Securities and Securities Fraud - Russell L. Forkey

Broker/Dealer Requirements Relating to a Contingency or Best Efforts Offering – South Florida Securities Arbitration and Litigation Attorney

Russell L. Forkey — Sat, 26 Feb 2022 16:32:48 GMT

CONTINGENCY OR BEST EFFORTS OFFERING:

Securities and Exchange Act Rules 10-b9 and 15c2-4 contain requirements that must be satisfied in “Contingency” or “Best Efforts” offerings. FINRA (the Financial Industry Regulatory Authority) has provided guidance to broker/dealers regarding the requirements of these rules and to remind broker-dealers of their responsibility to have procedures reasonably designed to achieve compliance with these rules.

Broker-dealers that participate in best efforts public and private securities offerings that have a contingency (i.e., an underlying condition or qualification that must take place by a specified date prior to the issuer taking possession of the offering proceeds) must safeguard investors’ funds they receive until the contingency is satisfied. If the contingency is not met, broker-dealers must ensure that investors’ funds are promptly refunded. There are various contingencies that might need to be satisfied in addition to meeting a subscription amount.

Best Efforts Contingency Offerings

In a best efforts offering, a broker-dealer does not commit to purchase any securities from the issuer or guarantee that the issuer will receive any amount of money from the offering (This is in contrast to a firm commitment). Furthermore, a best efforts offering subject to satisfaction of an underlying condition is deemed to be a “contingency offering.” The most common contingency offerings reviewed by FINRA are either “all-or-none” or “part-or-none” offerings that require all or a certain amount of the securities to be sold for the offering to close. Under Securities Exchange Act Rule 10b-9, a best efforts offering subject to either an “all-or-none” or “part-or-none” contingency must provide for the prompt return of investor funds in the event the requisite contingency fails to be met by a specific date.

Broker-Dealer Responsibilities in a Best Efforts Contingency Offering.

As discussed in Regulatory Notice 10-22, a broker-dealer that participates in an offering and recommends a security must, among other requirements, conduct a reasonable investigation of the security and the issuer’s representations about it. If the security is offered as part of a contingency offering, the broker-dealer’s reasonable investigation must include a review of the terms of the contingency, including any agreement and disclosure by the issuer regarding the contingency.

III. Requirements Concerning Manner of Handling Investor Funds

Securities Exchange Act Rule 15c2-4 requires that upon receiving money or other consideration from an investor in a contingency offering, a broker-dealer must promptly:

deposit those funds into “a separate bank account” for which the broker-dealer is the account holder and is designated as agent or trustee “for the persons who have the beneficial interests therein”; or
transmit those funds to a bank that has agreed in writing to act as the escrow agent for the offering.

The manner in which a broker-dealer must handle investor funds generally will be determined by two factors. First, pursuant to SEA Rule 15c3-1, only a broker-dealer that maintains at least $250,000 in net capital is allowed to carry customer accounts and receive or hold funds or securities for those persons. Therefore, while not a requirement of SEA Rule 15c2-4, a broker-dealer that maintains less than 250,000 in net capital and deposits investors’ funds into a separate bank account rather than transmitting those funds to an independent bank escrow agent would violate SEA Rule 15c3-1. Second, when a participating broker-dealer is an affiliate of the issuer, investors’ funds must be transmitted to an independent bank escrow agent.

Escrow Agreements

In contingent offerings that require an escrow agent, the escrow agreement must be executed with a bank that is unaffiliated with the broker-dealer and the issuer. The escrow account should be established before the broker-dealer receives any investor funds. The escrow account may not be controlled by the issuer, the broker-dealer or an attorney. As a general matter, the escrow agent must be a financial institution that meets the definition of a “bank” under SEA Section 3(a)(6), although the SEC staff has provided no-action relief to permit certain other entities to act as escrow agents.

