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FINRA Warns About Cryptocurrency Related-Fraud

Published on: December 22, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is warning investors interested in buying shares in companies touting potentially high returns related to cryptocurrency-related activities, but that are unable to “back up such claims,” to be on the lookout for potential financial fraud.

The self-regulatory organization provided a number of “tips” for avoiding a stock scam involving cryptocurrencies, including:
• Conduct your own research before making any investments.
• Watch out for “unrealistic predictions” or claims of results even if they are published online or issued via press release.
• Be wary of “aggressive” cold caller-sourced solicitations, especially if the stocks being recommended are “very low-priced.”
• Be careful of anyone promising guaranteed or specific returns.
• Consider “pushy sales pitches” or pressure to “act now” mandates to be red flags.
• Check FINRA’s BrokerCheck to see if the representative or firm is registered or to find out of they have been sanctioned for any alleged violations in the past.
• Look at the Securities and Exchange Commission’s Edgar database to see if the company that is selling the stock has submitted filings with the regulator. That said, registration of a security with the SEC is no guarantee that the investment is a good one.
• Watch out for stocks that see big price jumps because fraud or stock rigging may be involved.

Already, the US Securities and Exchange Commission has suspended trading in different securities over uncertainties regarding the accuracy of activities related to cryptocurrencies. Just this week, the regulator temporarily halted trading in shares of The Crypto Co. after its stock price increased by over 2,700 this month amidst concerns about “potentially manipulative transactions” and the “accuracy and adequacy of information” provided to investors and regulators.

Woodbridge Group and Owner Accused of $1.2B Ponzi Scam that Targeted Over 8,400 Investors, Including Senior Investors

Published on: December 21, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed financial fraud charges against the Woodbridge Group of Companies, LLC and its owner Robert H. Shapiro. The Woodbridge Group is comprised of unregistered investment companies. According to the regulator, Woodbridge and Shapiro ran a $1.2B Ponzi Scam that bilked over 8,400 investors, many of whom where older investors. At least 2,600 investors collectively spent close to $400M that came from their IRAs.

The civil fraud charges include other alleged federal securities law violations. The SEC also announced an asset freeze to keep more investor funds from dissipating. The regulator wants restoration of allegedly ill-gotten gains plus interest, as well as financial penalties.

Senior Financial Fraud

The Commission’s complaint accused Woodbridge and its owner of defrauding seniors using a “sham” business model that involved selling investments in unregistered Woodbridge funds. The company presented its main business as giving loans to third-party commercial property owners that were paying 11-15% in yearly interest for “’hard money’ short-term financing.” In fact, claims the SEC, the property owners were not third-parties but were companies belonging to Shapiro. Not only that but they had no income streams and never paid interest on these supposed loans. Woodbridge and Shapiro are said to have used investor money to buy nearly 200 commercial and residential properties in California and Colorado.

Chicago Investment Manager Indicted Over $10M Fraud

Published on: December 12, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Shawn Baldwin, a Chicago investment manager, is charged with eight counts of wire fraud. Baldwin, who owns a number of investment-related firms, is accused of fraudulently obtaining over $10M from at least 17 individual investors and corporate lenders between 2006 and May 2017.

According to the criminal indictment accusing him of financial fraud, Baldwin made false claims about his professional success and connections, including that his firm was affiliated with professional advisors and compliance officers with whom it, in fact, had no ties. He also allegedly misrepresented the seriousness of disciplinary actions that he had been subject to by regulators. Among these were that he was permanently barred from offering investment advice or securities in the state of Illinois, as well as that the Financial Industry Regulatory Authority had taken away his professional registrations eight years ago. In 2006, the National Association of Securities Dealers barred his firm, CMG Institutional Trading, for failing to meet the US Securities and Exchange Commission’s requirements regarding capital.

Baldwin is accused of telling investors that their money would go into investment products when, in reality, he allegedly used their funds for his own use. He purportedly tried to hide his investment scam by generating fraudulent account statements that didn’t accurately reflect the value of customers’ funds. He also made it appear as if he was involved in profitable business deals and was setting up new contacts that would lead to money from IPOs. In truth, claim prosecutors, Baldwin knew he wouldn’t be able to pay back investors because he had either spent or lost their money.

Securities Cases : Ex-Stock Trader Allegedly Made Over $1M from Insider Trading, Investment Advisers Accused of Conflicted Transactions & Misleading Investors, and Ex-Pro Football Player Gets 40 years Behind Bars over $10M Scam

Published on: December 11, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Philadelphia Eagles Player Who Bilked Former Coaches is Sentenced to 40 Years
Merrill Robertson Jr., a former Philadelphia Eagles football player, will serve 40 years in prison for a $10M fraud that bilked investors. Among his investor fraud victims were coaches he knew from when he played football at the University of Georgia and the Fork Union Military Academy.

The SEC also filed a case against him in a parallel civil case. According the regulator, Robertson, Sherman C. Vaughn Jr., and their Cavalier Union Investments diverted almost
$6M of investors’ money to pay for their own expenses and repay earlier investors.

Investment Advisers Accused of Mislead Investors About Conflicted Transactions
The US Securities and Exchange Commission has filed charges against Mohlman Asset Management, LLC, Mohlman Asset Management Fund, LLC, and Louis G. Mohlman, accusing them of misleading investors and engaging in conflicted transactions. Mohlman and the two investment advisers managed two private funds.

10 Four Points Capital Partners Customers Lose $574K Because of Alleged Broker Fraud

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

The US Securities and Exchange Commission has filed civil charges against two brokers for allegedly carrying out broker fraud in the form of unsuitable trades that made them money while costing investors. According to the regulator’s complaint, Zachary Berkey and Daniel Fischer engaged in in-and-out trading—a strategy that was “almost certain” to cause customers losses.

As a result, contends the SEC, 10 Four Points Capital Partners LLC customers collectively lost almost $574K while Fischer earned $175K in commissions and Berkey earned $106K. Four Points is a Texas LLC headquartered in NYC.

The Commission accused the two brokers of churning customer accounts while hiding material information from clients, including facts about commissions, fees, and other costs. Because the securities were only held for a brief time and the costs for these transactions were “significant,” the investments’ share prices would have had to go up substantially for even a “minimal profit” to be made.

Securities Firms: JP Morgan Securities to Pay $1.25 For Inadequate Background Checks of Thousands of Employees and Gray Financial Group Settles with SEC Over Unsuitable Investments to Pension Funds

Published on: November 22, 2017 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Orders JPMorgan Securities to Pay $1.25M
The Financial Industry Regulatory Authority said that J.P. Morgan Securities LLC (JPM) will pay $1.25M for not conducting proper background checks—or, in certain instances, conducting them but not in a timely enough manner—from 1/2009 through 5/2017 on 8,600 of its associated persons that were non-registered. According to the self-regulatory organization, this included the failure to properly fingerprint about 2,000 non-registered associated persons. The lapses kept the brokerage firm from knowing whether these individuals should be disqualified from employment.

Meantime, other non-registered associates persons who were fingerprinted were only screened for criminal convictions as they related to federal banking laws, as well as to list that was “internally created.” Still, said FINRA, four people who warranted disqualification due to a prior criminal conviction were allowed to work as non-registered associated persons.

Under federal securities laws, breakage firms must fingerprint certain associated staff even if they are employed in a non-registered manner because they could still pose a risk to customers otherwise. Fingerprinting allows for the identification of folk convicted of past crimes that may disqualify them from working for a firm in an associated role.

Credit Suisse Resolves NY Regulator’s Forex Rigging Probe for $135M

Published on: November 15, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Credit Suisse AG (CS) has agreed to settle currency rigging charges brought by New York’s Department of Financial Services by paying $135M. According to the state regulator, from at least ’08 to ’15, the Zurich-based bank violated NY banking law and engaged in other “unlawful conduct” that “disadvantaged customers.”

The consent order states that Credit Suisse did not put into place controls over its FX business that were “effective.” Also, its traders are accused of the “inappropriate sharing” of information with other banks that could have resulted in exchange rate rigging, coordination of trades, and a rise in the “ bid/ask spreads” that were offered to the bank’s forex customers. The DFS probe said that these actions were geared toward creating more profit for Credit Suisse, while decreasing its losses and harming not just its own customers but the marketplace. Meantime, other banks that it may have colluded with also sought to profit.

Credit Suisse is one of several banks whose traders are accused of gathering in chat rooms to rig currency prices. According to Bloomberg, traders from Barclays PLC (BARC), JPMorgan Chase & Co. (JPM), and Citigroup (C) are waiting for their trials over allegations that they sought to manipulate currencies. To date, banks accused of currency rigging have paid $5.8M to the US Justice Department to settle charges.

Thema International Reaches $687M Settlement Over Madoff Ponzi Scam

Published on: September 8, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Bernard L. Madoff Investment Securities LLC trustee Irving H. Picard announced that a settlement has been reached for $687M with Thema International Fund for its ties to the multibillion-dollar Madoff Ponzi Scam. Now, a court must approve the agreement.

According to Bloomberg, the “Irish investment fund funneled $1.1B” to the Ponzi scam that bilked thousands of investors, including those who were with offshore feeder funds, of billions of dollars over several decades. The $687M is representative of all the funds transferred from Madoff’s securities firm to Thema International prior to the former’s collapse, in addition to 19.26% of the withdrawals beyond that time period.

Thema International Fund belongs to a number of offshore entities with ties to Madoff friend and Austrian banker Sonja Kohn and the Benbasset family of Switzerland. Picard contends that Kohn and the Benbassets granted Madoff key access to funds as his Ponzi scam began to fail.

Mutual Fund Lord Abbett’s Institutional Investor Fraud Lawsuit Against Valeant Pharmaceuticals Could Seek Over Three Times The Losses Alleged

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

Lord Abbett is suing Valeant Pharmaceuticals contending that the defendant violated New Jersey’s RICO law. The institutional investor is claiming $80B in losses. By invoking the state’s RICO law, Lord Abbett could seek a penalty three times greater than the actual losses it allegedly suffered when the pharmaceutical company’s share price went down.

According to the mutual fund company, it purchased Valeant’s debt securities at a price that was artificially inflated after the pharmaceutical company provided it with information that wasn’t correct. Now, Lord Abbett is alleging violations of RICO law in NJ, which is where Valeant is headquartered.

The institutional investor is not the only party to file a RICO case against Valeant. The other complaints are primarily over allegations that the pharmaceutical company committed fraud by engaging in business practices that were deceptive, including charging too much for drugs. These plaintiffs are claiming hundreds of millions of dollars of losses.

Investors Continue to Bring Puerto Rico Bond Fraud Claims Against UBS For, Among Other Things, Encouraging Them to Use Non-Purpose Lines of Credit to Purchase Securities

Published on: August 18, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Two years after the Financial Industry Regulatory Authority (FINRA) barred former UBS Financial Services of Puerto Rico (UBS-PR) broker Jose Ramirez, nicknamed the Whopper, our UBS Puerto Rico fraud attorneys are continuing to provide representation to investors who sustained losses because they took his and other UBS-PR brokers’ advice to borrow from credit lines in order to invest in even more securities. If you are one of these investors and you would like to explore your legal options, please contact Shepherd Smith Edwards and Kantas, LTD LLP today.

It was in 2015 that the US Securities and Exchange Commission (SEC) brought charges against Ramirez accusing him of fraud in the offer and sale of $50 million of UBS-PR affiliated, non-exchange traded closed-end mutual funds. The former UBS broker allegedly enriched himself by advising certain customers to use non-purpose credit lines that a firm affiliate, UBS Bank USA, was offering so that they could buy even more shares.

These customers were not, in fact, allowed to use credit lines to buy the securities and Ramirez allegedly knew this. He is accused of getting around restrictions by telling customers to move money to a bank that had no affiliation with UBS and then re-depositing the funds to their UBS Puerto Rico brokerage account in order to buy additional closed-end mutual funds or Puerto Rico bonds. Such a scheme was a violation of numerous rules and regulations and, if misrepresented to the investors as the SEC has alleged, would have been a major legal violation.