Foreign Investors - Russell L. Forkey

EB5 Asset Manager, LLC. – South Florida Private Placement Fraud Litigation and Arbitration Attorney

Russell L. Forkey — Sat, 21 Nov 2015 01:19:37 GMT

EB5 Asset Manager, LLC. – South Florida Private Placement Fraud Litigation and Arbitration Attorney:

Securities and Exchange Commission v. EB5 Asset Manager, LLC, et al., Civil Action No. 0:15-CV-62323 (S.D. Fla., filed November 3, 2015)

Assets Frozen in Alleged Immigration Scam:

The Securities and Exchange Commission recently announced it has obtained a court order freezing the assets of a South Florida woman and her company accused of purchasing a boat and luxury cars with money she raised from investors seeking U.S. residency through the EB-5 Immigrant Investor Pilot Program.

Under the EB-5 program, foreign citizens may qualify for U.S. residency if they make a qualified investment of at least $500,000 in a specified project that creates or preserves at least 10 jobs for U.S. workers. The SEC alleges that Lin Zhong and her company EB5 Asset Manager LLC raised at least $8.5 million for use by U.S. EB-5 Investments LLC in job-creating real estate development projects, but they diverted nearly $1 million to purchase a boat, a BMW, and a Mercedes among other improper personal uses of investor funds.

The SEC also obtained a court order appointing a receiver to administer and manage the business affairs and assets of the company and its subsidiaries for the protection of investors.

According to the SEC’s complaint filed earlier this month in U.S. District Court for the Southern District of Florida against Lin Zhong, who also goes by the name Lily Zhong:

Investors were told that money they invested in U.S. EB-5 Investments LLC would be used for real estate development including a mixed-use commercial project planned for the City Center in Port St. Lucie, Fla.
Zhong and EB5 Asset Manager diverted approximately $900,000 of those funds for unrelated personal uses that also included her own real estate taxes as well as education expenses for her family members.
Zhong and EB5 Asset Manager also made misrepresentations to investors about the use of U.S. EB-5 Investments’ funds and failed to disclose Zhong’s past failed real estate venture.
Investors were falsely told that U.S. EB-5 Investments would prepare and provide unaudited financial reports to investors.
Zhong and EB5 Asset Manager falsely claimed that certain investors’ funds would be held in escrow until the form filed by potential EB-5 investors to petition the U.S. Citizenship and Immigration Services (USCIS) for immigration status received that agency’s approval.
Zhong and EB5 Asset Manager also made material omissions and false statements about conflicts of interest, and made false statements about the location of real estate development projects.

The SEC’s complaint alleges that Zhong and EB5 Asset Manager 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. Zhong has agreed to stipulate to the asset freeze and receiver following a lengthy hearing on the SEC’s motions when the court issued a separate order granting expedited discovery, prohibiting the destruction of documents, and requiring Zhong, EB5 Asset Manager, and relief defendants to provide the SEC and the court with a sworn accounting of their assets.

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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.

Equity Fund and Equity Manager Fruad and Mismanagement – South Florida Litigation and Arbitration Attorney

Russell L. Forkey — Fri, 31 Jan 2014 11:40:44 GMT

Private Equity Fund and Private Equity Fund Management Mismanagement and Fruad – South Florida Federal and State Court Litigation and Arbitration Attorney:

SEC Charges Manhattan-Based Private Equity Manager With Stealing $9 Million in Investor Funds:

The Securities and Exchange Commission recently charged a Manhattan-based private equity manager and his firm with stealing $9 million from investors in their private equity fund.

The SEC has obtained an emergency court order to freeze the assets of Lawrence E. Penn III and his firm Camelot Acquisitions Secondary Opportunities Management as well as another individual and three entities involved in the theft of investor funds.

The SEC alleges that Penn and his longtime acquaintance Altura S. Ewers concocted a sham due diligence arrangement where Penn used fund assets to pay fake fees to a front company controlled by Ewers. Instead of conducting any due diligence in connection with potential investments by Penn’s fund, Ewers’ company Ssecurion promptly kicked the money back to companies and accounts controlled by Penn so he could secretly spend investor funds for other purposes. For example, Penn paid hefty commissions to third parties to secure investments from pension funds. Penn also rented luxury office space and used the funds to project the false image that Camelot was a thriving international private equity operation.

According to the SEC’s complaint filed in federal court in Manhattan, Penn tapped into a network of public pension funds, high net worth individuals, and overseas investors to raise assets for his private equity fund Camelot Acquisitions Secondary Opportunities LP, which he started in early 2010. Penn eventually secured capital commitments of approximately $120 million. The fund is currently invested in growth-stage private companies that are seeking to go public.

The SEC alleges that Penn has diverted approximately $9.3 million in investor assets to Ssecurion. With the assistance of Ewers, who lives in San Francisco, Penn repeatedly misled the fund’s auditors about the nature and purpose of the due diligence fees. However, the scam began to unravel in 2013 when Camelot’s auditors became increasingly skeptical about the fees. In their haste to cover their tracks, Penn and Ewers brazenly lied to the auditors and forged documents as recently as July 2013, pretending the files were generated by Ssecurion.

The SEC’s complaint charges Penn, two Camelot entities, Ewers, and Ssecurion with violating the antifraud, books and records, and registration application provisions of the federal securities laws. The complaint seeks final judgments that would require them to disgorge ill-gotten gains with interest, pay financial penalties, and be barred from future violations of the antifraud provisions of the securities laws. The SEC’s complaint also charges another company owned by Ewers – A Bighouse Photography and Film Studio LLC – as a relief defendant for the purposes of recovering investor funds it allegedly obtained in the scheme.

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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.

EB-5 Visa Program Fraud – Florida EB-5 Fraud and Misrepresentation Litigation and Arbitration Attorney

Russell L. Forkey — Wed, 02 Oct 2013 10:18:02 GMT

The Securities and Exchange Commission Halts a Texas-Based Scheme Targeting Foreign Investors Seeking U.S. Residency Through EB-5 Visa Program:

The Securities and Exchange Commission recently announced fraud charges against a husband and wife in Texas for stealing funds from foreign investors under the guise of an investment opportunity to create U.S. jobs and a path to U.S. residency.

The SEC alleges that Marco and Bebe Ramirez and three companies they own have fraudulently raised at least $5 million from investors by falsely promising that their money would be invested as part of the EB-5 Immigrant Investor Pilot Program. Through the program, foreign investors can earn conditional visas and eventually green cards by making investments in U.S. economic development projects that will create or preserve a minimum number of jobs for U.S. workers. Instead of investing the money as promised, the Ramirezes routinely diverted investor funds to other undisclosed businesses and for their personal use. In at least one instance, they used new investor funds to make Ponzi-like payments to an existing investor.

