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Securities Cases: Massachusetts Charges Royal Alliance Over Unsuitable Investment Advice, Ex-Schwab Rep. is Fined For Alleged False Statements, and Texas Broker Accused of Bank Fraud Gets His CFP Designation Suspended

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

Former Centaurus Financial Broker’s Certified Financial Planner Designation is Suspended

The Certified Financial Planner Board of Standards has suspended Texas broker’s Larry J. Templin’s CFP designation. The interim suspension comes after Templin, who is accused of bank fraud, refused to provide the Financial Industry Regulatory Authority (Finra) with information related to the allegations against him.

Templin was a Centaurus Financial broker until last year when he was fired by the Texas-based brokerage firm. Previously, he was registered with USAllianz Securities and First Global Capital, which are both headquartered in Texas. Templin worked in the securities industry for over 20 years.

Royal Alliance and Former Broker Are Ordered to Pay $4.2M To Widow Who Was Victim of Investor Fraud

Published on: January 17, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority (FINRA) panel has found that ex-Royal Alliance Associates broker stole money from Cathy Carter, a 54-year-old widow suffering from a brain injury. Former broker Gary Basralian has already pleaded guilty to defrauding clients of at least $2M and using the funds on himself.

Now, FINRA has announced two awards holding Royal Alliance and its former broker liable for the fraud. The self-regulatory authority is ordering both of them to pay the widow $2.1M and $500K for legal fees each.

Basralian resigned from Royal Alliance in 2017. FINRA barred him from the securities industry last March.

UBS Ordered to Pay Investor $693K in Puerto Rico Bond Fraud Case

Published on: November 1, 2018 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority (FINRA) arbitration panel is ordering UBS Financial Services (UBS) and UBS Financial Services of Puerto Rico (UBS-PR) to pay investor Jose F. Pastrana $693K, including at least $564,559 in damages, legal fees, and other costs in its Puerto Rico bond fraud case. UBS also must buy back from Pastrana some of the illiquid closed-end funds that he purchased from the firm at what their market price was at the end of July. AdvisorHub says that this amount will total $128K.

Pastrana had accused the broker-dealer of:

Negligence

Texas Oil and Gas Businessman Settles $80M Fraud Case Involving Breitling Energy Shares

Published on: October 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission announced this week that Christopher Faulkner, a Texas businessman, will pay $23.8M to settle oil and gas charges involving an alleged over $80M securities scam that bilked hundreds of investors. Faulkner, who called himself the “Frack Master” and claimed to be an expert in hydraulic fracturing, is accused of setting up several companies and then selling interests in oil and gas prospects to investors in Texas and other US states.

The regulator contends that Faulkner:

“Systematically deceived” investors through offering materials that were “false and misleading.”

Unregistered Brokers Are Charged With Selling More Than $243M of Woodbridge Securities to Over 1600 Investors

Published on: August 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Top10-3 Five unregistered brokers and their companies are now facing US Securities and Exchange Commission charges accusing them of selling Woodbridge securities to investors even though they were not registered as broker-dealers and therefore were not allowed to sell these securities. The defendants allegedly made millions of dollars from the Woodbridge securities sales.

The unregistered brokers and their companies are Barry and Ferne Kornfeld and Fek Enterprises, Andrew G. Costa and Costa Financial Insurance Services Corp., Albert D. Klager and Atlantic Insurance & Financial Services Inc., and Lynette M. Robbins and Knowles Systems, Inc. They allegedly sold over $243M of Woodbridge unregistered securities to over 1600 retail investors.

According to the regulator’s complaints, the unregistered brokers and the companies marketed Woodbridge Group of Companies, LLC as an investment that was “safe and secure.” Woodbridge, however, declared bankruptcy last December. The moment Woodbridge filed for bankruptcy protection, investors stopped receiving the interest they were due each month and they still haven’t received a return on their principal.

Assured Guaranty Sues Puerto Rico Over Fiscal Rescue Plan

Published on: May 21, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Assured Guaranty has filed a lawsuit against Puerto Rico for the second time. The bond insurance company, which insures about $5 billion of Puerto Rico bonds, wants a federal court to decide that the U.S. territory’s latest fiscal plan to revive it from financial bankruptcy “invalid.”

Also named a defendant in the lawsuit is the fiscal oversight board that was federally appointed to help the island recover from the over $70 billion of debt that it owes. Assured had filed a similar complaint against Puerto Rico prior to Hurricane Maria’s arrival in September, but it withdrew the lawsuit after the storm.

