Commercial and Business Dispute Litigation - Russell L. Forkey

The Florida Uniform Fraudulent Transfer Act – How Can the Act Help You in Collecting on Your Judgment – South Florida and Central Florida Judgment Collection Attorney

Russell L. Forkey — Sat, 04 Jan 2020 18:19:11 GMT

The Florida Uniform Fraudulent Transfer Act – How Can the Act Help You in Collecting on Your Judgment – South and Central Florida Judgment (Including Out-of-State Judgments) Collection Attorney.

The Florida Uniform Fraudulent Transfer Act (“FUFTA”) is contained in Florida Statute §§ 726.101 – 201 FUFTA provides creditors (judgment holders) with various forms of relief to avoid a debtor’s (defendant’s) fraudulent transfer of assets or funds. A creditor (a plaintiff) may avoid a debtor’s transfer where the creditor shows that the transfer was made with actual intent to hinder, delay, or defraud. To that end, FUFTA provides a non-exhaustive litany of factors – referred to as “badges of fraud” – to consider when determining whether a debtor’s transfer is fraudulent as to the creditor:

The transfer or obligation was to an insider.
The debtor retained possession or control of the property transferred after the transfer.
The transfer or obligation was disclosed or concealed.
Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit.
The transfer was of substantially all of the debtor’s assets.
The debtor removed or concealed assets.
The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred.
The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation incurred.
. The transfer occurred shortly before or shortly after a substantial debt was incurred.
The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

The court may additionally consider any other factor it deems relevant and should look to the totality of the circumstances in determining actual fraud. The existence of badges of fraud creates a prima facie case and raises a rebuttable presumption that the transaction is void.

FUFTA also allows a creditor to avoid a debtor’s transfer that is constructively fraudulent. In order to establish a prima facie case for avoidance based on constructive fraud, the creditor must show that the debtor did not receive reasonable value for the transfer and either (1) the debtor was engaged or was about to engage in a business or transaction for which the debtor’s remaining assets were unreasonably small in relation, (2) the debtor intended to, believed, or reasonably should have believed that it would incur debt beyond what it could pay as the debt became due, or (3) the debtor was insolvent at the time of the transfer.

Please keep in mind that this article is for informational purposes only. It is not designed to be complete in all material respects. Moreover, there may be facts specific to your situation that would have to be considered to determine whether or not a fraudulent transfer has taken place. Thus, if you have any questions relative to this post, please feel free to contact us.

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With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation, commercial litigation 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, brokerage firms or U.S. companies. 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, precious metal firms and other types of business activities.

FAQ’s Joint Venture Agreements in Florida – Breach of Joint Venture Agreements

Russell L. Forkey — Fri, 13 Dec 2019 19:54:25 GMT

To establish a joint venture in Florida, the written contract must contain the following five elements: (1) a community of interest in the performance of a common purpose, (2) joint control or right of control, (3) a joint proprietary interest in the subject matter, (4) a right to share in the profits and (5) a duty to share in any losses which may be sustained. Absence of one element precludes the finding of a joint venture.

A party asserting that an unwritten, implied contract is the basis of a joint venture faces a heavy and difficult burden, as it must allege and prove that the implied contract contains the same five elements required of a joint venture based on a written contract.

If these five elements exist, joint venturers owe each other a duty of loyalty, breach of which gives rise to a claim for breach of fiduciary duty.

The above information is being provided for educational purposes. It is not designed to be complete in all material respects. If you have any questions concerning the contents of this post, please contact a qualified professional.

Contact Us:
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.

Justifiable Reliance – Orange County Florida Commercial Litigation and Arbitration Attorney

Russell L. Forkey — Thu, 31 Oct 2019 15:21:40 GMT

In examining the concept of justifiable reliance, the Florida Supreme Court opined that the question is whether the recipient of a misrepresentation or omission is justified in relying upon its truth. For if the recipient “knows that it [the statement] or [omission] is false or its falsity is obvious to him/her, his/her reliance is improper, and there can be no cause of action for fraudulent misrepresentation. This is particularly important in circumstances where the misrepresentation or omission is subsequently referenced in a written contract. In such a circumstance, the Court has determined that notwithstanding oral misrepresentations prior to the making of a contract, a party cannot establish justifiable reliance and “may not recover in fraud for an alleged false statement when proper disclosure of the truth is subsequently revealed in a written agreement between the parties.

Direct or Derivative Claim- South Florida Commerical State and Federal Court Litigation Attorney

Russell L. Forkey — Sat, 11 Aug 2018 17:25:04 GMT

As a Shareholder of a Corporation or Member of a Limited Liability Company, is Your Claim Direct or Derivative.

Recently, in Dinuro Investments, LLC v. Camacho, 141 So.3d 731 (Fla. 3d DCA 2014), the court conducted a detailed survaey of the law in this area in both Florida and throughout the country. The court noted that three tests routinely have been applied to resolve the direct versus derivative claim question.

1. Direct Harm Test

The first test is the direct harm test. Under this test, the court examines whether the harm from the alleged wrongdoing flows first to the company and only damages the shareholders or members due to the loss in value of their respective ownership interest in the company, or whether the harm flows directly to the shareholder or member in a way that is not secondary to the company’s loss. Under the direct harm approach, the examining court looks at the injury alleged by the individual shareholder and determines whether that injury flows from some damage to the company itself. The examining court then must compare the individual’s harm to the company’s harm, and a shareholder can only bring a direct suit if the damages are unrelated to the damages sustained by the company and if the company would have no right to recover in its own action. The Dinuro court noted that this approach likely provides the greatest simplicity in application, as the courts need only look to whether the alleged wrongful conduct devalued the company as a whole or was directed specifically towards the individual plaintiff.