According to the SEC’s complaint unsealed recently in U.S. District Court for the Southern District of Texas, the Ramirezes initially targeted investors in Mexico, but more recently have solicited investors in Egypt and Nigeria. The court has granted the SEC’s request to freeze the assets and accounts of the Ramirezes and their three companies: USA Now LLC, USA Now Energy Capital Group LP, and Now Co. Loan Services. This effectively halts their ability to raise further money from investors or spend any remaining funds in the scheme.

The SEC and U.S. Citizenship and Immigration Services (USCIS) recently issued a joint investor alert that provides additional information about the EB-5 program and cautions investors about fraudulent EB-5 schemes. USCIS offered substantial assistance in the SEC’s investigation of the Ramirezes. The EB-5 program is administered by USCIS and enables foreign investors to make their investments either directly in a business or through EB-5 “regional centers” that are private entities organized to promote economic development in specific geographic areas and industries.

According to the SEC’ s complaint, beginning in 2010, the Ramirezes sought approval from USCIS to register USA Now as an EB-5 regional center that would accept and direct investments from foreign investors into investment opportunities that would purportedly satisfy the EB-5 visa requirements. But even before USCIS decided, the Ramirezes and other USA Now employees already had started soliciting investors with false promises about how their money would be invested.

The SEC alleges that the Ramirezes told investors that USA Now would hold their investments in escrow until they received USCIS approval. And once the funds were released from escrow, they would be used for specific business purposes. However, the Ramriezes failed to hold the funds in escrow as required, and instead routinely diverted the funds for other uses not described in offering materials, often on the same day the funds were received. Among their misappropriations, the Ramirezes appear to have opened a Cajun-themed restaurant with investor funds and settled an unrelated lawsuit. Meanwhile, none of the at least 10 investors identified by the SEC as victims of the scheme have received visas from USCIS, and none of their funds seem to remain in escrow.

The SEC’s complaint alleges that the Ramirezes and their companies violated and aided and abetted violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint seeks various relief including preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

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“EB-5” Private Placement and Other Investment Abuses – Florida Private Placement and Other Investment Abuses Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Wed, 02 Oct 2013 09:31:36 GMT

Investment Scams That Exploit The Immigrant Investor Program:

Recently, the United States Securities and Exchange Commission’s Office of Investor Education and Advocacy and the United States Citizenship and Immigration Services (USCIS) jointly issued an Investor Alert to warn individual investors about fraudulent investment scams that exploit the Immigrant Investor Program, also known as “EB-5.”

The EB-5 program provides certain foreign investors who can demonstrate that their investments are creating jobs in this country, with a potential avenue to lawful permanent residency in the United States. Business owners apply to USCIS to be designated as “regional centers” for the EB-5 program. These regional centers offer investment opportunities in “new commercial enterprises” that may involve securities offerings. Through EB-5, a foreign investor who invests a certain amount of money that is placed at risk, and creates or preserves a minimum number of jobs in the United States, is eligible to apply for conditional lawful permanent residency. Toward the end of the two-year period of conditional residency, the foreign investor is eligible to apply to have the conditions on their lawful permanent residency removed, if he or she can establish that the job creation requirements have been met. Foreign investors who invest through EB-5, however, are not guaranteed a visa or to become lawful permanent residents of the United States. For more details, read the EB-5 Immigrant Investor section of USCIS’s website at www.uscis.gov.

The fact that a business is designated as a regional center by USCIS does not mean that USCIS, the SEC, or any other government agency has approved the investments offered by the business, or has otherwise expressed a view on the quality of the investment. The SEC and USCIS are aware of attempts to misuse the EB-5 program as a means to carry out fraudulent securities offerings. In a recent case, SEC v. Marco A. Ramirez, et al., the SEC and USCIS worked together to stop an alleged investment scam in which the SEC claims that the defendants, including the USA Now regional center, falsely promised investors a 5% return on their investment and an opportunity to obtain an EB-5 visa. The promoters allegedly started soliciting investors before USCIS had designated the business as a regional center. The SEC alleged that while the defendants told investors their money would be held in escrow until USCIS approved the business as eligible for EB-5, the defendants misused investor funds for personal use such as funding their Cajun-themed restaurant. According to the SEC’s complaint, the investors did not obtain even conditional visas as a result of their investments through the USA Now regional center.

In another case, SEC v. A Chicago Convention Center, et al., the SEC and USCIS coordinated to halt an alleged $156 million investment fraud. The SEC alleged that an individual and his companies used false and misleading information to solicit investors in the “World’s First Zero Carbon Emission Platinum LEED certified” hotel and conference center in Chicago, including falsely claiming that the business had acquired all necessary building permits and that the project was backed by several major hotel chains. According to the SEC’s complaint, the defendants promised investors that they would get back any administrative fees they paid for their investments if their EB-5 visa applications were denied. The defendants allegedly spent more than 90 percent of the administrative fees, including some for personal use, before USCIS adjudicated the visa applications.

As with any investment, it is important to research thoroughly any securities or other type of offering that purports to be affiliated with EB-5. At a minimum, you should take these steps:

Confirm that the regional center has been designated by USCIS. If you intend to invest through a regional center, check the list of current regional centers on USCIS’s website at www.uscis.gov. If the regional center is not on the list, exercise extreme caution. Even if it is on the list, understand that USCIS has not endorsed the regional center or any of the investments it offers.

Obtain copies of documents provided to USCIS. Regional centers must file an initial application (Form I-924) to obtain USCIS approval and designation, and must submit an information collection supplement (Form I-924A) at the end of every calendar year. Ask the regional center for copies of these forms and supporting documentation provided to USCIS.

Request investment information in writing. Ask for a copy of the investment offering memorandum or private placement memorandum from the issuer. Examine it carefully and research similar projects in evaluating the proposal. Follow up with any questions you may have. If you do not understand the information in the document or the issuer is unwilling or unable to answer your questions to your satisfaction, do not invest.

Ask if promoters are being paid. If there are supposedly unaffiliated consultants, lawyers, or agencies recommending or endorsing the investment, ask how much money or what type of benefits they expect to receive in connection with recommending the investment. Be skeptical of information from promoters that is inconsistent with the investment offering memorandum or private placement memorandum from the issuer.

