The Securities and Exchange Commission recently announced the unsealing of fraud charges against a group of companies and their principal who allegedly bilked at least 150 investors in a $55 million Ponzi scheme. The SEC obtained an emergency asset freeze and other relief.

According to the SEC’s complaint, Daniel B. Rudden and a group of companies operating under the name Financial Visions, which issued promissory notes to fund its operations in short-term financing for funeral services and related expenses, defrauded as many as 150 investors after promising them annual returns of 12% or more. The complaint alleges that since 2010 or 2011, Rudden used new investor funds to pay interest and redemptions to existing investors and concealed the Financial Visions companies’ true financial performance and condition. The complaint also alleges that Rudden continued to represent the business as successful to existing and prospective investors when he knew that he was running a Ponzi scheme.

The SEC’s complaint, filed under seal in federal court in Denver, Colorado on July 20, 2018, and unsealed yesterday, charges Rudden and the Financial Visions companies with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement plus prejudgment interest, and penalties. The SEC also named three entities as relief defendants, which the SEC alleges were controlled by Rudden and received investor funds from the alleged Ponzi scheme.

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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.

Recently, the Financial Industry Regulatory Authority announced that Peter David Holler executed an Acceptance, Waiver and Consent in which Holler was assessed a deferred fine of $10,000, suspended from association with any FINRA member in all capacities for two years and ordered to pay $49,790, plus interest, in deferred disgorgement of commissions received.

Without admitting or denying the findings, Holler consented to the sanctions and to the entry of findings that he engaged in a series of private securities transactions without providing notice to, or obtaining approval from, his member firm prior to participating in these private securities transactions. The findings stated that Holler solicited investors to purchase promissory notes in a purported real-estate investment fund. Ultimately, Holler sold approximately $1.39 million in the promissory notes to individuals, nine of whom were the firm customers. Holler received $49,790 in commission in connection with these transactions. Holler also purchased approximately $75,100 of the promissory notes for himself.

The suspension is in effect from May 21, 2018, through May 20, 2020. (FINRA Case #2017055239801).

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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.

Securities and Exchange Commission v. James A. Torchia et al., Civil Action No. 1:15-cv-03904-WSD (N.D. Ga., filed November 10, 2015)

SEC Announces Emergency Action to Halt Ongoing Investment Fraud Involving Promissory Notes and Life Settlement Contracts

The Securities and Exchange Commission (“SEC”) recently announced the entry of a Consent Order (“Order”) halting an alleged ongoing investment fraud by James Torchia and various related entities involving the sale of promissory notes and life settlement contracts.

On November 10, 2015, the SEC filed an emergency civil action in federal court in Atlanta against Torchia, a resident of Canton, Georgia, and the following entities that he operates and controls: (i) Credit Nation Capital, LLC (formerly known as Credit Nation Lending, LLC) (“CN Capital”), a Georgia limited liability company in Woodstock Georgia; (ii) Credit Nation Acceptance, LLC (“CN Acceptance”), a Texas limited liability company in Midland, Texas; (iii) Credit Nation Auto Sales, LLC, a Georgia limited liability company in Woodstock, Georgia; (iv) American Motor Credit, LLC, a Georgia limited liability company in Woodstock, Georgia; and (v) Spaghetti Junction, LLC, a Nevada limited liability company.

The SEC’s complaint alleges that since 2009, Torchia, through CN Capital, has raised tens of millions of dollars from investors who purchased unregistered promissory notes, most of which promised a 9% return. The complaint further alleges that CN Capital touts the safety of the promissory notes, describing them to investors as “100% asset backed” and “backed by hard assets dollar for dollar.” In reality, according to the complaint, CN Capital has generated substantial losses each year since at least 2011 and is insolvent. The SEC contends that contrary to representations made to investors portraying the notes as a secure investment capable of generating reliable investment returns, CN Capital basically operates as an ongoing Ponzi scheme through which the promised investment returns are paid using new investor money. The complaint alleges that neither CN Capital’s multi-million dollar per year operating losses nor its massive insolvency has ever been disclosed to investors.

The complaint also alleges that CN Acceptance sells unregistered fractional interests in life settlement contracts (“LS Interests”) to investors and that CN Acceptance promises to pay the policy premiums using a portion of the purchase price. But in practice, according to the complaint, Torchia disregards corporate formalities and commingles CN Acceptance’s funds with those of CN Capital, such that the LS Interests are now threatened by CN Capital’s Insolvency. The complaint further alleges that Torchia has transferred millions of dollars to entities he controls to support his and his family’s other businesses and to pay his personal expenses. According to the complaint, CN Capital and CN Acceptance, on average, have raised in excess of $2 million per month through the sale of notes and LS Interests in the first six months of 2015.

The complaint alleges that the defendants violated and/or aided and abetted or caused violations of the antifraud provisions of the securities laws in Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. The complaint also alleges that Torchia, CN Capital and CN Acceptance violated the registration provisions of the securities laws in Section 5 of the Securities Act.

On November 20, 2015, the Court approved an Order by which the defendants agreed, among other things, not to offer or sell any additional promissory notes or to advertise investment opportunities via general solicitations. The Order also restricts the defendants’ ability to transfer assets and funds and to sell fractional interests in life settlements. A related evidentiary hearing will be held on January 7, 2016.

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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.

Securities and Exchange Commission v. Cheryl L. Robinson, Civil Action No. 2:14-cv-1036 (D. Nev. June 26, 2014)

SEC Files Settled Charges Against Arizona Resident in Prime Bank Investment Scheme

On June 26, 2014, the Securities and Exchange Commission charged Cheryl L. Robinson with violating the antifraud and registration provisions of the federal securities laws in connection with an advance-fee high-yield investment scam perpetrated by Switzerland-based Malom Group AG (“Malom”) and Las Vegas-based M.Y. Consultants, Inc. As alleged in the complaint, Robinson acted as a promoter who recruited investors for Malom Group AG and M.Y. Consultants, Inc. from approximately 2009 to 2011. In this role, Robinson made materially false and misleading statements to investors about, among other things, Malom’s background, its financial resources, and history of success. She also failed to inform investors that none of her clients had received any profits from a transaction with Malom and that all had lost their entire investment. Finally, she omitted to tell any of the investors that she would be paid approximately 25% of the investors’ advance fees regardless of whether a transaction produced profits. The complaint also alleged that Robinson acted as an unregistered broker dealer and sold unregistered Malom securities. By virtue of this conduct, the complaint alleges Robinson violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and aided and abetted violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5.