2. Special Injury Test

The second test is the special injury test. Under this test, the examining court must compare the individual plaintiff’s alleged injury to those injuries suffered by the other members or shareholders of the company and then determine whether the plaintiff’s injury is separate and distinct from other members or shareholders. This approach requires a plaintiff to demonstrate that he has sustained a loss that is substantially different from those losses sustained by other shareholders or members before he can maintain an individual or direct suit. The Dinuro court noted that this test can be much more difficult to apply, as the ‘special’ nature of the injury can be a nebulous inquiry that is often not readily apparent.

3. Duty Owed Test

The third test is the duty owed test. Under this test, the examining court simply examines the statutory and contractual terms to determine whether the duty at issue was owed to the individual member or shareholder by a particular manager or member, or whether those duties were owed to the company generally. The Dinuro court noted that many courts have also applied this test as an exception to the general rule requiring either direct harm or special injury.

4. Florida’s Test (Two-Prong Test Plus Exception)

After discussing the various tests, the Dinuro court then surveyed Florida law. The court first noted that the Florida Supreme Court has not established a rule in this area. The court then cited to Citizens National Bank of St. Petersburg v. Peters, 175 So.2d 54 (Fla. 2d DCA 1965), as the first Florida appellate court to enunciate a rule governing the direct versus derivative suit issue as follows:

A Florida court has defined a derivative suit as an action in which a stockholder seeks to enforce a right of action existing in the corporation. Conversely, a direct action, or as some prefer, an individual action, is a suit by a stockholder to enforce a right of action existing in him.

What these definitions attempt to convey is that a stockholder may bring a suit in his own right to redress an injury sustained directly by him, and which is separate and distinct from that sustained by other stockholders. If, however, the injury is primarily against the corporation, or the stockholders generally, then the cause of action is in the corporation and the individual’s right to bring it is derived from the corporation. Under Peters, a shareholder can bring a direct action only if the complaint alleges both a direct harm and a special injury. The Dinuro court further noted that this two-prong language has essentially become canon in Florida corporate law, as nearly all subsequent cases deciding whether an action is direct or derivative have quoted Peters or one of its progeny.

The Dinuro court noted that, “Florida courts also recognize an exception to the Peters test when an individual member or manager owes a specific duty to another member or manager apart from the duty owed to the company.” Id. (citations omitted). After further surveying Florida law, the court adopted a two-prong test with an exception for a special duty as follows:

In the view of some courts, the only way to reconcile nearly fifty years of apparently divergent case law on this point is by holding that an action may be brought directly only if (1) there is a direct harm to the shareholder or member such that the alleged injury does not flow subsequently from an initial harm to the company and (2) there is a special injury to the shareholder or member that is separate and distinct from those sustained by the other shareholders or members….

These courts also find that there is an exception to this rule under Florida law. A shareholder or member need not satisfy this two-prong test when there is a separate duty owed by the defendant(s) to the individual plaintiff under contractual or statutory mandates. Thus, if the plaintiff has not satisfied the two-prong test (direct harm and special injury) or demonstrated a contractual or statutory exception, the action must be maintained derivatively on behalf of the corporation or company.

Please keep in mind that this post is being provided for educational purposes only. It is not designed to be complete in all material respects. In reading the above post, it is clear to see that determining what type of claim you have is not an easy task. Thus, if you have any questions, you should contact a qualified professional.

Bank Claims – Breach of Fiduciary Duty and Breach of Contract Commercial Litigation Attorney

Russell L. Forkey — Sun, 29 Nov 2015 14:23:45 GMT

Bank Claims – Breach of Fiduciary Duty and Breach of Contract Federal and State South Florida Commercial Litigation Attorney

Bank Claims – Breach of Fiduciary Duty:

Does a bank owe you a duty of care, which would support a claim for negligence?

“To maintain an action for negligence, a plaintiff must establish that the defendant owed a duty, that the defendant breached that duty, and that this breach caused the plaintiff damages.” Fla. Dep’t of Corrs. v. Abril, 969 So.2d 201, 204 (Fla.2007). See Harbor Court, LLC v. Colonial Bancgroup, Inc., No. 08-80824-CIV, 2009 WL 455434, at *2 (S.D.Fla. Feb.23, 2009). The first step in a negligence analysis is to identify the standard of care with regard to a duty and then determine to whom that duty is owed. Therefore, if it is found that the bank did not owe the plaintiff a duty of care, a negligence claim cannot be maintained.

The general rule is that a bank has a duty to use ordinary care, presumptively in all its dealings. In re Meridian Asset Mgmt., Inc., 296 B.R. 243, 259 (Bankr.N.D.Fla.2003); See Fla. Stat. § 674.10. Banks owe a duty to customers. Wiand v. Wells Fargo Bank, N.A., 8:12-CV-00557-T-27, 2013 WL 1401414 (M.D.Fla. Apr.5, 2013). However, as a matter of law, a bank does not owe a duty to non-customers regarding the opening and maintenance of its accounts. Sroka v. Bank, 2006-CA-001117, 2006 WL 2535656 (Fla.Cir.Ct. Aug.31, 2006).

In this fact pattern, the bank asserts that it did not owe the plaintiff a duty because the plaintiffs were a “third party non-customer.” Therefore, the basis of banks argument relies on the plaintiffs being a non-customer. The plaintiffs argue that the bank owed it a duty of reasonable care to not allow an unauthorized third person to open a bank account in their name.