Now, however, the bond insurer is contending that the fiscal plan, which establishes future economic projections for the U.S. territory, was developed without consulting creditors. The plan estimates about $6.05 billion of debt service capacity over six years, which is a sign that creditors should expect significant reductions to their repayments.

Gerova Financial Group Chairman and Others Plead Guilty

Published on: May 16, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Gerova Financial Group Chairman and Two Others Plead Guilty in Scam to Defraud Native American Tribe and Other Investors

Gary Hirst, Jason Galanis, and Hugh Dunkerley have all pleaded guilty to criminal charges related to a scam to defraud a Native American tribal entity and a number of investment advisory clients. Prosecutors contend that the three men took part in a scam to misappropriate bond proceeds from securities issued by the Wakpamni Lake Community Corporation and to use money in asset management firm clients’ accounts to buy the bonds. The clients were then not able to buy or sell the bonds, because the securities were not liquid and did not have a ready secondary market.

Hirst, who pleaded guilty to four fraud counts, now faces up to 35 years in prison and $2.75M in fines. The former chairman of Gerova Financial Group Ltd was sentenced to 6.5 years in prison last year for defrauding shareholders when he secretly awarded himself and others almost $72M of the reinsurer’s stock. Hirst also had to forfeit approximately $19M.

SECURITIES CASES: YAHOO AGREES TO PAY $35M TO SETTLE CHARGES AND A BIOTECH START UP IS ACCUSED OF ISSUING MISLEADING INFORMATION

Published on: April 26, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Altaba is Fined $35M For Not Disclosing World’s Largest Data Breach

Altaba, formerly Yahoo! Inc., will pay a $35M penalty in a data breach settlement to resolve US Securities and Exchange Commission charges accusing the entity of misleading investors because it did not disclose a major cyber-security data breach. Despite settling, Yahoo is not denying or admitting to the findings.

The data breach, one of the largest in the world to date, involved Russian hackers stealing personal information involving hundreds of millions of user accounts in 2014. The information that was taken included usernames, birth dates, email addresses, passwords that were encrypted, phone numbers, and both security questions and answers. Yahoo’s information security team found out about the breach soon after it happened.

Stock Fraud: Fyre Festival Founder to Pay $26M After Guilty Plea, Promoter is Accused of Defrauding Gold Mining Stock Investors, and SEC Prevents Alleged Pump-And-Dump Scam

Published on: March 17, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Fyre Festival Founder Pleads Guilty to Wire Fraud and Must Pay Back Investors

Billy McFarland, the founder of the failed Fyre Festival who pleaded guilty to two counts of wire fraud, must may pay back millions of dollars to investors whom he bilked. In Manhattan federal court, McFarland acknowledged that he received more than $26M in investor funds for the Bahamas festival that promised catered dining, luxury accommodations, and renowned performers. Instead, attendees were greeted with no food or tent accommodations.

Billboard reports that eventually prepackaged sandwiches were served, local musicians performed, and the festival was postponed even though it had already begun. Travelers who headed back home encountered rescheduled and delayed flights. Many festival employees went unpaid.

The FBI arrested McFarland last summer. He has since admitted that he solicited investors using bogus documents touting financial holdings that he didn’t possess.

Ex-Equifax Trader is Accused of Insider Trading Before Data Breach News Was Disclosed to the Public

Published on: March 14, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed insider trading charges against Jun Ying, the ex-chief information officer of an Equifax US business unit. The regulator contends that Ying engaged in insider trading in 2007 before the consumer credit reporting agency announced that there had been a major data breach exposing personal information of approximately 148 million customers in the US. Among the information that was disclosed were social security numbers, names, addresses, and birth dates.

The Commission’s complaint accuses Yin of using confidential information to determine that Equifax had experienced a major breach. The SEC said that before the company disclosed the information breach, Ying exercised all the Equifax stock options he had vested and made almost $1M when he sold the shares. The regulator claims that Ying was able to avoid losing over $117K by selling the shares when he did.

Now, the SEC, which has filed charges against Ying accusing him of violating federal securities laws’ antifraud provisions, is pursuing ill-gotten gains, interest, injunctive relief, and penalties against him. Ying resigned from Equifax after the company found out about his trades and reportedly made plans to let him go. US prosecutors have filed a parallel criminal case against Ying.