SEC Enforcement Actions 2013

Gregory N. McKnight – Florida Investment and Securities Ponzi Scheme FINRA Arbitration and Litigation Attorney

Published on: August 14, 2013 | By Russell L. Forkey, P.A.

Securities and Exchange Commission v. Gregory N. McKnight, et al., Civil Action No. 08-cv-11887 (E.D. Mich.)

15 Year Prison Term for Gregory Mcknight, Orchestrator of $72 Million Ponzi Scheme

The Securities and Exchange Commission recently announced that on August 6, 2013, the Honorable Mark A. Goldsmith of the United States District Court for the Eastern District of Michigan sentenced Gregory N. McKnight to 188 months (15 years and 8 months) in prison, followed by supervised release of 3 years, and ordered McKnight to pay $48,969,560 in restitution to his victims. McKnight, 53, of Swartz Creek, Michigan, had previously pled guilty to one count of wire fraud for his role in orchestrating a $72 million Ponzi scheme involving at least 3,000 investors. The U.S. Attorney’s Office for the Eastern District of Michigan filed criminal charges against McKnight on February 14, 2012. McKnight was taken into custody immediately after the sentencing hearing.

Steven B. Heinz and S.B. Heinz & Associates, Inc. – Florida Financial Planning and Insurance Fraud, Misrepresentation and Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney

Published on: August 13, 2013 | By Russell L. Forkey, P.A.

SEC Obtains Asset Freeze and Other Relief in $4 Million Offering Fraud

Recently, the Securities and Exchange Commission (“Commission”) obtained a temporary restraining order and an emergency asset freeze in a $4 million offering fraud and Ponzi scheme orchestrated by Steven B. Heinz (Heinz) and his company S.B. Heinz & Associates, Inc. (S.B. Heinz), a financial planning and insurance agency located in Provo, Utah.

The complaint alleges that since January 1, 2012, Heinz acted as an investment adviser and solicited nearly $4 million from more than fifteen former clients, family members, and friends to enable him, through his company S.B. Heinz, to execute rapid buy and sell orders of futures contracts. The complaint further alleges that investor funds are being used to falsely create the appearance of a successful investment business although S.B. Heinz has actually lost approximately $1.5 million executing Heinz’s high risk futures contract trading activities. In addition, the complaint alleges that Heinz pays “returns” to earlier investors using new investor funds, used investor funds for his own personal purposes and that S.B. Heinz used investor funds to pay business expenses, including the salary for its secretary and its office rent.

Hedge Fund Scheme Targeting Fellow Military – South Florida Hedge Fund and Investment Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney

Published on: August 8, 2013 | By Russell L. Forkey, P.A.

SEC Halts Ex-Marine’s Hedge Fund Fraud Targeting Fellow Military

The Securities and Exchange Commission (the” Commission”) recently obtained an emergency court order to halt a hedge fund investment scheme by a former Marine living in the Chicago area who has been masquerading as a successful trader to defraud fellow veterans, current military, and other investors.

The SEC alleges that Clayton A. Cohn and his hedge fund management firm Market Action Advisors raised nearly $1.8 million from investors through a hedge fund he managed. Cohn lied to investors about his success as a trader, the performance of the hedge fund, his use of investor proceeds, and his personal stake in the hedge fund. Cohn only invested less than half of the money raised from investors and instead used more than $400,000 for such personal expenses as a Hollywood mansion, luxury automobile, and extravagant tabs at high-end nightclubs. He used his lavish lifestyle to carefully contrive the image of a successful trader and investor, when in reality he lost nearly all of the money invested through the hedge fund. In order to cover up his fraud and continue raising money from investors, Cohn generated phony hedge fund account statements showing annual returns exceeding 200 percent.

Bank Of America N.A., Banc of America Mortgage Securities, Inc., and Merrill Lynch, Pierce, Fenner & Smith, Inc. – Florida Residential Mortgage-Backed Securities – South Florida Material Misrepresentation FINRA Arbitration and Litigation Attorney

Published on: August 8, 2013 | By Russell L. Forkey, P.A.

SEC Charges Bank of America Entities with Material Misrepresentations and Omissions in Connection with an RMBS Offering

Recently, the Securities and Exchange Commission (“Commission”) filed a civil injunctive action against Bank of America, N.A. (BANA), Banc of America Mortgage Securities, Inc. (BOAMS), and Merrill Lynch, Pierce, Fenner & Smith, Inc. f/k/a Banc of America Securities LLC (BAS) (collectively the Bank of America Entities). The Commission alleges that the Bank of America Entities made material misrepresentations and omissions in connection with the sale of residential mortgage-backed securities known as BOAMS 2008-A. Specifically, the complaint alleges that the Bank of America Entities failed to disclose the disproportionate concentration of wholesale loans (72% by unpaid principal balance) underlying BOAMS 2008-A as compared to prior BOAMS offerings. The complaint also alleges that the Bank of America Entities failed to disclose known risks associated with the high concentration of wholesale loans in BOAMS 2008-A including higher likelihood that the loans would be subject to material underwriting errors, become severely delinquent, fail early in the life of the loan, or prepay. The complaint further alleges that the Bank of America entities violated Regulation S-K and subpart Regulation AB of the Securities Act by failing to disclose the material characteristics of the pool of loans underlying BOAMS 2008-A. The complaint also alleges that the Bank of America Entities made material misrepresentations and omissions in its public filings and in the loan tapes it provided to investors and rating agencies that the loans in BOAMS 2008-A complied with BANA’s underwriting standards when a material amount did not. Finally, the complaint alleges that BOAMS and BAS violated Section 5(b)(1) of the Securities Act by failing to file with the Commission certain loan tapes that it provided only to select investors.