Prompt Transmittal of Funds

SEA Rule 15c2-4(b) requires that a broker-dealer promptly transmit funds to either an escrow agent or a separate bank account. SEC staff has interpreted “promptly” to mean by noon of the next business day. Failure to promptly transmit funds to either the escrow agent or a separate bank account has resulted in sanctions. However, in certain offerings, such as direct participation programs that require suitability determinations by the issuer, the SEC staff has provided procedural guidance under which a broker-dealer can still comply with the “promptly” component of SEA Rule 15c2-4 even if the funds are not transmitted by noon the next business day after they are received.

A broker-dealer’s responsibility does not end when it promptly transmits investor funds to an escrow agent or separate bank account. A broker-dealer must also promptly refund investors’ funds if the contingency is not met.

Disbursal to the Issuer

Broker-dealers must segregate investor funds they receive at least until the contingency is met.

It is important to keep in mind that the private security offerings that are not offered through a broker/dealer are subject to many of the core requirements discussed in this post.

Please keep in mind that the above summary is being provided for educational purposes only. It is not designed to be complete in all material respects. If you have any question relative to the contents of this post, you should contact a qualified professional.

Mohamud Abdi Ahmed and 2waytrading, LLC. – South Florida Unregistered Investment Adviser Fraud and Misrepresentation Attorney

Russell L. Forkey — Sun, 14 May 2017 23:15:43 GMT

South Florida Unregistered Investment Adviser Fraud and Misrepresentation Attorney.

Securities and Exchange Commission v. Mohamud Abdi Ahmed and 2waytrading, LLC, No. 17-cv-1478 (D. Minn. filed May 4, 2017)

SEC Halts Fraudulent Conduct by Recidivist and Unregistered Investment Adviser Firm

The Securities and Exchange Commission recently announced that it obtained an asset freeze and court order halting an ongoing investment fraud, orchestrated by a recidivist, that falsely promised safe and unrealistic returns to convince clients to provide access to their brokerage accounts.

According to the SEC’s complaint, filed in federal court in Minneapolis on May 4, 2017, Mohamud Abdi Ahmed and 2waytrading, LLC have been offering investment advice to clients since 2014. The complaint alleges they have been falsely promising unrealistic double-digit investment returns and assuring clients that Ahmed’s risky options trading investment strategy is safe and secure. The complaint alleges that Ahmed and 2waytrading are also using these false claims to convince clients to give them access to their clients’ brokerage accounts so Ahmed can place trades on their behalf. The complaint further alleges that Ahmed hid the fact that the SEC previously stopped him from orchertrating a securities fraud targeting investors in the Somali immigrant community in San Diego, Seattle, and elsewhere and that Ahmed had been convicted of wire fraud and ordered to pay restitution of $551,250, serve 21 months in prison, and remain on three years’ supervised release after his release from prison.

The Honorable Paul A. Magnuson, Senior Judge of the U.S. District Court, issued a temporary restraining order that imposed the freeze on Ahmed’s and 2waytrading’s assets and prohibits them from making any investment decisions or accessing any brokerage accounts they do not own. The order also temporarily prohibits Ahmed and 2waytrading from violating the antifraud provisions, and Judge Magnuson has scheduled a hearing on May 18 for Ahmed to show cause why a preliminary injunction should not be entered against him.

The SEC’s complaint charges Ahmed and 2waytrading with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Sections 206(1) and (2) of the Investment Advisers Act of 1940. The SEC is seeking financial penalties and disgorgement of ill-gotten gains as well as permanent injunctive relief.

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 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.

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.

Contact Us:

Gregory Ruehle – Boca Raton, Florida Unregistered Broker and Securities Fraud Attorney

Russell L. Forkey — Sat, 13 Feb 2016 17:08:11 GMT

Gregory Ruehle – Boca Raton, Florida Unregistered Broker and Securities Fraud Attorney

SEC Charges Oceanside Man with Defrauding Investors and Acting as an Unregistered Broker-Dealer

Securities and Exchange Commission v. Gregory Ruehle, Civil Action No. 3:16-cv-00366-AJB-MDD (S.D. Cal., filed February 11, 2016)

The Securities and Exchange Commission (SEC) recently charged an unregistered broker in Oceanside, Calif., with fraudulently selling purported stock in a medical device company and pocketing investors’ money.