Florida law defines “customer” as “a person having an account with a bank or for whom a bank has agreed to collect items.” Fla. Stat. § 674.104(e). The complaint, in this fact pattern, alleges that the bank permitted a third party to open a “sham plaintiffs’ account” without authorization or approval. “That allegation, standing alone, demonstrates that plaintiffs were a customer of bank.” Harbor Court, LLC v. Colonial Bancgroup, Inc., No. 08-80824-CIV, 2009 WL 455434, at *2 (S.D.Fla. Feb.23, 2009). Even though the individual opening the account did not have authority to do so, the account that was opened was in plaintiffs name. Thus, the plaintiffs were the account holders and accordingly, the customer of bank. The complaint also alleges that the bank breached its duty by allowing the third party to open the account without proper authority. Plaintiffs further claim that as a result of bank’s breach of duty, the third party was able to misappropriate funds from the plaintiffs. Therefore, because the complaint alleges facts sufficient to support a claim for negligence, the bank’s motion to dismiss must fail.

Under this factual pattern, the court found that because the plaintiffs were customers, the bank owed them a duty of care and therefore, plaintiffs’ negligence claim survived.

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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.

Sethi Petroleum, LLC and Sameer Praveen Sethi – Fraudulent Oil and Gas Scheme – South Florida Commercial Litigation Attorney

Russell L. Forkey — Tue, 19 May 2015 16:53:52 GMT

Sethi Petroleum, LLC and Sameer Praveen Sethi – Fraudulent Oil and Gas Scheme – South Florida, including Boca Raton, Fort Lauderdale and West Palm Beach, Commercial Litigation Attorney

Securities and Exchange Commission v. Sethi Petroleum, LLC and Sameer Sethi, Civil Action No. 4:15-CV-338 (E.D. Tex.)

SEC Halts Fraudulent Oil and Gas Scheme and Obtains Asset Freeze and Appointment of a Receiver Over Sameer Sethi and Sethi Petroleum, LLC

On May 14, 2015, the Securities and Exchange Commission filed an emergency civil action against Sethi Petroleum, LLC and its president, Sameer Praveen Sethi, for offering fraudulent oil and gas investments. At the Commission’s request, the U.S. District Court for the Eastern District of Texas has entered a temporary restraining order halting the offering, as well as orders appointing a receiver over, and freezing, the defendants’ assets.

The Commission’s complaint alleges that, since at least January 2014, defendants have raised approximately $4 million through the fraudulent offer and sale of securities in the Sethi-North Dakota Drilling Fund-LVIII Joint Venture (“NDDF”). According to the complaint, defendants’ offering materials represented that 70% of investor funds would be used to acquire working interests in and drill and complete 20 oil and gas wells in the Bakken Shale formation in North Dakota. But the Commission alleges that defendants spent less than 25% for these purposes. Instead, defendants spent more than 75% of investor funds on undisclosed and unapproved expenditures such as diverting $1.6 million to Sameer Sethi, his family, and Sethi Petroleum’s parent company and over $1 million to sales employees. Less than $1 million of the funds raised went to NDDF’s actual oil and gas operations.

The Commission also contends that defendants made numerous other misrepresentations and omissions to NDDF investors. For instance, defendants falsely claimed to have “partnered directly with” large public oil and gas companies like ConocoPhillips and Continental Resources, Inc. to develop oil and gas properties, and Sethi Petroleum’s website featured corporate logos for other well-known companies like Exxon Mobil and Hess Corporation, falsely suggesting that defendants had relationships with these companies as well. The Commission further alleges that defendants misled investors about the number of wells in which NDDF actually held interests; the operating status of those wells; and the returns investors could expect from those properties. Defendants also failed adequately to disclose prior enforcement actions taken against them and their affiliates by state securities regulators, and Sameer Sethi’s prior criminal conviction and incarceration.

The complaint alleges that both defendants violated Section 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, and that Sameer Sethi also violated Exchange Act Section 20(b) and is liable under Exchange Act Section 20(a) as a control person for Sethi Petroleum’s violations. The Commission seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties against both defendants.

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Boca Raton, Florida Business and Construction Dispute Litigation and Arbitration Attorney

Russell L. Forkey — Sun, 22 Mar 2015 02:15:41 GMT

South Florida, including Boca Raton, Fort Lauderdale, West Palm Beach and Delray Beach Business and Construction Litigation and Arbitration Attorney:

The Law Office of Russell L. Forkey, P.A. handles all types of contract disputes including business and construction disputes. Business disputes include such things as breach of non-compete agreements, shareholder derivative actions, breach of employment agreements and breach of shareholder agreements. Construction disputes include disagreements between real estate developers, homeowners, general contractors and subcontractors. Construction law can be very complex and we understand those complexities. We offer our knowledge and experience and if needed, the assistance of experts to achieve the best decisions possible.

When a business or individual fails to live up to the terms of a written or an oral agreement, legal action might be necessary. Many times the issues involved are complex. It is in your best interest to choose an experienced business dispute attorney. It will be beneficial to you to find a business dispute attorney that has an established reputation and is recognized for integrity. We have been providing such services in the South Florida area for over 35 years. Our years of experience and dedication have allowed our business dispute attorneys to achieve tremendous success in the resolution of business disputes.

Whether you are an individual or a corporation, contracts are involved in many aspects of your daily activities. Businesses use contracts to create certainty in their dealing with their employees, suppliers and end-users. Individuals use contracts to also create certainty in their dealings with third parties. It is for this reason that all parties take the negotiation, drafting and execution of the contract very seriously.

Negotiation is generally defined as discussing a matter with a view towards reaching an agreement. In this process, the initial consideration that needs to be made is whether you are sufficiently competent, in the subject matter of the negotiation, to complete the process yourself or, if you are a business, with members of your staff. If you have any doubt about your ability or that of your staff or if you are dealing with complex and/or technical issues, especially if the other party is represented by an attorney or has involved other technical experts, it is strongly recommended that you retain appropriate professionals to assist you. One of the biggest mistakes that we have seen, at this stage of a business transaction, is being penny wise and pound foolish. In other words, by trying to save a few dollars at this stage of a transaction could result in unnecessary litigation expenses in the future.