The Commission’s complaint, filed in the United States District Court for the Western District of North Carolina, charges the Bank of America Entities with violating the antifraud provisions of the federal securities laws. The complaint alleges that each violated Sections 17(a)(2) and 17(a)(3) of the Securities Act. The complaint also alleges that BAS and BOAMS violated Section 5(b)(1) of the Securities Act. The complaint seeks against each of the Bank of America Entities a permanent injunction, disgorgement with prejudgment interest and civil monetary penalties pursuant Section 20(d) of the Securities Act.

UBS – Collateralized Debt Obligation (CDO) – Florida Collateralized Debt Obligation Fraud and Market Manipulation FINRA Arbitration and Litigation Attorney

Published on: August 8, 2013 | By Russell L. Forkey, P.A.

Florida Collateralized Debt Obligation – FINRA Arbitration and Litigation Attorney:

Pool Identification – ACA ABS 2007-2:

UBS to Pay $50 Million to Settle SEC Charges of Misleading CDO Investors

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

Published on: August 6, 2013 | By Russell L. Forkey, P.A.

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

SEC Charges Penny Stock CEO in International Boiler Room Scheme

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

Cort Poyner and Mohammad Dolah – Florida Common and Penny Stock Manipulation and Fraud FINRA Arbitration and Litigation Attorney

Published on: August 6, 2013 | By Russell L. Forkey, P.A.

Securities and Exchange Commission v. Cort Poyner and Mohammed Dolah, Civil Action No. 13 Civ. 4331 (SJ) (E.D.N.Y.)

SEC Charges Stock Promoters with Market Manipulation

The Securities and Exchange Commission recently announced that it filed a civil injunctive action against Cort Poyner (“Poyner”) and Mohammad Dolah (“Dolah”), alleging that they engaged in a fraudulent broker bribery scheme designed to manipulate the market for the common stock of Resource Group International, Inc. (“Resource Group”) and Gold Rock Resources Inc. (“Gold Rock”).

Jorge Bravo, Jr. – “Wrap Around Agreements” – Florida Unregistered Sale of Securities Fraud Litigation and Arbitration Attorney

Published on: July 26, 2013 | By Russell L. Forkey, P.A.

Securities and Exchange Commission v. Jorge Bravo, Jr., Civil Action No. 13-CV-5116 (PGG) (S.D.N.Y., July 23, 2013)

SEC Charges Florida Resident with Unregistered Sales of Securities

Recently, the Securities and Exchange Commission filed settled charges against Florida resident Jorge Bravo, Jr., for unlawful sales of millions of shares of a microcap company to the public without complying with the registration requirements of the Securities Act of 1933.

City of Miami and Michael Boudreaux – South Florida (Miami) Municipal Bond Offering Fraud and Misrepresentation Litigation and FINRA Arbitration Attorney

Published on: July 19, 2013 | By Russell L. Forkey, P.A.

City of Miami and Michael Boudreaux – South Florida (Miami) Municipal Bond Offering Fraud and Misrepresentation Litigation and FINRA Arbitration Attorney:

Securities and Exchange Commission v. City of Miami, Florida, and Michael Boudreaux, Civil Action No. 1:13-cv-22600 (U.S. District Court for the Southern District of Florida, filed July 19, 2013)

The Securities and Exchange Commission announced that it recently charged the City of Miami and its former Budget Director with securities fraud in connection with several municipal bond offerings and other disclosures made to the bond investing public. The SEC’s action also charges the City with violating a 2003 SEC Cease-and-Desist Order which was entered against the City based on similar misconduct. This case is the SEC’s first ever injunctive action against a municipality already under an existing SEC cease-and-desist order.

Steven J. Brewer – South Florida Promissory Note Fraud and Misrepresentation Litigation and FINRA Arbitration Attorney

Published on: July 17, 2013 | By Russell L. Forkey, P.A.

In the Matter of Steven J. Brewer:

On July 12, 2013, the Securities and Exchange Commission announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) and Section 203(f) of the Investment Advisers Act of 1940 (Advisers Act), Making Findings and Imposing Remedial Sanctions (Order) against Steven J. Brewer.

The Order finds that from June 2009 through October 2010, Steven J. Brewer was engaged in the business of effecting transactions in securities for the accounts of others by offering and selling promissory notes to investors. During that time, Brewer was associated with a registered broker dealer and with a registered investment adviser. On April 22, 2013, a judgment was entered by consent against Brewer, permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and from aiding and abetting future violations of Section 15(c) of the Exchange Act and Sections 206(1) and 206(2) of the Advisers Act, in the civil action entitled Securities and Exchange Commission v. Steven Brewer, et al., Civil Action Number 10-cv-6932-BMM-AK, in the United States District Court for the Northern District of Illinois. The Commission’s complaint alleged that, from June 2009 through at least the end of September 2010, Brewer and others participated in fraudulent, unregistered offerings of promissory notes issued by FPA Limited, an Isle of Man company, in the aggregate amount of $5.6 million to at least 74 investors. The offering materials created and used for the offerings misrepresented the risk of the investment and misrepresented the use of proceeds of the offering. The complaint alleged that Brewer originated the fraudulent offerings and participated in creating the fraudulent offering documents. Brewer also controlled the bank account into which the proceeds of the offerings were deposited and then disbursed, primarily to BIG.