Affinity Fraud - Russell L. Forkey

Pyramid/Ponzi Scheme – South Florida Fraud and Misrepresentation Litigation and Arbitration Attorney

Russell L. Forkey — Fri, 03 Jul 2015 00:23:51 GMT

Pyramid/Ponzi Scheme – South Florida Fraud and Misrepresentation Litigation and Arbitration Attorney

Securities and Exchange Commission v. DFRF Enterprises LLC, et al., Civil Action No. 1:15 cv 12857-PBS (United States District Court for the District of Massachusetts)

SEC Halts Pyramid/Ponzi Scheme Targeting Spanish and Portuguese-Speaking Communities

The Securities and Exchange Commission recently announced fraud charges and an asset freeze against the operators of a pyramid and Ponzi scheme falsely promising a gold mine of investment opportunity to investors in Spanish and Portuguese-speaking communities in Massachusetts, Florida, and elsewhere in the U.S.

The SEC alleges that DFRF Enterprises, named for its founder Daniel Fernandes Rojo Filho, claimed to operate more than 50 gold mines in Brazil and Africa, but the company’s revenues came solely from selling membership interests to investors and not from mining gold. With the help of several promoters, they lured investors with such false promises as their money would be fully insured, DFRF has a line of credit with a Swiss private bank, and one-quarter of DFRF’s profits are used for charitable work in Africa. The scheme raised more than $15 million from at least 1,400 investors by recruiting new members in pyramid scheme fashion to keep the fraud afloat, and commissions were paid to earlier investors in Ponzi-like fashion for their recruitment efforts. The SEC further alleges that Filho has withdrawn more than $6 million of investor funds to buy a fleet of luxury cars among other personal expenses.

According to the SEC’s complaint filed June 30 and unsealed today in federal court in Boston, Filho is a Brazilian native who lives in Winter Garden, Fla., and he orchestrated the scheme with assistance from six promoters also charged in the case: Wanderley M. Dalman of Revere, Mass., Gaspar C. Jesus of Malden, Mass., Eduardo N. Da Silva of Orlando, Fla., Heriberto C. Perez Valdes of Miami, Jeffrey A. Feldman of Boca Raton, and Romildo Da Cunha of Brazil.

The SEC alleges that Filho and others began selling “memberships” in DFRF last year through meetings with prospective investors primarily in Massachusetts hotel conference rooms, private homes, and businesses. DFRF promoted the investment opportunity through online videos in which Filho falsely claimed that the company had registered with the SEC and its stock would be publicly traded. As DFRF’s marketing reach widened, membership sales dramatically increased from under $100,000 in June 2014 to more than $4 million in March 2015 alone.

The SEC’s complaint alleges that all defendants violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and registration provisions Section 5(a) and 5(c) of the Securities Act.

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With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Scam Websites (Affinity Fraud) – Buyer Beware – South Florida Investment and Securities Fraud Litigation and Arbitration Attorney

Russell L. Forkey — Sat, 27 Sep 2014 11:50:58 GMT

Affinity and Elder Financial Abuse and Exploitation Fraud, Misrepresentation and Theft – Boca Raton, Delray Beach, Lake Worth, Boynton Beach and Deerfield Beach, Florida Litigation and Arbitration Attorney:

SEC Announces Cases Targeting International Pyramid Scheme Operators

The Securities and Exchange Commission recently announced charges against the operators of an international pyramid scheme that raised more than $129 million from investors worldwide, primarily in the U.S., China, and Taiwan. The case follows another against a separate pyramid scheme that lured investors in the U.S., China, and Korea with seminars, webinars, and YouTube videos.

The newest case, filed in federal court in San Francisco, charges Hong Kong-based eAdGear Holdings Limited and California-based eAdGear, Inc., along with operators Charles S. Wang and Qian Cathy Zhang, of Warren, N.J., and Francis Y. Yuen, of Dublin, Calif. According to the SEC complaint, even though eAdGear claimed to be a successful Internet marketing company, nearly all of its revenue was generated by investors, not its products or services.

The complaint alleges that eAdGear’s operators used money from new investors to pay earlier investors as well as to repay a personal loan and purchase million-dollar homes for themselves. It alleges the operators concealed and perpetuated the scheme by displaying sham websites on eAdGear’s own site to make it appear as if it had real, paying customers and manipulated revenue distributions to investors to appear profitable.

“eAdGear and its operators falsely claimed that they were running a profitable Internet marketing company when in reality, they were operating a Ponzi and pyramid scheme that preyed on Chinese communities and caused investors to lose millions of dollars,” said Jina L. Choi, director of the SEC’s San Francisco Regional Office.

The eAdGear case follows one filed Monday in federal court in Georgia against Zhunrize Inc. and CEO Jeff Pan for allegedly defrauding investors of more than $105 million since 2012. Despite its claims to be a legitimate multi-level marketing company, Zhunrize derived most of its funds from selling memberships, not products, according to the SEC complaint.

“Zhunrize claimed to offer investors the opportunity to be an ‘e-commerce Business Owner’ selling products to customers through a website. In fact, it was a pyramid and ‘profits’ came from fees paid by later investors,” said William Hicks, associate regional director of the SEC’s Atlanta Regional Office.

In both cases, the courts granted the SEC’s request for an asset freeze and issued a temporary restraining order. In the case of eAdGear, that order bars the defendants from soliciting investors, including through websites they have used until now – www.eadgear.com, www.eadgear.net, www.winteam777.com, and www.winteam168.com. A court hearing has been scheduled for October 10, 2014.

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At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Annuity and Insurance Fraud and Misrepresentation – Boca Raton, West Palm Beach and Fort Lauderdale, Florida Litigation and Arbitration Attorney

Russell L. Forkey — Sat, 27 Sep 2014 11:39:03 GMT

Annuity and Insurance Fraud and Misrepresentation – Elder Financial Abuse and Exploitation Litigation and Arbitration Attorney:

SEC Charges Four Insurance Agents in Securities Fraud Targeting Elderly Investors

The Securities and Exchange Commission recently announced charges against four insurance agents for unlawfully selling securities in what turned out to be a multi-million dollar offering fraud targeting elderly investors.

The SEC previously charged a Colorado man who allegedly orchestrated the scheme and recruited active insurance agents to help him solicit investors in Colorado and several other states. The scheme raised approximately $4.3 million during a nearly 18-month period. The SEC’s investigation further found that the four insurance agents charged today solicited funds without registering with the SEC as a broker-dealer as required under the federal securities laws.

“When individuals act as a broker and sell securities to the public, they must comply with registration, supervision, and compliance requirements that exist to protect investors,” said Julie K. Lutz, Director of the SEC’s Denver Regional Office. “These insurance agents improperly operated outside of that regulatory framework and thereby placed their clients at risk.”

According to the SEC’s order instituting administrative proceedings, the scheme primarily targeted retired annuity holders by using insurance agents to sell interests in a company called Arete LLC, which was controlled by the Colorado man orchestrating the scheme: Gary Snisky. The insurance agents told investors that their funds would be used by Snisky to purchase government-backed agency bonds at a discount. However, Snisky did not purchase bonds or conduct any such trading, and he misappropriated approximately $2.8 million of investor funds to pay commissions and make personal mortgage payments.