Once you have your team in place and have completed the preliminary discussions concerning the agreement. The next step in the process is to have one of the parties to the transaction prepare the initial draft of the agreement. During this phase of the process, the negotiation process usually continues as the parties attempt to make sure that the agreement contains all necessary and appropriate provisions. This includes attempting to provide for both anticipated and unanticipated issues that might arise during the performance stage of the contract.

Unfortunately, once the contract has been entered into, numerous circumstances arise when one party to the agreement does not live up to all of its obligations. Sometimes these failures can be resolved by further negotiation and a written modification to the agreement. If this does not work, the aggrieved is left with no option but to file an action either seeking specific performance of the contract terms or for damages that were suffered as a result of the breach.

We represent local, regional and national clients in obtaining legal solutions in complex commercial litigation. We offer sound guidance in breach of contract disputes and other commercial disputes involving:

Breach of written and oral contracts
Partnership disputes
Shareholder disputes and business management agreement disputes
Employment contract disputes, including breach of noncompete agreements
Business dissolutions
UCC issues
Transaction disputes
Purchase order disputes
Commercial lease disputes
Unfair business and trade practices
Business fraud
Misappropriation of trade secrets
Lending disputes
Business defamation
Other commercial disputes

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Boca Raton, Florida Corporate and Shareholder Business and Commercial Dispute Litigation and Arbitration Attorney

Russell L. Forkey — Mon, 02 Mar 2015 03:01:28 GMT

South Florida (Boca Raton, Florida) Corporate and Shareholder Business Dispute Litigation and Arbitration Attorney:

Florida Minority Shareholder Election Statute:

607.1436 Election to purchase instead of dissolution.

Fla Stat. § 607.1436 gives the court charged with valuing shares in a corporation discretion to determine the most appropriate valuation method by which to arrive at “fair value.” A trial court’s selection of one valuation method over another does not require reversal. The valuation process is fact specific with an emphasis on the particular circumstances of the case. The factors to be considered in determining ‘fair value’ are market value, investment value, and net asset value, and the weight to be accorded each factor depends upon the circumstances of the particular case.

A. Consideration of Fair Market Value:

Florida courts have explained that determination of “fair value” for the purposes of the election statute rests on determining what a willing purchaser in an arm’s length transaction would offer for an interest in the subject business. This is not to say that “fair value” is synonymous with “fair market value.” Most courts have rejected the notion of such synonymity. However, the terms are not mutually exclusive. On one hand, as Florida courts have explained, where “fair market value” would take into account appreciation or depreciation in anticipation of corporate action such as a merger or acquisition, the valuation process under § 607.1436 must exclude both positive and negative effects of any such impending transaction. On the other hand, a court may use fair market value as an estimate of “fair value” when such potentially distorting corporate actions are not at issue.

Accordingly, Florida courts have recognized that valuation proceedings necessarily confront them with a variety of evidence and methods aimed at determining the price of minority interests. In valuing a corporation, a court should consider proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court such as net asset values, market price, earnings, and the like.

B. Definition of “Going Concern” and Normalization of EBITDA:

The “fair value” of a business should be determined based on the value of that business as a going concern. The term “going concern” is generally understood to refer to a commercial enterprise actively engaging in business with the expectation of indefinite continuance. In the valuation context, it is generally used in contradistinction to a business that will be liquidated. Essentially, it requires an appraisal to assume the continued operation of the same type and size of business and to exclude consideration of any merger or liquidation.

C. Compensation for Past Misconduct:

Entry of an order directing the purchase of minority shareholdings pursuant to Fla. Stat. § 607.1436 requires the dismissal of the underlying petition for dissolution pursuant to § 607.1430. § 607.1436(6). However, courts have clarified that “fair value” still ought to take into account any effect thereupon of corporate asset waste or other harm caused by mismanagement.

In a comparable sales analysis, corporate waste would affect the estimation of fair value in that it would result in higher expenses, which would, in turn, yield a lower operating margin. Normalizing the operating margin according to that of comparable businesses for any distortion caused by greater than normal expenses.

D. Prejudgment Interest:

Section 607.1436(5) provides that the valuing court “may” award interest “at the rate and from the date determined by that court to be equitable. The statute further provides that “no interest shall be allowed” when the petitioning shareholder has acted arbitrarily or in bad faith by turning down a purchase price or otherwise lengthening the proceedings. In other words, giving the statutory language its plain and ordinary meaning, the only limit on the court’s discretion to award prejudgment interest on the value of shares to be purchased arises when the minority shareholder at issue has acted in bad faith.

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Fraudulent Day Trading Scheme – Boca Raton, Florida Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Wed, 19 Nov 2014 16:03:43 GMT

Boca Raton, Florida – Fraudulent Day Trading Scheme FINRA Arbitration and Litigation Attorney:

SEC Charges Unregistered Broker in Tampa Area With Stealing From Investors in Fraudulent Day Trading Scheme

The Securities and Exchange Commission recently charged an unregistered broker living outside Tampa, Fla., with stealing investor funds as part of a fraudulent day trading scheme.

The SEC alleges that Albert J. Scipione and his business partner solicited investors to establish accounts at their company called Traders Café for the purposes of day trading, which entails the rapid buying and selling of stocks throughout the day in hope that the stock values continue climbing or falling for the seconds to minutes they own them so they can lock in quick profits. Scipione touted Traders Café’s software trading platform and made a series of false misrepresentations to investors about low commissions and fees, high trading leverage, and safety of their assets. More than $500,000 was raised from investors who were assured that funds invested with Traders Café would be segregated and used only for day trading or other specific business purposes. However, many customers encountered technical service problems that prevented them from trading at all, and Scipione and his business partner squandered nearly all of the money in investor accounts for their personal use. Meanwhile, Traders Café was never registered with the SEC as a broker-dealer as required under the federal securities laws.