Seek independent verification. Confirm whether claims made about the investment are true. For example, if the investment involves construction of commercial real estate, check county records to see if the issuer has obtained the proper permits and whether state and local property tax assessments correspond with the values the regional center attributes to the property. If other companies have purportedly signed onto the project, go directly to those companies for confirmation.

Examine structural risk. Understand that you may be investing in a new commercial enterprise that has no assets and has been established to loan funds to a company that will use the funds to develop projects. Carefully examine loan documents and offering statements to determine if the loan is secured by any collateral pledged to investors.

Consider the developer’s incentives. EB-5 regional center principals and developers often make capital investments in the projects they manage. Recognize that if principals and developers do not make an equity investment in the project, their financial incentives may not be linked to the success of the project.

Look for warning signs of fraud. Beware if you spot any of these hallmarks of fraud:

Promises of a visa or becoming a lawful permanent resident. Investing through EB-5 makes you eligible to apply for a conditional visa, but there is no guarantee that USCIS will grant you a conditional visa or subsequently remove the conditions on your lawful permanent residency. USCIS carefully reviews each case and denies cases where eligibility rules are not met. Guarantees of the receipt or timing of a visa or green card are warning signs of fraud.

Guaranteed investment returns or no investment risk. Money invested through EB-5 must be at risk for the purpose of generating a return. If you are guaranteed investment returns or told you will get back a portion of the money you invested, be suspicious.

Overly consistent high investment returns. Investments tend to go up and down over time, particularly those that offer high returns. Be suspicious of an investment that claims to provide, or continues to generate, high rates of return regardless of overall market conditions.

Unregistered investments. Even though a regional center may be designated as a regional center by USCIS, most new commercial enterprise investment opportunities offered through regional centers are not registered with the SEC or any state regulator. When an offering is unregistered, the issuer may not provide investors with access to key information about the company’s management, products, services, and finances that registration requires. In such circumstances, investors should obtain additional information about the company to help ensure that the investment opportunity is bona fide.

Unlicensed sellers. Federal and state securities laws require investment professionals and their firms who offer and sell investments to be licensed or registered. Designation as a regional center does not satisfy this requirement. Many fraudulent investment schemes involve unlicensed individuals or unregistered firms.

Layers of companies run by the same individuals. Some EB-5 regional center investments are structured through layers of different companies that are managed by the same individuals. In such circumstances, confirm that conflicts of interest have been fully disclosed and are minimized.

If your investment through EB-5 turns out to be in a fraudulent securities offering, you may lose both your money and your path to lawful permanent residency in the United States. Carefully vet any EB-5 offering before investing your money and your hope of becoming a lawful permanent resident of the United States.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as providing legal or investment advice. If the reader has any questions concerning the contents of this alert, you should contact a qualified professional.

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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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Chan Tze Ngon – Florida Reverse Merger Fraud, Misrepresentation and Breach of Contract Litigation and FINRA Arbitration Attorney

Russell L. Forkey — Fri, 27 Sep 2013 11:19:36 GMT

Securities and Exchange Commission v. Chan Tze Ngon and Jiang Xiangyuan, Civil Action No. 13-cv-6828 (S.D.N.Y.)

The Securities and Exchange Commission recently charged the former CEO of an education services provider based in China with stealing tens of millions of dollars from investors in a U.S. public offering, and charged another executive with illegally dumping his stock in the company after he helped steal valuable company assets.

The SEC alleges that ChinaCast Education Corporation’s former CEO and chairman of the board Chan Tze Ngon illicitly transferred $41 million out of the $43.8 million raised from investors to a purported subsidiary in which he secretly held a controlling 50 percent ownership stake. From there, Chan transferred investor funds to another entity outside ChinaCast’s control. Chan also secretly pledged $30.4 million of ChinaCast’s cash deposits to secure the debts of entities unrelated to ChinaCast. None of the transactions were disclosed in the periodic and other reports signed by Chan and filed with the SEC.

The SEC further alleges that Jiang Xiangyuan, ChinaCast’s former president for operations in China, avoided more than $200,000 in losses by illegally selling approximately 50,000 ChinaCast shares after participating in the ownership transfer of one of company’s revenue-generating colleges before it was publicly disclosed by a new management team. ChinaCast had a market capitalization of more than $200 million before these alleged frauds came to light. After Chan and Jiang were terminated and their misconduct was publicly disclosed by new management, ChinaCast’s market capitalization dropped to less than $5 million.

According to the SEC’s complaint filed in federal court in Manhattan, ChinaCast entered the U.S. capital markets through a reverse merger in December 2006, and its common stock was listed on the NASDAQ from Oct. 29, 2007 to June 25, 2012. ChinaCast conducted multiple public stock offerings in the U.S., with the second one occurring in December 2009 when ChinaCast represented that the proceeds would be used for “working capital, future acquisitions, and general corporate purposes.” Chan instead directed and engaged in the transactions that moved investor funds outside ChinaCast’s corporate structure for his personal benefit. He did so without seeking or obtaining the approval of ChinaCast’s board of directors, and the transactions were not publicly disclosed until ChinaCast’s new management prompted the company to file a Form 8-K on Dec. 21, 2012, disclosing Chan’s misconduct.

The SEC alleges that ChinaCast falsely stated in multiple SEC filings signed by Chan that the company indirectly owned 98.5 percent of ChinaCast Technology (HK) Limited – the purported subsidiary to which Chan first transferred investor funds. However, ChinaCast actually held only an indirect 49.2 percent interest while Chan personally owned 50 percent. Chan also signed a number of periodic reports falsely stating that offering proceeds were under ChinaCast’s control and falsely including those funds in amounts that ChinaCast reported as cash and cash equivalents. Chan also defrauded shareholders and prospective investors by secretly pledging ChinaCast’s existing term cash deposits as collateral to secure debts incurred by various third parties that had nothing to do with ChinaCast’s business. Chan signed periodic reports falsely stating that ChinaCast’s cash and cash equivalents were completely unencumbered.

According to the SEC’s complaint, Jiang was a member of the senior management group headed by Chan. Jiang engaged in illegal trading based on inside information by selling his shares on March 28, 2012, at $4.59 per share. After Chan’s management group lost control of the board, they transferred ownership of ChinaCast’s three profitable brick-and-mortar colleges away from ChinaCast to Jiang and the dean of one of the colleges. They were later sold to others. At least one of the colleges was transferred to Jiang and the dean three weeks before Jiang’s March 28 stock sale. Jiang was terminated on March 29, and NASDAQ suspended trading in ChinaCast on April 2 due to its failure to file an annual report for 2011. ChinaCast was later delisted. When over-the-counter trading resumed on June 25 after multiple disclosures made by new management about former management’s misconduct, the stock opened at 55 cents per share and closed at 82 cents. ChinaCast’s stock is currently trading at 10 cents per share.