The SEC’s Enforcement Division alleges that the following three brokers raised approximately $1.5 million for Snisky and received almost $90,000 in commissions:

Kenneth C. Meissner of Fair Oaks Branch, Texas
James Doug Scott of Perkasie, Penn.
Mark S. “Mike” Tomich of Belmont, Mich.

The other insurance agent – David C. Sorrells of Linden, Texas – entered into a cooperation agreement with the SEC. Without admitting or denying the findings, Sorrells consented to an order finding that he violated Section 15(a) of the Securities Exchange Act of 1934. He agreed to be barred from the securities industry, cease and desist from future violations of Section 15(a), and pay disgorgement of $207,213.34. He also is subject to an additional financial penalty. The settlement reflects substantial assistance that Sorrells provided in the SEC’s investigation.

The SEC’s Enforcement Division alleges that Meissner, Scott, and Tomich violated Section 15(a) of the Exchange Act, and is seeking disgorgement, penalties, and securities industry bars in the matter, which will be litigated before an administrative law judge. The SEC’s case against Snisky, filed in November 2013, is still pending in federal court in Colorado.

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South Florida Elder and Retirement Financial Abuse and Exploitation FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Mon, 15 Sep 2014 21:54:01 GMT

Fort Lauderdale, Boca Raton, Delray Beach, Lantana, Lake Worth and West Palm Beach, Florida Elder Financial Abuse and Exploitation Litigation and FINRA Arbitration Attorney:

SEC Charges Virginia-Based Broker With Stealing Funds From Elderly Customers

The Securities and Exchange Commission recently charged a broker based in Roanoke, Va., with defrauding elderly customers, including some who are legally blind, by stealing their funds for her personal use and falsifying their account statements to cover up her fraud.

According to the SEC’s complaint filed in U.S. District Court for the Western District of Virginia, Donna Jessee Tucker siphoned $730,289 from elderly customers and used the money to pay for such personal expenses as vacations, vehicles, clothes, and a country club membership. Tucker ensured that the customers received their monthly account statements electronically, knowing that they were unable or unwilling to access their statements in that format. The SEC further alleges that Tucker engaged in unauthorized trading and other financial transactions while making misrepresentations to customers about their investment accounts and forging brokerage, banking, and other documents.

The SEC’s investigation resulted from a broker-dealer examination of the firm where Tucker worked that was conducted by the SEC’s Philadelphia Regional Office.

In a parallel action, the U.S. Attorney’s Office for the Western District of Virginia announced criminal charges against Tucker.

Tucker has agreed to settle the SEC’s charges and disgorge the $730,289 in ill-gotten gains either in the criminal case or the civil case. She consented to the entry of an order permanently enjoining her from violating Section 17(a) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The settlement is subject to court approval.

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Elder and Retirement Financial Abuse – How To Spot Investment Fraud – South Florida FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Sat, 26 Jul 2014 22:23:15 GMT

Boca Raton, Fort Lauderdale and West Palm Beach, Florida Elder and Retirement Financial Abuse FINRA Arbitration and Litigation Attorney:

Elder and retirees should think twice about investing if you spot any of these red flags of investment fraud:

Limited history of posts. Fraudsters can set up new accounts specifically designed to carry out their scam while concealing their true identities. Be skeptical of information from social media accounts that lack a history of prior postings or sending messages.
Pressure to buy or sell RIGHT NOW. Take the time to research the stock before you invest. Be skeptical of messages urging you to buy a hot stock before you “miss out” or to sell shares of a stock you own before the price goes down after negative news is announced. Be especially wary if the promoter claims the recommendation is based on “inside” or confidential information.
Unsolicited investment information or offers. Fraudsters may look for victims on social media sites, chat rooms, and bulletin boards. Exercise extreme caution regarding information provided in new posts on your wall, tweets, direct messages, e-mails, or other communications that solicit an investment or provide information about a particular stock if you do not personally know the sender (even if the sender appears connected to someone you know).
Unlicensed sellers. Federal and state securities laws require investment professionals and their firms who offer and sell investments to be licensed or registered. Many fraudulent investment schemes involve unlicensed individuals or unregistered firms. Check license and registration status by searching the SEC’s Investment Adviser Public Disclosure (IAPD) website or the Financial Industry Regulatory Authority (FINRA)’s BrokerCheck website.

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Pyramid Scheme, Ponzi Scheme and Affinity Fraud – South Florida Securities and Elder Abuse and Exploitation Litigation and FINRA Arbitration Attorney

Russell L. Forkey — Tue, 01 Apr 2014 00:14:03 GMT

Securities and Exchange Commission v. World Capital Market Inc., et al., Civil Action No. CV14-2334-CAS (MRWx)

South Florida Pyramid Scheme, Ponzi Scheme and Affinity Fraud Litigation and Arbitration Attorney:

SEC Halts Los Angeles- and Hong Kong-Based Pyramid Scheme Targeting Asian and Latino Communities

The Securities and Exchange Commission recently announced charges and asset freezes against the operators of a worldwide pyramid scheme targeting Asian and Latino communities in the U.S. and abroad.

The SEC alleges that three entities collectively operating under the business names WCM and WCM777 are posing as multi-level marketing companies in the business of selling third-party cloud computing services, which can include website hosting, data storage, and software support. The entities are based in California and Hong Kong and controlled by “Phil” Ming Xu, who is a resident of Temple City, California.

According to the SEC’s complaint filed in federal court in Los Angeles, WCM and WCM777 have raised more than $65 million since March 2013 by falsely promising tens of thousands of investors that the return on investment in the cloud services venture would be 100 percent or more in 100 days. Investors were told they would receive “points” for making investments or enrolling other investors. The points would be convertible into equity in initial public offerings of high-tech companies their money would help launch. However, rather than building out cloud services or incubating high-tech companies, Xu and the WCM entities used investor funds to make Ponzi payments of purported investment returns to some investors. They also spent investor money to purchase golf courses and other U.S.-based properties among other unauthorized expenditures.

The court has granted the SEC’s request for an asset freeze and the appointment of a temporary receiver over the assets of WCM, WCM777, and several other entities named as relief defendants for the purpose of recovering money from the scheme in their possession.

According to the SEC’s complaint, WCM and WCM777 sell their products exclusively to investors and have no other apparent sources of revenue. Their offerings and operations depend almost entirely on the recruitment of new investors and purchases by existing investors to provide the money for returns. On its website, WCM777 specifically addressed the question “Is WCM777 a Ponzi Game?” by writing, “In summary, we are not a Ponzi game company. We are creating a new business model.”

The SEC alleges that Xu and his entities made various false claims to investors about purported partnerships with more than 700 major companies such as Siemens, Denny’s, and Goldman Sachs – in some instances falsely representing that they had permission to use their logos. Meantime, besides buying two golf courses with investor money, Xu and his entities also purchased a warehouse, vacant land, and several single family homes They also used investor funds to play the stock market and make other related investments through intermediary companies, such as an oil and gas offering. They also sent investor money to a rough diamond jewel merchant in Hong Kong and another unrelated company affiliated with Xu.

The SEC’s complaint alleges that WCM, WCM777, and Xu violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5. The complaint further alleges that Xu violated Section 20(a) of the Exchange Act. In addition to the asset freezes and appointment of a temporary receiver, the Honorable Christina A. Snyder also granted the SEC’s request for an order prohibiting the destruction of documents and requiring the defendants to provide accountings. A court hearing has been scheduled for April 10, 2014.

