SEC Enforcement Actions - Russell L. Forkey

Avalon FA Ltd. – South Florida Stock Fraud and Misrepresentation Litigation Attorney

Russell L. Forkey — Tue, 14 Mar 2017 02:47:33 GMT

The Securities and Exchange Commission recently announced fraud charges against a Ukraine-based trading firm accused of manipulating the U.S. markets hundreds of thousands of times and the New York-based brokerage firm and CEO who allegedly helped make it possible.

The SEC’s complaint alleges that Avalon FA Ltd touted itself to traders as a destination to engage in layering, a scheme in which orders are placed but later canceled after tricking others into buying or selling stocks at artificial prices, resulting in illicit profits. Avalon allegedly made more than $21 million in the layering scheme involving U.S. stocks during a five-year period. According to the SEC’s complaint, Avalon also made more than $7 million in illicit profits through a cross-market manipulation scheme in which the firm bought and sold U.S. stocks at a loss in order to manipulate the prices of the stock and its corresponding options so that it could then profitably trade at artificial prices. Avalon allegedly used traders in Eastern Europe and Asia to conduct its trading, and the firm kept a portion of the profits and collected commissions from the traders.

The SEC’s complaint also describes fraud charges against Avalon’s named owner Nathan Fayyer and Sergey Pustelnik, who allegedly kept his controlling interest in Avalon undisclosed and embedded himself at Lek Securities as a registered representative, using his position to facilitate the schemes.

The SEC further alleges that Lek Securities and its owner Samuel Lek made the schemes possible by providing Avalon with access to the U.S. markets, approving the cross-market trading scheme, and improving its trading technology to assist Avalon’s trading. According to the SEC’s complaint, Lek Securities also relaxed its layering controls after Avalon complained. Avalon was the highest-producing customer for Lek Securities in terms of trading commissions, fees, and rebates generated.

After filing its complaint in U.S. District Court for the Southern District of New York, the SEC obtained an emergency court order freezing Avalon’s assets held in its account at Lek Securities as well as freezing and repatriating funds that Avalon has transferred overseas.

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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.

Professional Athletes Beware Of Placing Too Much Trust In Your Financial Advisors – South Florida Financial Advisor Litigation and Arbitration Attorney

Russell L. Forkey — Thu, 19 May 2016 01:32:41 GMT

Professional Athletes Beware Of Placing Too Much Trust In Your Financial Advisors – South Florida Financial Advisor Litigation and Arbitration Attorney

SEC: Financial Adviser Defrauded Pro Athletes and Lied to SEC Examiners

The Securities and Exchange Commission recently announced fraud charges against a Pittsburgh, Pa.-based financial adviser accused of taking money without permission from the accounts of several professional athletes in order to invest in movie projects and make Ponzi-like payments.

According to the SEC’s complaint filed today in federal court in Manhattan, when SEC examiners uncovered the unauthorized withdrawals that Louis Martin Blazer III made from his clients’ accounts and asked him to explain the transactions, he lied and produced false deal documents that he created after the fact in a failed attempt to hide his misconduct.

The SEC alleges that Blazer, who founded Blazer Capital Management as a “concierge” firm targeting professional athletes and other high-net worth individuals as clients, took approximately $2.35 million from five clients without their authorization so he could invest in two movie projects. Blazer had a personal financial interest in the development of both films, one called “Mafia the Movie” and the other called “Sibling.” In one instance, Blazer actually pitched the movie project to an athlete as an investment opportunity, but that client expressly refused to make the investment. Blazer allegedly took $550,000 from the client’s account anyway and invested the money in the film projects.

The SEC further alleges that the client later learned about Blazer making the unauthorized investment in the movies and demanded repayment, even threatening a lawsuit. Blazer then took money out of a different athlete’s account to make the repayment in Ponzi-like fashion.

Blazer has agreed to settle the charges without admitting or denying the allegations. The settlement is subject to court approval with determination of disgorgement and financial penalties to be decided by the court at a later date. The SEC’s complaint charges Blazer with violations of Sections 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Section 206(1) and 206(2) of the Investment Advisers Act of 1940.

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Common Stock Buyers Beware – Boca Raton, Florida Securities Litigation and Arbitration Attorney

Russell L. Forkey — Thu, 19 May 2016 01:16:20 GMT

Common Stock Buyers Beware – Boca Raton, Florida Securities Litigation and Arbitration Attorney

SEC Charges Shell Factory Operators With Fraud

The Securities and Exchange Commission (SEC) recently announced fraud charges against a California stock promoter and a New Jersey lawyer who allegedly were creating sham companies and selling them until the SEC stopped them in their tracks.

The SEC alleges that Imran Husain and Gregg Evan Jaclin essentially operated a shell factory enterprise by filing registration statements to form various startup companies and misleading potential investors to believe each company would be operating and profitable. The agency further alleges that their secret objective all along was merely to make money for themselves by selling the companies as empty shells rather than actually implementing business plans and following through on their representations to investors.

Moving quickly to protect investors based on evidence collected even before its investigation was complete, the SEC issued stop orders and suspended the registration statements of the last two created companies – Counseling International and Comp Services – before investors could be harmed and the companies could be sold.

According to the SEC’s complaint filed in federal court in Los Angeles:

Husain and Jaclin created nine shell companies and sold seven using essentially the same pattern.
Husain created a business plan for each company that would not be implemented beyond a few initial steps, and then convinced a friend, relative, or acquaintance to become a puppet CEO who approved and signed corporate documents at Husain’s direction.
Jaclin supplied bogus legal documents that Husain used to conduct sham private sales of a company’s shares of stock to “straw shareholders” who were recruited and given cash to pay for the stock they purchased plus a commission. Some of the recorded shareholders were not even real people.
Husain and Jaclin filed registration statements for initial public offerings and falsely claimed that a particular business plan would be implemented. Deliberately omitted from the registration statements were any mention of Husain starting and controlling the company.
Husain and Jaclin filed misleading quarterly and annual reports once a company became registered publicly, providing much of the same false information depicted in the registration statements.
Husain obtained about $2.25 million in total proceeds when the empty shell companies were sold, and Jaclin and his firm received nearly $225,000 for their legal services.