Chan is charged with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as violations of various corporate reporting, recordkeeping, and internal controls provisions. Jiang is charged with illegal insider trading in violations of the same antifraud provisions. The SEC seeks disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, permanent injunctions, and officer-and-director bars.

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Stephen L. Kirkland and the Kirkland Organization, Inc. – False and Misleading Statements to Foreign and Domestic Investors – Florida FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Thu, 26 Sep 2013 00:25:00 GMT

SEC Charges Atlanta-Area Defendants with Securities Fraud

Recently, the Securities and Exchange Commission filed an action in federal court in the Northern District of Georgia, charging Stephen L. Kirkland (Kirkland), a Marietta, Georgia resident, and his company The Kirkland Organization, Inc. (TKO), a Georgia corporation, with violations of the federal securities laws for making false and misleading statements to investors in the United States and in Great Britain. The Commission’s complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against the defendants.

The Commission’s complaint alleges that between late 2008 and late 2010, Kirkland and TKO repeatedly made false and misleading statements to investors and potential investors including but not limited to: (a) if they invested with the defendants through a managed account at Westover Energy Trading Partners, LLC (Westover), there would be no risk of losing their principal; (b) they would earn 2% to 3% per month; (c) a specified New York real estate developer/owner was a manager of Westover; and (d) the New York real estate developer/owner’s substantial wealth would be used to indemnify investors against loss. Investors in the United States and Great Britain have invested at least $800,000 with the defendants based upon those false representations.

The complaint alleges that Kirkland and TKO violated the antifraud provisions of the federal securities laws, Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. It further alleges that while acting as investment advisors, the Defendants violated Sections 206 (1) and Section 206 (2) of the Investment Advisers Act of 1940 (“Advisers Act”), the antifraud provisions of the Advisers Act. With respect to Kirkland, the complaint also alleges that he, while acting as a control person, induced violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

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John Rizzo – Florida Penny Stock Boiler Room and Market Manipulation FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Tue, 06 Aug 2013 17:44:14 GMT

Securities and Exchange Commission v. John G. Rizzo, Civil Action No. 13 CV 1801 MMA (BLM) (S.D. Cal. August 2, 2013)

SEC Charges Penny Stock CEO in International Boiler Room Scheme

The Securities and Exchange Commission recently announced charges against a penny stock company CEO in Boca Raton, Fla., for orchestrating an international boiler room scheme.

The SEC alleges that John G. Rizzo, the former CEO of iTrackr Systems Inc., used offshore boiler rooms to solicit foreign investors as he attempted to evade registration requirements under the U.S. securities laws. The boiler rooms raised approximately $2.5 million from investors living in the United Kingdom. Unbeknownst to investors, Rizzo funneled the money raised to his bank account in Belize. After paying commissions to the boiler room operators, he used investor money to pay his personal expenses.

In a parallel action, the U.S. Attorney’s Office for the Southern District of California announced criminal charges against Rizzo on August 2, 2013.

According to the SEC’s complaint filed August 2, 2013 in U.S. District Court for the Southern District of California, Rizzo used U.S.-based escrow agents and bank accounts to make iTrackr investments appear more legitimate to investors. After investors wired funds to one of the U.S. bank accounts, Rizzo arranged for the money to be transferred to his Belize account in an effort to conceal his undisclosed use of investor funds to pay boiler room operators and his own expenses.

The SEC’s complaint alleges that Rizzo agreed to pay the boiler room operators a commission of up to 80 percent of the amount they raised from investors. The arrangement was never disclosed to iTrackr investors.

The SEC’s complaint alleges that Rizzo violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks disgorgement with prejudgment interest, financial penalties, officer-and-director and penny stock bars, and a permanent injunction against Rizzo.

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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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Angelica Aguilera and LatAm Investments, LLC. – South Florida Failure to Supervise and Negligent Supervision FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Fri, 28 Sep 2012 10:09:02 GMT

In the Matter of Angelica Aguilera:

August, 2012:

Recently, the Securities and Exchange Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Order) against Angelica Aguilera. The Division of Enforcement (Division) alleges that Aguilera, former President of LatAm Investments, LLC, failed reasonably to supervise former registered representatives Fabrizio Neves and Jose Luna, who violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and aided and abetted LatAm’s violations of Section 15(c) of the Exchange Act. The Division alleges that from at least November 2006 to September 2009, Neves and Luna engaged in a fraudulent markup and markdown scheme to defraud certain customers of LatAm Investments, LLC (LatAm) in the offer, purchase and sale of structured notes.

The Division further alleges that Aguilera, who was Neves and Luna’s direct supervisor, failed to effectively follow or implement LatAm’s supervisory policies and procedures to ensure the fairness of markups and markdowns charged by Neves and Luna to LatAm’s customers. The Division also alleges, among other things, that Aguilera delegated compliance responsibility for reviewing markups and commissions to the firm’s chief compliance officer, an individual who lacked the authority and ability to take meaningful action to address excessive markups and markdowns charged to LatAm’s customers by Neves and Luna. As a result, Neves and Luna were able to carry out the fraudulent markup scheme undetected.

A hearing before an administrative law judge will be scheduled to determine whether the allegations in the Order are true, to provide Aguilera an opportunity to respond to these allegations, and to determine what, if any, remedial action is appropriate in the public interest. The Order directed the Administrative Law Judge to issue an initial decision within 300 days from the date of service of the Order. (Rel. 34-67748; File No. 3-14999).

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Fabrizio Neves, Jose Luna and LatAm Investments, LLC – Florida Fraudulent Markup FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Fri, 28 Sep 2012 10:00:42 GMT

Commission Charges Brokers for Defrauding Brazilian Public Pension Funds in Markup Scheme

August, 2012:

The Commission today filed a civil fraud action in the United States District Court for the Southern District of Florida against two former brokers in Miami for overcharging customers approximately $36 million by using hidden markup fees on structured note transactions.