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Pyramid Scheme – Florida Fraud and Misrepresentation State and Federal Court Litigation Attorney

Russell L. Forkey — Fri, 18 Oct 2013 10:33:04 GMT

Securities and Exchange Commission v. CKB Holdings Ltd., et al., Civil Action No. 13-5584 (E.D.N.Y., filed October 9, 2013)

SEC Halts $20 Million Pyramid Scheme Targeting Asian-American Community

The Securities and Exchange Commission recently announced charges and asset freezes against the operators and promoters of a worldwide pyramid scheme targeting members of the Asian-American community. The perpetrators of the scheme falsely promised exponential, risk-free returns to investors in a venture that purportedly sold Internet-based children’s educational courses.

The SEC’s complaint, filed under seal on October 9, 2013 and unsealed October 16, 2013 in the Eastern District of New York, alleges that since mid-2011, the defendants have solicited investments in an entity operating under the business name “CKB” or “CKB168,” which they claim is a rapidly growing and legitimate multi-level marketing company that purportedly sells web-based children’s educational courses. Defendants solicit investors through a variety of tactics, including in-person sales pitches, videotaped presentations posted on the Internet, websites, written brochures, and email and telephone communications. They attract investors by claiming that the investors will earn exponential, risk-free returns with little or no effort. Defendants claim that investors can earn money when “Profit Reward Points” (Prpts) they are granted at the time of their initial investments increase in value or pay dividends, and can earn even larger returns by converting their Prpts into shares of CKB168 stock when the company conducts a promised IPO on the Hong Kong stock exchange. Investors have also been told that they will be able to make even greater returns in the forms of commissions and bonuses by recruiting new investors. CKB promoters have raised more than $20 million from U.S. investors, and millions of dollars more from investors in Canada, Taiwan, Hong Kong, and other countries in Asia.

The complaint alleges that in reality, CKB168 is nothing more than a fraudulent pyramid scheme. CKB has little or no real-world retail consumer sales to generate the promised returns and has no apparent source of revenue other than money received from new investors. Defendants promote recruitment of new investors instead of retail sales. Most of the money raised has been paid out to accounts controlled by CKB entities and as commissions to promoters, with the bulk of the payouts going to those at or near the top of the investment pyramids, including the Defendants. The company has taken no steps to prepare for the promised IPO. The Prpts granted investors are essentially worthless.

The Honorable Roslynn Mauskopf granted the SEC’s request for a temporary restraining order, asset freeze, and other emergency relief against the 16 defendants as well as seven entities controlled by the U.S. promoters that are named as relief defendants in the complaint. A court hearing has been set for October 21, 2013 on the SEC’s motion for a preliminary injunction.

The corporate defendants are five entities based in Hong Kong, Canada, and the British Virgin Islands that collectively operate under the business name “CKB168” or “CKB.” (WIN168 Biz Solutions Ltd., CKB168 Ltd., CKB168 Holdings, Ltd., CKB168 Biz Solution Inc., and Cyber Kids Best Education Limited.) The individual defendants are three foreign nationals – Rayla Melchor Santos, Hung Wai (Howard) Shern, and Rui Ling (Florence) Leung (aka Kwai Chee Leung) – who control the CKB entities, and eight “senior promoters” in the United States – Daliang (David) Guo, Yao Lin, Chih Hsuan (Kiki) Lin, Wen Chen Hwang (aka Wendy Lee), Toni Tong Chen, Cheongwha (Heywood) Chang, Joan Congyi (JC) Ma, and Heidi Mao Liu (aka Heidi Mao.) The SEC’s complaint alleges that all sixteen Defendants violated Sections 5(a), 5(c), 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5(a) and (c) thereunder. WIN168, Howard Shern, and the senior promoters are also charged with violating Securities Act Section 17(a)(2) and Exchange Act Rule 10b-5(b). Shern and the senior promoters are charged with violating the broker-dealer registration provisions under Section 15(a)(1) of the Exchange Act. The SEC seeks disgorgement of ill-gotten gains, financial penalties, permanent injunctions, and other relief. The SEC also seeks disgorgement from Relief Defendants USA Trade Group, Inc., Ouni International Trading Inc., E-Stock Club Corp., EZ Stock Club Corp., HTC Consulting LLC, and Arcadia Business Consulting, Inc.

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With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

Jenny Coplan and Immigration General Services – South Florida Affinity and Ponzi Scheme Fraud and Misrepresentation Litigation and FINRA Arbitration Attorney

Russell L. Forkey — Mon, 30 Sep 2013 17:42:21 GMT

SEC Charges South Florida Woman Behind Ponzi Scheme Targeting Colombian-American Community

The Securities and Exchange Commission recently charged a woman living in South Florida with defrauding investors in a Ponzi scheme and affinity fraud that targeted the local Colombian-American community and involved purported investments in immigration bail bonds.

The SEC alleges that Jenny E. Coplan told investors that her company Immigration General Services operated through an investment broker that would invest the funds she raised in immigration bail bonds and turn a profit. Coplan promised interest payments ranging from 60 to 108 percent annually. She also assured investors that their money was safe because it was insured by the Federal Deposit Insurance Corporation (FDIC). However, Coplan never placed investor funds with any investment broker, and their money was never FDIC insured. Instead, she paid supposed profits to earlier investors using funds from newer investors in classic Ponzi fashion, and she stole approximately $878,000 of investor money for her own personal use.

In a parallel action, the U.S. Attorney’s Office for the Southern District of Florida today announced criminal charges against Coplan.

According to the SEC’s complaint filed in federal court in Miami, Coplan solicited investors through personal conversations over the phone and in person, and many of her targets were Colombian-Americans and Colombians living in Florida. She raised approximately $4 million from more than 90 investors in Florida, California, Georgia, Texas, Canada, and Colombia.

The SEC alleges that Coplan created fictitious investor statements that she disseminated to hide her misuse of the money and lead investors to believe their investments were growing. Furthermore, Coplan e-mailed one investor two purported FDIC statements reflecting insured balances of $107,000 and $250,000, lulling the investor to think the investment was particularly safe. When her scheme began to unravel in 2011, Coplan blamed the purported investment broker for the delay in interest payments to investors, telling them the broker held the investors’ funds to cover deficiencies because Coplan had failed to meet certain monthly investment quotas. Even though Immigration General Services had virtually no funds in its bank accounts and was unable to honor investors’ increasing redemption requests, Coplan tried in late 2011 to create a false appearance that the company was back to business as usual. She issued non-sufficient fund checks to investors purporting to be their monthly profits. Through her continued misstatements, Coplan was able to raise another $578,000 from new investors before the scheme collapsed entirely.

The SEC’s complaint against Coplan, who lives in Tamarac, Fla., seeks disgorgement of ill-gotten gains, financial penalties, and permanent injunctions.

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Affinity Fraud – Haitian-American Investors – South Florida Affinity Investment Fraud FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Thu, 12 Sep 2013 14:59:09 GMT

Securities and Exchange Commission Defendant Indicted in $30 Million Ponzi Scheme and Affinity Fraud Targeting Haitian-American Investors

The Securities and Exchange Commission recently announced that on July 2, 2013, the United States Attorney’s Office for the Southern District of Florida filed criminal charges against George Louis Theodule, a defendant in a now settled SEC action. The 40-count indictment charges Theodule with securities fraud, wire fraud, and money laundering. According to the indictment, Theodule, among other things, falsely presented himself as a financial expert who would double investors’ funds within three months by placing trades through their investment accounts. The indictment also alleges that Theodule operated a Ponzi scheme that raised more than $30 million from thousands of investors. Theodule allegedly perpetrated the fraud through Creative Capital Consortium, LLC and Creative Capital Concept$, LLC (the “Creative Capital entities”), among other entities he controlled.

