Senior Investors

Mispriced Funds and Elder Investor Fraud Lead to SEC Cases

Published on: August 8, 2019 | by Shepherd Smith Edwards & Kantas, LLP

State Street To Pay More Than $88M After Overcharging For Mutual Funds

State Street Bank and Trust Company will pay over $88M to resolve US Securities and Exchange Commission charges accusing it of overcharging investment advisory clients, including mutual funds, for expenses related to its custody of client assets. From 1998 to 2015, State Street allegedly collected $170M in overcharges involving out-of-pocket custodial costs that it paid on behalf of clients. While the clients had consented to pay for these costs, they did not agree to being overcharged for them.

Of the $170M in excessive charges, $110M was for a concealed markup added to the charge for transmitting financial messages via the Society of Worldwide Interbank Financial Telecommunication (SWIFT) network. As part of the settlement, State Street will pay almost $49M of disgorgement plus prejudgment interest and a $40M penalty.

Texas Investor Says Kalos Capital Advisor Inappropriately Recommended GPB Private Placements

Published on: August 5, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Texas investor has filed an investor fraud claim against Kalos Capital, Inc. and its financial advisor Joshua Daniel Stivers, who operated under the name Platinum Wealth Advisory. The retired investor claims that Stivers promised her an investment plan that was low risk and conservative. Instead, the Kalos Capital advisor allegedly employed an unsuitable employment strategy that was improperly allocated and involved investing in private placements, including the GPB Holdings II, LP Fund.

The investor contends that this has resulted in substantial losses for her. Now, she is seeking up to $500K, with interest, plus costs.

GPB Private Placements Funds

Recent SEC Cases Involves Market Rigging

Published on: June 19, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Investors in Alleged $2.3M Prime Bank Fraud Were Promised Huge Profits

In the US Securities and Exchange Commission’s (SEC) prime bank investment fraud case against Elizabeth Oharriz of Florida and Peter Baker of Georgia, the regulator is accusing the two of them and their companies of stealing more than $2.2M from investors. The Commission contends that Oharriz and Baker sold fake prime bank instruments from supposedly known banks while promising investors “astronomical profits.” The regulator’s complaint said that they also were also told that if these instruments could not be obtained, then their advance payments would be returned to them.

Instead, claims the SEC, Oharriz and Baker allegedly used investors’ money for their own personal spending or sent the funds to third parties. Meantime, investors were given bogus bank instruments along with accompanying documents.

Morgan Stanley Ordered to Pay $519K to Retired Couple

Published on: May 24, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority (FINRA) arbitration panel has awarded $519,000 to Stephen and Brenda Balock in their investor fraud claim against Morgan Stanley (MS). The couple contends that that one of the firm’s brokers, Tim J. Prouty, placed their funds in investments that were complex and inappropriate for them, causing them to lose money in eight accounts between 2012 and 2015. They filed their claim against Morgan Stanley in 2016.

The Balocks began working with Prouty after Stephen’s employer, the Public Service Co. of New Mexico, compelled him into early retirement due to downsizing. He had never worked with a broker before then.

The couple wanted to invest in certificates of deposit. Instead, Prouty placed them in a Morgan Stanley investment advisory program that involved more complex investments, such as options contracts, derivates, junk bonds, and exchange-traded funds. In their investor claim against Morgan Stanley, the Balocks made a number of allegations, including the following:

AXA Financial Ordered to Pay $3.2M to Farming Family

Published on: May 10, 2019 | by Shepherd Smith Edwards & Kantas, LLP

An egg-farming family based in New York has been awarded $3.2M in its Financial Industry Regulatory Authority (FINRA) arbitration claim against AXA Financial. The claimants are an older couple, Sandra and James Fitzpatrick, who own Fitzpatrick Poultry Farm. They contend that Franceso Puccio, an ex-AXA Financial broker, placed their money into variable annuities (VA), which were unsuitable for them. Puccio has already been convicted for senior investor fraud involving another elderly client that was also with the firm.

The couple are claiming that they lost millions of dollars because of the way AXA and Puccio handled their funds. They contend that their money had been invested in mutual funds until Puccio moved their funds, as well as four life insurance policies, into VAs.

Puccio worked in the securities industry for 16 years. He was barred by FINRA in 2015 after he failed to turn over information and documents that the regulator had requested related to an investigation into whether he had converted monies from a non-customer. Puccio’s BrokerCheck record notes several customer disputes, with allegations including unsuitable investments sold to claimants, negligence, breach of fiduciary duty, misrepresentations, and omissions.

Claim Filed Against Arkadios Over GPB Capital Private Placements

Published on: May 3, 2019 | by Shepherd Smith Edwards & Kantas, LLP

An investor in GPB Capital has filed a Financial Industry Regulatory Authority (FINRA) Claim against Arkadios Capital and one of its brokers over losses she sustained to her IRA after she followed the financial adviser’s recommendation to invest in GPB Capital Holdings.

Now she is claiming retirement fund losses in the hundreds of thousands of dollars. Our investor fraud law firm, Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) is representing the investor, who hails from the greater Atlanta area, and we have filed a FINRA arbitration claim on her behalf.