The SEC alleges that Gregory Ruehle raised approximately $1.9 million from more than 100 investors but never delivered or transferred the securities as promised while using the money to pay gambling debts among other personal expenditures.

In a parallel action, the U.S. Attorney’s Office for the Southern District of California yesterday announced criminal charges against Ruehle.

According to the SEC’s complaint filed in U.S. District Court for the Southern District of California:

Ruehle began his scheme as early as 2012, misrepresenting to investors in California and Minnesota that he would sell them his personally-owned securities in a La Jolla, Calif.-based medical device company called ICB International, Inc. He was a former consultant for the company.
Ruehle, however, sold investors far more securities than he actually owned, and those he did own were not transferable. Ruehle never disclosed these facts to investors.
Ruehle compounded his fraud by creating fabricated documents that he told investors were from the company.
He disseminated fake company stock certificates purportedly informing the investor of the number of shares they owned in ICB.
He transmitted the fake stock certificates with a letter falsely stating that the certificates had been transferred from Ruehle to the investor.
Ruehle also fabricated and sent investors an additional document that served as a phony confirmation that his shares had been transferred to the investor. The document falsely appeared to be on ICB letterhead and signed by the company’s CEO.

The SEC alleges that Ruehle violated 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 of 1933. Finally, the SEC alleges that Ruehle also violated Section 15(a) of the Exchange Act by acting as an unregistered broker-dealer. The SEC’s complaint seeks a permanent injunction, civil penalties, disgorgement plus prejudgment interest, and other relief against Ruehle.

Contact Us:

Anthony Guerriero and Oxford City Football Club, Inc. – Boca Raton, Florida Micro-Cap Penny Stock Fraud Litigation Attorney

Russell L. Forkey — Sat, 12 Dec 2015 13:23:54 GMT

Anthony Guerriero and Oxford City Football Club, Inc. – South Florida, including Boca Raton, West Palm Beach, Delray Beach, Lake Worth and Royal Palm Beach, Florida Micro-Cap Penny Stock Fraud Litigation Attorney

The Securities and Exchange Commission (SEC) recently announced fraud charges and a court-ordered asset freeze obtained against a Florida-based penny stock company falsely touting itself as “the largest publicly traded diversified portfolio of professional sports teams in the world.”

The SEC alleges that Thomas Anthony Guerriero as CEO of Oxford City Football Club Inc. used pressure tactics and a boiler room of salespeople to raise more than $6.5 million from primarily inexperienced investors who were misled to believe that the company was a thriving conglomerate of sports teams, academic institutions, and real estate holdings. But in reality the company was losing millions of dollars each year and turning zero profit from its two lower-division soccer teams in the U.K.

“As alleged in our complaint, Guerriero portrayed himself as one of the most powerful and influential CEOs in the history of Wall Street when he’s really a penny stock fraudster mixing lies and verbal threats to line his own pocket with money from unsuspecting investors,” said Scott Friestad, Associate Director of the SEC Enforcement Division.

According to the SEC’s complaint filed in U.S. District Court for the Southern District of Florida:

Since at least August 2013, Guerriero has operated a classic boiler room scheme under the guise of nominal legitimate businesses through which millions of unregistered shares of stock were sold to investors who were deceived about the stock value and potential profits.
Guerriero’s salespeople sold Oxford City stock to the public based on leads lists he purchased from third parties. Guerriero crafted scripts for the salespeople, who used aliases to mask their true identities.
Prospective investors were told they were being offered a limited-time deal to purchase Oxford City shares at a deep discount from the publicly quoted price. Unbeknownst to the victims, the stock price was controlled by Guerriero.
Guerriero claimed to record phone conversations with potential investors using a “verbal verification system” that supposedly tied the stock “transaction” to their social security number and birthday. In reality, Guerriero and his associates simply pressed any button on their phone to make a sound signaling the fake start of a recording. If investors later refused to pay, Guerriero would threaten them with lawsuits based on their “recorded” verbal commitment.
Investors were falsely told that Oxford City would pay a 50-cents-per-share dividend within a year. In reality, the company was losing millions of dollars a year and was legally prohibited from paying a dividend.
Oxford City purportedly had real estate holdings worth approximately $100 million and owned a radio broadcast network that projected profits of almost $20 million. Oxford City actually had assets of approximately $1 million and never owned a radio station – it simply purchased one hour of air time per week.
Oxford City claimed to own an online university with students already enrolled and projected profits of $495 million for the upcoming five-year period. In reality, there was no such university that ever enrolled a student or had revenue.
Oxford City purported it would earn more than $238 million over five years from existing and new sports-related facilities. The truth was that Oxford City owned a minority interest in a lower division English soccer club, which generated a small amount of revenue but never turned a profit.

The SEC’s complaint charges Guerriero and Oxford City with violations of Sections 10(b) and 20(b) of Securities Exchange Act of 1934 and Rule 10b-5 as well as Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933.

Contact Us:

Bitcoin Ponzi Scheme – South Florida Securities Fraud and Misrepresentation State and Federal Court Litigation Attorney

Russell L. Forkey — Tue, 01 Dec 2015 22:47:26 GMT

Bitcoin Ponzi Scheme – South Florida Securities Fraud and Misrepresentation State and Federal Court Litigation Attorney

Securities and Exchange Commission v. Homero Joshua Garza, Civil Action No. 3:15-cv-01760 (D. Conn., Complaint filed Dec. 1, 2015)

SEC Charges Bitcoin Mining Companies

The Securities and Exchange Commission recently charged two Bitcoin mining companies and their founder with conducting a Ponzi scheme that used the lure of quick riches from virtual currency to defraud investors.

According to the SEC’s complaint filed in federal court in Connecticut, “mining” for Bitcoin or other virtual currencies means applying computer power to try to solve complex equations that verify a group of transactions in that virtual currency. The first computer or collection of computers to solve an equation is awarded new units of that virtual currency.

The SEC alleges that Homero Joshua Garza perpetrated the fraud through his Connecticut-based companies GAW Miners and ZenMiner by purporting to offer shares of a digital Bitcoin mining operation. In reality, GAW Miners and ZenMiner did not own enough computing power for the mining it promised to conduct, so most investors paid for a share of computing power that never existed. Returns paid to some investors came from proceeds generated from sales to other investors.

According to the SEC’s complaint:

From August 2014 to December 2014, Garza and his companies sold $20 million worth of purported shares in a digital mining contract they called a Hashlet.
More than 10,000 investors purchased Hashlets, which were touted as always profitable and never obsolete.
Although Hashlets were depicted in GAW Miners’ marketing materials as a physical product or piece of mining hardware, the promised contract purportedly entitled the investor to control a share of computing power that GAW Miners claimed to own and operate.
Investors were misled to believe they would share in returns earned by the Bitcoin mining activities when in reality GAW Miners directed little or no computing power toward any mining activity.
Because Garza and his companies sold far more computing power than they owned, they owed investors a daily return that was larger than any actual return they were making on their limited mining operations.
Therefore, investors were simply paid back gradually over time under the mantra of “returns” out of funds that Garza and his companies collected from other investors.
Most Hashlet investors never recovered the full amount of their investments, and few made a profit.

The SEC’s complaint charges Garza, GAW Miners, and ZenMiner with violating Sections 5(a) and 5(c) of the Securities Act of 1933 (Securities Act); GAW Miners and Garza with violating Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder; and ZenMiner with violating Sections 17(a)(1) and (3) of the Securities Act, Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder. The SEC’s complaint seeks permanent injunctive relief as well as the disgorgement of ill-gotten gains plus prejudgment interest and penalties.

Contact Us:

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.