Without admitting or denying the SEC’s allegations, Robinson agreed to settle the case against her. The settlement is pending final approval by the court. Specifically, Robinson consented to the entry of a final judgment that (1) permanently enjoins her from future violations of Securities Act Sections 5(a), 5(c), and 17(a), Exchange Act Sections 10(b), 15(a), and Rule 10b-5 thereunder, and from aiding and abetting violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5; (2) permanently enjoins her from directly or indirectly participating in the issuance, offer, or sale of any security, including but not limited to joint venture agreements, proofs of funds, bank guarantees, medium term notes, standby letters of credit, structured notes, and similar instruments, with the exception of the purchase or sale of securities listed on a national securities exchange; (3) orders that she is liable for disgorgement in the amount of $204,417 and $13,802 in prejudgment interest, for a total of $218,219, and waives that amount based on her demonstrated inability to pay. The Commission also decided to forego a civil penalty based on her demonstrated financial condition.

As part of the settlement, and following the entry of the proposed final judgment, Robinson, without admitting or denying the Commission’s findings, has consented to the entry of a Commission order, pursuant to Exchange Act Section 15(b)(6), permanently barring her from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, or from participating in an offering of penny stock.

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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 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.

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:

January 2014 Disciplinary and Other FINRA Actions

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

Lunick Jean Dorleus (CRD #5436401, Registered Representative, Greenacres, Florida) submitted a Letter of Acceptance, Wavier and Consent in which he was suspended from association with any FINRA member in any capacity for nine months. In light of Dorleus’ financial status, no monetary sanction has been imposed. Without admitting or denying the findings, Dorleus consented to the described sanction and to the entry of findings that, at the behest of an individual, Dorleus and other individuals formed an investment club whereby investors’ funds would be collected, forwarded to the individual or entities the individual controlled, and ultimately used by the individual for unspecified securities investments. The findings stated that Dorleus participated in private securities transactions of investors. FINRA Case No. 2011029760701. To review the entire FINRA release relative to this matter, please follow one of the above referenced links.

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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 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.

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:

January 2014 Disciplinary and Other FINRA Actions

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

Donald Richard Dahn (CRD #2172800, Registered Representative, Palm City, Florida) submitted a Letter of Acceptance, Wavier and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Dahn consented to the described sanction and to the entry of findings that he borrowed a total of $27,100 from public customers without the ability to repay the loans that had been represented to be used for operating expenses for a company Dahn ran with his brother. The findings stated that Dahn failed to disclose the loans to his members firms. The firms’ WSPs prohibited borrowing money from customers. Dahn has failed to repay either of the loans, one of which required payment within 90 days. Dahn misappropriated the funds by failing to repay either loan, and by borrowing customer funds without the ability to repay the loans. FINRA Case No. 2013036768101

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.

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.

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:

January 2014 Disciplinary and Other FINRA Actions

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

Jinesh Pravin Brahmbhatt (CRD #2491299, Registered Representative, Potomac, Maryland) submitted a Letter of Acceptance, Wavier and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Brahmbhatt consented to the described sanctions and to the entry of findings that he failed to appear and testify at a disciplinary proceeding regarding a complaint FINRA filed against his member firm and its CEO/president alleging that they engaged in an $18 million offering fraud in connection with the sale of promissory notes. FINRA Case No. 2012034211303.

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.

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.

Securities and Exchange Commission v. Palladino, et al., Civil Action No. 13-11024-DPW (United States District Court for the District of Massachusetts)

Commonwealth of Massachusetts v. Palladino, Crim. Action Nos. 13-10207, 13-10891; Commonwealth of Massachusetts v. Viking Financial Group, Inc., Crim. Action Nos. 13-10209, 13-10894 (Suffolk Superior Court)

Massachusetts Resident Steven Palladino Sentenced to 10-12 Years in Prison for Role in Multi-Million Dollar Ponzi Scheme

The Securities and Exchange Commission recently announced that, on January 21, 2014, a Massachusetts state court judge sentenced Massachusetts resident Steven Palladino to a prison term in a criminal action filed by the Suffolk County (Massachusetts) District Attorney. The criminal action against Palladino and his company, Massachusetts-based Viking Financial Group, Inc., was initially filed in March 2013 and involves the same conduct alleged in a civil securities fraud action brought by the Commission in April 2013. Suffolk Superior Court Judge Janet Sanders sentenced Palladino, of West Roxbury, Massachusetts, to serve a prison term of 10-12 years, followed by a probationary period of five years, and to pay restitution to victims, for crimes that he committed in connection with a Ponzi scheme perpetrated through Viking. At the same hearing, Palladino pled guilty to criminal charges that included conspiracy, being an open and notorious thief, larceny, and larceny from elderly person(s). Viking also pled guilty to related charges and was sentenced to a probationary period of five years and ordered to pay restitution to victims. The Court set a further hearing for March 7, 2014 to determine, among other things, the amount of restitution to be paid to victims.

The Commission previously filed an emergency action against Viking and Palladino (collectively, “Defendants”) in federal district court in Massachusetts. In its complaint, the Commission alleged that, since April 2011, Defendants misrepresented to at least 33 investors that their funds would be used to conduct the business of Viking – which was purportedly to make short-term, high interest loans to those unable to obtain traditional financing. The Commission also alleged that Palladino misrepresented to investors that the loans made by Viking would be secured by first interest liens on non-primary residence properties and that investors would be repaid their principal, plus monthly interest at rates generally ranging from 7-15%, from payments that borrowers made on loans. The complaint alleged that, in truth, Defendants made very few real loans to borrowers, and instead used investors’ funds largely to pay earlier investors and to pay for the Palladino family’s substantial personal expenses, including cash withdrawals, gambling debts, vacations, luxury vehicles and tuition.

The Commission first filed this action on April 30, 2013, seeking a temporary restraining order, asset freeze, and other emergency relief – which the Court granted. On May 15, 2013, the Court also issued an escrow order, which ordered Defendants to deposit all funds and assets in their possession into an escrow account. The asset freeze and escrow order have remained in effect at all times since April 30, 2013 and May 15, 2013, respectively. On July 15, 2013, the Court held that Defendants’ conduct violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. On November 18, 2013, the Court entered orders that enjoined Defendants from further violations of the antifraud provisions of the securities laws and ordered them to pay disgorgement of $9,701,738, plus prejudgment interest of $122,370.

On September 4, 2013, the Commission filed a motion for contempt against Palladino for violations of the asset freeze and the escrow order. The motion alleged that Palladino violated the asset freeze by transferring three vehicles that he owned (solely or jointly with his wife) into his wife’s name and using the vehicles as collateral for new loans – effectively cashing out the equity in these vehicles. The motion also alleged that Palladino violated the escrow order by failing to deposit all cash in his possession into the escrow account. On November 15, 2013, the Court held Palladino in contempt and ordered that he restore ownership of the vehicles that he had transferred into his wife’s name. Subsequently, Palladino restored ownership of two of the vehicles but has failed to restore ownership of one vehicle. As a result, the Court refused to dismiss the contempt finding against him at hearings on December 3, 2013 and January 17, 2014. The Court has set a further hearing date of February 20, 2014 to address, among other things, whether Palladino remains in contempt.