The SEC previously charged Scipione’s business partner Matthew P. Ionno, who agreed to settle the case and has been barred from the securities industry. Financial penalties will be decided by the court at a later date.

In a parallel action, the U.S. Attorney’s Office for the Middle District of Florida today announced that Scipione has pleaded guilty to criminal charges. The U.S. Attorney’s Office previously brought a criminal case against Ionno.

According to the SEC’s complaint filed against Scipione in federal court in Tampa, customers across the country deposited approximately $367,000 with Traders Café from December 2012 to October 2013 with the intention of opening day trading accounts. Traders Café also received approximately $150,000 from an investor who invested directly in Traders Café’s business. Customers encountered problems with Traders Café from the outset, and many of them cancelled their accounts and requested refunds of their remaining account balances. Scipione and Ionno tried to cover up their fraudulent scheme by offering excuses and delays for why customers could not get refunds. Eventually less than $1,200 remained in Traders Café’s accounts primarily due to the repeated misuse of investor funds by Scipione and Ionno.

The SEC’s complaint against Scipione alleges that he violated Section 17(a) of the Securities Act of 1933 as well as Section 15(a) and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC seeks disgorgement of ill-gotten gains, financial penalties, and permanent injunctive relief to enjoin Scipione from future violations of the federal securities laws.

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SEC Charges Business Owner and Stockbroker in Real Estate Offering Fraud

Russell L. Forkey — Fri, 14 Nov 2014 21:22:04 GMT

Boca Raton, Florida Real Estate Investment and Offering Fraud FINRA Arbitration and Litigation Attorney:

SEC Charges Business Owner and Stockbroker in Maryland-Based Real Estate Offering Fraud

The Securities and Exchange Commission today charged the owner of a Maryland-based real estate company with conducting an offering fraud and spending investor money on such personal expenses as his mortgage, country club dues, and season tickets to the Baltimore Ravens. The agency also charged a former stockbroker for participating in the scheme.

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SEC Charges Business Owner and Stockbroker in Maryland-Based Real Estate Offering Fraud

The Securities and Exchange Commission recently charged the owner of a Maryland-based real estate company with conducting an offering fraud and spending investor money on such personal expenses as his mortgage, country club dues, and season tickets to the Baltimore Ravens. The agency also charged a former stockbroker for participating in the scheme.

The SEC alleges that Wilfred T. Azar III sold investors purported bonds in his company Empire Corporation, which he touted as a successful and profitable business with the resources to pay promised annual returns of 10 percent. Along with Joseph A. Giordano, Azar and his company raised more than $7 million by making these and other false and misleading statements exaggerating the safety and low risk of the bonds. However, Empire Corporation was functionally insolvent in reality, and despite saying investor funds would be used for various corporate purposes, Azar used the money to pay personal expenses as well as thousands of dollars in compensation to Giordano for participating in the fraud. Giordano also steered a mutual fund that he managed into purchasing the bonds despite knowing the company was nearly broke. The scheme collapsed when they were unable to recruit new investors to fund Empire Corporation’s operations and repay existing investors, who did not receive their promised returns and lost substantially all of their investments.

In a parallel case, the U.S. Attorney’s Office for the District of Maryland today announced criminal charges against Azar.

The SEC’s complaint filed in federal court in Baltimore charges Empire Corporation, Azar, and Giordano with violations of Sections 5(a), 5(c) and 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 complaint also charges Giordano with violations of Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 as well as Section 34(b) of the Investment Company Act of 1940. The SEC seeks disgorgement plus prejudgment interest and penalties as well as permanent injunctions. The agency is seeking an officer-and-director bar against Azar.

Boca Raton, Florida Misappropriation and Theft Litigation and Arbitration Attorney

Russell L. Forkey — Sun, 19 Oct 2014 02:00:09 GMT

Boca Raton, Florida Misappropriation and Theft Litigation and Arbitration Attorney:

Securities and Exchange Commission v. Dennis F. Wright, Civil Action No. 1:14-cv-01896-SHR (M.D. Pa)

Final Judgment and Administrative Order Entered Against Pennsylvania-Based Registered Representative Who Stole Funds from Customers

The Securities and Exchange Commission (the “Commission”) recently announced that the United States District Court for the Middle District of Pennsylvania entered a final judgment by consent in a previously filed enforcement action against defendant Dennis F. Wright, a former registered representative based in Lewistown, Pennsylvania. The final judgment permanently enjoins Wright from violating 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. Wright is also ordered to disgorge his ill-gotten gains of $1,533,416.33 and prejudgment interest thereon of $490,618.77, which will be deemed satisfied by the entry of an order of restitution in a parallel criminal case.

According to the Commission’s complaint filed on September 30, 2014, Wright misappropriated more than $1.5 million from at least 28 customers. Wright fraudulently induced his customers to redeem securities held in their securities accounts, including variable annuities and mutual funds, by falsely representing that he would invest the proceeds from the redemptions in a managed account that held other securities that yielded higher returns than their existing securities accounts. Instead, Wright deposited his customers’ funds in a bank account he controlled and from which he misappropriated the funds in order to pay his personal expenses as well as to fund customer withdrawals. Wright concealed his fraud by providing his customers with falsified account statements purportedly showing that they had purchased and owned interests in the non-existent managed accounts with appreciating balances.