In December 2008, the Commission halted Theodule’s on-going fraud at Creative Capital when it filed an emergency civil enforcement action against him and his companies. The SEC’s complaint alleged that the defendants had raised more than $23 million from thousands of mostly Haitian-American investors through a fraudulent, unregistered offering of securities nationwide, and operated a Ponzi scheme, having lost at least $18 million trading stocks and options through a network of purported investment clubs. The SEC obtained a restraining order to halt the fraudulent activity, and thereafter a receiver was appointed by the United States District Court for the Southern District of Florida to identify and trace assets. In October 2009, the Court entered a Judgment of Permanent Injunction and Other Relief against Theodule. The Judgment entered by consent, enjoined Theodule from violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, and also ordered Theodule to pay disgorgement with prejudgment interest and a civil penalty. In March 2010, the Court entered a Final Judgment ordering him to pay disgorgement in the amount of $5,099,512, prejudgment interest of $202,638 and imposed a civil penalty of $250,000.

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Jeffrey Rubin – South Florida Unsuitable Recommendations and Selling Away FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Wed, 27 Mar 2013 10:06:07 GMT

Jeffrey Rubin, Registered Representative, Lighthouse Point, Florida:

FINRA Bars Florida Broker for Unsuitable Recommendations and Unapproved Securities Transactions Involving 31 NFL Players

The Financial Industry Regulatory Authority (FINRA) recently announced that it has barred broker Jeffrey Rubin of Lighthouse Point, Florida, from the securities industry for making unsuitable recommendations to his customer, an NFL player, to invest in illiquid, high-risk securities issued in connection with a now-bankrupt casino in Alabama. As a result, the customer lost approximately $3 million. Based on Rubin’s referrals, 30 other NFL players also invested in the casino project and lost approximately $40 million. Rubin also failed to obtain the required approval from his employers to participate in the securities transactions involving the casino.

Rubin operated a Florida-based company, Pro Sports Financial, which provided financial-related “concierge” services to professional athletes for an annual fee. Between March 2006 and June 2008, while he was registered as a broker at Lincoln Financial Advisors Corporation and Alterna Capital Corporation, Rubin recommended that one of his NFL clients invest a total of $3.5 million, the majority of his liquid net worth, in four high-risk securities. Rubin recommended and facilitated the largest investment, $2 million, in the Alabama casino project without informing his employer member firm or receiving the firm’s approval of this activity.

Rubin referred other investors to the casino project while employed by Alterna Capital Corporation and International Assets Advisory, LLC without the firms’ knowledge or approval. FINRA found that from approximately January 2008 through March 2011, 30 additional clients of Rubin’s concierge firm, all NFL players, invested approximately $40 million in the casino project. Rubin received a 4 percent ownership stake and $500,000 from the project promoter for these referrals.

Apparently, in settling this matter, Rubin neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

Additional information will ultimately be available on the FINRA BrokerCheck website.

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We The People, Inc., Richard Olive, Susan Olive and William Reeves – Florida Affinity Securities and Investment Fraud FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Wed, 20 Feb 2013 01:44:18 GMT

Securities and Exchange Commission v. We The People, Inc., of The United States; Richard K. Olive and Susan L. Olive; William G. Reeves, Esq., Civil Action No. 2:13-cv-14050; 2:13-civ-14047; 2:13-cv-14048

SEC Charges We The People, Inc., of The United States and Three Individuals In Offering Fraud Scheme

Recently, the Securities and Exchange Commission filed complaints in the U.S. District Court for the Southern District of Florida in connection with an offering fraud conducted by We The People, Inc. of the United States (“We The People”), a purported charitable organization based in Tallahassee, Florida.

In its complaint against Richard Olive, We The People’s former chief of program services, and Susan Olive, We The People’s former chief of finance and administration, the Commission alleges that the Olives, husband and wife, orchestrated a fraudulent scheme that raised more than $75 million from approximately 450 investors located across the United States, most of whom were senior citizens. Investors were solicited to transfer assets to We The People in exchange for what it called a charitable gift annuity. The Commission alleges that We The People – through the Olives – lured investors by making various false and misleading statements regarding, among other things, the value of the products sold and the safety and security of the investments. The complaint also alleges that the Olives failed to disclose to investors indictments and regulatory sanctions issued against them for fraudulently selling similar products. In addition to the misrepresentations, the Commission alleges that the Olives misappropriated investor funds for personal use.

The complaint alleges that, based on this conduct, Richard and Susan Olive violated, or aided and abetted the violation of, Sections 17(a) of the Securities Act of 1933 (“Securities Act”), and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The complaint also claims that the Olives violated Sections 5(a) and 5(c) of the Securities Act, and Section 15(a) of the Exchange Act. The Commission seeks that the Olives be permanently enjoined, and be ordered to pay disgorgement plus pre- and post-judgment interest, and third-tier civil money penalties.

In addition, the Commission filed settled actions against We The People and William Reeves, We The People’s in-house counsel. Without admitting or denying the Commission’s allegations, We The People consented to a final judgment providing injunctive relief under Sections 5(a), 5(c) and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, disgorgement, and the appointment of a receiver to protect the more than $60 million of investor assets still held by We The People.

Without admitting or denying the Commission’s allegations, Reeves consented to a final judgment providing injunctive relief under Sections 5(a), 5(c), 17(a)(2) and 17(a)(3) of the Securities Act, and providing that the Court will determine issues relating to the imposition of a civil money penalty against him at a later date. Reeves also agreed to a suspension from appearing or practicing before the Commission as an attorney, with the right to apply for reinstatement after 5 years. Reeves entered into a cooperation agreement with the Commission, and the terms of his settlement reflect his assistance in the Commission’s investigation and anticipated cooperation in its pending enforcement action.

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Sean David Morton, Vajra Productions, LLC., 27 Investments, LLC, and Magic Eight Ball Distributing, Inc. – Florida Securities and Private Placement and Offering Fraud FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Wed, 20 Feb 2013 01:14:05 GMT

Securities and Exchange Commission v. Sean David Morton, Vajra Productions, LLC, 27 Investments, LLC, and Magic Eight Ball Distributing, Inc., defendants, and Melissa Morton and Prophecy Research Institute, relief defendants, Civil Action No. 10-CV-1720 (SDNY) (KBF)

District Court Grants Securities and Exchange Commission’s Motions for Default Judgment against a Nationally Known Psychic and his Corporate Entities in Multi-Million Dollar Offering Fraud

The Securities and Exchange Commission (Commission) announced recently that on February 11, 2013 the U.S. District Court for the Southern District of New York entered default judgments against Sean David Morton (Morton), a nationally-recognized psychic who bills himself as “America’s Prophet,” his wife, relief defendant Melissa Morton, and corporate shell entities co-owned by the Mortons. In addition to ordering permanent injunctions from violating antifraud and registration statutes and rule, each defendant was ordered to disgorge, jointly and severally, $5,181,135.82, along with prejudgment interest of $1,171,110.54, and pay a penalty of $5,181,135.82 for a total of $11,533,382.18. Relief defendants Melissa Morton and the Prophecy Research Institute, the Mortons’ nonprofit religious organization, were ordered to disgorge $468,281 plus prejudgment interest of $105,847.23, for a total of $574,128.23.