Contact Us:

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.

Contact Us:

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.

Contact Us:

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.

Contact Us:

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.

Contact Us:

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.

Contact Us:

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.

Contact Us:

John Cherry III – Conversion of Client Funds, Fraud and Misrepresentation Boca Raton, Florida FINRA Arbitration Attorney

Russell L. Forkey — Sun, 23 Aug 2015 23:26:26 GMT

John Cherry III – Conversion of Client Funds, Fraud and Misrepresentation Boca Raton, Florida FINRA Arbitration Attorney:

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

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

August 2015 Disciplinary and Other FINRA Actions:

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

John Cherry III (CRD #1891720, New York, New York) was barred from association with any FINRA member in any capacity and ordered to pay $138,235.38 in restitution and $300,000 in disgorgement, along with prejudgment interest on both amounts. The NAC imposed these sanctions following an appeal of an OHO decision. Cherry appealed this matter to the SEC but later withdrew his application. The sanctions are based on findings that Cherry converted $474,000 in customers’ funds to purchase a house without the customers’ knowledge or authorization. At Cherry’s direction, the customers transferred their funds to a company Cherry owned and controlled for the purpose of investing in securities. Rather than investing the funds in securities as the customers had directed, Cherry used the funds to purchase the house in which he and his wife were living. To review the release, please follow the above link.

Contact Us:

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.

Contact Us:

North Dakota Developments, LLC., Robert L. Gavin and Daniel J. Hogan – South Florida Securities and Investment Fraud and Commercial Litigation Attorney

Russell L. Forkey — Mon, 25 May 2015 19:31:28 GMT

North Dakota Developments, LLC., Robert L. Gavin and Daniel J. Hogan – South Florida Securities and Investment Fraud and Commercial Litigation Attorney:

Securities and Exchange Commission v. North Dakota Developments, LLC, Robert L. Gavin, and Daniel J. Hogan, et. al., Civil Action No. 4:15-cv-00053-DLH-CSM (D.N.D.)

SEC Halts Bakken Oil and Gas-Related Investment Scheme

The Securities and Exchange Commission recently announced charges and an emergency asset freeze against North Dakota Developments, LLC (“NDD”) and its two principals for allegedly defrauding investors in a scheme to purportedly build and operate short-term housing facilities or “man camps” for workers in the Bakken oil and gas formation of North Dakota and Montana.

The SEC alleges that NDD and its owners Robert L. Gavin and Daniel J. Hogan have raised over $62 million from hundreds of investors in various states in the U.S. and foreign countries for interests in one of four “man camp” projects. According to the SEC’s complaint filed recently in U.S. District Court for the District of North Dakota, investors bought “units” in NDD’s projects motivated by the Defendants’ promises of exceptionally high annual returns, up to 42%, and that NDD would jointly manage all of the units as a fully-developed short-term housing facility with amenities typically found in a hotel. The SEC also alleges that the Defendants offered investors the option of receiving a “guaranteed” annual return of up to 25% of the purchase price of their unit without regard to actual rental income. As further inducement to invest, Defendants also promised investors that the various projects would be operational in a very short time frame, often within months. In reality, the SEC alleges, despite the substantial amount of funds raised by the Defendants since May 2012, at the present time, none of the projects are fully operational and one of the projects offered does not even have governmental approval for construction to begin.

According to the SEC’s complaint, Defendants directly or indirectly made material misrepresentations and omissions regarding the use of investor funds, the payment of commissions, and the return on the investment. Among other things, the SEC alleges that NDD’s first project was delayed and unprofitable. The SEC alleges that, despite the lack of profits, the Defendants made Ponzi-style payments to certain early investors by paying their “guaranteed” returns using funds provided by later investors. The SEC also alleges that instead of developing the projects as promised, the Defendants have misappropriated over $25 million of investor funds to pay undisclosed commissions to sales agents, make payments to Gavin and Hogan, make investments in unrelated Bakken area projects for Gavin’s and Hogan’s personal benefit, and to make the Ponzi-like payments.