On October 16, 2014, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b)(6) of the Securities and Exchange Act and Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (“”Order”) against Wright. The Order permanently bars Wright from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; and also bars him from participating in any offering of a penny stock. Wright consented to the issuance of the Order.

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Anthony Coronati and Bidtoask LLC. – Boca Raton, Florida Investment and Advertising

Russell L. Forkey — Sun, 19 Oct 2014 01:38:43 GMT

Boca Raton, Florida Investment and Advertising Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney:

SEC Charges Staten Island Man With Conducting Fraudulent Offerings and Stealing Investor Funds

The Securities and Exchange Commission trecently charged the operator of an online stock recommendation business with conducting several fraudulent securities offerings and siphoning some of the money raised from investors for a Caribbean vacation and plastic surgery.

An SEC investigation found that Anthony Coronati, who lives on Staten Island, initially held himself out as an investment adviser to a hedge fund that he claimed would invest in equity securities. But the hedge fund was fictitious and Coronati used investor money for other purposes. When the money began drying up, he went on to defraud investors in additional schemes involving his New Jersey-based company Bidtoask LLC. Coronati and Bidtoask sold membership interests in the company for the purpose of investing in promising technology companies that had yet to hold initial public offerings (IPOs). Investors were told that Bidtoask would invest directly in pre-IPO Facebook shares without charging any fees, commissions, or markups to investors. However, Bidtoask’s Facebook-related investments actually did require the payment of significant fees that Coronati and Bidtoask concealed from investors. Bidtoask did not even own the shares of other technology companies in which it was supposedly investing, and these companies were not actually in the process of an IPO.

Coronati and Bidtoask have agreed to settle the SEC’s charges. Coronati must pay back $400,000 in funds stolen from investors, and the money will be deposited into a Fair Fund for distribution to victims of the fraud schemes. Coronati also agreed to be permanently barred from the securities industry.

Coronati, who operates the website BidToAsk.com that offers stock recommendations to subscribers, was the subject of a subpoena enforcement action filed by the SEC late last yearwhen he failed to produce documents or appear for scheduled testimony during the SEC’s investigation. As a result of his continued failure to comply with SEC subpoenas in spite of a court order, Coronati was held in contempt of court and arrested earlier this year.

According to the SEC’s order instituting a settled administrative proceeding, Coronati conducted his schemes from at least 2009 to 2013. As the various schemes unraveled, he faced increasing concerns from investors. Coronati placated certain investors by making Ponzi-like payments to them using other investors’ money, and he sent a phony account statement to at least one investor purporting a position in the fake hedge fund that was worth more than $120,000. The account statement also purported that the fictitious hedge fund was more than 80 percent invested in well-known public companies such as Apple. Meanwhile, Coronati used investor funds to pay business expenses and such personal expenses as the Caribbean vacation and plastic surgery, and he also used investor money to purchase securities in a personal brokerage account he held in his own name.

The SEC’s order finds that Coronati and Bidtoask violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Coronati additionally violated Sections 206(1), 206(2), 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8. Without admitting or denying the findings, Coronati and Bidtoask consented to the SEC’s order requiring them to cease and desist from further violations of those provisions of the securities laws and SEC rules. Information about the Fair Fund will be available at: www.sec.gov/litigation/fairfundlist.htm.

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Bradley Thomas Badger – Boca Raton, Florida Account Executive Unapproved Outside Business Activity FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Sun, 05 Oct 2014 14:45:49 GMT

Bradley Thomas Badger – Boca Raton, Florida Account Executive Unapproved Outside Business Activity FINRA Arbitration and Litigation Attorney

The Financial Industry Regulatory Authority, Inc. (FINRA) is a self-regulatory authority assigned the responsibility, by the Securities and Exchange Commission, to license, regulate and discipline securities broker/dealers and their employees, including account executives. In the event that FINRA elects to institute an enforcement action, firms and licensed individuals have the responsibility to reflect such action on their U-4 and/or U-5 filings, which can be viewed on the FINRA website under the broker-check section of the site or by viewing the monthly disciplinary information also provided on the FINRA site.

The monthly disciplinary information is referenced on the FINRA site generally in alphabetical order. This post relates to the following company or individuals. If the reader would like to review the entire FINRA release or the broker-check information concerning this matter, you can follow these highlighted links:

September 2014 Disciplinary and Other FINRA Actions

Broker Check: http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/

Bradley Thomas Badger (CRD #5665584, Pleasanton, California) submitted a Letter of Acceptance, Waiver and Consent in which he was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in any capacity for 30 business days. Without admitting or denying the findings, Badger consented to the sanctions and to the entry of findings that he failed to provide prior written notice of his involvement in an outside business activity to his member firm. (FINRA Case #2012034456903).

Luciano Andres Battioli – Boca Raton, Florida Account Executive Conversion and Theft FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Sun, 05 Oct 2014 13:37:44 GMT

Luciano Andres Battioli – Boca Raton, Florida Account Executive Conversion and Theft FINRA Arbitration and Litigation Attorney

September 2014 Disciplinary and Other FINRA Actions

Broker Check: http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/

Luciano Andres Battioli (CRD #6229734, Huntington Beach, California) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Battioli consented to the sanction and to the entry of findings that he converted funds belonging to customers of his member firm’s affiliate bank, and forged and falsified bank documents. (FINRA Case #2013039521501)

Wealth Strategy Partners, LC, Harvey Altholtz, Stevens Resource Group, LLC and George Stevens – Boca Raton, Florida Investment Fund and Investment Advisor Fraud and Mismanagement Litigation and Arbitration Attorney

Russell L. Forkey — Sun, 05 Oct 2014 13:18:59 GMT

Wealth Strategy Partners, LC, Harvey Altholtz, Stevens Resource Group, LLC and George Stevens – Boca Raton, Florida Investment Fund and Investment Advisor Fraud and Mismanagement Litigation and Arbitration Attorney