According to the SEC’s complaint, from 2006 to 2009, Fabrizio Neves conducted the markup scheme while working at the broker-dealer LatAm Investments LLC, which is no longer in business. He was assisted by Jose Luna. The pair defrauded two Brazilian public pension funds and a Colombian institutional investor that purchased from LatAm the structured notes issued by major U.S. and European commercial banks. Instead of purchasing the notes for his customers’ accounts for prices around the banks’ issuance amounts – which totaled approximately $70 million – in most transactions Neves first traded the notes with one or more accounts in the name of offshore nominee entities that he and Luna controlled. Neves then sold the notes to his customers with undisclosed markups as high as 67 percent.

The SEC alleges that to conceal the excessive markups that Neves charged customers, in half of the transactions, Neves directed Luna to alter the banks’ structured note term sheets by either whiting out or electronically cutting and pasting the markup amounts over the actual price and trade information, and then sending the forged documents to customers. Neves received millions of dollars in inflated sales commissions for the structured note transactions that he made at inflated prices.

As alleged in the SEC’s complaint, Neves and Luna violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and aided and abetted LatAm’s violations of Section 15(c) of the Exchange Act. The SEC’s complaint seeks disgorgement of ill-gotten gains, financial penalties, and injunctive relief against Neves and Luna to enjoin them from future violations of the federal securities laws.

Luna has agreed to the entry of a judgment ordering him to pay disgorgement of $923,704.85, prejudgment interest of $241,643.51, and a penalty amount to be determined. The judgment permanently enjoins him from violations of the antifraud provisions of the federal securities laws. Luna neither admitted nor denied the allegations in the SEC’s complaint. Luna also agreed to settle a related SEC administrative proceeding by agreeing to be barred from association with any broker, dealer, investment advisor, municipal securities dealer, municipal advisor, transfer agent, or credit rating agency.

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Hold Brothers On-Line, Steve Hold, Robert Vallone and William Tobias – Layering or Spoofing (Manipulation) Florida Securities Fraud and Misrepresentation Attorney

Russell L. Forkey — Wed, 26 Sep 2012 10:06:09 GMT

SEC Charges N.Y.-Based Brokerage Firm With Layering

September, 2012:

The Securities and Exchange Commission recently announced that it charged a New York-based brokerage firm and three executives for allowing traders outside the U.S. to access the markets and conduct manipulative trading through accounts the firm controlled.

The SEC’s investigation found that Hold Brothers On-Line Investment Services ignored red flags indicating that overseas traders were accessing the markets through the firm’s customer accounts and repeatedly manipulating publicly-traded stocks through an illegal practice known as “layering” or “spoofing.” In layering, the trader places orders with no intention of having them executed but rather to trick others into buying or selling a stock at an artificial price driven by the orders that the trader later cancels. Hold Brothers’ president and co-founder Steve Hold, former chief compliance officer and chief financial officer Robert Vallone, and a third executive William Tobias were aware of several e-mails and other indications that manipulative trading was occurring through Hold Brothers accounts, yet they failed to properly investigate the warning signs and recklessly continued to provide overseas traders with buying power and access to the U.S. markets.

The SEC also charged two Hold Brothers customers whose accounts were used for the manipulative trading. The two foreign companies – Trade Alpha Corporate Ltd. and Demostrate LLC – were created and partially owned by Steve Hold, so essentially Hold provided the capital for the manipulative trading by the overseas traders. The six individuals and entities charged in the SEC’s case agreed to pay a total of $4 million in disgorgement and penalties to settle the charges.

“Manipulation, whether executed by e-mail, instant message, or multiple phantom orders, is still manipulation,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Traders and the firms that provide them market access should not labor under the illusion that illegally layering orders amidst voluminous trading data will somehow allow them to evade detection by the SEC.”

Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit, added, “The fairness principle that underlies the foundation of our markets demands that prices of securities accurately reflect a genuine supply of and demand for those securities. The SEC will not tolerate any abusive practice that is designed to distort these natural forces.”

According to the SEC’s order instituting settled administrative proceedings, the manipulative trading occurred from at least January 2009 to September 2010. Hold Brothers’ primary business was to provide market access to its customers’ traders, a majority of whom were located overseas. The vast majority of these overseas traders traded for Trade Alpha and Demostrate.

According to the SEC’s order, the layering strategy used by the overseas traders typically followed the same pattern. Traders placed a bona fide order that was intended to be executed on one side of the market (buy or sell). The traders then immediately entered numerous non-bona fide orders on the opposite side of the market for the purpose of attracting interest to the bona fide order and artificially improving or depressing the bid or ask price of the security. The nature of these non-bona fide orders was to induce other traders to execute against the initial, bona fide order. Immediately after the execution against the bona fide order, the overseas traders canceled the open non-bona fide orders, and repeated this strategy on the opposite side of the market to close out the position.

The SEC’s order finds that Hold Brothers willfully violated Sections 9(a)(2) and 17(a) of the Securities Exchange Act of 1934 and Rules 17a-4 and 17a-8, and failed reasonably to supervise its associated persons, the overseas traders, with a view to preventing and detecting their violations. The order also finds that Demostrate and Trade Alpha violated Section 9(a)(2) of the Exchange Act. The order finds that each of the individual respondents willfully aided and abetted and caused each entity’s violations of Section 9(a)(2) of the Exchange Act, and that Steve Hold failed reasonably to supervise Vallone.

The SEC’s charges were settled without admitting or denying the findings:

Hold Brothers agreed to pay $635,000 in disgorgement and interest and nearly $1.9 million in penalties. The firm also agreed to a censure and to cease and desist from committing or causing any violations of Sections 9(a)(2) and 17(a) of the Exchange Act and Rules 17a-4 and 17a-8. Hold Brothers also settled to a finding that it failed reasonably to supervise the overseas traders.

Trade Alpha and Demostrate have agreed to pay more than $1.25 million in disgorgement and to cease and desist from committing or causing any violations of Section 9(a)(2) and 17(a) of the Exchange Act.

Hold, Vallone, and Tobias each agreed to pay $75,000 penalties and accept industry bars (three years for Vallone and Tobias and two years for Hold). They also agreed to cease and desist from committing or causing any violations of Section 9(a)(2) of the Exchange Act. Hold additionally agreed to be barred from acting in a supervisory capacity for a period of three years, which will run concurrently with his two-year industry bar.

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Fabrizio Neves and Jose Luna – Excessive Markups Fruad, Negligence and Breach of Fudiciary Duty South Florida Attorney

Russell L. Forkey — Thu, 30 Aug 2012 10:54:06 GMT

SEC Charges Florida Brokers for Defrauding Brazilian Public Pension Funds in Markup Scheme

August, 2012:

The Securities and Exchange Commission recently charged two former brokers in Miami with fraud for overcharging customers approximately $36 million by using hidden markup fees on structured notes transactions.