On March 4, 2010, the Commission filed a civil injunctive action in the United States District Court for the Southern District of New York charging Morton and his corporate shell entities for engaging in a multi-million offering fraud. According to the Commission’s complaint, Morton fraudulently raised more than $5 million from more than 100 investors for his investment group, which he called the Delphi Associates Investment Group (Delphi Investment Group).

Beginning in or around the summer of 2006, the complaint alleged, Morton solicited individuals to invest in one of several companies he and Melissa Morton controlled under the umbrella of the Delphi Investment Group. According to the Commission’s complaint, Morton used his monthly newsletter, his website, his appearances on a nationally syndicated radio show called Coast to Coast AM, and appearances at public events, to promote his alleged psychic expertise in predicting the securities markets, and to solicit investors for the Delphi Investment Group. During these solicitations, Morton made numerous materially false representations. For example, Morton falsely told potential investors that he has called all the highs and lows of the stock market, on their exact dates, over a fourteen year period. Morton further falsely asserted that the alleged profits in the accounts were audited and certified by PricewaterhouseCoopers LLP (PWC) who he claimed certified that the accounts had profited by 117%. Morton also falsely asserted that the investor funds would be used exclusively for foreign currency investments, and that any other use of the funds would be considered a criminal act. Morton further falsely claimed that he would use the pooled funds to trade in foreign currencies and distribute pro rata the trading profits among the investors. In private one-on-one correspondence with potential investors, Morton was even more aggressive in his solicitation. For example, Morton wrote to a potential investor urging he invest more money in the Delphi Investment Group “RIGHT NOW…[Because] [o]nce the DOLLAR starts to DROP, which will happen soon, we are set to make a FORTUNE!”

However, the complaint alleged, Morton lied to investors about his past successes, and about key aspects of the Delphi Investment Group, including the use of investor funds and the liquidity of the funds. According to the complaint, Morton did not have the successful track record picking stocks in which he claimed, and that he in fact was simply wrong in many of his securities predictions. Further, PWC never audited the Delphi Investment Group, let alone certify any profits. Also, unbeknownst to the investors, instead of investing all of the funds into foreign currency trading firms, the Mortons diverted some of the investor funds, including nearly half a million dollars to themselves through their own shell entities.

The defendants never properly answered the allegations in the complaint. Instead, the Mortons filed dozens of papers with the Court claiming, for instance, that the Commission is a private entity that has no jurisdiction over them, and that the staff attorneys working on the case do not exist.

On February 11, 2013, United States District Judge Forrest issued default judgments against all of the defendants and relief defendants. With the entry of the default judgments, the Commission received full relief requested in its complaint. The complaint charged each of the defendants with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further charged that the relief defendants were unjustly enriched by receiving investor funds. The complaint sought a final judgment permanently restraining and enjoining the defendants from future violations of the above provisions of the federal securities laws.

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Florida Foreign Investment Fraud Litigation and Arbitration Attorney – A Chicago Convention Center, LLC., Anshoo Sethi and Intercontinental Regional Center Trust of Chicago, LLC.

Russell L. Forkey — Mon, 11 Feb 2013 13:51:50 GMT

Securities and Exchange Commission v. A Chicago Convention Center, LLC, Anshoo Sethi, and Intercontinental Regional Center Trust of Chicago, LLC, Civil Action No. 13-cv-982

SEC HALTS $150 MILLION INVESTMENT SCHEME TO DUPE FOREIGN INVESTORS AND EXPLOIT IMMIGRATION PROGRAM

The Securities and Exchange Commission recently announced charges and an asset freeze against an individual living in Illinois and two companies behind an investment scheme defrauding foreign investors seeking profitable returns and a legal path to U.S. residency through a federal visa program.

The SEC alleges that Anshoo R. Sethi created A Chicago Convention Center (ACCC) and Intercontinental Regional Center Trust of Chicago (IRCTC) and fraudulently sold more than $145 million in securities and collected $11 million in administrative fees from more than 250 investors primarily from China. Sethi and his companies duped investors into believing that by purchasing interests in ACCC, they would be financing construction of the “World’s First Zero Carbon Emission Platinum LEED certified” hotel and conference center near Chicago’s O’Hare Airport. Investors were misled to believe their investments were simultaneously enhancing their prospects for U.S. citizenship through the EB-5 Immigrant Investor Pilot Program, which provides foreign investors an avenue to U.S. residency by investing in domestic projects that will create or preserve a minimum number of jobs for U.S. workers.

The SEC alleges that Sethi and his companies falsely boasted to investors that they had acquired all the necessary building permits and that several major hotel chains had signed onto the project. They also provided falsified documents to U.S. Citizenship and Immigration Services (USCIS) – the federal agency that administers the EB-5 program – in an attempt to secure the agency’s preliminary approval of the project and investors’ provisional visas. Meanwhile, Sethi and his companies have spent more than 90 percent of the administrative fees collected from investors despite their promise to return this money to investors if their visa applications are denied. More than $2.5 million of these funds were directed to Sethi’s personal bank account in Hong Kong.

Swift coordination between the SEC and USCIS has brought the scheme to a halt in its application stage at USCIS. The SEC filed its complaint under seal earlier this week and obtained an emergency court order to protect the remaining $145 million in investor assets that were at risk of being similarly misappropriated by Sethi and his companies. The case was unsealed this morning.

According to the SEC’s complaint filed in U.S. District Court for the Northern District of Illinois, the EB-5 program enables foreign investors to possibly qualify for a green card if they invest $1 million (or $500,000 in a “Targeted Employment Area” with a high unemployment rate) in a project that creates or preserves at least 10 jobs for U.S. workers, excluding the investor and his or her immediate family. Sethi and his companies used the lure of a pathway to U.S. citizenship to convince investors to wire a minimum of $500,000 apiece plus a $41,500 “administrative fee” to U.S. bank accounts. These administrative fees are separate from the investment capital that the EB-5 program requires to be deployed into a job-creating enterprise. More than $11 million in administrative fees were collected with the claim that they were fully refundable to investors if their visa applications are rejected. Sethi and his companies have instead been spending those funds.

The SEC alleges that Sethi submitted false claims about the project to USCIS. Among the phony documentation that he provided to the agency in seeking preliminary approval for the project under the EB-5 program were a comfort letter from Hyatt Hotels that was not genuine, and a false backup financing letter from the Qatar Investment Authority.

The SEC’s complaint alleges that Sethi and his companies made a number of misrepresentations about the project to dupe investors. Offering materials stated that investors’ funds would help build “a convention center and hotel complex, including convention and meeting space, five upscale hotels, and amenities including restaurants, lounges, bars, and entertainment facilities.” Sethi and his companies prominently featured in their marketing materials the purported participation of three major hotel chains in the project: Hyatt, Intercontinental Hotel Group, and Starwood Hotels. However, none of these hotel chains have executed franchise agreements to include a brand hotel in this project as represented to investors in the offering materials. Two of the chains actually terminated prior deals with other Sethi-related entities more than two years before these offering materials were circulated to investors.

