Archives for Investor Protection

SEC Charges Aequitas Management with Defrauding Investors

The Securities and Exchange Commission recently announced that it charged an Oregon-based investment group and three top executives with hiding the rapidly deteriorating financial condition of its enterprise while raising more than $350 million from investors.  Aequitas Management LLC and four affiliates allegedly defrauded more than 1,500 investors nationwide into believing they were making health care, education, and transportation-related investments when their money was really being used in a last-ditch effort to save the firm.  Some money from new investors was allegedly used to pay earlier investors.

The SEC’s complaint, filed today in federal district court in Oregon, alleges that CEO Robert J. Jesenik and executive vice president Brian A. Oliver were well aware of Aequitas’s calamitous financial condition yet continued to solicit millions of dollars from investors to pay the firm’s ever-increasing expenses and attempt to stave off the impending collapse.  Former CFO and chief operating officer N. Scott Gillis allegedly concealed the firm’s insolvency from investors and was aware that Jesenik and Oliver continued soliciting investors so that Aequitas could pay operating expenses and repay earlier investors with money from new investors.

“We allege that Aequitas had severe and persistent cash flow shortages and top executives knew they weren’t using money raised from investors like they said they would.  But they refused to disclose the true financial condition, continued to draw lucrative salaries, and roped even more unknowing investors into a losing venture,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office.

According to the SEC’s complaint:

  • From January 2014 to January 2016, Aequitas raised money from investors by issuing promissory notes with high rates of return typically ranging from 8.5 to 10 percent.
  • While Aequitas did use some investor money to acquire trade receivables in health care, education, transportation, and other consumer credit sectors, the vast majority was concentrated in student loan receivables of for-profit education provider Corinthian Colleges.  Corinthian defaulted on its recourse obligations to Aequitas in mid-2014, which significantly exacerbated the firm’s already severe cash flow problems.
  • The executives continued to draw their lucrative salaries, use a private jet, and attend posh dinner and golf outings, all at the expense of investors.  They used the outings to raise more money from investors.  Jesenik, Oliver, and Gillis took home at least $2.5 million in combined salaries during this period.
  • By November 2015, Aequitas could no longer meet scheduled redemptions.  Last month, the firm dismissed two-thirds of its employees and hired a chief restructuring officer.

The SEC’s complaint charges violations of the federal securities laws by Aequitas Management, Aequitas Holdings LLC, Aequitas Commercial Finance LLC, Aequitas Capital Management Inc., and Aequitas Investment Management LLC as well as Jesenik, Oliver, and Gillis.  The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and monetary penalties from all defendants as well as bars prohibiting Jesenik, Oliver, and Gillis from serving as officers or directors of any public company.

Aequitas and the affiliated entities have agreed to be preliminarily enjoined from raising any additional funds by offering and selling securities, and agreed to the appointment of a receiver to marshal and preserve remaining Aequitas assets for distribution to defrauded investors.  The stipulated orders are subject to court approval.

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options. The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide. If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses. Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.

Categories: Investor Protection, Securities Fraud, and Securities Investigations.

SEC Charges Wells Fargo With Fraud in 38 Studios Bond Offering

The Securities and Exchange Commission recently announced that it had charged a Rhode Island agency and its bond underwriter Wells Fargo Securities with defrauding investors in a municipal bond offering to finance startup video game company 38 Studios. 

The Rhode Island Economic Development Corporation (RIEDC, now called the Rhode Island Commerce Corporation) issued $75 million in bonds for the 38 Studios project as part of a state government program intended to spur economic development and increase employment opportunities by loaning bond proceeds to private companies.

According to the SEC’s complaint filed in federal district court in Providence:

  • The RIEDC loaned $50 million in bond proceeds to 38 Studios.  Remaining proceeds were used to pay related bond offering expenses and establish a reserve fund and a capitalized interest fund.
  • The loan and, in turn, bond investors would be repaid from revenues generated by video games that 38 Studios planned to develop.
  • The bond offering document produced by the RIEDC and Wells Fargo failed to disclose to investors that 38 Studios had conveyed it needed at least $75 million in funding to produce a particular video game.
  • Therefore, investors weren’t fully informed when deciding to purchase the bonds that 38 Studios faced a funding shortfall even with the loan proceeds and could not develop the video game without additional sources of financing.
  • When 38 Studios was later unable to obtain additional financing, the video game didn’t materialize and the company defaulted on the loan.