The SEC’s complaint charges Husain and Jaclin with violating or aiding and abetting violations of the antifraud, reporting, and securities registration provisions of the federal securities laws. The SEC seeks disgorgement of ill-gotten gains plus interest and penalties, permanent injunctions, and penny stock bars. The SEC also seeks an officer-and-director bar against Husain.

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Ross McLellan – South Florida Unauthorized and Fraudulent Mark-Up FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Thu, 19 May 2016 00:49:19 GMT

Ross McLellan – South Florida Unauthorized and Fraudulent Mark-Up FINRA Arbitration and Litigation Attorney

Securities and Exchange Commission v. Ross McLellan, Civil Action No. 16-cv-10874 (D. Mass. filed May 13, 2016)

SEC Charges Former Executive of Massachusetts-Based State Street Corporation with Defrauding Investors

The Securities and Exchange Commission recently announced fraud charges against Ross McLellan, a former executive of Massachusetts-based State Street Corporation, for engaging in a scheme to defraud investors who were customers of State Street’s Transition Management line of business.

According to the SEC’s complaint filed in federal court in Boston, Massachusetts, State Street Corporation, a publicly-traded financial holding company based in Boston, and its affiliates provide transition management services, which are offered to large investment clients such as pension funds or endowments who need to buy and sell large quantities of securities when the client may be changing fund managers or investment strategies. The SEC alleges that McLellan defrauded State Street Transition Management customers by charging hidden and unauthorized mark-ups (or amounts added to the cost of the service) on trading in U.S. and European securities.

According to the SEC’s complaint:

McLellan, along with co-schemers, developed and orchestrated a deliberate strategy to charge Transition Management customers hidden mark-ups on certain transactions. Among other things, State Street employees, under the supervision of McLellan, made misrepresentations concerning pricing in connection with certain transition engagements. These misrepresentations were made in a variety of communications to customers, including false trading statements, pre-trade estimates, and post-trade reporting.
When McLellan and co-schemers were ultimately confronted by a customer that had detected some of the hidden mark-ups, McLellan aided and abetted others at State Street who made materially false and misleading statements to that customer to conceal the scheme. Among other things, in or about August 2011, McLellan directed others at State Street to misleadingly characterize the hidden mark-ups as a “fat finger error” and as “inadvertent commissions.”
In addition to identifying customers to overcharge, McLellan oversaw the practice of taking hidden mark-ups, and directed others at State Street to engage in fraudulent acts and practices in furtherance of the scheme.
By engaging in the misconduct directly, and by directing subordinates to mislead customers and/or conceal mark-ups as part of this scheme to defraud, McLellan and co-schemers generated approximately $20 million in additional revenue for State Street.

The SEC’s complaint charges McLellan with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also charges McLellan with aiding and abetting violations by others at State Street of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC’s Complaint seeks as relief a permanent injunction prohibiting future violations of these statutes, disgorgement of ill-gotten gains plus prejudgment interest, and civil monetary penalties.

On April 5, 2016, the U.S. Attorney’s Office for the District of Massachusetts announced parallel criminal charges against McLellan and another individual not charged in the SEC’s complaint. The United Kingdom’s Financial Conduct Authority, on January 31, 2014, found that State Street deliberately overcharged six customers a total of $20,169,603 and imposed a financial penalty of £22,885,000.

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Gregory Jones – South Florida Fraudulent Offering Documents Litigation and Arbitration Attorney

Russell L. Forkey — Thu, 24 Mar 2016 23:50:50 GMT

Gregory Jones – South Florida Fraudulent Offering Documents Litigation and Arbitration Attorney

Securities and Exchange Commission v. Gregory G. Jones., Civil Action No. 4:15-CV-438-A (NDTX)

Court Orders Nearly $2 Million Judgment from Attorney Who Defrauded Investors

The Securities and Exchange Commission recently announced that a federal court has ordered a nearly $2 million judgment from an attorney who admitted to defrauding investors in two fraudulent schemes. The Honorable John McBryde, District Judge of the United States District Court for the Northern District of Texas, entered a final judgment on March 22, 2016 against Southlake, Texas attorney Gregory G. Jones. The final judgment orders Jones to disgorge $1,125,000, plus prejudgment interest of $51,534, and to pay a civil penalty of $600,000.

Jones admitted in 2015 to raising approximately $645,000 by selling securities issued by Aquaphex Total Water Solutions, LLC, a company he controlled that purported to recycle fracking water through a filtration process. Jones provided investors with fraudulent offering documents stating that Aquaphex’s principals had invested $2 million in the company when they had not put any cash into the company. Jones’s offering documents also misrepresented that Aquaphex was expected “to be acquired by an oil services company within five years at a projected value of $21B,” that projected investment returns would exceed 115 percent per year, and that investors were guaranteed to at least double their investment within five years. None of these claims had a reasonable basis in fact, since Aquaphex had no customers, no contracts to provide water-filtration services, and no revenues. Separately, in 2009, Jones represented a small group of investors that invested approximately $6 million in an entity called Edwards Exploration. Jones failed to disclose to the investors that Edwards Exploration paid Jones approximately $480,000 from the principal amount invested.

In its latest order, the court determined that Jones’s violations in the Aquaphex scheme involved “fraud, deceit, manipulation” and that he “acted intentionally” in duping investors. The court specifically observed that Jones’s testimony or presentation was not “credible,” and that the court was not “impressed with Jones’s demeanor for truthfulness while he was on the stand.”

The court previously enjoined Jones and Aquaphex from violating anti-fraud provisions of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 and Section 17(a) of the Securities Act of 1933, and from violating registration provisions of Sections 5(a) and (c) of the Securities Act.