District Court Finds Eric Aronson Liable for Operating a Ponzi Scheme, Issues Permanent Injunctions Against Remaining Individual Defendants and Grants Other Relief

The Securities and Exchange Commission recently announced that U.S. District Court Judge Jed S. Rakoff has ruled that Defendant Eric Aronson violated the antifraud and other provisions of the federal securities laws. In addition, the Court entered orders of permanent injunctions against Defendants Vincent Buonauro and Fredric Aaron and further imposed officer and director and penny stock bars against Aaron. Furthermore, the Court ordered Aronson’s wife, Relief Defendant Caroline Aronson, to disgorge the ill-gotten gains she received from her husband.

The Commission’s Complaint, filed in October 2011, alleged that, from 2006 to 2010, PermaPave Industries and its affiliates raised more than $26 million from the sale of promissory notes and “use of funds” agreements to over 140 investors. Eric Aronson, Vincent Buonauro and others told investors that there was a tremendous demand for the product – permeable paving stones – and that investors would be repaid from the profits generated by guaranteed product sales. In reality, there was little demand for the product, and defendants used investors’ money to make “interest” and “profit” payments to earlier investors and to fund management’s lavish lifestyles. In addition, shortly after an affiliate of PermaPave Industries acquired a majority stake in Interlink-US-Network, Ltd., Eric Aronson, Fredric Aaron – who was the attorney for Eric Aronson and the entity defendants – and others issued a press release stating that a company that had never heard of Interlink intended to invest $6 million in Interlink.

On August 6, 2013, the Court granted in part the Commission’s motion for summary judgment. Finding that the Commission proved an “almost endless fraud” with evidence that Eric Aronson and others raised millions from investors, misappropriated the funds raised, and then converted the investments several times over to delay and ultimately avoid repayment, the Court ruled that Eric Aronson, age 45 and resident of Syosset, New York, violated Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Subsequently, on December 11, 2013, the Court granted the Commission’s motion for reconsideration of the Court’s summary judgment order and ruled that Eric Aronson also violated Section 20(e) of the Exchange Act by aiding and abetting Interlink’s violations of Exchange Act Sections 10(b) and 13(a) and Rules 10b-5, 12b-20 and 13a-11. Relief for these violations will be determined at a later date.

The Court also granted summary judgment on the Commission’s claim for disgorgement against Caroline Aronson, age 43 and resident of Syosset, New York. On December 23, 2013, the Court issued a final judgment ordering Caroline Aronson to pay the full disgorgement amount sought, $296,262.

Also on December 23, 2013, the Court issued judgments as to Vincent Buonauro, age 42 and resident of West Islip, New York, and Fredric Aaron, age 49 and resident of Plainview, New York. Vincent Buonauro agreed to consent to the judgment as to him, which enjoins him from violating Securities Act Sections 5 and 17(a) and Exchange Act Sections 10(b) and 15(a) and Rule 10b-5. Fredric Aaron also agreed to consent to the judgment as to him, which enjoins him from violating Exchange Act Section 10(b) and Rule 10b-5 and from aiding and abetting violations of Exchange Act Section 13(a) and Rules 12b-20 and 13a-11. The judgment as to Fredric Aaron also imposes five year officer and director and penny stock bars. The Commission’s claims for monetary relief against Vincent Buonauro and Fredric Aaron will be determined at a later date.

The Commission’s civil action also continues against Relief Defendant Deborah Buonauro. The Court previously issued final judgments against all entity defendants and entity relief defendants on January 19, 2012 and against Defendant Robert Kondratick on October 17, 2012.

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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.

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.

When using the term “Face Value” in referring to a security, it means the value as given on the certificate or instrument. For example, corporate bonds are usually issued with $1,000 face values, municipal bonds with $5,000 face values and federal government bonds with $10,000 face values. If these instruments are held to maturity, the investor, absent default, would receive the face value of the instrument. This is not necessarily true if the instrument is sold before maturity as the value of the bonds fluctuate in price from the time that they are issued until redemption. This price fluctuation is based upon a number of factors, including the credit worthiness of the issuer, the interest rate carried by the bond and the length of time until maturity.

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 the contents of this post, you should contact a qualified professional.

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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.

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.

Securities and Exchange Commission v. Malom Group AG, Martin U. Schläpfer, Hans-Jürg Lips, et al., Civil Action No. 2:13-cv-2280 (D. Nev. Dec. 16, 2013)

SEC Charges Perpetrators of Prime Bank Schemes in Las Vegas and Switzerland

The Securities and Exchange Commission recently filed fraud charges against a company named with an acronym for “Make A Lot Of Money” that is behind a pair of advance fee schemes guaranteeing astronomical returns to investors in purported prime bank transactions and overseas debt instruments.

The SEC alleges that Swiss-based Malom Group AG and several individuals conducted the schemes from Las Vegas and Zurich. They raised $11 million from U.S. investors by using a series of lies and forged documents to steer them into seemingly successful foreign trading programs that were nothing more than vehicles to steal money. Advance fee frauds solicit investors to make upfront payments before purported deals can go through, and perpetrators fool investors with official-sounding terminology to add an air of legitimacy to the investment programs. Many transactions offered by Malom bore the hallmarks of prime bank frauds, which tout the supposed use of well-known overseas banks to attract investors.

The SEC alleges that Malom charged investors fees for bogus services, and the individuals pulling the strings distributed investor funds among themselves for personal use. They further lied to investors who later inquired about the progress of the transactions, lulling them with excuses about why they have yet to receive investment returns or refunds.

In a parallel action, the U.S. Department of Justice today announced criminal charges against the same six individuals charged in the SEC’s complaint:

• Martin U. Schläpfer of Switzerland, who has been described as Malom’s chief executive officer, managing director, and legal counsel.
• Hans-Jürg Lips of Switzerland, who has been described as the Malom’s president or chairman of the board of directors.
• James C. Warras of Waterford, Wisc., who has been described as Malom’s executive vice president.
• Joseph N. Micelli of Las Vegas, who has been described as Malom’s compliance officer.
• Anthony B. Brandel of Las Vegas, who served as Malom’s main point of contact with U.S. investors – explaining the investments, collecting investor funds, and lulling investors about the status of the transactions. His Las Vegas company, M.Y. Consultants, also is charged in the SEC’s complaint.
• Sean P. Finn of Whitefish, Mont., who recruited U.S. investors through his Wyoming-based company M. Dwyer LLC, which also is charged in the SEC’s complaint.