On May 5, 2015, the Honorable Daniel L. Hovland for the U.S. District Court for the District of North Dakota granted the SEC’s request for a temporary restraining order and asset freeze against NDD, Gavin, and Hogan. A court hearing has been scheduled for May 18, 2015, on the SEC’s motion for a preliminary injunction.

The Commission’s complaint alleges that NDD, Gavin, and Hogan 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 and Rule 10b-5 thereunder; and seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties against each of them.

Contact Us:

David Craven and Alex Craven – American Energy Development Corp. – Microcap Security and Investment Fraud and Misrepresentaiton Litigation Attorney

Russell L. Forkey — Fri, 13 Mar 2015 12:03:24 GMT

South Florida, including Boca Raton, West Palm Beach and Royal Palm Beach Microcap Investment and Security Fraud and Misrepresentation Litigation Attorney

Securities and Exchange Commission v. David Carven et. a. Civil Action No. 15-cv-1820 (S.D.N.Y.)

SEC Files Emergency Action Against Father and Son Behind Pump and Dump Scheme, Obtains Asset Freeze

The U.S. Securities and Exchange Commission recently filed an emergency action ex parte against David Craven and Alex J. Craven, a father and son who manipulated the public market for shares of microcap issuer American Energy Development Corp. (AEDC) in violation of the securities laws. The Complaint alleges that by the middle of 2011, David Craven and Alex Craven, who are British citizens residing in Switzerland and England, respectively, gained control of over 87% of the purportedly non-restricted shares of AEDC through nominee companies under their control. Then, between October 2011 and February 2012, the Cravens inflated AEDC’s share price through deceptive “wash trading” and “matched trading.” Shortly thereafter, they secretly funded a $1.6 million promotional campaign for AEDC stock that involved a 16-page mailer being sent nationwide in April and May 2012 to 1.2 million U.S. residents. The Cravens’ deceptive trading and the mailer’s rosy predictions succeeded in driving up the price for and daily trading volumes in AEDC stock, which allowed the Cravens to dump over $4 million worth of artificially inflated AEDC stock on unsuspecting investors through numerous overseas trading accounts under their control.

The SEC’s Complaint alleges that the Cravens violated Sections 17(a)(1), (2) and (3) of the Securities Act of 1933 and Sections 9(a)(1) and (2) and 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder. The SEC’s Complaint also names David Craven’s wife, Anna Craven, as a relief defendant.

According to documents filed simultaneously with the SEC’s Complaint in federal court in Manhattan, David Craven is actively attempting to sell property he owns jointly with Anna Craven in Florida. The Court’s order freezes David Craven’s and Anna Craven’s U.S. assets. Pursuant to the order, the Commission has taken immediate action to freeze David and Anna Craven’s U.S. assets, which include property in Florida and Kentucky and a bank account in Florida.

Contact Us:

Frederic Elm and Elm Tree Investment Advisors – Boca Raton, Florida Securities and Investment Fund Fraud and Misrepresentation Attorney

Russell L. Forkey — Thu, 22 Jan 2015 20:53:12 GMT

Boca Raton, Florida Securities and Investment Fund Fraud and Misrepresentation Litigation and Arbitration Attorney:

Securities and Exchange Commission v. Frederic Elm f/k/a Frederic Elmaleh, et al., Case No. 15-cv-60082-DIMITROULEAS/SNOW

SEC Charges Investment Adviser and Manager in South Florida-Based Fraud

The Securities and Exchange Commission recently announced fraud charges and an asset freeze against a Fort Lauderdale, Florida-based investment adviser, its manager, and three related funds with defrauding investors in a scheme that raised more than $17 million since November 2013.