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Jose G. Ramirez Jr. – Boca Raton, Florida Closed-End Mutual Fund Breach of Fiduciary Duty and Unsuitability FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Sun, 11 Oct 2015 15:16:58 GMT

Jose G. Ramirez Jr. – Boca Raton, Florida Closed-End Mutual Fund Breach of Fiduciary Duty and Unsuitability FINRA Arbitration and Litigation Attorney

Securities and Exchange Commission v. Jose G. Ramirez Jr., Civil Action No. 15-cv-02365 (USDC District of Puerto Rico, filed September 29, 2015)

The Securities and Exchange Commission recently charged Jose G. Ramirez, Jr., a former top broker at UBS Financial Services Incorporated of Puerto Rico (“UBSPR”), who made material misrepresentations and omissions and orchestrated a fraudulent scheme involving the use of credit line proceeds from a UBSPR-affiliated bank to purchase shares in UBSPR affiliated closed-end mutual funds.

The complaint filed in federal court in Puerto Rico against Jose Ramirez, Jr., a former registered representative in UBSPR’s Guaynabo branch office alleges that Ramirez increased his compensation by at least $2.8 million by having certain customers use proceeds from lines of credit with UBS Bank USA to purchase additional shares in UBSPR closed-end mutual funds. To evade detection, Ramirez allegedly instructed the customers to transfer money from their line of credit to an outside bank account before depositing the funds into their UBSPR brokerage account and purchasing the closed-end funds. The funds invested heavily in Puerto Rico municipal bonds and lost value as the Puerto Rico bond market declined, requiring the customers to pay down a portion of the loans or risk having their investments liquidated.

According to the SEC’s complaint, Ramirez misled customers about the safety of the closed-end funds and the risks of investing in them with borrowed money. He also is alleged to have lied to his branch manager when questioned about suspicious transactions in the closed-end mutual funds. Ramirez was terminated by UBSPR in January 2014. As a result of this conduct, the SEC’s complaint alleges Ramirez 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.

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William J. Wells and Promitor Capital Management LLC. – Boca Raton, Florida Investment Advisor Fraud and Mismanagement Litigation and Arbitration Attorney

Russell L. Forkey — Sun, 11 Oct 2015 14:38:35 GMT

William J. Wells and Promitor Capital Management LLC. – Boca Raton, Florida Investment Advisor Fraud and Mismanagement Litigation and Arbitration Attorney

SEC Charges New Jersey Fund Manager With Securities Fraud

The Securities and Exchange Commission recently charged a New Jersey fund manager and his firm with defrauding investors by lying about his credentials, concealing trading losses, and using investor funds to make Ponzi-like payments to other investors.

The SEC’s complaint filed in federal court in Manhattan alleges that William J. Wells, of River Vale, New Jersey, falsely told some investors that he was a registered investment adviser and would invest their money in specific stocks. Instead, Wells and his firm, Promitor Capital Management LLC, are alleged to have invested mainly in high-risk options with poor results that Wells concealed with phony investor account statements that grossly inflated performance. Wells further attempted to hide the losses by using funds from new investors to make Ponzi-like payments to earlier investors, the complaint alleges. Wells allegedly raised more than $1.1 million from dozens of investors since 2009, but by late summer, the Promitor fund brokerage accounts held less than $35, with the rest dissipated by trading losses and Ponzi-like payments, or diverted into Wells’s personal bank account, the complaint alleges.

According to the complaint, when one investor was unable to get Wells to return a portion of his investment, he asked Wells by text, “You running Ponzi scheme? Why the heck is this going down like this.” Wells later responded by text saying, “My explanation is that I’m an idiot and was trying to get some big trades to. . . make you more money.”

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

The SEC’s complaint alleges that Wells and Promitor violated antifraud provisions of the federal securities laws and SEC antifraud rules. Wells also was charged with aiding and abetting liability and control person liability for Promitor’s alleged violations. The SEC is seeking permanent injunctions and financial penalties against Wells and Promitor, and return of allegedly ill-gotten gains with prejudgment interest.

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Steve Chen and USFIA Inc. – Fort Lauderdale, Florida Securities and Investment Fraud Litigation and Arbitration Attorney

Russell L. Forkey — Sun, 11 Oct 2015 14:23:20 GMT

Steve Chen and USFIA Inc. – South Florida, including Fort Lauderdale, Pompano Beach, Deerfield Beach and Boynton Beach, Securities and Investment Fraud Litigation and Arbitration Attorney

SEC Halts $32 Million Scheme That Promised Riches From Amber Mining

The Securities and Exchange Commission recently announced it has filed fraud charges and obtained asset freezes against the operator of a worldwide pyramid scheme that falsely promised investors would profit from a venture purportedly backed by the company’s massive amber holdings.

California resident Steve Chen and 13 California-based entities, including USFIA Inc., are at the center of the alleged scheme, the SEC said in a complaint filed in federal court in Los Angeles. According to the SEC’s complaint, USFIA and Chen’s other entities have raised more than $32 million from investors in and outside the U.S. since at least April 2013. The SEC’s complaint alleges that Chen and his companies misled investors about a lucrative initial public offering for USFIA that never happened and about claims to own or control amber deposits worth billions of dollars.

The Hon. R. Gary Klausner of the U.S. District Court for the Central District of California granted the SEC’s request for an asset freeze and the appointment of Thomas Seaman as the temporary receiver over USFIA and the other entities. In addition to the temporary relief, the SEC is seeking preliminary and permanent injunctions, disgorgement of allegedly ill-gotten gains with prejudgment interest, and civil penalties. The complaint, which had been filed under seal, alleges that the defendants violated the registration and antifraud provisions of the federal securities laws and SEC antifraud rules.

According to the SEC’s complaint, Chen falsely promoted USFIA as a legitimate multi-level marketing company that owns several large and valuable amber mines in Argentina and the Dominican Republic. Investors were told that they could profit by investing in amounts ranging from $1,000 to $30,000, and earn larger returns based on the number of investors they brought into the program. The SEC further alleges that beginning in September 2014, the defendants claimed to have converted existing investors’ holdings into “Gemcoins,” which they said was a virtual currency secured by the company’s amber holdings. In reality, the SEC complaint alleges that Gemcoins are worthless.