The SEC alleges that Fabrizio Neves conducted the scheme while working at LatAm Investments LLC, a broker-dealer that is no longer in business. He was assisted by Jose Luna. The pair defrauded two Brazilian public pension funds and a Colombian institutional investor that purchased from LatAm the structured notes issued by major commercial banks. To conceal the excessive markups that Neves charged customers, Neves directed Luna to alter the banks’ structured note term sheets in half of the transactions by either whiting out or electronically cutting and pasting the markup amounts over the actual price and trade information, and then sending the forged documents to customers. Neves and Luna further concealed the egregious markups in most transactions by first purchasing the notes into accounts in the name of nominee entities they controlled in the British Virgin Islands.

The SEC also instituted an administrative proceeding against LatAm’s former president Angelica Aguilera, who was the direct supervisor over Neves and Luna. The SEC’s Enforcement Division alleges that Aguilera failed reasonably to supervise Neves and Luna and effectively follow or implement LatAm’s supervisory policies and procedures to ensure the fairness of markups and markdowns they charged to LatAm customers. As a result, Neves and Luna were able to carry out the fraudulent markup scheme undetected.

According to the SEC’s complaint against Neves and Luna filed in U.S. District Court for the Southern District of Florida, Neves negotiated with several U.S. and European commercial banks to structure 12 notes on his customers’ behalf from 2006 to 2009. But instead of purchasing the notes for his customers’ accounts for prices around the banks’ issuance amounts – which totaled approximately $70 million – in most transactions Neves first traded the notes with one or more accounts in the name of offshore nominee entities that he and Luna controlled. Neves then sold the notes to his customers with undisclosed markups as high as 67 percent. Neves had no reasonable basis to mark up the prices that significantly.

The SEC alleges that as a result of the markup scheme, the Brazilian funds overpaid by approximately $24 million and the Colombian institutional investor overpaid by approximately $12 million due to the undisclosed, excessive fees. Neves enjoyed a financial boon from the scheme as LatAm paid him millions of dollars in inflated sales commissions for the structured note transactions that he made at inflated prices. Luna received hundreds of thousands of dollars in inflated salary and commissions from LatAm and tens of thousands of dollars in additional compensation from a company that Neves controlled.

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

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International Investing – Florida Fraud, Mismanagement and Negligent Supervision FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Thu, 09 Aug 2012 10:24:37 GMT

Invest Internationally – How to do it.

There are a number of ways individual investors may gain exposure to international investments. As with domestic investments, investors should first learn as much as they can about an investment. The purpose of this post is to provide the reader with general discussion of this topic. This information is being provided for educational purposes only and is not designed to be complete in all material respects. Thus, it should not be relief upon as providing legal or investment advice.

If you are contemplating investing internationally, consider the following:

Mutual funds. There are different kinds of mutual funds that invest in foreign securities, including: global and international funds (that invest in companies and businesses outside of the United States); regional or country funds (that invest in a particular region or country); or international index funds (that seek to track the results of a particular foreign market or international index). Investing through mutual funds may reduce some of the potential risks of investing internationally because mutual funds provide more diversification than most investors could achieve on their own. If you want to learn more about investing in these types of mutual funds, as well as in mutual funds generally, information is available in Mutual Funds – A Guide for Investors.

Exchange-traded funds. An exchange-traded fund (ETF) is a type of investment that typically has an objective to achieve the same return as a particular market index. ETFs are listed on stock exchanges and, like stocks (and in contrast to mutual funds), trade throughout the trading day with fluctuating market prices. A share in an ETF that tracks an international or foreign index seeks to give an investor exposure to the performance of the underlying international or foreign stock or bond portfolio along with the ability to trade the ETF shares like any other exchange-traded security.

American depositary receipts. The stocks of most foreign companies that trade in U.S. markets are traded as American depositary receipts (ADRs) issued by U.S. depositary banks (rather than the actual foreign company stock). Each ADR represents one or more shares of a foreign stock or a fraction of a share. If you own an ADR you have the right to obtain the foreign stock it represents, but U.S. investors usually find it more convenient and cost-effective to own the ADR. The price of an ADR generally corresponds to the price of the foreign stock in its home market, adjusted for the ratio of ADRs to foreign company shares. Sometimes the terms “ADR” and “ADS” (for American depositary share) are used interchangeably.

U.S.-traded foreign stocks. Although most foreign stocks trade in the U.S. markets as ADRs, some foreign companies list their stock directly here as well as in their local market. For example, some Canadian stocks that are listed and trade on Canadian markets are also listed and trade directly in U.S. markets, rather than as ADRs. Some foreign companies list their securities in multiple markets, which may include U.S. markets. You can purchase ADRs and U.S.-listed foreign stocks that trade in the United States through your U.S. broker.

Trading on foreign markets. Your U.S. broker may be able to process an order for a company that only trades on a foreign securities market. These foreign companies are not likely to file reports with the SEC. The information available about these companies may be different than the information available about companies that file reports with the SEC. Moreover, the information may not be available in English.

How to Protect Yourself from Worthless Stock Scams

Russell L. Forkey — Fri, 09 Mar 2012 21:30:58 GMT

March, 2012:

How to Protect Yourself from Worthless Stock Scams:

Regulators often refer to worthless stock scams as “recovery room operations,” “advance fee schemes,” or “reload scams” because the perpetrators prey on individuals who lost money once and are willing to invest even more in the hope of recovering their losses. Here are several ways to arm yourself against these thieving opportunists:

Look Past Fancy Websites and Letterheads – Anyone who knows how to “cut and paste” can create impressive, legitimate-looking websites and stationery at little to no cost. Don’t be taken in by a glossy brochure, a glitzy website, or the presence of a regulator’s official seal on a web page or document. For example, the SEC does not authorize private companies to use its seal. If you see the SEC seal on a company’s website or materials, think twice – and then think twice again.

Be Skeptical of Government “Approval” – Like most regulators around the world, neither the SEC nor any state securities agency evaluate the merits of any securities offering, nor do they determine whether a particular security is a “good” investment. Moreover, they never endorse specific firms, individuals, products, or services.

Deal Only with Real Regulators – Don’t be fooled by those who tell you how and where to check out their credentials. Go straight to a real regulator for help. Here are some URLs you’ll need to find a regulator:

International Regulators — http://www.iosco.org/lists/
U.S. Regulators —
SEC — http://www.sec.gov
FINRA — http://www.finra.org
State Regulators — http://www.nasaa.org

Caution: If your contact provides any of these links electronically (in an email or on a website), do not simply click on those links. Type the full URL into your web browser yourself. Even though the URL looks right, a fraudster’s link can take you to a very different destination.