GPB Capital Holdings is an alternative asset management firm whose private placement funds are primarily invested in auto dealerships and waste management. The firm is under scrutiny by FINRA, the US Securities and Exchange Commission (SEC), Massachusetts Secretary of the Commonwealth William Galvin, and the FBI over its private placements that were sold by dozens of brokerage firms and their brokers.

Recent Fraud Cases Targeted Hedge Funds, Senior Investors, and Israeli-Americans

Published on: April 25, 2019 | by Shepherd Smith Edwards & Kantas, LLP

SEC Accuses Investment Adviser of Misappropriating Funds from Hedge Funds

The US Securities and Exchange Commission (SEC) has secured an emergency asset freeze, as well as a temporary restraining order, to stop an ongoing allegedly fraudulent securities offering that was purportedly conducted to conceal the misappropriation of about $570K from hedge fund clients. The regulator contends that investment adviser Eric D. Lyons and his investment advisory businesses, Synchronicity Capital GP, LLC, Synchronicity Capital Group, and Synchronicity Group, LLC, used the money to pay for Lyons’ personal spending, including Broadway shows, concert tickets, sailing expenses, rent, and other costs.

According to the regulator’s complaint, the allegedly fraudulent securities offering involved securing about $300K from one investor who thought other large investors would be potentially involved and that there was a $100M business valuation. The SEC alleges that, in total, the Synchronicity entities and Lyons raised about $700K through both the misappropriation of funds and the allegedly fraudulent offering.

Radio Host Accused in $19.6M Texas Scam That Targeted Elderly Investors

Published on: March 18, 2019 | by Shepherd Smith Edwards & Kantas, LLP

William Neil Gallagher, a Dallas area-based radio host based who calls himself the “Money Doctor,” is now facing securities fraud charges accusing him and his companies, Gallagher Financial Group and W. Neil Gallagher, PhD Agency, Inc., of seeking to defraud older investors of their retirement money in a $19.6M Texas-based Ponzi scam/affinity fraud. The US Securities and Exchange Commission (SEC) brought the civil fraud charges against them.

According to the SEC’s complaint, from 12/2014 through 1/2019, Gallagher, who is based in the Dallas/Fort Worth area, raised at least $19.6M (maybe even up to more than $29M) from about 60 elderly investors ranging in age from about 60 to the early 90’s. He allegedly did this through his companies in what the regulator is referring to as an “affinity fraud investment scam” that is also a Ponzi scheme.

Gallagher is accused of using his radio shows to target retired Christian investors, who were his radio audience, and to whom he ingratiated himself by often making religious references on his shows. He also allegedly urged radio listeners to call GFC to set up meetings, during which he would help them with their retirement plans and give them advice regarding how to make money without having to take on any risks.

SEC Bars Former Wells Fargo Broker Over Alleged $1.3M Senior Investor Fraud

Published on: March 11, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Just a few weeks after former Wells Fargo (WFC) broker John Gregory Schmidt consented to a final judgment in the US Securities and Exchange Commission’s (SEC) investor fraud case against him, the regulator announced that it has barred Schmidt for misappropriating more than $1.3M from clients, most of them elderly retired investors. Schmidt, who also ran Schmitt Investment Strategies Group in Ohio and was already barred by the Financial Industry Regulatory Authority (Finra), was fired by Wells Fargo in 2017. In a parallel criminal case, he is also charged with 128 felony counts over the same fraud allegations.

The SEC’s complaint notes that at the time that Wells Fargo fired Schmidt, he had about 325 retail brokerage customers. At least half of them had worked with him for over a decade, and a “significant percentage” were retirees who depended on regular withdrawals from their brokerage accounts to cover their living expenses. Many of them were unsophisticated, inexperienced investors, some of whom were suffering from dementia, including Alzheimer’s disease.

Schmidt’s scam purportedly involved making unauthorized sales and withdrawals involving variable annuities from certain customers’ accounts and then using fraudulent authorization letters to move the money to the other clients’ accounts. According to the Commission’s complaint, between ’03 and ’17, Schmidt took money out of seven clients’ accounts and moved the funds to the accounts of other clients to conceal shortfalls there.

Retirement Losses: First Allied Securities and Financial Adviser to Pay Retirees Over $1.6M for Investment Advice, MetLife to Pay Another $189M to Individuals Owed Pensions, and Duke University Will Pay Over $10M to Settles Lawsuits Alleging ERISA Violations

Published on: February 4, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Investors Alleging Negligence and Mishandling of Their Retirement Funds Win FINRA Case

A Financial Industry Regulatory Authority (FINRA) panel arbitration is ordering First Allied Securities and financial adviser Larry Glenn Boggs to pay claimants and early retirees Nita and Mike Snow over $578K in compensatory damages, $500,000 in punitive damages, $350K in attorney’s fees, and $60K in other costs related to losses they sustained. Boggs had worked with the Snows on their early retirement plan, which included investing in the Sun America Life-issued variable annuity the Polaris Advantage II and other investments.

In their securities arbitration claim, the Snows sought compensation from Boggs, First Allied Securities, First Allied Advisory Securities, and American Retirement Solutions of Louisiana, LLC. All of them denied wrongdoing.