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Boca Raton, Florida Boiler Room Fraud and Misrepresentation Litigation Attorney

Russell L. Forkey — Sat, 10 Oct 2015 15:49:19 GMT

South Florida, including Boca Raton, Fort Lauderdale and West Palm Beach Boiler Room Fraud and Misrepresentation Litigation Attorney

Securities and Exchange Commission v. Commodore Financial Corp., et al., Civil Action No. 15-CV-01567 (C.D. Cal., filed September 30, 2015)

SEC Charges Orange County Oil and Gas Company, CEO, and Arizona Boiler Room Operator with Defrauding Investors

The Securities and Exchange Commission recently announced fraud charges against an Orange County, Calif. oil and gas company, its CEO, and an Arizona-based boiler room operator.

The SEC alleges Commodore Financial Corporation, CEO Christopher Schlegel, M&G Cap Services, and Andres Calvo raised approximately $7.5 million from at least 84 investors through their fraudulent offer and sale of fractional interests in oil and gas wells. According to the SEC’s complaint, filed on September 30, 2015 in the U.S. District Court for the Central District of California, Commodore and Schlegel engaged in a scheme to defraud investors by misappropriating almost half of investor funds to pay exorbitant commissions to Calvo and his boiler room operation as well as for Schlegel’s own personal use, which included private jet charters and Las Vegas casino expenses.

The complaint alleges Commodore and Schlegel compounded their fraud by falsely telling investors that the vast majority of their money-80% to 90%-would be used to fund oil and gas operations, and that Commodore was an experienced, Texas-based oil and gas company with a proven track record of profitability. The complaint further alleges that only about half of investor funds went toward oil and gas operations. In addition, the complaint alleges that Commodore had no real Texas presence, and neither Commodore nor Schlegel had any actual oil and gas experience, let alone a proven track record of profitability. Further, Commodore and Schlegel allegedly falsely represented to existing investors that Commodore was almost finished preparing checks to pay returns on their current investment in order to solicit investments for a new project. According the complaint, however, the current investment had not yet generated any revenue. M&G and Calvo also lied about the exorbitant commissions they actually received.

The Commission alleges that defendants violated Section 5 of the Securities Act of 1933 and the antifraud provisions of the securities laws in Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act. Finally, the complaint alleges that M&G and Calvo violated Section 15(a) of the Exchange Act by acting as unregistered broker-dealers. The SEC’s complaint seeks permanent injunctions, civil penalties, disgorgement plus prejudgment interest, and other relief against all of the defendants.

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Briargate Trading LLP and Eric Oscher – Boca Raton, Florida Securities and Investment Fraud Litigation and Arbitration Attorney

Russell L. Forkey — Sat, 10 Oct 2015 15:34:22 GMT

Briargate Trading LLP and Eric Oscher – Boca Raton, Florida Securities and Investment Fraud Litigation and Arbitration Attorney

SEC Charges Firm and Owner With Manipulative Trading

The Securities and Exchange Commission recently charged a New York-based proprietary trading firm and one of its co-founders with engaging in a manipulative trading strategy known as “spoofing.”

An SEC investigation found that Briargate Trading LLP and co-founder Eric Oscher orchestrated a scheme in which they placed sham orders – spoofs – to create the false appearance of interest in stocks and manipulate their prices. After entering spoof orders, Oscher placed bona fide orders on the opposite side of the market for the same stocks and took advantage of the artificially inflated or depressed prices. Immediately after the bona fide orders were executed, Oscher canceled the spoof orders.

Briargate and Oscher agreed to pay more than $1 million to settle the SEC’s charges.

“Spoofing is an illegal tactic where traders place fake orders to trick others into trading at inflated or depressed prices,” said Andrew M. Calamari, Regional Director of the SEC’s New York office. “Today’s action shows our ongoing resolve to prevent all forms of market manipulation.”

According to the SEC’s order instituting settled proceedings:

Oscher and Briargate’s spoofing scheme ran from October 2011 through September 2012 and focused on securities listed on the New York Stock Exchange.
Oscher, a former NYSE specialist, used his Briargate account to place multiple, large, non-bona fide orders on the NYSE before the exchange opened for trading at 9:30 a.m. Briargate’s non-bona fide orders impacted the market’s perception of demand for the stocks it spoofed and often the prices of the stocks.
Oscher took advantage of the price movement in the spoofed securities by sending orders for them on the opposite side of the market to exchanges that opened before the NYSE. Oscher cancelled the non-bona fide NYSE orders before the NYSE opened and unwound the positions he had established on other exchanges. Through this conduct, the Oscher and Briargate reaped approximately $525,000 in profits.

“Oscher took advantage of our interconnected markets by placing non bona fide orders on one exchange, and then buying or selling the spoofed securities at artificial prices on other exchanges,” said Joseph G. Sansone, Co-Chief of the SEC’s Market Abuse Unit. “Notwithstanding these deceptive tactics, the SEC was able to uncover Oscher’s fraudulent scheme and hold him accountable for his actions.”

The order found that Oscher and Briargate’s conduct violated the antifraud provisions of the federal securities laws and a related SEC antifraud rule. Without admitting or denying the findings, Oscher and Briargate agreed to disgorge $525,000 of ill-gotten gains plus prejudgment interest of $37,842.32. Briargate also agreed to pay a civil penalty of $350,000 and Oscher agreed to pay a civil penalty of $150,000. The order also requires Briargate and Oscher to cease and desist from committing or causing any future violations of the securities laws.

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Pyramid Scheme Fraud – South Florida Pyramid Scheme and Investment Fraud and Mismanagement FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Tue, 06 Oct 2015 12:04:49 GMT

Pyramid Scheme and Other Investment Frauds – South Florida Pyramid Scheme and Investment Fraud and Mismanagement FINRA Arbitration and Litigation Attorney

Securities and Exchange Commission v. Steve Chen, et al., Civil Action No. CV 15-07425 (C.D. Cal., filed September 22, 2015)

Securities and Exchange Commission v. Steve Chen, et al.