Independently Determine Whether the Offering Is Registered — In general, all securities offered in the U.S. must be registered with the SEC or qualify for an exemption from registration. You can see whether a company has registered its securities with the SEC and download its disclosure documents using the SEC’s EDGAR database.

Check Out the Broker and the Firm – Always verify whether the individual broker and the firm are properly licensed to do business in your state, province, or country. If the person claims to work at a U.S. brokerage firm, use FINRA’s BrokerCheck website or call FINRA’s Public Disclosure Program hotline at (800) 289-9999. If the person works elsewhere, contact the securities regulator for that country – and also for your home country, if more than one country is involved.

Tip: Several international regulators list on their websites the names of unlicensed firms or entities that have allegedly targeted their citizens for worthless stock scams and other frauds. Some sites that presently maintain these lists include:

Australian Securities and Investment Commission
Bermuda Monetary Authority
Guernsey FSC
Hong Kong Securities and Futures Commission
Indonesian Capital Markets Supervisory Agency (BAPEPAM)
Irish Financial Services Authority
Isle of Man FSC
Italian CONSOB
Netherlands Authority for Financial Markets
New Zealand Securities Commission
Philippines SEC
Spanish CNMV (click on “Investor Alerts” under “Cautions”)
Thailand Securities and Exchange Commission
United Kingdom Financial Services Authority

Please note that the information contained on these lists may or may not be accurate. Therefore, it may be necessary for you to conduct a more through investigation of the company with which you are involved or which you are contemplating becoming involved.

Independently Verify References – Never rely solely on references given to you by a broker you’ve never worked with before. The “international organizations” or “satisfied clients” they suggest you contact may well be part of the scam.

Be Wary of Unusual Banking Instructions – Most reputable brokerage firms in the U.S. would not ask you to send your money to a non-U.S. bank – or to a U.S. bank for further credit to another bank or entity. In fact, a U.S. broker probably would not ever ask you to send payment to their bank at all.

How to Get More Information:

If you want to invest wisely and steer clear of frauds, you must get the facts. Never, ever, make an investment based solely on a promoter’s promises over the telephone or what you see on the Internet – especially if the investment involves a small, thinly-traded company that isn’t well known. And don’t even think about investing on your own in small companies that don’t file regular reports with the SEC, unless you are willing to investigate each company thoroughly and to check the truth of every statement about the company. Otherwise, be prepared to lose your entire investment.

Worthless Stock – How to Avoid Additional Losses

Russell L. Forkey — Fri, 09 Mar 2012 21:15:28 GMT

March, 2012:

In our continued effort to educate the investing public about various aspects of the securities markets and fraudulent activity associated therewith, we are providing the below information. Because this information is being provided for educational purposes only, it should not be relied upon as providing legal or investment advice. Moreover, it is not intended to be complete in all material respects. If you have any questions concerning the information set forth below, you should contact a qualified professional.

Worthless Stock: Con artists across the globe have stepped up their efforts to rip off investors, especially non-U.S. residents who have lost money in the U.S. securities markets. While it’s natural to want to recoup one’s losses as quickly and as fully as possible, the Securities and Exchange Commission (SEC) has warned investors to be extremely skeptical of offers to exchange worthless or poorly performing stocks for blue chips or “hot” performers.

Worthless stock is typically just that – worthless. And anyone who promises a quick way to recover from a bad investment is probably just lying to you. You are encouraged to thoroughly investigate any investment opportunity, as well as the person promoting it, before you part with your money. This is especially critical if you are a non-U.S. investor seeking to invest in U.S. stocks – or if you learn about the opportunity over the telephone from a broker you don’t know. The “broker” may well be a con artist, and the deal may be a dud. Remember, if an offer sounds too good to be true, it probably isn’t true.

This alert tells you how to spot potential “stock swap” scams and how to evaluate the offers you hear about.

What You Need to Watch Out For:

Although fraudsters use a wide variety of techniques to carry out their “worthless stock swap” scams, most of these frauds boil down to a predictable formula: a persuasive pitch, which nearly always contains false assurances of legitimacy, followed by demands for money. Here are some “red flags” to avoid:

Aggressive Cold Calls from “Boiler-Rooms” – Con artists posing as U.S. or United Kingdom brokers will first identify investors who have lost money investing in “microcap” stocks, the low-priced and thinly traded stocks issued by the smallest of U.S. companies. Operating from remote boiler-rooms, they then mount an aggressive cold calling or emailing campaign, focusing their pitch on loss recovery. They might offer to swap a poorly performing stock for an established, blue chip stock – or they will claim that their firm or an anonymous “client” wants to purchase the shares directly.

Impressive Websites Serving as Fronts for Virtual Offices – To make their schemes appear convincing, fraudsters will invite you to visit “their” website – which will have pages of detailed information and perhaps a photo or biography of the broker. But all too often the site will be nothing more than a fraudulent copy of a legitimate firm’s website – with changes made only to the name and contact information. The con artists will adopt fake yet familiar-sounding names and operate out of virtual offices, using phony addresses, remote mail drops, and redirected phone and facsimile numbers to carry out their scams.

Self-Provided References – Knowing that regulators encourage investors to investigate before they invest, fraudsters often pretend to do the same. They will falsely assure you that the investment is properly registered with the appropriate agency and purport to give you the agency’s telephone number so that you can verify that “fact.” Sometimes they will give you the name of a real agency – other times they will fabricate one. But even if the agency does exist, the contact information invariably will be false. Instead of speaking with a government official, you’ll reach the fraudsters or their colleagues – who will give the company, the promoter, or the transaction high marks.

Claims of Government “Approval” – Another ruse fraudsters use to appear credible involves the misuse of federal agency seals, including the seals of the SEC and the Federal Trade Commission. They will copy the official seal from the regulator’s website and use it to create fake letterhead for a fictitious letter of approval. But you should know that the SEC and FTC – like other state and federal regulators in the U.S. and around the world – do not “approve” or “endorse” any particular stock transactions or “loss recovery” programs.