The SEC further alleges that the offering materials falsely stated that construction would begin in summer 2012 and occupancy of the first tower would occur in early spring 2014. A search of the Chicago Building Permits database for the project address shows that the only recent permits are for a tent for a purported groundbreaking ceremony held in November 2012, a demolition permit, construction of a fence, and a minor electrical wiring permit.

According to the SEC’s complaint, the 29-year-old Sethi misrepresented to investors in offering materials that he has “over fifteen years of experience in real estate development and management, specifically in the lodging area.” Offering materials also misleadingly state that the project’s developer Upgrowth LLC has “more than 35 years of experience.” Illinois corporate records show that Upgrowth was just recently organized in 2010.

The SEC’s complaint alleges that Sethi, ACCC, and IRCTC violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In addition to the temporary restraining order and asset freeze granted by the court, the SEC’s complaint seeks permanent injunctions and other monetary relief.

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Charitable Gift Annuity Florida Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Mon, 04 Feb 2013 17:54:31 GMT

SEC Charges Husband and Wife in Florida with Defrauding Seniors Investing in Purported Charity

The Securities and Exchange Commission recently charged a husband and wife who raised millions of dollars selling investments for a purported charitable organization in Tallahassee, Fla., while defrauding senior citizens and significantly exaggerating the amount of contributions actually made to charity.

The SEC alleges that after Richard K. Olive and Susan L. Olive were hired at We The People Inc., the organization obtained $75 million from more than 400 investors in Florida, Colorado, and Texas among more than 30 states across the country by selling an investment product they described as a charitable gift annuity (CGA). However, the CGAs issued by We The People differed in several ways from CGAs issued legitimately, namely that they were issued primarily to benefit the Olives and other third-party promoters and consultants. Only a small amount of the money raised was actually directed to charitable services. Meanwhile the Olives received more than $1.1 million in salary and commissions, and they also siphoned away investor funds for their personal use.

The SEC further alleges that the Olives lured elderly investors with limited investing experience into the scheme by making a number of false representations about the purported value and financial benefits of We The People’s CGAs. The Olives also lied about the safety and security of the investments.

According to the SEC’s complaint against the Olives filed in U.S. District Court for the Southern District of Florida, investors were coaxed to transfer assets including stocks, annuities, real estate, and cash to We The People in exchange for a CGA. We The People claimed to operate as a non-profit organization while it was offering the CGAs from June 2008 to April 2012. However, We The People was not operating as a charity but instead for the primary purpose of issuing CGAs and using the proceeds to pay substantial sums to the Olives, third-party promoters, and consultants. On rare occasions when We The People did actually direct money raised toward charitable services, it was insignificant. For instance, the organization made public statements that it donated $21.8 million in relief aid to AIDS orphans in Zambia, but in fact the supplies were donated by others and We The People merely made a small payment to the third party that was shipping the supplies.

The SEC alleges that We The People’s marketing and promotional materials for the CGA offering contained misrepresentations and omissions including:

False statements that the CGAs were worth the “full” accumulated value of the assets transferred by investors to We The People. Investors were not told in advance of transferring their assets that the value of the CGA as calculated by We The People was always substantially less than the “full” accumulated value of those assets because We The People took a significant percentage of the asset’s value and kept it as a purported “charitable gift.”
False statements about the safety and security of the CGA program including that We The People held in trust a reserve equal to 110 percent of its liabilities and that it “reinsured” its products through “highly rated” commercial insurance companies. We The People did not in fact have any restricted-access trust accounts let alone maintain a reserve in them, and it did not purchase reinsurance from any insurance company to cover its potential liabilities under the CGAs.
Omissions of the previous indictments and regulatory sanctions against Richard and Susan Olive when they previously sold similar products.
Omissions of the sizable commissions that We The People paid to third-party promoters and the Olives on the sale of the CGAs, hiding from investors that these commissions totaled several million dollars.

The SEC’s complaint charges the Olives with violations, or aiding and abetting violations, of the antifraud provisions of the federal securities laws as well as violations of the securities and broker-dealer registration provisions of the federal securities laws. The SEC is seeking disgorgement of ill-gotten gains plus pre- and post-judgment interest and financial penalties against the Olives.

The SEC also filed separate complaints today against We The People as well as the company’s in-house counsel William G. Reeves. They both agreed to settle the charges without admitting or denying the allegations. The settlements are subject to court approval.

We The People consented to a final judgment that will enable the appointment of a receiver to protect more than $60 million of investor assets still held by the company. The final judgment also provides for disgorgement of ill-gotten gains and provides injunctive relief under the antifraud and registration provisions of the federal securities laws.

Reeves entered into a cooperation agreement with the SEC, and the terms of his settlement reflect his assistance in the SEC’s investigation and anticipated cooperation in its pending action against the Olives. Reeves agreed to be suspended from appearing or practicing before the SEC for at least five years, and consented to a final judgment providing injunctive relief under the provisions of the federal securities laws that he violated. The court will determine at a later date whether a financial penalty should be imposed against Reeves.

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Trading Program Fraud and Misrepresentation South Florida FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Thu, 31 Jan 2013 02:22:27 GMT

SEC Charges Trader in Houston-Area Investment Scheme Targeting Lebanese and Druze Communities

The Securities and Exchange Commission recently charged a day trader in Sugar Land, Texas, with defrauding investors in his supposed high-frequency trading program and providing them falsified brokerage records that drastically overstated assets and hid his massive trading losses.

The SEC alleges that Firas Hamdan particularly targeted fellow members of the Houston-area Lebanese and Druze communities, raising more than $6 million during a five-year period from at least 33 investors. Hamdan told prospective investors that he would pool their investments with his own money and conduct high-frequency trading using a supposed proprietary trading algorithm. Hamdan promised annual returns of 30 percent and assured investors that his program was safe and proven when in reality it was a dismal failure, generating $1.5 million in losses. As he failed to deliver the promised profits, Hamdan told investors that his funds were tied up in the Greek debt crisis and the MF Global bankruptcy among other phony excuses.

The SEC is seeking an emergency court order to halt the scheme and freeze Hamdan’s assets and those of his firm, FAH Capital Partners.

According to the SEC’s complaint filed in federal court in Houston, Hamdan is well-known in the Lebanese and Druze communities in the Houston area and is a former treasurer of the Houston branch of the American Druze Society. Hamdan found investors for his trading program by talking with his friends and family in these communities. As word spread about his purported trading success, he asked existing investors to solicit their friends for investments.

The SEC alleges that Hamdan misrepresented to investors that he generated positive returns in 59 of 60 months between 2007 and 2012. He showed them phony documentation to support his false claims. For instance, a purported brokerage statement he provided investors for the first quarter of 2010 showed an opening balance of more than $2.3 million with quarterly trading gains of $2.7 million for a closing balance above $5.1 million. An actual brokerage statement obtained by SEC investigators for Hamdan’s account during that same period shows the opening balance at just $27,970.76 and the closing balance at $148,210.02, with quarterly trading losses of $7,452.80.

According to the SEC’s complaint, Hamdan made several other false claims to potential investors. For instance, he lied about the existence of a cash reserve account that secured their investments. Hamdan falsely stated that investments were further secured by a $5 million “key-man” insurance policy. He also falsely claimed that a well-known hedge fund manager in the Dallas area made a million-dollar investment with him and promised to invest more based on Hamdan’s continuing success.