The SEC’s complaint, filed in federal court in the Southern District of Florida on January 15, 2015, charged Elm Tree Investment Advisors LLC, its founder and manager, Frederic Elm, and three funds, Elm Tree Investment Fund LP, Elm Tree “e”Conomy Fund LP, and Elm Tree Motion Opportunity LP. According to the complaint, Elm, formerly known as Frederic Elmaleh, his unregistered investment advisory firm, and three funds misled investors and used most of the money raised to make Ponzi-like payments to the investors. The complaint also alleges that Elm treated the funds as his personal piggy bank, tapping them to buy a $1.75 million home, luxury automobiles, jewelry, and cover daily living expenses. Elm’s wife, Amanda Elm, formerly Elmaleh, is named as a relief defendant based on her receipt of investor monies.

The SEC’s complaint charges Elm, his advisory firm and the Elm Tree funds with violating Section 17(a) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint also charges Elm and ETIA with violations of Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8. The SEC is seeking relief for investors, including return of allegedly ill-gotten gains, with interest, and financial penalties.

The Honorable William Dimitrouleas on January 16 granted the SEC’s request for a temporary restraining order and temporary asset freeze against Elm, his firm, and the three Elm Tree funds. The judge ordered a temporary asset freeze against Amanda Elm and required her and the other defendants to provide accountings. Judge Dimitrouleas also entered an order appointing Grisel Alonso as receiver for Elm Tree Investment Advisors and the Elm Tree funds. A court hearing has been scheduled for January 29.

Contact Us:

Efstratios D. Argyropoulos and Prima Capital Group, Inc. – Boca Raton, Florida Stock Promoter Fraud and Misrepresentation Attorney

Russell L. Forkey — Sun, 28 Dec 2014 02:59:21 GMT

Efstratios D. Argyropoulos and Prima Capital Group, Inc. – Boca Raton, Florida Stock Promoter Fraud and Misrepresentation Attorney

Securities and Exchange Commission v. Efstratios “Elias” D. Argyropoulos and Prima Capital Group, Inc., Civil Action No. 2:14-cv-09800 (C.D. Cal.)

SEC Charges Stock Promoter with Fraudulent Scheme Related to Pre-IPO Facebook and Twitter Shares

On December 23, 2014, the Securities and Exchange Commission charged a stock promoter based in Santa Barbara, Calif., with fraudulently raising nearly $3.5 million from investors purportedly to purchase Facebook and Twitter shares prior to their initial public offerings (IPOs).

The SEC alleges that instead of purchasing the shares in the secondary market as promised, Efstratios “Elias” Argyropoulos and his firm Prima Capital Group misappropriated investor funds. They used the money primarily for day trading of stocks and options as well as to pay off certain investors who complained when they didn’t receive the promised Facebook or Twitter shares.

Argyropoulos and Prima Capital agreed to settle the SEC’s charges and to be barred from working for an investment adviser or broker-dealer, and financial penalties will be determined at a later date.

The SEC’s complaint alleges that Argyropoulos and Prima violated Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and, against Argyropoulos only, civil money penalties.

Without admitting or denying the allegations in the SEC’s complaint, Argyropoulos and Prima consented to a judgment permanently enjoining them from violations of Section 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder, ordering them to pay, jointly and severally, disgorgement with prejudgment interest, and ordering Argyropoulos to pay civil money penalties. There will be further proceedings before the District Court to determine the amounts of disgorgement with prejudgment interest and civil money penalties. The bifurcated settlement remains subject to court approval. Argyropoulos also consented, without admitting or denying the SEC’s findings, to an administrative proceeding order barring him from, among other things, association with any broker, dealer or investment adviser. The administrative proceeding will be instituted following court approval of the bifurcated settlement.

Also on December 23, 2014, SEC separately announced an administrative proceeding against Khaled A. Eldaher, a registered representative living in Austin, Texas. The SEC Enforcement Division alleges that while working for a registered broker-dealer, Eldaher reached a side agreement with Argyropoulos to solicit investors and receive 50 percent of the mark-up on Facebook shares he sold. Eldaher sold $362,887.50 worth of Facebook shares and was paid $15,478 by Prima Capital. He was later terminated by the broker-dealer for selling securities other than through the firm. The Enforcement Division alleges that Eldaher’s sales of unregistered securities violated Section 15(a)(1) of the Exchange Act. 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.