According to the SEC’s complaint, filed in U.S. District Court for the District of Nevada, the schemes occurred from 2009 to 2011, and lulling of investors continued through 2013. None of the transactions in securities offered or sold were registered with the SEC or eligible for an exemption. In the first scheme, they offered “joint venture” agreements that purportedly allowed investors to “use” Malom’s financial resources in exchange for an upfront fee. The agreements required the investors to propose investment transactions for Malom to enter into with third parties in order to generate returns for the company and the investor. Malom supplied investors with forged bank statements and “proof of funds” letters to give the false impression that the company had the millions of dollars needed for the transactions. Before investors paid their upfront fees, the Malom executives and promoters typically knew at least the basic details of the proposed trading programs, in some cases actually providing the trading program for investors to propose. But after receiving the upfront fees from investors, Malom proceeded to reject every proposed transaction and misappropriate investor funds to further the scheme and line the perpetrators’ pockets.

According to the SEC’s complaint, the second scheme falsely promised investors that Malom would generate funding by creating structured notes that would be listed on “Western European” exchanges. After inducing investors to pay an “underwriting fee” and making personal and corporate guarantees of repayment, Malom reneged on the guarantees of repayment and failed to issue any structured notes. Again the perpetrators behind the scheme quickly distributed investor funds among themselves.

The SEC’s complaint alleges that Malom, its principals and agents Martin U. Schläpfer, Hans-Jurg Lips, James C. Warras, and Joseph N. Micelli violated the antifraud and securities registration provisions of the federal securities laws, specifically, Section 17(a) and Section 5 of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and, except as to Malom Group, they aided and abetted violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Further, the SEC’s complaint alleges that M.Y. Consultants, Inc., Anthony B. Brandel, M. Dwyer LLC, and Sean P. Finn violated the antifraud and securities and broker-dealer registration provisions of the federal securities laws. Specifically, the complaint alleges that these defendants violated Sections 17(a) and 5 of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 15(a) of the Exchange Act; and that they aided and abetted violations of Section 17(a) of the Securities Act Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest thereon, and civil penalties against each defendant.

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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.

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.

The elements of a breach of fiduciary duty action are (1) the existence of a fiduciary duty and (2) the breach of that duty that was the proximate cause of the plaintiff’s damages. A fiduciary relationship exists when confidence is reposed by one party and trust accepted by the other. Such a relationship exists where confidence is reposed on one side and there is resulting superiority and influence on the other. When a fiduciary relationship has not been created by an express agreement, the question of whether the relationship exists generally depends upon the specific facts and circumstances surrounding the relationship of the parties in a transaction in which they are involved.

The law is clear that a broker owes a fiduciary duty of care and loyalty to a securities investor. The type and extent of this duty is fact specific. In other words, your relationship with, in the case, your broker/dealer and/or account executive will be determinative of the type of duty that you are owed. However, please keep in mind that the extent of this duty is organic. It is constantly changing. It is for this reason that your specific circumstances need to be reviewed by a qualified professional.

Fiduciary duties associated with a non-discretionary account. A non-discretionary account is an account in which the customer rather than the broker determines which purchases and sales to make. In a non-discretionary account each transaction is viewed singly. In such cases the broker is bound to act in the customer’s interest when transacting business for the account; however, all duties to the customer cease when the transaction is closed. The duties associated with a non-discretionary account include, but may not necessarily limited to: (1) the duty to recommend a stock only after studying it sufficiently to become informed as to its nature, price and financial prognosis; (2) the duty to carry out the customer’s orders promptly in a manner best suited to serve the customer’s interests; (3) the duty to inform the customer of the risks involved in purchasing or selling a particular security; (4) the duty to refrain from self-dealing or refusing to disclose any personal interest the broker may have in a particular recommended security; (5) the duty not to misrepresent any fact material to the transaction; and (6) the duty to transact business only after receiving prior authorization from the customer.

Of course the precise manner in which a broker performs these duties will depend to some degree upon the intelligence and personality of his customer. For example, where the customer is uneducated or generally unsophisticated with regard to financial matters, the broker will have to define the potential risks of a particular transaction carefully and cautiously. Conversely, where a customer fully understands the dynamics of the stock market or is personally familiar with a security, the broker’s explanation of such risks may be merely perfunctory. In either case, however, the broker’s responsibility to his customer ceases when the transaction is complete. A broker has no continuing duty to keep abreast of financial information which may affect his customer’s portfolio or to inform his customer of developments which could influence his investments. Although a good broker may choose to perform these services for his customers, he is under no legal obligation to do so.

Absent from the above list is the duty, on the part of the broker, to engage in a particular course of trading. So long as a broker performs the transactional duties outlined above, he and his customer may embark upon a course of heavy trading in speculative stocks or in-out trading as well as upon a course of conservative investment in blue chip securities.

Unlike the broker who handles a non-discretionary account, the broker handling a discretionary account becomes the fiduciary of his customer in a broad sense. Such a broker, while not needing prior authorization for each transaction, must (1) manage the account in a manner directly comporting with the needs and objectives of the customer as stated in the authorization papers or as apparent from the customer’s investment and trading history; (2) keep informed regarding the changes in the market which affect his customer’s interest and act responsively to protect those interests; (3) keep his customer informed as to each completed transaction; and (5) explain forthrightly the practical impact and potential risks of the course of dealing in which the broker is engaged.

Although no particular type of trading is required of brokers handling discretionary accounts, most concentrate on conservative investments with few trades usually in blue chip growth stocks. Where a broker engages in more active trading, particularly where such trading deviates from the customer’s stated investment goals or is more risky than the average customer would prefer, the broker has an affirmative duty to explain the possible consequences of his actions to his customer. This explanation should include a discussion of the effect of active trading upon broker commissions and customer profits.

Between the purely non-discretionary account and the purely discretionary account there is a hybrid-type account which usually exists between most customers and their broker. Such an account is one in which the broker has usurped actual control over a technically non-discretionary account. In such cases the courts have held that the broker owes his customer the same fiduciary duties as he would have had the account been discretionary from the moment of its creation.

In Hecht v. Harris, 430 F.2d 1202 (9th Cir. 1970), the plaintiff, a 77 year old widow, opened a non-discretionary account with a major brokerage firm. Consistent with the practice in such accounts plaintiff received confirmation slips of each transaction and monthly statements on the status of her account. In addition, she spoke personally with the defendant broker several times a week. Nonetheless, the court held that the broker was liable to plaintiff for churning her account on the ground that he had traded excessively without informing plaintiff of the potential hazards involved in such a course of trading. Since the plaintiff was informed, for the most part, of the individual transactions in her account, the court’s holding assumed that the defendant owed plaintiff the additional fiduciary duty to explain the risks of pursuing a particular course of trading. That assumption derived from the court’s finding that the broker had taken full control over the plaintiff’s account and thus owed her those fiduciary duties normally associated with discretionary accounts.

In determining whether a broker has assumed control of a non-discretionary account the courts weigh several factors. First, the courts examine the age, education, intelligence and investment experience of the customer. Where the customer is particularly young, old, or naive with regard to financial matters, the courts are likely to find that the broker assumed control over the account. Second, if the broker is socially or personally involved with the customer, the courts are likely to conclude that the customer relinquished control because of the relationship of trust and confidence. Conversely, where the relationship between the broker and the customer is an arms-length business relationship, the courts are inclined to find that the customer retained control over the account. Third, if many of the transactions occurred without the customer’s prior approval, the courts will often interpret this as a serious usurpation of control by the broker. Fourth, if the customer and the broker speak frequently with each other regarding the status of the account or the prudence of a particular transaction, the courts will usually find that the customer, by maintaining such active interest in the account, thereby maintained control over it.

Importantly, the category which you fall in is not something that you should try to figure out yourself. You should attempt to make this determination in conjunction with a qualified professional.

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 you have any questions concerning this post, you should contact a qualified professional.

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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.

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.

The Securities and Exchange Commission (SEC) recently announced that the United States District Court for the District of Columbia granted the SEC’s motion for summary judgment against all primary defendants and certain relief defendants in a civil action arising from a prime bank investment scheme that defrauded at least 13 investors out of more than $2 million from August 2010 to November 2011. Pursuant to the court’s ruling and judgment issued on August 26, 2013, the court permanently enjoined Washington D.C. attorney Brynee K. Baylor, her law firm Baylor & Jackson, P.L.L.C., and their former “client” The Milan Group, Inc. from violations of the antifraud and other securities law provisions, and from engaging in similar investment schemes. The court also required these defendants to pay disgorgement and penalties, required the Estate of Frank L. Pavlico to pay disgorgement, and barred Baylor from acting as an officer or director of any public company. The court required relief defendants Patrick T. Lewis and The Julian Estate to disgorge illegally obtained investor funds. The court granted in part or denied summary judgment against two other relief defendants, but declined in September 2013 to reconsider that ruling.

The SEC’s complaint, filed on November 30, 2011, alleged that Pavlico and Baylor operated a prime bank scheme, offering investors risk-free returns of up to 20 times the original investment within as few as 45 days through the purported “lease” and “trading” of foreign bank instruments, including “standby letters of credit” and “bank guarantees,” in highly complex transactions with unidentified parties and secretive international “trading platforms.” However, the bank instruments and trading programs were entirely fictitious. As the complaint alleged, Pavlico and Baylor provided investors with phony contracts and legal documents, digitally-created computer screen shots, and copies of fictitious foreign bank instruments as purported proof of the ongoing success of the transactions. Baylor and her law firm acted as “counsel” for Pavlico’s company Milan, vouching for Pavlico and acting as an escrow agent that in reality was merely receiving and diverting the majority of investor funds.

In furtherance of the scheme, the complaint alleged that Baylor provided investors with “attorney attestation” letters that assured them the investments were legitimate, and investor contracts that promised investment profits would be shared among investors, Milan, and Baylor & Jackson. Meanwhile, Pavlico was using a fake name of “Frank Lorenzo” to conceal his 2008 money laundering conviction from investors. The complaint also alleged that Pavlico and Baylor used investor funds to pay Baylor & Jackson business expenses as well as personal expenditures.

The court held in its summary judgment ruling that Baylor, an experienced lawyer, “acted with extreme recklessness” in the scheme, carrying out Pavlico’s bidding while failing to exercise even a “modicum of lawyerly interest in the legal implications of” Pavlico’s and Milan’s activities. The court found that Baylor “encouraged others to invest in unregistered securities, aided and abetted Milan’s fraud, and knowingly allowed investors’ monies-placed for safekeeping in her firm’s IOLTA account-to be dispersed to Milan and then back to her”, with 71% of investor funds paid out to Baylor and Pavlico and no funds being used in any investment. Finding the record clear despite Baylor’s claimed ignorance of the fraud, the court ruled that she made “extensive material misrepresentations and omissions…. Ms. Baylor knew that she omitted telling investors about the disbursements from her IOLTA account without any investment; she knew that she told investors that Milan was just closing a deal and/or that all would be well with multiple investments when, in fact, no profits were ever returned to an investor; she knew that she told investors that investments through Milan were outside federal oversight when, at best, she had not researched the question; and she knew that she was assuring investors that she had ‘validated’ aspects of the transactions, as an attorney, when, in fact, she had not.” The court found that “Baylor’s attempt to use her role as an attorney as a shield is particularly pernicious because, as an attorney, she was in the position to lead investors to believe that their money was safe.”

The court granted the SEC’s motion for summary judgment against all of the principal defendants-Baylor, Baylor & Jackson, The Milan Group, and Frank Pavlico, as substituted by his Estate following his death in December 2012 during the litigation-that they 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 thereunder, and that Pavlico, Baylor, and Baylor & Jackson aided and abetted violations of these provisions; that they violated Sections 5(a) and 5(c) of the Securities Act and that Baylor and Baylor & Jackson aided and abetted such violations; and that Baylor and Pavlico violated Section 15(a) of the Exchange Act.

The judgment permanently enjoins Baylor, Baylor & Jackson, and Milan from violating and aiding and abetting violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5, and from violating Section 5 of the Securities Act and Section 15(a) of the Exchange Act. The judgment also prohibits Baylor, Baylor & Jackson, and Milan from soliciting or accepting funds from investors in investment programs relating to bank instruments or bank instrument trading programs, or in any other investment program. The judgment holds the Estate of Frank Pavlico, Milan, Baylor & Jackson, and Baylor jointly and severally liable for disgorgement of their ill-gotten gains of $2,665,000, together with prejudgment interest thereon of $157,414, for a total of $2,822,414. The judgment orders Baylor to pay the remaining obligation of $2,752,758 and directed the Estate of Pavlico to make payments as directed in the future by the court as the Estate collects estate assets and pays estate costs. The judgment also orders Milan to pay a civil penalty of $1,318,734 and orders Baylor and Baylor & Jackson to pay, jointly and severally, a civil penalty of $746,266. The judgment permanently bars Baylor from acting as an officer or director of any public company.

The court also granted summary judgment against two relief defendants, Patrick Lewis and The Julian Estate, an entity Pavlico formed to purchase a residence using investor funds. The judgment orders Lewis to pay $375,000 and orders The Julian Estate to pay $437,250, with the amount to be satisfied by the sale of the property it purchased with investor funds.

The court also granted in part the SEC’s motion for summary judgment against relief defendant Mia Baldassari with respect to $13,156 she received from Milan, but denied further relief against her. The court also denied summary judgment against relief defendant Brett Cooper, whom the SEC alleged received investor funds from Milan through his company Global Funding Systems, LLC. In September 2013, the court denied the SEC’s request to reconsider its summary judgment rulings as to Cooper and Mia Baldassari and, therefore, the litigation as to them is pending.

The court previously entered default judgments against two other relief defendants: on November 14, 2012 the court ordered Patrick Lewis’ company GPH Holdings, LLC to pay a total of $399,743, consisting of $375,000 it received in investor funds plus $24,743 in prejudgment interest; and on January 23, 2013, the court ordered Brett Cooper’s company Global Funding Systems, LLC to pay a total of $238,253, consisting of $225,000 it received in investor funds plus $13,253 in prejudgment interest.

In addition, the SEC previously settled with relief defendant Dawn Jackson, Baylor’s law partner, and the court entered a final judgment against her on March 21, 2013. Without admitting or denying the allegations in the SEC’s complaint, Jackson agreed to the final judgment that held her liable for disgorgement of $153,000 and $9,410 in prejudgment interest, for a total of $162,410, the payment of which is to be made from the sale, if any, of a Bahamian property but is otherwise waived based on Jackson’s sworn statement of financial condition.

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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.

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.

SEC Charges New Jersey Resident in Prime Bank Investment Scheme and Files Settled Charges Against California Attorney Escrow Agent

Recently, the Securities and Exchange Commission filed an enforcement action in the U.S. District Court for the District of New Jersey against New Jersey resident Brett A. Cooper and his companies Global Funding Systems LLC, Dream Holdings, LLC, Fortitude Investing, LLC, Peninsula Waterfront Development, LP and REOP Group Inc., who from at least November 2008 through about April 2012 perpetrated three fraudulent schemes and engaged in various fraudulent and deceitful acts, practices and courses of business in furtherance of those schemes.

The SEC’s complaint alleges that, in the first scheme, commonly referred to as a “Prime Bank Fraud”, Cooper raised approximately $1.4 million from investors by claiming to have special access to programs that through pooling of funds allowed individual investors to participate in this investment opportunity generally available only to Wall Street insiders. Cooper misrepresented to investors that the financial instruments are issued by the world’s largest and most financially sound banks; used vague, complex, and meaningless legal and financial terms designed to deceive the investors into believing that he offered legitimate investments; misrepresented that extraordinary returns of up to 1,000 percent within as little as 60 days were possible with little risk to principal; lied to investors that their principal would be collateralized with cash or semi-precious gemstones; and lied that their money would remain safe in escrow with attorneys pending the completion of certain steps in the transaction.

In the second scheme, also purportedly involving investment in prime bank paper, Cooper offered to participate as an investor in the purchase and trade of a $100 million bank guarantee on the condition that all investor funds were pooled in an attorney client trust account. Cooper sent a forged escrow agreement, purportedly from an attorney, containing wiring instructions for the attorney client trust account. The wire instructions, however, were for an account controlled by Cooper, not an attorney acting as escrow agent. The four investors unwittingly deposited a total of $925,000 in the phony escrow account which was, in fact, for Cooper’s company Dream Holdings, after which Cooper misappropriated the funds.

In March 2012 Cooper and his company REOP participated in a third scheme involving the sale of a purported Brazilian sovereign bond. Cooper claimed that, in exchange for a $50,000 “fee”, he would locate a buyer for the bond and open an account at a registered broker-dealer, which Cooper claimed was necessary to sell the bond. Cooper forged a letter that purported to be from the broker-dealer indicating that the bond had been “accepted” by the broker-dealer. Based upon this letter, the deceived investor paid Cooper’s $50,000 “fee”.

According to the SEC’s complaint, Cooper used the investor money to pay personal expenses, buy cars, pay associates in the scheme, and fund frequent gambling junkets to casinos in Las Vegas and Atlantic City.

The SEC’s complaint alleges that, despite his offering and selling of securities, Cooper has never been registered with the SEC to sell securities.

The SEC’s complaint alleges that Cooper and his companies violated the antifraud and broker-dealer registration provisions of the federal securities laws. Specifically, the complaint alleges that they each 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; that Cooper aided and abetted violations of Securities Act, Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5; and that Cooper also violated Exchange Act Section 15(a). The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest thereon, and civil penalties against each defendant.

Also on September 27, 2013, the SEC charged California attorney David H. Frederickson, a sole practitioner, and his law firm The Law Offices of David H. Frederickson, with aiding and abetting Cooper’s prime bank scheme in two transactions in 2010 and 2011.

According to the SEC’s complaint filed separately in the U.S. District Court for the District of New Jersey, Frederickson served as escrow agent for two of Cooper’s prime bank transactions, and provided letters to investors stating that their investments were secured by collateral owned by Cooper’s company Global Funding Systems LLC. Frederickson did nothing to verify the value, authenticity, or ownership of the collateral, which Cooper claimed to be seven sapphires valued at $376 million. The SEC’s complaint also alleges that by the time Frederickson served as escrow agent for the second of these investors, Frederickson had learned facts indicating that Cooper had affixed Frederickson’s electronic signature to a forged escrow agreement that caused investor funds to be diverted to another Cooper company instead of being sent to Frederickson’s escrow account. Moreover, Frederickson told this second investor that he had served as escrow agent for Cooper in numerous other successful bank instrument trading transactions. In fact, none of the bank instrument trading transactions had been successful.

Frederickson earned a total of $6,790 in escrow fees for these transactions and for a transaction involving an escrow agreement Cooper forged, for which Frederickson provided no escrow services. These fees were paid from the funds of the defrauded investors.

Without admitting or denying the SEC’s allegations, Frederickson and his firm agreed to settle the case against them. The settlement is pending final approval by the court. Specifically, Frederickson and his firm consented to the entry of a final judgment that (1) permanently enjoins each of them from violating or aiding and abetting violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5; (2) permanently enjoins each of them from providing professional legal or escrow services in connection with, or from participating directly or indirectly in, the issuance, offer, or sale of securities involving bank guarantees, medium term notes, standby letters of credit, structured notes, and similar instruments, provided, however, that such injunction shall not prevent Frederickson from purchasing or selling securities listed on a national securities exchange; and (3) orders them to pay, jointly and severally, disgorgement and prejudgment interest totaling $7,257, and a civil penalty in the amount of $25,000, for a total of $32,257.

As part of the settlement, and following the entry of the proposed final judgment, Frederickson, without admitting or denying the Commission’s findings, has consented to the entry of a Commission order pursuant to Rule 102(e)(3) of the Commission’s rules of practice permanently suspending him from appearing or practicing before the Commission as an attorney.

Contact Us:

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.

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.

The Securities and Exchange Commission recently charged the former president of a purported private equity real estate firm based in San Bernardino, Calif., with defrauding nearly 500 investors who purchased promissory notes under the false premise that they were secured by specific properties or other collateral.

The SEC alleges that Larry Polhill used his company American Pacific Financial Corporation (APFC) to buy and sell real estate and distressed assets, and he offered investors the opportunity to invest in the company through unregistered notes that would yield them interest payments of 5 to 17 percent per year. However, the collateral that Polhill and APFC claimed made the investments secure was often non-existent or otherwise impaired. The properties underlying the investments were sometimes even sold without notice to investors. When APFC eventually filed for bankruptcy, it named the investors as unsecured creditors who were owed nearly $160 million. None of Polhill’s investment offerings were registered with the SEC.

Polhill agreed to settle the SEC’s charges and be barred from acting as the officer or director of any public company. The settlement is subject to the approval of the U.S. District Court for the Central District of California, which would decide monetary sanctions at a later date.

According to the SEC’s complaint, in addition to promissory notes, investors also could invest in APFC-sponsored funds that pooled investor money to make loans to APFC. The company made regularly scheduled interest payments to investors in the notes and the funds from the mid-1980s to 2007. As a result, its investor base continually grew and the company began making larger and larger investments in distressed assets by buying numerous companies out of bankruptcy. While a few of APFC’s investments were successful, the vast majority failed unbeknownst to investors. Consequently, the assets held by APFC that were securing the notes and loans held by investors decreased in value. In early 2008, APFC ceased making its scheduled payments to most investors, but continued to issue newsletters, pay preferred investors, and engage in other activities designed to create a false sense of security about the investments in the company.

The SEC alleges that Polhill made several material misrepresentations to investors. Specifically, he told investors that the notes were secured by collateral when no such security interest existed. He failed to disclose that the collateral securing some investors’ notes already had been pledged to other lenders. Polhill represented that he would notify investors if their collateral went into default when that was often not the case. For instance, one investor’s note specifically stated it was secured by property located in Hesperia, Calif., that was owned by APFC and pledged as collateral. However, APFC sold the collateral in 2004, and neither Polhill nor APFC informed the investor that his collateral had been sold and there was no longer any asset securing the note.

The SEC’s complaint charges Polhill with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act. Polhill has consented to the entry of an order that permanently enjoins him from violating these laws and permanently bars him from acting as an officer or director of any public company.

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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.

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.

The Securities and Exchange Commission (“Commission”) has charged Jenifer E. Hoffman and John C. Boschert, the former principals of Assured Capital Consultants, LLC – a now-dissolved Florida company – and Bryan T. Zuzga, the company’s purported escrow agent, for their involvement in a fraudulent prime bank offering and Ponzi scheme.

According to the Commission’s complaint, filed in U.S. District Court for the Middle District of Florida, between approximately January and September 2009, Assured Capital, through Hoffman, Boschert, and Zuzga, raised at least $25 million from investors, through false representations and fake documents. The complaint alleges that Hoffman and Boschert represented to investors that their money would be invested in Assured Capital’s offshore, confidential trading program which, in turn, would invest in blocks of medium term notes. As the complaint further alleges, Hoffman and Boschert enticed investors with claims of exorbitant profits and with the illusion of safety by telling them that the investment would provide weekly returns of up to 50% and that it was performing, safe, and guaranteed. In addition, Hoffman and Boschert represented to investors their money would remain safe in an Assured Capital escrow account that would be used to secure a line of credit for investing in the company’s offshore trading program. Furthermore, Hoffman, Boschert, and Zuzga told investors that Zuzga controlled the escrow account as Assured Capital’s escrow agent and that he was a licensed attorney. Moreover, Hoffman provided investors with fake bank documents and a sham verification letter, notarized by Zuzga, purporting to confirm Assured Capital had $500 million at a Panamanian bank.

As the complaint alleges, none of these representations were true and the investment program was purely fictional. Zuzga was not Assured Capital’s escrow agent and has never been a licensed attorney. Hoffman and Boschert used investor funds to make payments to other investors in Ponzi fashion, and stole investor funds along with Zuzga for their personal use. Assured Capital has since gone out of business.

The Commission’s complaint alleges that Hoffman of Clermont, Florida, Boschert of Apopka, Florida, and Zuzga of Coldwater, Michigan, all 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 thereunder. The Commission is seeking financial penalties, disgorgement of ill-gotten gains plus prejudgment interest, and permanent injunctions against all the defendants.

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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.

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.

The Securities and Exchange Commission (Commission) recently announced that on September 4, 2013, a Grand Jury sitting in the United States District Court for the Southern District of Florida returned an Indictment charging Joseph Paul Zada with 21 counts of mail fraud, two counts of wire fraud, two counts of money laundering, and two counts of interstate transportation of stolen property. The Indictment also seeks forfeiture of properties obtained as a result of the alleged criminal violations.

The Indictment alleges that from at least January 1998 through August 2009, Zada caused over twenty investors to invest over $20 million based on materially false statements and omissions. According to the Indictment, Zada attracted investors by projecting an image of great wealth, portraying himself as a successful businessman and investor with connections to Saudi Arabian oil ventures. He also hosted extravagant parties, drove expensive luxury vehicles, and maintained expensive homes in Wellington, Florida and Grosse Pointe, Michigan. The investors sent money to Zada with the understanding that he would use the funds to invest in various oil ventures on their behalf. The investors usually received promissory notes reflecting the principal amount of their investment. Zada deposited investors’ funds into bank accounts he controlled. Instead of investing the funds in oil ventures, Zada used the money to support his lavish lifestyle and to make purported returns on investments to prior investors.

The Indictment’s allegations are based on the same conduct underlying the Commission’s November 10, 2010 Complaint against Zada in the United States District Court for the Eastern District of Michigan. The Commission charged Zada with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. On July 31, 2013, the Court granted the Commission’s motion for summary judgment against Zada, finding that Zada had violated the provisions alleged by the Commission in its Complaint. The Court set a hearing for October 9, 2013 on the Commission’s for disgorgement and civil penalties against Zada. [U.S. v. Joseph Paul Zada, Case No. 13-80173-CV (S. Dist. Fla.)]

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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.

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.

Recently, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the District of Colorado against Brian G. Elrod for allegedly conducting a fraudulent offering of promissory notes for which Nova Dean Pack acted as an unregistered broker. Elrod and Pack reside in Buffalo Creek, Colorado and Highland, California, respectively.

The Complaint alleges that, from at least March 2009 through November 2009, Elrod and Pack raised approximately $2 million from 12 investors who invested in high-yield promissory notes issued by CFS Holding Company LLC (“CFS”), a Colorado company owned and managed by Elrod. According to the Complaint, Elrod told investors that their investments were secured and guaranteed and would generate annual returns ranging from 12% to 24%. According to the Complaint, Elrod further represented to investors that the proceeds from their promissory notes would be used to expand a group of financial services companies owned and managed by Elrod. The Complaint alleges that the foregoing representations, among others, were false and misleading when made, and that Elrod, rather than use investor money for legitimate business purposes, improperly used most of the investor funds to make substantial payments to himself and family members and to pay for personal expenses, to pay Pack significant commissions for referring investors, and to make interest payments back to investors. According to the Complaint, the CFS note offering was not registered with the Commission, and Pack was not an associated person of a registered broker or dealer at the time he participated in the CFS note offering.

Without admitting or denying the SEC’s allegations, Elrod and Pack agreed to settle the case against them. The settlement is pending final approval by the court. Specifically, Elrod consented to the entry of a final judgment permanently enjoining him from future violations of Sections 5 and 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 requiring him to pay disgorgement of $1,720,491, the amount of his ill-gotten gains, plus prejudgment interest of $295,817, and a civil penalty of $1,720,491. Pack consented to the entry of a final judgment permanently enjoining him from future violations of Section 5 of the Securities Act and Section 15(a) of the Exchange Act, and ordering disgorgement of $171,500 plus prejudgment interest of $25,177, but waiving payment and not imposing a civil penalty based upon his financial condition.

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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.

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.

SEC Halts Florida-Based Prime Bank Investment Scheme

The Securities and Exchange Commission recently announced that it has obtained an emergency court order to halt a prime bank investment scheme by a Miami attorney and others who have promised investors exorbitant returns to be derived from a program based on the trading of bank instruments.

In a complaint unsealed September 6 in U.S. District Court for the Southern District of Florida, the SEC alleges that Bernard H. Butts, Jr.; Fotios Geievelis, Jr., a/k/a Frank Anastasio; Worldwide Funding III Limited LLC; Douglas J. Anisky; Sidney Banner, Express Commercial Capital LLC; and James Baggs raised over $3.5 million from approximately 45 investors in both the United States and abroad. Worldwide Funding, through Geivelis, told investors that they would receive returns of 6.6 million Euros (approximately $8.7 million U.S. dollars) on a $60,000-$90,000 investment within 15 to 45 days, and then approximately 14% returns per week for 40 to 42 weeks. Butts, who also solicited investors, acted as the escrow agent for the transaction. Both Geivelis and Butts assured investors that their funds would remain in escrow in Butts’ account until Worldwide Funding had acquired the bank instruments necessary to generate the promised returns. In reality, Butts transferred funds out of his trust account almost as soon as they were received, giving approximately 45% to Geivelis, 10% to sales agents, and retaining approximately 45% for himself. The SEC alleges that no funds were used to acquire bank instruments and that Geivelis used investor funds to travel and gamble. Anisky, Banner, Express Commercial Capital, and Baggs all sold interests in the fraudulent scheme.

The SEC’s complaint charges all defendants with violations of Sections 5(a), 5(c), and 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. The complaint also charges Butts, Geivelis, Anisky, Banner, Express Commercial Capital, and Baggs with violations of Section 15(a) of the Exchange Act. The SEC also named Bernard H. Butts, Jr. PA; Butts Holding Corporation; Margaret A. Hering; Global Worldwide Funding Ventures, Inc.; and PW Consulting Group, LLC as relief defendants. The SEC believes that these parties may have received ill-gotten assets from the fraud that should be returned to investors.

The court granted the SEC’s request for emergency relief including a temporary restraining order and asset freeze. The SEC further seeks permanent injunctions, disgorgement of ill-gotten gains, and financial penalties from each defendant.

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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.

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.

Commission Charges Indiana Resident with Conducting Ponzi Scheme Targeting Retirement Savings of Investors

The Securities and Exchange Commission (“Commission”) recently charged a Noblesville, Ind., resident and his company with defrauding investors in a Ponzi scheme that targeted retirement savings.

The SEC alleges that John K. Marcum touted himself as a successful trader and asset manager to raise more than $6 million through promissory notes issued by his company Guaranty Reserves Trust. Marcum helped investors set up self-directed IRA accounts and gained control over their retirement assets, saying he would earn them strong returns on the promissory notes by day-trading in stocks while guaranteeing the safety of their principal investment. Yet Marcum did little actual trading and almost always lost money when he did. Throughout his scheme, Marcum provided investors with false account statements showing annual returns of more than 20 percent. Meanwhile, he used investor funds to pay for his luxurious personal lifestyle and finance several start-up companies. The SEC obtained an emergency court order to freeze the assets of Marcum and his company.

According to the SEC’s complaint filed in federal court in Indianapolis, Marcum began his scheme in 2010. Investors gave Marcum control of their assets by either rolling their existing IRA accounts into the newly-established self-directed IRA accounts or by transferring their taxable assets directly to brokerage accounts that Marcum controlled. Marcum and certain investors co-signed the promissory notes, and Marcum then placed them in the IRA accounts.

The SEC alleges that Marcum assured investors he could safely grow their money through investments in widely-held publicly-traded stocks, and he promised annual returns between 10 percent and 20 percent. Marcum also told a number of investors that their principal was “guaranteed” and would never be at risk. He falsely told at least one investor that her principal would be federally insured. In the little trading he has done, Marcum has suffered losses amounting to more than $900,000. He has misappropriated the remaining investor funds for various unauthorized uses.

According to the SEC’s complaint, Marcum used investor money as collateral for a $3 million line of credit at the brokerage firm where he used to work. He took frequent and regular advances from the line of credit to fund such start-up ventures as a bridal store, a bounty hunter reality television show, and a soul food restaurant owned and operated by the bounty hunters. None of these businesses appear to be profitable, and Marcum’s investors were not aware that their money was being used for these purposes. Marcum used nearly $1.4 million of investor money to make payments directly to the start-up ventures and other companies. He also used more than a half-million dollars to pay personal expenses accrued on credit card bills, including airline tickets, luxury car payments, hotel stays, sports and event tickets, and tabs at a Hollywood nightclub.

According to the SEC’s complaint, Marcum did not have the funds needed to honor investor redemption requests. So he provided certain investors with a “recovery plan” that revealed his intention to solicit funds from new investors so that he could pay back his existing investors. Marcum had a phone conversation with three investors in June 2013 and admitted that he had misappropriated investor funds and was unable to pay investors back. During this call, Marcum begged the investors for more time to recover their money. He offered to name them as beneficiaries on his life insurance policies, which he claimed include a “suicide clause” imposing a two-year waiting period for benefits. He suggested that if he is unsuccessful in returning their money, he would commit suicide to guarantee that they would eventually be repaid.

The SEC’s complaint alleges that Marcum and Guaranty Reserves Trust violated the antifraud provisions of the federal securities laws. The SEC sought and obtained emergency relief including a temporary restraining order and asset freeze. The SEC additionally seeks permanent injunctions, disgorgement of ill-gotten gains and financial penalties from Marcum and Guaranty Reserves Trust, and disgorgement of ill-gotten gains from Marcum Companies LLC, which is named as a relief defendant.

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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.

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.