Recently, the Securities and Exchange Commission filed, under seal, fraud charges and, on September 28, obtained asset freezes against the operator of a worldwide pyramid scheme that falsely promised investors would profit from a venture purportedly backed by the company’s massive amber holdings.

The SEC alleges that defendants Steve Chen, USFIA Inc. and Chen’s other entities have raised more than $32 million from investors in and outside the U.S. since at least April 2013. The SEC’s complaint alleges that Chen and his companies misled investors about a lucrative initial public offering for USFIA that never happened and about claims to own or control amber deposits worth billions of dollars.

The Hon. R. Gary Klausner of the U.S. District Court for the Central District of California on September 28 granted the SEC’s request for an asset freeze and the appointment of Thomas Seaman as the temporary receiver over USFIA and the other entities. In addition to the temporary relief, the SEC is seeking preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties in its complaint, which alleges that the defendants violated the registration and antifraud provisions of the federal securities laws and SEC antifraud rules.

The SEC’s complaint charges the defendants with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.

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Innovative Business Solutions, LLC. and Arthur Jacob – Boca Raton, Florida Investment Adviser Fraud, Mismanagement and Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Tue, 06 Oct 2015 11:51:20 GMT

Innovative Business Solutions, LLC. and Arthur Jacob – Boca Raton, Florida Investment Adviser Fraud, Mismanagement and Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney Relating to Among Other Investments, Exchange Traded Funds.

SEC Charges Florida Investment Adviser and His Company With Defrauding Investors

The Securities and Exchange Commission recently announced fraud charges against Florida-based investment adviser Arthur F. Jacob and his company, Innovative Business Solutions LLC, for allegedly deceiving clients over a period of at least five years.

In an order instituting administrative proceedings the SEC Enforcement Division alleges that from at least mid-2009 through July 2014:

Jacob and IBS misrepresented the risks and profitability of investments he purchased for investment advisory clients. Jacob was informed of investment risks of certain exchange traded funds but failed to disclose these risks to clients and told them that the investment strategy he used was safe, carried low or no risk, and would produce predictable profits.
Jacob concealed from clients his disciplinary history, which included being disbarred as a lawyer for misappropriating client funds and other professional misconduct.
Jacob and IBS were not registered with the SEC or any state as investment advisers and Jacob falsely told clients that he and IBS were not required to register as an investment adviser.
Jacob gave false information to a brokerage firm about the advisory services he and IBS provided so that he could retain trading authorization over clients’ accounts and continue to receive advisory fees for managing the accounts.

“Investment advisers owe their clients a duty of full and fair disclosure of all material facts,” said Antonia Chion, an Associate Director in the SEC’s Division of Enforcement. “Advisers who conceal their disciplinary history and mislead clients about their investment strategy and the risks associated with it, as we allege Jacob did, are in breach of that duty.”

The SEC’s order alleges that Jacob and IBS willfully violated the antifraud provisions of federal securities laws and an SEC antifraud rule. The matter will be scheduled for a public hearing before an administrative law judge to adjudicate and determine what if any remedial actions are appropriate.

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Securities and Investment Advisor Fraud – South Florida Securities Fraud and Mismanagement Litigation Attorney

Russell L. Forkey — Sun, 27 Sep 2015 16:18:21 GMT

Securities and Investment Advisor Fraud – South Florida Securities Fraud, Breach of Fiduciary Duty and Mismanagement Litigation and Arbitration Attorney

Securities and Exchange Commission v. Jason W. Galanis, Civil Action No. 1:15-cv-07547 (Southern District of New York, Complaint filed Sept. 24, 2015)

SEC Charges Six in Stock Fraud Scheme

The Securities and Exchange Commission recently charged six men, including a father and three sons, with defrauding investors in Gerova Financial Group Ltd., whose shares once traded on the New York Stock Exchange.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against the six: Jason Galanis, his father John Galanis, brothers Derek Galanis and Jared Galanis, along with Gerova president and chairman Gary T. Hirst and investment adviser Gavin Hamels. Jason Galanis is a securities fraud recidivist who was charged by the SEC in 2007 and his father John Galanis has been a defendant in numerous SEC enforcement actions dating back to the early 1970s.

In a complaint filed in U.S. District Court in Manhattan, the SEC alleges that in early 2010, Jason Galanis and Hirst orchestrated a scheme to secretly issue $72 million of unrestricted Gerova shares to a Galanis family friend in Kosovo. According to the complaint, Jason Galanis, his father, and his brothers directed sales of the shares from the Kosovo friend’s brokerage accounts and had the proceeds wired to them and their associates who collectively realized at least $16 million in illicit profits.

In addition, the complaint names Gavin Hamels, an investment adviser that Jason Galanis allegedly bribed to purchase Gerova stock to help stabilize Gerova’s stock price as the shares were liquidated. The complaint alleges that many of the purchases were coordinated in matched trades with the Kosovo friend’s sales. Hamels is alleged to have purchased Gerova stock for clients based on arrangements with Jared Galanis regarding the times, prices, and amounts of stock to purchase, and is alleged to have failed to inform his clients of the bribe from Jason Galanis.

The complaint charges Jason Galanis, Jared Galanis, Derek Galanis and Hirst with violations of Sections 5(a) and (c) of the Securities Act of 1933 (“Securities Act”); Jason Galanis, Jared Galanis and Derek Galanis with violations of Section 17(a)(1) of the Securities Act; Jason Galanis, Jared Galanis, Derek Galanis and Hamels with violations of Section 10(b) of the Securities Exchange Act of 1934, and Rules 10b-5(a) and (c) thereunder; John Galanis and Hirst with violations of Section 20(e) of the Exchange Act for aiding and abetting violations of Section 10(b) of the Exchange Act, and Rules 10b-5(a) and (c) thereunder; Jared Galanis with violations of Section 20(e) of the Exchange Act for aiding and abetting violations of Section 9(a)(1) of the Exchange Act; and Hamels with violations of Section 9(a)(1) of the Exchange Act, and Sections 206(1) and (2) of the Investment Advisers Act of 1940 (“Advisers Act”). In addition, the Commission alleges, in the alternative, that Derek Galanis violated Section 15(b) of the Securities Act by aiding and abetting violations of Section 17(a)(1); Jared Galanis and Derek Galanis violated Section 20(e) of the Exchange Act by aiding and abetting violations of Section 10(b) of the Exchange Act, and Rules 10b-5(a) and (c) thereunder; and Hamels violated Section 209(f) of the Advisers Act by aiding and abetting violations of Sections 206(1) and (2) of the Advisers Act.