Contact Us:

Oil and Gas Offering Fraud – Fraudulent Stock Manipulation – False and Misleading Press Releases

Russell L. Forkey — Mon, 15 Dec 2014 23:47:20 GMT

Boca Raton, Florida – Oil and Gas Offering Fraud – Fraudulent Stock Manipulation – False and Misleading Press Releases

SEC Charges New Orleans Oil-And-Gas Company with Fraudulent Stock Manipulation

Securities and Exchange Commission v. Treaty Energy Corporation, et al., Civil Action No. 4:14-cv-00812 (E.D. Tex., filed December 15, 2014)

The Securities and Exchange Commission recently charged a New Orleans-based oil-and-gas company and five executives with running a stock trading scheme in which they claimed to have struck oil in Belize in order to manipulate the price of the company’s stock as they illegally sold restricted shares to the public.

The SEC also charged a Houston-based attorney with facilitating the scheme by issuing false legal opinion letters that allowed free trading of the restricted company stock.

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of Texas, Treaty Energy Corporation issued deceptive press releases touting drilling successes in Belize and Texas to induce investor demand for its unregistered stock, which was then illegally distributed to the public. The SEC alleges that Treaty Energy’s founder Ronald Blackburn and four company officers – Andrew V. Reid, Bruce A. Gwyn, Lee C. Schlesinger, and Michael A. Mulshine – obtained at least $3.5 million in illicit profits from the scheme.

The SEC’s complaint further alleges that Treaty Energy’s outside counsel Samuel Whitley abused his gatekeeper role and enabled the scheme by authoring improper legal opinion letters that allowed the company and its officers to illegally distribute unregistered stock to the public. Whitley was aware that Blackburn was running the company and Treaty Energy was abusing registration rules under the federal securities laws. Yet these facts did not deter him from issuing the opinion letters that allowed the scheme to proceed.

According to the SEC’s complaint, the scheme had three basic components. The first part began in January 2012 when Blackburn directed Treaty Energy to issue a press release claiming that its purported oil strike in Belize contained an estimated five to six million barrels of recoverable oil. Treaty’s stock price shot up nearly 80 percent that day. However, the Belize government publicly refuted Treaty Energy’s purported oil strike the very next day, calling the company’s statement “false and misleading” and “irresponsible.” The SEC alleges that despite Belize’s denial, Blackburn and the company’s officers continued to mislead investors by claiming that Belize was merely downplaying an actual oil strike for strategic reasons.

The SEC alleges that the second part of the scheme entailed Treaty Energy’s failure to disclose in public filings from 2009 to 2013 that Blackburn – previously convicted of federal income tax evasion – actually controlled the company and was a de facto officer. The SEC alleges that Reid, Gwyn, Schlesinger, and Mulshine all knew Blackburn’s true role at the company, but intentionally kept this fact out of its disclosures to conceal from the public that a convicted felon was in charge.

According to the SEC’s complaint, the final part of the scheme got underway in November 2013 when Treaty Energy began offering investors working interests in a well in West Texas. Investors were enticed with claims that the working interests were low-risk and expected to yield a return of 111.42 percent over a 10-year period. The SEC alleges that Treaty Energy and its officers knew these claims were baseless because the well was producing only marginal amounts of oil. In fact, the well produced 235 total barrels from October 2013 to October 2014.

The SEC’s complaint charges Treaty Energy, Blackburn, Reid, Gwyn, Mulshine, and Schlesinger with securities fraud as well as violations of the registration and reporting violations of the federal securities laws. The SEC seeks disgorgement of ill-gotten gains with prejudgment interest plus financial penalties as well as penny stock bars, officer-and-director bars, and permanent injunctions against them. Reid and Gwyn are additionally charged with signing false certifications in Treaty Energy’s SEC filings, and Whitley is accused of securities registration violations.

Contact Us: