Financial Fraud: Massachusetts Mayor is Accused of Bilking Investors, Former Wells Fargo Broker Allegedly Stole $1M From Older Clients, and the LendingClub Asset Management Settles $4.27M Securities Case

26-Year Old Mayor is Arrested and Accused of Investor Fraud
Jasiel Correira, who is the mayor of Fall River, Massachusetts, has pleaded not guilty to multiple criminal counts of wire fraud and tax fraud. The 26-year-old was arrested this week following allegations that he defrauded investors of over $230K.

Correira maintains that the investor fraud allegations are false. He refuses to step down as city mayor.

According to prosecutors, Correira founded the SnoOwl app to supposedly help local businesses reach out to targeted consumer groups. Investors were to receive equity in the company in exchange for funding. The 26-year-old mayor allegedly then used their money for his political campaign and to support his “lavish lifestyle.”

At least seven investors were allegedly defrauded.

Former Wells Fargo Broker Faces Elder Investor Fraud Charges
The US Securities and Exchange Commission has filed broker fraud-related charges against former John Greg Schmidt, a former broker for Stifel, Nicholaus and Company (SF) and Wells Fargo Financial Network LLC (WFC).

According to the regulator, Schmidt defrauded retail brokerage customers of more than $1M when he sold securities to at least seven customers and then moved, in secret, their money to the accounts of several other customers in order to conceal shortfalls in those accounts. Most of those who were harmed were older, unsophisticated investors. Some of them had dementia, even Alzheimer’s. Several of them passed away during the alleged senior investor fraud.

Schmidt earned more than $230K in commissions from these customers.

The regulator is accusing him of making unauthorized variable annuities (VA) transactions. The VAs were held by his customers. He allegedly used fraudulent authorization letters to transfer the monies between clients.

Customers were not told that their assets were decreasing. Schmidt is accused of sending them bogus account statements that “grossly overstated,” sometimes by 50-70 times, the actual account balances. These clients were allegedly told that they could keep taking out money and that their principal would not be harmed.

The Financial Industry Regulatory Authority barred Schmidt in March. Last year, Wells Fargo fired him in the wake of the elder investor fraud allegations. The financial firm has already settled two related client complaints.

In a different matter, in 2007, Schmidt, Stifel, and Wells Fargo together paid $80K to resolve a claim accusing the former broker of negligence, breach of fiduciary obligation, and malpractice.

Schmidt previously worked for several other financial firms, including First Union Securities, PaineWebber Incorporated, and Prudential-Bache Securities.

LendingClub Asset Management and Its Executives to Pay $4.27M
San Francisco based investment advisory company LendingClub Asset Management, its founder Renaud Laplanche, and ex-CFO Carrie Dolan will settle SEC charges accusing them of improperly directing investors’ money to parent firm LendingClub Corp. Laplanche also founded and was that company’s CEO. He is barred from the securities industry for at least three years.

The regulator contends that LendingClub Asset Management, previously called Lending Club Advisors, and Laplanche, compelled a private fund that the company managed to buy interest in loans that were at risk of not being funded. They purportedly did this to benefit LendingClub rather than the fund.

The investment advisory firm, its founder, and Dolan allegedly “improperly adjusted” the fund’s monthly return figures, as well as the monthly returns of other funds that LendingClub Asset Management oversaw, and shared these inaccurate figures with investors.

As part of the settlement, LendingClub Asset Management will pay $4M in penalties. Laplanche will pay a $200K penalty. Dolan’s penalty is $65K.

Investors who were harmed have been paid back about $1M.

At Shepherd Smith Edwards and Kantas, LLP, our broker fraud lawyers work with investors nationwide. We have helped clients to recover losses they sustained because a broker was negligent or a financial firm failed to properly supervise him or her. Contact our brokerage firm misconduct law firm today.

Young Mass. Mayor, 26, Stole From Investors: Feds, NBC, October 11, 2018

Read the SEC Complaint in the John Gregory Schmidt Case (PDF)

Read the SEC Order in the Lending Asset Management Club Case (PDF)