The complaint seeks a final judgment permanently enjoining the defendants from committing future violations of these provisions, ordering them to disgorge their ill-gotten gains plus prejudgment interest, imposing financial penalties and barring Jason Galanis and Hirst from acting as officers or directors of a public company.

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iShopNoMarkup.com, Inc. – South Florida Fraudulent Unregistered Offering of Securities FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Sun, 27 Sep 2015 15:35:21 GMT

iShopNoMarkup.com, Inc. – South Florida Fraudulent Unregistered Offering of Securities – FINRA Arbitration and Litigation Attorney

Securities and Exchange Commission v. iShopNoMarkup.com, Inc., Civil Action No. 04-CV-4057 (E.D.N.Y.)

Court Imposes Over $5 Million in Monetary Relief, an Officer and Director Bar, and Permanent Injunctions Against Former Chairman of a Failed Internet Startup Who Committed Securities Fraud and IIIegally Sold Unregistered Securities

On Thursday, September 3, 2015, United States District Court Judge Denis R. Hurley of the United States District Court for the Eastern District of New York issued an order and judgment imposing relief against Defendant Anthony Knight, the former Chairman of failed Long Island-based internet startup, iShopNoMarkup.com, Inc. The Commission’s complaint alleged that from the fall of 1999 until the summer of 2000, iShop, Knight and others conducted an unregistered offering of securities and fraudulent scheme that defrauded over 350 investors who invested approximately $2.3 million. On October 14, 2014, a federal jury found Knight liable for violating 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.

Judge Hurley ordered Knight to pay $2.3 million in disgorgement, over $2.5 million of prejudgment interest, and a $330,000 civil penalty. Pursuant to Section 21(d) of the Exchange Act, the Court also barred Knight from serving as an officer or director of a public company, and enjoined Knight from committing any further violations of Sections 5 and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

Anthony Knight, a/k/a Ali Haghighi, age 49, was at the time of the conduct a resident of Great Neck, New York, and is currently a resident of San Diego, California.

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Manny Shulman and David K. Hirschman – Boca Raton, Florida Unregistered Securities Fraud and Misrepresentation Attorney

Russell L. Forkey — Wed, 09 Sep 2015 00:35:07 GMT

Manny Shulman and David K. Hirschman – Boca Raton, Florida Unregistered Securities Fraud and Misrepresentation Litigation and Arbitration Attorney

Securities and Exchange Commission v. Manny J. Shulman and David K. Hirschman, Civil Action No. 0:15-cv-61861-WJZ (U.S. District Court for the Southern District of Florida, Sept. 3, 2015)

On September 3, 2015, the Securities and Exchange Commission (“Commission”) charged Manny J. Shulman and David K. Hirschman for their involvement in the fraudulent, unregistered sale of securities of Caribbean Pacific Marketing, Inc. (“Caribbean Pacific”), a now-defunct Florida corporation that purported to be a sun-care and skin-care products start-up company. The Commission also charged Shulman for making misstatements and omissions in Caribbean Pacific’s registration statement.

According to the Commission’s complaint, filed in U.S. District Court for the Southern District of Florida, Caribbean Pacific’s Form S-1 registration statement filed with the Commission, which was declared effective in August 2012, failed to disclose that Shulman, a securities fraud recidivist, controlled the company’s day-to-day operations. Nor did the registration statement disclose the managerial role in the company of another individual, William J. Reilly, who is also a securities fraud recidivist and a disbarred attorney. Although two other individuals were listed in the registration statement as the corporate officers and directors of Caribbean Pacific, Shulman and Reilly actually controlled the company and ran in on a day-to-day basis. The Commission subsequently suspended the effectiveness of Caribbean Pacific’s registration statement pursuant to a settled stop order administrative proceeding based on findings that it was materially misleading and deficient. See In the Matter of the Registration Statement of Caribbean Pacific Marketing, Inc., Admin. Proc. File No. 3-15083 (Dec. 3, 2012).

In addition, the complaint alleges that from June 2012 through October 2012, Shulman and Hirschman engaged in a private, unregistered offering of Caribbean Pacific stock, raising $271,500 from 18 investors located in various states. The complaint also alleges that Shulman and Hirschman told investors that Caribbean Pacific would serve as a public shell that would later engage in a reverse merger with another Florida-based company called Dreamscapes International Properties, Inc. (“Dreamscapes”). Instead of using investors’ money for expenses related to Caribbean Pacific’s IPO and the business development of Dreamscapes, the complaint alleges that Shulman and Hirschman misappropriated most of their money.

The Commission’s complaint alleges that Shulman of Boca Raton, Florida and Hirschman of Plantation, Florida, both violated 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 (“Exchange Act”) and Rule 10b-5 thereunder and that Hirschman also violated Section 15(a) of the Exchange Act. The Commission is seeking financial penalties, disgorgement of ill-gotten gains plus prejudgment interest, and permanent injunctions against both Shulman and Hirschman and a penny stock bar against Hirschman. Shulman has consented, without admitting or denying the allegations of the complaint, to the entry of judgment ordering permanent injunctive relief against him and requiring him to pay disgorgement and a civil penalty, in amounts to be determined by the Court at a later date.