Securities and Exchange Commission v. Wealth Strategy Partners, LC, et al., Civil Action No. 14-CV-02427-JDW-TGW

SEC Charges General Partner and Investment Advisers to the Stealth and Adamas Funds with Fraud

The Securities and Exchange Commission filed a civil injunctive action on September 25, 2014 charging Wealth Strategy Partners, LC (“Wealth Strategy”), a Sarasota, Florida company, and its principal, Harvey Altholtz of Sarasota, Florida, and Stevens Resource Group, LLC (“Stevens Resource”), a Washington company, and its principal, George Stevens of Lacey, Washington, with securities fraud involving the fraudulent offers and sales of securities in two investment funds – The Stealth Fund, LLLP and The Adamas Fund, LLLP. Wealth Strategy and Altholtz controlled and managed the two funds and later served as investment advisers to the funds. Stevens Resource and Stevens also served as investment advisers to both funds.

According to the Commission’s complaint filed in the United States District Court for the Middle District of Florida, the Stealth and Adamas Funds, combined, raised approximately $30.8 million from over 143 investors nationwide between 2007 and November, 2009. The complaint alleges that, from October 2008 through April 2010, the defendants failed to disclose in offering materials distributed to investors that Stealth’s assets could be used to guarantee certain loans that Altholtz’s family made to two portfolio companies that Stealth invested in and that his family also made loans to Adamas and Stealth in violation of the funds’ operating agreements. The complaint also alleges that Wealth Strategy and Altholtz committed fraud by giving an Altholtz family trust, who was an investor in Adamas, preferential treatment with regard to redemptions over other investors. The complaint further alleges that the defendants made misstatements and omissions in newsletters to investors regarding the financial condition of some of the funds’ portfolio companies.

The SEC’s complaint charges the defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, and Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint seeks permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against all of the defendants, and officer and director bars against Altholtz and Stevens. Stevens and Stevens Resource have agreed to settle the case against them by consenting to, among other things, the entry of a judgment permanently enjoining them from future violations of the securities laws, imposing a permanent officer and director bar against Stevens, and ordering them to pay disgorgement and civil penalties, in amounts to be determined by the Court later.

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Oscar F. Villarreal – Boca Raton, Florida Investment and Investment Advisor Fraud Litigation and Arbitration Attorney

Russell L. Forkey — Sun, 05 Oct 2014 12:34:45 GMT

Securities and Exchange Commission v. Oscar F. Villarreal, Civil Action No. 14-cv-01891

Former Cleveland-Area Investment Promoter Oscar F. Villarreal Indicted

On September 16, 2014, the United States Attorney for the Northern District of Ohio obtained a Grand Jury indictment charging Oscar F. Villarreal with ten counts of wire fraud, seven counts of money laundering, one count of securities fraud, and one count of investment adviser fraud.

The Indictment’s allegations are based on the same conduct underlying the Commission’s August 26, 2014 Complaint against Villarreal filed in the United States District Court for the Northern District of Ohio.

The SEC’s Complaint alleges that from March 2009 through December 2010, Villarreal conducted a fraudulent offering, known as Fund III, which raised $9.2 million from 46 investors. According to the complaint, Villarreal told investors that their money was to be used to make private equity investments in companies in the petroleum, steel, and other industries in Mexico. Villarreal lied to these investors about the success of a previous fund he operated, lied in saying that he used their money to purchase and profitably operate a Mexican pipeline manufacturer, and lied by telling investors that Fund III had ownership interests in several U.S. and Mexican drilling companies. Villarreal instead used $7.4 million of Fund III assets to trade in publicly traded securities in a brokerage account-contrary to his representations to investors-and sustained heavy losses, and also stole $5.8 million for himself. By November 2011, Fund III was essentially insolvent.

The Commission’s complaint also alleges that, between August 2010 and March 2011, Villarreal conducted a second fraudulent offering, known as the Standard Asset Management Fund I, (“SAM Fund”), which raised $9 million from 11 investors, six of whom had previously invested in Fund III. According to the complaint, Villarreal told these investors that the SAM Fund would invest in companies listed on the Mexican stock exchange. Villarreal made numerous misrepresentations to these investors. Among other things, Villarreal repeated his earlier lies about Fund II and Fund III’s purported acquisition and profitable operation of a Mexican pipeline manufacturer, he stole at least $327,000 of SAM Fund assets, and Villarreal’s trading was a massive failure, resulting in an 83% loss for the SAM Fund.

The complaint also alleges that Villarreal defrauded the SAM Fund investors between March 2012 and May 2012 by offering to “exchange” limited partnership units he claimed he owned in Fund III for the SAM Fund investors’ limited partnership units in the SAM Fund. Eight SAM Fund investors accepted Villarreal’s offer and exchanged their SAM Fund units, which they had purchased for a total of $3.1 million. Villarreal, however, lied about the number of Fund III limited partnership units he owned and the value of the Fund III units. Villarreal did not disclose to these investors that the Fund III limited partnership units were worthless.

The SEC’s Complaint alleges that Villarreal violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Commission’s complaint seeks a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties.

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Patrick G. Rooney, John R. Rooney and Positron Corporation – Boca Raton, Florida Market Manipulation and Investment Fraud Litigation and Arbitration Attorney

Russell L. Forkey — Sun, 05 Oct 2014 12:14:29 GMT

Patrick G. Rooney, John R. Rooney and Positron Corporation – Boca Raton, Florida Market Manipulation and Investment Fraud Litigation and Arbitration Attorney

SEC v. Patrick G. Rooney, John R. Rooney, and Positron Corporation, Civil Action No. 9:14-cv-81224-KAM (U.S. District Court for the Southern District of Florida)

The Securities and Exchange Commission announced that on September 30, 2014 it filed a civil injunctive action charging Positron Corporation, a microcap company based in Westmont, Ill., Patrick G. Rooney of Oak Brook, Ill., the company’s then-CEO, and John R. Rooney of Jupiter, Fla., a penny stock promoter, for orchestrating a market manipulation scheme involving the company’s stock.

