, Massachusetts Man Admits to Bilking Neighbors, & More Than Two Dozen 27 Parties Under Fire Over Alleged Stock Promotion Scams

Published on: April 17, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Former Wells Fargo and LPL Financial Broker Receives 41-Month Prison Term for Elder Financial Fraud
Robert N. Tricarico, an ex-broker for both Wells Fargo Advisors (WFC) and LPL Financial (LPLA), will serve 41 months behind bars and pay restitution of over $1.2M after he pleaded guilty to elder financial fraud. The Securities and Exchange Commission, which brought a civil case against Tricarico, has barred him from the securities industry.

Court documents note that from 1/2010 to 6/2013, Tricarico was the financial adviser for a sick and elderly investor. He misappropriated over $1.1M from her by writing a number of checks to himself without the client’s consent, misappropriated checks written to her, liquidated her coin collection, and used her funds for his own expenses.

He has also admitted to bilking two other victims of $20K when he falsely represented that their money would go toward a business venture. He kept their money for himself.

Swaps Interest Rate Cases: FHLBNY Settles With Lehman Brothers for $70M & Banco Santander and Portugal Come to An Agreement

Published on: April 13, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The Federal Home Loan Bank of New York will pay Lehman Brothers and its Special Financing unit a $70M settlement in an interest-rate swaps case. The plaintiffs sued FHLBNY two years ago seeking over $150M that they claim they were owed related to their position on more than 350 swaps and options transactions.

Lehman filed for Chapter 11 bankruptcy protection in 2008. The move froze the markets while spurring the end of millions of derivative transactions in which it was involved. A few days later, when FHlBNY ended its swaps with Lehman, it did so with a $16.5B notional amount.

According to Lehman, due to interest rate fluctuations after its bankruptcy filing, FHLBNY returned and “cherry picked” other end dates. As a result, claims the plaintiff, the latter “massively understate” how much it owed Lehman.

Securities Cases: SEC Fines Credit Suisse $8M Over Improper Investments, $5M Investment Fraud Case Leads to Guilty Plea, and Florida Man is Ordered to Pay Back Investors $2.9M

Published on: April 6, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Credit Suisse Unit and Ex-Investment Adviser Settle SEC Charges, Pay $8M Fine
Credit Suisse AG (CS) unit Credit Suisse Securities and Ex-investment adviser Sanford Michael Katz have settled SEC charges accusing them of improperly investing the funds of clients in “Class A” mutual fund shares instead of “institutional” shares that were less costly. According to the regulator, the firm and Katz did not adequately disclose the conflict of interest presented by choosing the Class A investment, which allowed them to profit more at investors’ expense. They are accused of breaching their fiduciary duties.

The SEC’s orders state that Credit Suisse made about $3.2M in 12b-1 fees that could have been avoided. According to the Commission, about $2.5M of those fees came from Katz’s clients. The regulator said that the firm did not put into place policies and procedures to prevent fiduciary breaches.

Both Credit Suisse and Katz settled the SEC charges without denying or admitting to the regulator’s findings. Together, they have to pay over $3.2M of disgorgement, over $577K of prejudgment interest, and an over $4.1M penalty. A fair fund has been set up to compensate clients.

Retired San Antonio Spurs Star Tim Duncan’s Ex-Financial Adviser Pleads Guilty To Texas Securities Fraud

Published on: April 4, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In federal court in Texas, Charles Banks, the former financial adviser to ex-NBA star Tim Duncan, has pleaded guilty to wire fraud. Banks admitted to misleading Duncan into guaranteeing a $6M loan to a company that had financial connections to the ex-advisor.

Duncan, who retired from professional basketball in 2016, claims that he lost more than $20M through deals he was involved in because of Banks. The two first started working together in 1997 when Banks was employed with CSI Capital Management Inc. and Duncan was an NBA rookie. After Banks left the firm he continued working with Banks.

Banks encouraged Duncan to lend a company, Gameday Entertainment, $7.5M. The company then obtained a $6M bank loan using what Duncan contends was his forged signature. Banks was Gameday’s chairman at the time.

CFTC Cases: Ex-Citigroup Global Markets Traders Settle Spoofing Charges and Vision Financial Partners to Pay Over $6.5M in Off-Exchange Binary Options Fraud Case

Published on: March 31, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Former Citigroup Global Markets Traders to Pay Penalties for Spoofing

Ex-Citigroup Global Markets Inc. (C) traders Jonathan Brims and Stephen Gola have settled spoofing charges that the US Commodity Futures Trading Commission brought against them. According to the regulator, the two men engaged in spoofing while trading for the firm, and they must now pay $200K and $350K in civil monetary penalties, respectively. They also are temporarily “banned from trading in futures markets.” Goal and Brims won’t be allowed to resume trading in the futures markets until six months after they’ve paid their penalties in full.

According to their respective orders, the two men engaged in spoofing, which involves making a bid or offer with the intention to cancel the bid or offer prior to execution of the bid. They did this over 1,000 times in different Chicago Mercantile Exchange US Treasury futures products. They would make offers or bids of at least 1,000 lots even though they planned to cancel the orders before they actually occurred.

The orders were made after another small offer or bid was made on the other side of the same market “or a correlated futures or cash market.” The CFTC said that the two men initiated the orders in order set up or increase an already existing imbalance in the order book. They purportedly canceled the orders after the smaller orders were filed or if they determined that there was too high a risk that their orders might actually go through.

Securities News: Deutsche Bank Unit Ordered to Pay $150M for Libor Rigging, FINRA Bars Broker Indicted in NY Pension Fund Scam, and Hedge Fund Manager Who Lost Investors’ Money In Madoff Ponzi Scam Commits Suicide

Published on: March 30, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Judge Orders Deutsche Bank Subsidiary to Pay $150Mfor Libor Rigging
A federal judge is ordering Deutsche Bank Group Services, a subsidiary of Deutsche Bank (DB), to pay $150M for its involvement in an interest rate manipulation scam. The London unit pleaded guilty last year to rigging the London Interbank Offered Rate benchmark.

The fine comes two years after Deutsche Bank settled Libor rigging allegations with US and British regulators for $2.5B. According to prosecutors, derivatives traders at the German bank and at other banks colluded together to manipulate LIBOR rates to preference their trading positions.

Libor rigging allegations are not the only claims that Deutsche Bank has been contending with. Recently, the German Bank reached a $7.2B settlement with the US DOJ over its part in the 2008 global financial crisis. Meantime, NY and British officials ordered Deutsche Bank to pay $630M in fines because of alleged money laundering that occurred in Russia.