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Edward Jones to Pay 20 Million for Overcharging Retail Customers in Municipal Bond Underwritings – Boca Raton, Florida FINRA Arbitration Attorney

Russell L. Forkey — Tue, 18 Aug 2015 01:09:28 GMT

Edward Jones to Pay 20 Million for Overcharging Retail Customers in Municipal Bond Underwritings – Boca Raton, Florida FINRA Arbitration Attorney

Edward Jones to Pay $20 Million for Overcharging Retail Customers in Municipal Bond Underwritings

The Securities and Exchange Commission recently announced that St. Louis-based brokerage firm Edward Jones and the former head of its municipal underwriting desk have agreed to settle charges that they overcharged customers in new municipal bonds sales. It’s the SEC’s first case against an underwriter for pricing-related fraud in the primary market for municipal securities. The firm also was charged with separate misconduct related to supervisory failures in its review of certain secondary market municipal bond trades.

Municipal bond underwriters are required to offer new bonds to their customers at what is known as the “initial offering price,” which is negotiated with the issuer of the bonds. An SEC investigation found that instead of offering bonds to customers at the initial offering price, Edward Jones and Stina R. Wishman took new bonds into Edward Jones’ own inventory and improperly offered them to customers at higher prices. In other instances, Edward Jones entirely refrained from offering the bonds to its customers until after trading commenced in the secondary market, and then offered the bonds at prices higher than the initial offering prices. The firm’s customers paid at least $4.6 million more than they should have for new bonds. In one instance, the misconduct resulted in an adverse federal tax determination for an issuer and put it at risk of losing valuable federal tax subsidies.

Edward Jones agreed to settle the case by paying more than $20 million, which includes nearly $5.2 million in disgorgement and prejudgment interest that will be distributed to current and former customers who were overcharged for the bonds. Wishman agreed to pay $15,000 and will be barred from working in the securities industry for at least two years.

“Edward Jones undermined the integrity of the bond underwriting process by overcharging retail customers by at least $4.6 million and by misleading municipal issuers,” said Andrew J. Ceresney, Director of the SEC Enforcement Division. “This enforcement action, which is the first of its kind, reflects our commitment to addressing abuses in all areas of the municipal bond market.”

According to the SEC’s order instituting a settled administrative proceeding against Edward Jones, the firm’s supervisory failures related to dealer markups on secondary market trades that involved the firm purchasing municipal bonds from customers, placing them into its inventory, and selling them to other customers often within the same day. Because of the short holding periods, the firm faced little risk as a principal and almost never experienced losses on these intraday trades. The SEC’s investigation found that Edward Jones’ supervisory system was not designed to monitor whether the markups it charged customers for certain trades were reasonable.

“Because current rules do not require dealers to disclose markups on municipal bonds, investors receive very little information about their dealer’s compensation in municipal bond trades,” said LeeAnn Ghazil Gaunt, Chief of the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit. “It is therefore important that firms have adequate supervisory systems to ensure that they are complying with their fair pricing obligations.”

Edward Jones consented to the SEC order without admitting or denying the findings that the firm willfully violated Sections 17(a)(2) and (3) of the Securities Act of 1933, Section 15B(c)(1) of the Securities Exchange Act of 1934, and Rules G-17, G-11(b) and (d), G-27, and G-30(a) of the Municipal Securities Rulemaking Board (MSRB). The firm also failed reasonably to supervise within the meaning of Section 15(b)(4)(E) of the Exchange Act. Edward Jones undertook a number of remedial efforts and now discloses the percentage and dollar amount of markups on all fixed income retail order trade confirmations in principal transactions.

Wishman consented to a separate SEC order without admitting or denying the findings that she willfully violated Sections 17(a)(3) of the Securities Act, MSRB Rules G-17, G-11(b) and (d), and G-30(a). She also was a cause of Edward Jones’ violations of Section 17(a)(2) of the Securities Act and Section 15B(c)(1) of the Exchange Act.

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Russell Haraburda and EnviraTrends, Inc. – South Florida Unregistered Securities Offering Litigation Attorney

Russell L. Forkey — Tue, 18 Aug 2015 00:54:14 GMT

South Florida Unregistered and Private Offering Fraud and Misrepresentation Litigation Attorney:

Securities and Exchange Commission v. EnviraTrends, Inc., et al., Civil Action No. 8:15CV1903T27TGW (M.D. Fla., August 17, 2015)

SEC Charges Development Stage Company and Founder in Unregistered Offering Fraud Scheme

Recently, the Securities and Exchange Commission filed a settled civil injunctive action against Russell Haraburda, the founder and Chief Executive Officer of EnviraTrends, Inc., a Sarasota, Florida-based development stage company purportedly in the business of selling pet memorial products. The Commission’s action also charged EnviraTrends. The Commission’s complaint alleges that Haraburda and EnviraTrends engaged in a fraudulent scheme to sell EnviraTrends securities to the public in unregistered offerings based on false and misleading statements regarding the company’s activities and financial condition, and the purposes for which investors’ funds would be used, while Haraburda misappropriated most of the money raised from investors for his own personal use. The Commission charges Haraburda and EnviraTrends with violating the antifraud, registration, and other provisions of the federal securities laws.

The Commission’s complaint, filed in federal court in the Middle District of Florida, also alleges:

From mid-2009 until at least February 2014, Haraburda and EnviraTrends raised over $2.3 million through the sale of EnviraTrends stock to over 100 investors in thirteen states.
In soliciting these funds, Haraburda and EnviraTrends made numerous oral and written misrepresentations, including in filings with the SEC, regarding EnviraTrends’ activities, operations, and finances. Haraburda and EnviraTrends repeatedly assured investors that their money would be used to build the company’s business, including arranging for EnviraTrends’ shares to be listed on a stock exchange or quoted on the OTC Bulletin Board. Contrary to these representations, Haraburda misappropriated $1.8 million, or 78% of the funds obtained from investors, spending it on personal expenses, including his mortgage payments, car and motorcycle payments, alimony, shopping sprees, and personal travel. EnviraTrends never developed or sold a product or service, never generated revenue, and a public market for EnviraTrends shares was never created.
In annual and quarterly reports and other filings EnviraTrends made with the Commission, Haraburda and EnviraTrends falsely stated that Haraburda had loaned funds to the company. But Haraburda did not make any loans to the Company. While there were occasional transfers of small sums from Haraburda’s personal bank account to the company’s bank accounts, the funds transferred were investor funds that Haraburda had previously misappropriated.
Haraburda further concealed his misappropriations by falsely stating to auditors that the company owed him hundreds of thousands of dollars, thus creating a pretext for his personal use of investor funds.
After the Commission’s investigation of this matter began, Haraburda in 2014 created sham promissory notes purporting to show that he intended to repay the amounts he had misappropriated.