The SEC’s complaint alleges that Hamdan violated the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint seeks various relief including a temporary restraining order, preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

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Arnett L. Waters – South Florida Broker/Dealer and Investment Advisor Fraud and Misappropriation FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Wed, 05 Dec 2012 02:01:00 GMT

Defendant in SEC Action Pleads Guilty to Criminal Charges and is Barred from the Securities Industry

The Securities and Exchange Commission recently announced that Arnett L. Waters of Milton, Massachusetts, a principal of a broker-dealer and investment adviser who is a defendant in a securities fraud action filed by the Commission in May 2012, has pleaded guilty to criminal charges brought by the U.S. Attorney for the District of Massachusetts and has been barred from the securities industry by the Commission. Waters’ guilty plea to securities fraud and other charges occurred on November 29, 2012, and follows an earlier guilty plea by Waters in October 2012 to criminal contempt charges for violating a preliminary injunction order obtained by the Commission in its case. The Commission’s Order barring Waters from the securities industry was issued on December 3, 2012.

The Commission filed an emergency enforcement action against Waters on May 1, 2012, alleging that he and two companies under his control, broker-dealer A.L. Waters Capital, LLC and investment adviser Moneta Management, LLC, defrauded investors from at least 2009-2012 by, among other things, misappropriating investor funds and spending it on personal expenses. On May 3, 2012, the Court entered a preliminary injunction order that, among other things, froze Waters’ assets and required him to provide an accounting of all his assets to the Commission. On August 7, 2012, the Commission filed a civil contempt motion against Waters, alleging that he had violated the court’s preliminary injunction order by establishing an undisclosed bank account, transferring funds to that account, dissipating assets, and failing to disclose the bank account to the Commission, as required by the Court’s order. On August 9, 2012, the U.S. Attorney for the District of Massachusetts filed a separate criminal contempt action against Waters based on the same allegations. On October 2, 2012, Waters pleaded guilty to the criminal contempt charges, and the Court ordered him detained pending sentencing.

The Commission’s Order barring Waters from the securities industry was issued on December 3, 2012, and is based on his October 2, 2012 guilty plea to criminal contempt charges. The Order bars Waters from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock.

The U.S. Attorney for the District of Massachusetts also charged Waters with a broader array of securities fraud and other violations on October 17, 2012. On November 29, 2012, Waters pleaded guilty to sixteen counts of securities fraud, mail fraud, money laundering, and obstruction of justice. The counts of the criminal information to which Waters pleaded guilty alleged that, from at least 2007 through 2012, he used fictitious investment-related partnerships to draw in investors, misappropriate their investment money, and spend the vast majority of it on personal and business expenses and debts. Waters raised at least $839,000 from at least thirteen investors, including $500,000 from his church in March 2012. Waters also pleaded guilty to engaging in a criminal scheme to defraud clients of his rare coin business. Under this scheme, Waters defrauded coin customers out of as much as $7.8 million by selling coins at prices inflated, on average, by 600% and by inducing coin purchasers to return coins to him, on the false representation that he would sell those coins on the customers’ behalf, when, in fact, he sold most or all of the coins and kept the proceeds for himself. The criminal information to which Waters pleaded guilty further alleged that he engaged in money laundering through two transactions totaling $77,000. Finally, Waters pleaded guilty to allegations that he made multiple misrepresentations to Commission staff, including that there were no investors in his investment-related partnerships, in order to conceal the fact that investor money was misappropriated in a fraudulent scheme. Waters is charged with obstruction of justice related to this conduct.

Waters has been detained since October 2, 2012, when the Court ordered him held pending sentencing in the criminal contempt action. He is currently scheduled to be sentenced in April 2013 in connection with the guilty pleas in the two separate criminal actions against him.

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James F. Ellis – Wilton Manors, Florida Ponzi Scheme and Investment Fraud FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Fri, 09 Nov 2012 20:01:20 GMT

Securities and Exchange Commission v. Ellis, Civil Action No. 0:12-cv-62211

SEC Charges South Florida Man with Recruiting Victims of Ponzi Scheme

The Securities and Exchange Commission recently charged a South Florida man with defrauding at least 14 investors by soliciting them to invest in a Ponzi scheme. A significant number of the victims were members of the gay community in Wilton Manors, Florida and included inexperienced, unaccredited investors.

In the complaint filed in the U.S. District Court for the Southern District of Florida, the SEC alleges that James F. Ellis, 69, a resident of Wilton Manors, Florida, fraudulently solicited investors for George Elia from 2004 to 2011. Elia operated pooled investment vehicles under the names Investor Funding Club and Vision Equities Funds. Elia purported to trade in stocks and earn annual returns as high as 26 percent, but was actually running a Ponzi scheme and paying returns to existing investors from new investor funds. In April 2012, the Commission charged Elia with securities fraud. See Litigation Release No. 22319 (April 6, 2012).

According to the Commission’s complaint against Ellis, Ellis persuaded prospective investors by falsely telling them that he had personally invested with Elia at least $5 million that he had inherited from his parents. Ellis variously told investors that he earned 16% to 20% annual returns on his investment with Elia or that he earned $20,000 to $24,000 per month. Elia and his entities did in fact pay Ellis over $2.1 million over seven years. However, those payments were not investment returns because, as Ellis knew, he had not made an investment with Elia that would have returned such large sums of money. According to the complaint, Ellis also reassured prospective investors of the safety of the investment by falsely telling them that he had tested Elia by depositing a large amount of money with Elia, then asking for and receiving it back.

According to the complaint, Ellis bolstered his deceptive claims about the success of his investment with Elia with ostentatious displays of wealth, including expensive real estate, luxury cars, jewelry, opulent entertaining of his friends, and expensive cruises. Though Ellis claimed that his investments with Elia made his luxurious lifestyle possible, he failed to disclose to investors that his wealth derived not from legitimate investment returns but from the money that Elia paid him for fraudulently touting Elia’s investment vehicles.

The Commission’s complaint charges Ellis with securities fraud in violation of Section 17(a)(1), (2) and (3) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The complaint also alleges that Ellis violated the registration provisions of Sections 5(a) and (c) of the Securities Act. The Commission is seeking permanent injunctions against Ellis for violating the above provisions of the securities laws, disgorgement of ill-gotten gains plus pre-judgment interest, and civil penalties.

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Arnett L. Waters – Florida Securities and Precious Metals Fraud AAA and JAMS Arbitration and Litigation Attorney

Russell L. Forkey — Fri, 19 Oct 2012 09:14:38 GMT

Securities and Exchange Commission v. A.L. Waters Capital, LLC, et al., Civil Action No. 12-cv-10783-DJC (District of Massachusetts)

United States of America v. Arnett L. Waters, Criminal No. 12-cr-10336-DJC (District of Massachusetts)

Defendant in SEC Action Charged by United States Attorney’s Office for the District of Massachusetts

The Securities and Exchange Commission recently announced that on October 17, 2012, the United States Attorney’s Office for the District of Massachusetts charged Arnett L. Waters, a resident of Milton, Massachusetts, with multiple schemes to defraud investors and business clients, as well as with obstruction of justice. Waters is also a defendant in an action filed by the Commission on May 1, 2012. The criminal information charges Waters with sixteen counts of securities fraud, mail fraud, money laundering, and obstruction of justice.

According to the criminal information, from at least 2007 through 2012, Waters used fictitious investment-related partnerships to draw in investors, misappropriate their investment money, and spend the vast majority of it on personal and business expenses and debts. Waters is alleged to have raised at least $839,000 from at least thirteen investors, including $500,000 from his church in March 2012.