According to the SEC’s complaint filed in the United States District Court for the Southern District of Florida, Positron Corporation, Patrick Rooney, and John Rooney, engaged in market manipulation fraud in which they made an inducement payment to a stock promoter who would purchase shares of Positron in the open market ahead of planned press releases to help them manipulate the stock. The SEC alleges that the scheme was designed to generate the appearance of market activity in the company’s stock to induce investors to purchase the stock and artificially increase the trading price and volume.

The SEC’s complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and 10b-5(c). The SEC is seeking permanent injunctions and civil money penalties against all three defendants, as well as penny stock bars against both Patrick and John Rooney and an officer-and-director bar against Patrick Rooney.

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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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Microcap and Penny Stock Market Manipulation and Fraud – Boca Raton, Florida Federal and State Court Litigation Attorney

Russell L. Forkey — Thu, 18 Sep 2014 19:51:37 GMT

Microcap and Penny Stock Market Manipulation and Fraud – Boca Raton, Fort Lauderdale and West Palm Beach, Florida State and Federal Court Litigation Attorney:

SEC Charges Eight for Roles in Widespread Pump-and-Dump Scheme Involving California-Based Microcap Company

The Securities and Exchange Commission recently charged a ring of eight individuals for their roles in an alleged pump-and-dump scheme involving a penny stock company based in California that has repeatedly changed its name and purported line of business over the past several years.

The SEC alleges that the scheme was orchestrated by Izak Zirk de Maison, who was named Izak Zirk Engelbrecht before taking the surname of his wife Angelique de Maison. Both de Maisons are charged by the SEC in the case along with others enlisted to buy, sell, or promote stock in the company now called Gepco Ltd. Zirk de Maison installed some of these associates as officers and directors of Gepco while he secretly ran the company behind the scenes. Collectively, they amassed large blocks of shares of Gepco common stock while the de Maisons manipulated the market to create the appearance of genuine investor demand, allowing an associate to sell his stock at inflated prices to make hundreds of thousands of dollars in illicit profits.

In a parallel action, the U.S. Attorney’s Office for the Northern District of Ohio and the Cleveland Division of the Federal Bureau of Investigation today announced criminal charges against Zirk de Maison.

The SEC has obtained an emergency court order to freeze the assets of the de Maisons and others who profited illegally through the alleged scheme.

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Zirk de Maison has secretly controlled the shell company now known as Gepco since its incorporation in 2008 under a different name. During the next five years, he caused the company to enter into a number of reverse mergers and its reported business evolved from equipment leasing to prepaid stored value cards related to electronic devices until the company eventually became known as WikiFamilies and claimed to own and operate a social media website. The company name changed to Gepco in 2013, and after a failed attempt to merge it into a private mixed martial arts company, de Maison created his own private company purportedly in the high-end diamond business and merged Gepco into it.

The SEC alleges that the de Maisons, who reside in Redlands, Calif., brought at least six others into the fold to coordinate various components of the scheme. They each are charged in the SEC’s complaint:

Jason Cope of Gates Mills, Ohio, is a longtime associate of Zirk de Maison and has a past record of securities fraud with a court judgment against him in a previous SEC enforcement action. On Cope’s behalf, Louis Mastromatteo of Bay Village, Ohio, allegedly dumped more than 2.5 million shares of Gepco stock through a nominee into the public market for hundreds of thousands of dollars in illicit profits that were kicked back to Cope.
Trish Malone, who lives in Santee, Calif., serves as Gepco’s president, CFO, and secretary. She allegedly used Gepco to issue stock to Zirk de Maison and others so that they could conduct two unregistered and illegal distributions of the securities.
Peter Voutsas, who lives in Santa Monica, Calif., and owns a jewelry store in Beverly Hills, serves as Gepco’s CEO and chief investment officer even though Zirk de Maison runs the company behind the scenes. Along with Angelique de Maison, Voutsas allegedly made a materially misleading statement about Gepco to the public while the de Maisons manipulated the market for Gepco’s stock.
Ronald Loshin of San Anselmo, Calif., served as Gepco’s chief creative officer and allegedly failed to make required regulatory filings to report his transactions in Gepco stock as an insider. Furthermore, Loshin enabled de Maison to deceptively hide his own trading by allowing him to use a brokerage account held in Loshin’s name.
Kieran Kuhn of Port Washington, N.Y., allegedly promoted Gepco stock through his firm Small Cap Resource Corp. and inflated the stock value to help the scheme succeed. He then conducted one of the unregistered and illegal distributions of Gepco-related securities for Zirk de Maison’s benefit.

According to the SEC’s complaint, Zirk de Maison exchanged e-mails and text messages with many of his co-conspirators as they openly discussed coordinating their promotional activities and manipulative trading in Gepco’s stock in order to create a false impression of market activity. They stood to earn exponentially more illicit profits given that they continue to beneficially own tens of millions of shares of Gepco stock, so the SEC suspended trading in Gepco securities in order to prevent any further manipulation or dumping of the stock.

The SEC’s complaint, which additionally charges several companies connected to the scheme, alleges violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 9 and 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks a permanent injunction and disgorgement of ill-gotten gains along with prejudgment interest, financial penalties, and penny stock bars. The SEC also seeks officer-and-director bars against the de Maisons and Malone.

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