Haraburda and EnviraTrends, without admitting or denying the allegations in the complaint, have agreed to the entry of a final judgment providing permanent injunctive relief, barring Haraburda from serving as an officer or director of a public company, barring Haraburda from being associated with any offering of penny stock, and ordering Haraburda and EnviraTrends to disgorge their ill-gotten gains. The final judgment would provide permanent injunctive relief against Haraburda and EnviraTrends under the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Exchange Act Rule 10b-5. The final judgment would enjoin Haraburda from violating the registration provisions of Sections 5(a) and (c) of the Securities Act; the certification requirements of Exchange Act Rules 13a-14 and 15d-14; and the prohibition against misrepresentations to auditors in Exchange Act Rule 13b2-2; and from aiding and abetting violations of the reporting provisions of Section 13(a) and 15(d)(1) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1, 13a-13, and 15d-1. The final judgment would further enjoin EnviraTrends from violating Sections 5(a) and (c) of the Securities Act; and Section 13(a) and 15(d)(1) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-13, and 15d-1. The final judgment also would order Haraburda and EnviraTrends to jointly pay more than $2.3 million in disgorgement and prejudgment interest, but would waive these payments, except for $150,000, based their financial condition. The proposed settlement is subject to the approval of the District Court.

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Stockbroker and Account Executive Misconduct – Boca Raton, Florida Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Fri, 03 Jul 2015 00:43:55 GMT

Stockbroker and Account Executive Misconduct – Boca Raton, Florida Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney

Securities and Exchange Commission v. Malcolm Segal, Civil Action No. 15-3668 (E.D. Pa.)

SEC Charges Former Stockbroker with Conducting Ponzi Scheme

The Securities and Exchange Commission recently charged a former stockbroker in Pennsylvania with conducting a Ponzi scheme and stealing investor money to purchase a condominium in Florida and afford his own vacations and other luxuries.

The SEC alleges that Malcolm Segal fraudulently sold so-called certificates of deposits (CDs) to his brokerage customers by falsely claiming that he could get them higher interest rates of return on FDIC-insured CDs than otherwise available to the general public. In some instances, Segal purchased CDs on behalf of investors but secretly redeemed them early and took the proceeds. Other times, Segal did not purchase CDs at all despite telling customers he had. He raised approximately $15.5 million from at least 50 investors. Besides spending investor money on himself, Segal used it in Ponzi scheme fashion for purported interest payments and principal repayments to earlier investors.

The Commission further alleges that Segal eventually started stealing directly from his customers’ brokerage accounts in a last-ditch effort to keep funding the Ponzi payments. He forged letters of authorization to facilitate the transfer of customer funds to accounts he controlled, notably forging the signature of one customer’s wife who had died before the date of the transfer. The scheme collapsed in July 2014.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of Pennsylvania today announced criminal charges against Segal.

The SEC’s complaint filed in federal court in Philadelphia charges Segal with violations of Section 17(a) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC seeks disgorgement plus prejudgment interest and penalties as well as a permanent injunction.

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

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

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

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

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

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

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

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

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

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

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Mark Welhouse and Welhouse & Associates, Inc. – South Florida Improper Trade Allocation and Cherry-Picking FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Mon, 29 Jun 2015 17:21:28 GMT

Mark Welhouse and Welhouse & Associates, Inc. – South Florida Improper Trade Allocation and Cherry-Picking FINRA Arbitration and Litigation Attorney

SEC Announces Cherry-Picking Charges Against Investment Manager

Case Arises From Enforcement Initiative Analyzing Large Volumes of Investment Advisers’ Trade Allocation Data

The Securities and Exchange Commission recently announced fraud charges against a Wisconsin-based investment advisory firm and its owner accused of improperly allocating to his personal and business accounts certain options trades that appreciated in value during the course of a trading day while allocating to his clients other trades that depreciated in value.

The SEC Enforcement Division has engaged in a data-driven initiative to identify potentially fraudulent trade allocations known as “cherry-picking,” and this enforcement action is the first arising from that effort. Working with economists in the agency’s Division of Economic and Risk Analysis, enforcement investigators analyze large volumes of investment advisers’ trade allocation data and identify instances where it appears an adviser is disproportionately allocating profitable trades to favored accounts.

The SEC Enforcement Division alleges that Mark P. Welhouse purchased options in an omnibus or master account for Welhouse & Associates Inc. and delayed allocation of the purchases to either his or his clients’ accounts until later in the day after he saw whether or not the securities appreciated in value. Welhouse allegedly reaped $442,319 in ill-gotten gains by unfairly allocating options trades in an S&P 500 exchange-traded fund named SPY. His personal trades in these options had an average first-day positive return of 6.28 percent while his clients’ trades in these options had an average first-day loss of 5.05 percent.

As described in the SEC order instituting administrative proceedings against Welhouse and his firm, SEC staff conducted a statistical analysis to determine whether Welhouse’s profitability in these accounts could have resulted from a coincidental or lucky combination of trades. After running a simulation test one million times, the staff concluded it could not.

The SEC Enforcement Division alleges that Welhouse and his firm violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, Section 17(a) of the Securities Act of 1933, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The matter will be scheduled for a public hearing before an administrative law judge for proceedings to adjudicate the Enforcement Division’s allegations and determine what, if any, remedial actions are appropriate.

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