The criminal information also alleges that Waters engaged in a criminal scheme to defraud clients of his rare coins business using interstate commerce and the mails. Under this scheme, Waters defrauded coin customers out of as much as $7.8 million by selling coins at prices inflated, on average, by 600% and by inducing coin purchasers to return coins to him, on the false representation that he would sell those coins on the customers’ behalf, when, in fact, he sold most or all of the coins and kept the proceeds for himself. The criminal information further alleges that Waters engaged in money laundering through two transactions totaling $77,000.

Finally, the criminal information alleges that Waters made multiple misrepresentations to Commission staff, including that there were no investors in his investment-related partnerships, in order to conceal the fact that investor money was misappropriated in a fraudulent scheme. Waters is charged with obstruction of justice related to this conduct.

The filing of the criminal information follows the Commission’s complaint filed in federal court in Boston on May 1, 2012 against Waters and two of his companies, A.L. Waters Capital, LLC and Moneta Management. The Commission’s complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. The Commission also alleges that Arnett Waters and Moneta Management violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Complaint also named Arnett Waters’ wife, Janet Waters, and a third entity controlled by Arnett Waters, Port Huron Partners, L.P., as relief defendants. In its action, the Commission seeks the entry of a permanent injunction against the defendants, disgorgement of ill-gotten gains by the defendants and relief defendants plus pre-judgment interest thereon, and the imposition of civil monetary penalties against the defendants.

On May 3, 2012, the U.S. District Court in Massachusetts issued a preliminary injunction in the SEC’s action that, among other things, prohibits the civil defendants from continuing to violate certain federal securities laws and freezes the assets of the defendants.

On August 7, 2012, the Commission also filed a civil contempt motion alleging that Arnett Waters had willfully violated the Court’s preliminary injunction order. The Commission’s motion alleged that Waters had established an undisclosed bank account, transferred funds to that account, dissipated assets, and failed to disclose the bank account as required by the Court. On August 9, 2012, the United States Attorney’s Office for the District of Massachusetts filed a separate criminal information charging Waters with two counts of criminal contempt based on the same allegations. On October 2, 2012, Waters pled guilty to both counts of criminal contempt, and the Court ordered him detained pending sentencing on December 5, 2012.

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Deer Hill Financial Group and Stephen B. Blankenship – Florida Investment Theft and Conversion Attorney

Russell L. Forkey — Fri, 14 Sep 2012 00:37:26 GMT

SEC Charges Connecticut-Based Broker With Stealing Investor Funds to Pay Mortgage and Shopping Bills

September, 2012:

The Securities and Exchange Commission recently charged a broker and his company based in Danbury, Conn., with stealing at least $600,000 from customers who he persuaded to withdraw money from their brokerage accounts he managed at other firms and instead invest with him directly.

The SEC alleges that Stephen B. Blankenship lured about a dozen customers – including some retirees and others he met at church – into his scheme by assuring them they could obtain a greater rate of return on their money by transferring it to his firm, Deer Hill Financial Group. Blankenship claimed he was investing their money in established securities such as publicly-traded mutual funds. But in reality he made no investments and merely transferred customer money to his own bank account, and he misused it to pay his mortgage, travel, and grocery bills among other personal expenses. Blankenship also paid some business expenses and made Ponzi-like payments to other customers who requested a return of all or part of their investment.

In a parallel action, the U.S. Attorney’s Office for the District of Connecticut also announced criminal charges against Blankenship.

“Blankenship took advantage of fellow churchgoers and senior citizens who relied on their savings for retirement and placed their trust in him,” said David P. Bergers, Director of the SEC’s Boston Regional Office. “He betrayed that trust by using their money to make personal credit card payments and home improvements.”

According to the SEC’s complaint filed in the U.S. District Court for the District of Connecticut, most of the investors deceived by Blankenship became his brokerage customers at Santa Monica-based Syndicated Capital and later at Melville, N.Y.-based Vanderbilt Securities. Some had been his customers for as long as two decades. Beginning in at least 2002, Blankenship took advantage of those longstanding relationships and began convincing customers to withdraw money from their brokerage accounts at those firms with promises that he could achieve a greater rate of return for them directly by investing their money through Deer Hill.

The SEC alleges that in order to conceal his scheme, Blankenship often created fake account statements that falsely represented that he had invested their money in a variety of investments. The purported account statements were printed on Deer Hill letterhead and provided to customers. In all instances, the investments described on the account statements did not exist.

The SEC’s complaint alleges that Deer Hill and Blankenship violated the antifraud provisions of the federal securities laws and acted as unregistered brokers. The complaint seeks disgorgement of ill-gotten gains plus prejudgment interest, monetary penalties, and the entry of a permanent injunction against Deer Hill and Blankenship, who lives in New Fairfield, Conn.

Based on the same misconduct, the U.S. Attorney’s Office for the District of Connecticut charged Blankenship with criminal violations. The Connecticut Department of Banking’s Securities Division has obtained, by consent, a revocation of Blankenship’s registration and has barred Blankenship and Deer Hill from operating in Connecticut.

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Ricardo Bonilla Rojas and Shadal Yire – Ponzi Scheme Florida Fraud and Misrepresentation Attorney

Russell L. Forkey — Wed, 22 Aug 2012 08:46:57 GMT

SEC Brings Charges in Puerto Rico-Based Ponzi Scheme Targeting Evangelical Christians and Factory Workers

August, 2012:

The Securities and Exchange Commission recently charged a Puerto Rico resident and his company with conducting a Ponzi scheme that targeted evangelical Christians and factory workers in Puerto Rico.

The SEC alleges that Ricardo Bonilla Rojas and his firm Shadai Yire raised at least $7 million from as many as 200 investors living primarily in Puerto Rico but also on the U.S. mainland in such states as Florida, New York, and North Carolina. Rojas actively solicited investors through personal discussions with individuals both over the phone and in person, and he also marketed the investment opportunity in presentations to evangelical Christian groups and factory workers who were often inexperienced investors. Rojas falsely assured investors that their principal contributions were “100% guaranteed” and promised returns up to 50 percent, telling them he’d be investing their money in commodities. But Rojas never actually invested any money in commodities and instead used new contributions to repay earlier investors in classic Ponzi scheme fashion. He stole $700,000 for himself.

In a parallel action, the U.S. Attorney’s Office for the District of Puerto Rico today announced criminal charges against Rojas.

“Rojas targeted novice investors who were often evangelical Christians, and he touted a long history of successful trading in commodities,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “In reality, he was fleecing the flock.”

According to the SEC’s complaint filed in U.S. District Court for the District of Puerto Rico, Rojas and Shadai Yire conducted the scheme from at least August 2005 to February 2009. Rojas, who resides in Arecibo, Puerto Rico, and his company Shadai Yire have never been registered with the SEC to offer securities.

The SEC alleges that Rojas hired some sales agents to help him solicit investors, and paid commissions based on a percentage of the investor funds they raised. Rojas and his sales agents pitched the investment opportunity to individuals as a risk-free way to earn high returns in a short period of time. Rojas also created phony account statements that were sent to investors to hide his misuse of investor money and lead them to believe their investments were growing.

The SEC’s complaint seeks disgorgement of ill-gotten gains, financial penalties, and injunctive relief against Rojas and Shadai Yire to enjoin them from future violations of the federal securities laws.

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