Advance Payment Requests – Regardless of how the fraudsters pitch their offers to “help”, there’s always a catch. Before they will complete the deal, they first will ask for an upfront “security deposit” or “margin payment” – or claim that you must post an “insurance” or “performance bond.” The minute you pay the advance fee, the fraudsters nearly always disappear – leaving you with new losses. If you seem willing to make further payments, the con artists may instead keep asking for more – falsely claiming that the market price of the security has changed or that the payments will cover additional fees, taxes, bonds for the courier service, or other similar expenses. Only when you finally run out of patience or money to chase your losses do the fraudsters disappear for good.

Risk Tolerance – One of the first things that you need to consider before making an investment. This is especially true for seniors.

Russell L. Forkey — Sun, 05 Feb 2012 20:48:02 GMT

Assessing Your Risk Tolerance!

One of the first factors that needs to be considered when thinking about making any type of investment is risk. When it comes to investing, you need to remember that risk and reward go hand in hand. The phrase “no pain, no gain” – comes close to summing up the relationship between risk and reward. Don’t let anyone tell you otherwise: all investments involve some degree of risk. If you plan to buy securities – such as stocks, bonds or mutual funds or even if you loan money to a friend – it’s important that you understand that you could lose some or all of the money you invest.

The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long time horizon, you may make more money by carefully investing in higher risk assets, such as stocks or bonds, than if limit yourself to less risky assets. On the other hand, lower risk cash investments may be appropriate for short-term financial goals.

An aggressive investor, or one with a high risk tolerance, is willing to risk losing money to get potentially better results. A conservative investor, or one with a low risk tolerance, favors investments that maintain his or her original investment.

Many investment websites offer free online questionnaires to help you assess your risk tolerance. Some of the websites will even estimate asset allocations based on responses to the questionnaires. While the suggested asset allocations may be a useful starting point, keep in mind that the results may be biased towards financial products or services sold by companies or individuals sponsoring the websites.

With the above said, risk vs. reward is simply exercising common sense. If you do your homework (due diligence), you should be able to make intelligent decisions. If you don’t understand the investment or it sounds to good to be true, just say no.

Foreign Investors – Tips on Protecting Yourself When Investing in U.S. Markets or Companies

Russell L. Forkey — Thu, 19 Jan 2012 10:19:01 GMT

We encourage all investors to thoroughly investigate any investment opportunity and the person promoting it before you part with your money-especially if you are a non-U.S. investor seeking to invest in U.S. stocks or other types of investments. This is particularly important if you learn about the investment on the Internet or hear about it over the telephone from an alleged broker or other individual that you don’t know.

The recent globalization of world financial markets and the strength of the U.S. securities markets have fueled a strong demand by foreign investors for U.S. stocks. But this increased appetite has, in turn, spawned new types of fraud. This alert describes how some of these scams work, and provides tips on how to avoid them However, please keep in mind that this information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If you have any questions, concerning this post, please contact a qualified professional.

What the Frauds Look Like:

Many of the new frauds target investors worldwide who purchase “microcap” stocks, the low-priced and thinly traded stocks issued by the smallest of U.S. companies. If the stock price falls, the fraudsters swoop in, falsely claiming that they can help investors recover their losses-for a substantial fee disguised as some type of tax, deposit, or refundable insurance bond. Here’s how some of the most common schemes work:

Aggressive Sales – Dishonest brokers purchase large blocks of stock from U.S. issuers at a deep discount. They then use high-pressure sales tactics to persuade non-U.S. investors to buy, often at extremely inflated prices. Once the brokers have finished selling the stock, the price typically collapses, leaving investors vulnerable to substantial losses.

Absentee Brokers – For many investors, the scam ends here. When they attempt to contact the individuals who sold the worthless stock, the investors discover that the brokers have disappeared.

Advanced Fee Schemes – For other investors, the fraud takes on a new twist. Fraudsters posing as legitimate U.S. brokers or firms offer to help the investors recover their losses by exchanging the worthless stock for an established, blue chip stock or by purchasing the stock outright. But investors must first pay an upfront “security deposit” or post an “insurance” or “performance bond.”

Further Demands for Money – As long as an investor appears willing to make payments, the fraudsters will keep asking for more-falsely claiming that the payments will cover additional fees, taxes, bonds for the courier service, or other similar expenses.

How to Avoid Getting Burned:

The best way to protect against investment fraud is to ask tough questions about the opportunity and the people promoting it-before you invest. For example, you’ll want to know:

Are the Broker and the Firm Licensed? Contact your securities regulator to find out. The International Organization of Securities Commissioners (IOSCO) provides contact information for most securities regulators on its website. Be sure to ask whether the broker or the firm has a history of complaints. If the person claims to work with a U.S. brokerage firm, call the FINRA’s public disclosure hotline at (800) 289-9999, or visit its website. Is the Investment Registered with SEC? Check the SEC’s EDGAR database to find out. But always remember the fact that a company has registered its securities or has filed reports with the SEC doesn’t guarantee that the company will be a good investment. Likewise, the fact that a company hasn’t registered and doesn’t file reports with us doesn’t mean the company is a fraud.

Where Does the Stock Trade? Many frauds involve microcap companies whose stocks are quoted in the “pink sheets” or on the OTC Bulletin Board. These companies generally do not meet the minimum listing requirements for trading on a national exchange, such as the New York Stock Exchange or the Nasdaq Stock Market. And companies quoted in the pink sheets generally do not file reports or audited financial statements with the SEC. It can be very difficult for investors to find reliable, unbiased information about microcap companies. For that reason, microcap stocks can be among the most risky investments.

What Is the Stock Price in the U.S.? Before you purchase any U.S. stock, be sure to independently confirm its current U.S. trading price. Dishonest brokers may charge you a much higher price, assuming that you’ll never check. The Nasdaq’s website-at quotes.nasdaq.com-features current quotes for stocks listed on the New York Stock Exchange, American Stock Exchange, and the Nasdaq Stock Market and for stocks quoted on the OTC Bulletin Board.

How Can I Independently Research This Opportunity? Always ask to see-and carefully read-written information about the company, including a prospectus and recent financial statements. But also research the company on your own.

Look Past the Name – Some fraudsters illicitly use the names of legitimate brokers and brokerage firms. Be sure to compare any address a broker gives you with the address you obtain from your securities regulator or FINRA. If they are not the same, you may be dealing with a fraudster.

Independently Verify References – Never rely solely on the references given to you by a broker you’ve never worked with before. The “satisfied clients” or “international organizations” they suggest you contact may well be part of the scam.

Be Wary of Unusual Banking Instructions – Most reputable brokerage firms in the U.S. use U.S. banks and would not, for example, ask you to transfer money to a U.S. bank for further credit to a non-U.S. bank.