The SEC also charged Wells Fargo’s lead banker on the deal, Peter M. Cannava, and two then-RIEDC executives Keith W. Stokes and James Michael Saul with aiding and abetting the fraud.  Stokes and Saul agreed to settle the charges without admitting or denying the allegations and must each pay a $25,000 penalty.  They are prohibited from participating in any future municipal securities offerings.  The SEC’s litigation continues against Cannava, Wells Fargo, and RIEDC.

The SEC’s complaint further alleges that Wells Fargo and Cannava misled investors in an additional way in bond offering materials:

  • Wells Fargo disclosed its bond offering compensation as a share of the placement agent fee plus a $50,000 payment from 38 Studios.  No other fees or compensation to Wells Fargo were disclosed, and the bond placement agreement stated that no other money was anticipated.
  • Investors weren’t informed that Wells Fargo had a side deal with 38 Studios that enabled the firm to receive nearly double the amount of compensation disclosed in offering documents.
  • This additional compensation, totaling $400,000 and paid from bond proceeds, created a conflict of interest that Wells Fargo should have disclosed to bond investors.
  • Cannava was responsible for Wells Fargo’s failure to disclose its additional fees.

The SEC’s complaint charges the RIEDC and Wells Fargo with violations of Sections 17(a)(2) and (a)(3) of the Securities Act of 1933, and charges Stokes, Saul, and Cannava with aiding and abetting those violations.  Wells Fargo also is charged with violations of Section 15B(c)(1) of the Securities Exchange Act of 1934 and Rules G-17 and G-32 of the Municipal Securities Rulemaking Board (MSRB).  Cannava is charged with aiding and abetting those violations.

In a separate administrative proceeding, the RIEDC’s financial advisor for the bond offering – First Southwest Company LLC – agreed to settle charges that it violated MSRB rules by failing to document in writing the scope of the services the firm was providing in the bond offering until seven months after the financial advisory relationship began.  Without admitting or denying the findings, First Southwest agreed to pay disgorgement of $120,000, prejudgment interest of $22,400, and a penalty of $50,000.

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options. The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide. If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses. Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.

 

Categories: Broker Investigations, Investor Protection, Securities Broker Misconduct, Securities Fraud, and Securities Investigations.

SEC Charges Wade James Lawrence with Unauthorized Trading and Fraud

The Securities and Exchange Commission recently announced that it charged Wade James Lawrence, a former investment adviser  with executing unauthorized trades in his clients’ investment accounts and defrauding other individuals who tried to invest their money with him.The SEC’s complaint, filed in federal court in Texas, alleges that:

  • Starting in 2010 while employed at the first firm, Lawrence executed unauthorized trades in speculative, high-risk securities in several of his clients’ accounts.
  • After joining the other firm in August 2011, Lawrence continued to place unauthorized trades of risky securities in his clients’ accounts.
  • Between 2010 and 2013, Lawrence’s clients lost at least $2 million due to his improper and unauthorized trading.
  • Lawrence fraudulently obtained approximately $480,000 from at least five individuals by claiming that he could trade securities for them at prices lower than those available to the general public and in securities that were not otherwise available to individual investors.
  • Immediately after receiving the investors’ funds, Lawrence used most of the money for personal expenditures and to repay personal debts, while returning a portion of the funds disguised as investment profits.

In a related action, on August 25, 2015, Lawrence pleaded guilty to fraud charges and, on January 20, 2015 was sentenced to 36 months imprisonment, ordered to pay $1,454,384.48 in restitution, and ordered to forfeit $126,074.10 as a result of his conduct.

Lawrence has agreed to settle the SEC’s action by consenting to a court order that enjoins him from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940; orders him to disgorge $458,700 plus prejudgment interest of $32,101.13, but deems payment of these amounts satisfied by the entry of the criminal restitution and forfeiture orders; and does not order the payment of a civil penalty based in consideration of his criminal conviction and 36-month sentence. The settlement is subject to court approval.

Lawrence was previously registered with:

08/2011 – 12/2013 SOUTHWEST SECURITIES, INC. (CRD# 6220) – DALLAS, TX

06/2008 – 07/2011 OPPENHEIMER & CO. INC. (CRD# 249) – FORTH WORTH, TX
If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options. The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide. If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses. Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.
Categories: Broker Fraud, Broker Investigations, and Investor Protection.

Attention Purchasers of IceWEB, Inc. (IWEB)

The Financial Industry Regulatory Authority (FINRA) announced that it barred broker George Johnson from the securities industry for engaging in a manipulative trading scheme to artificially inflate the market price and trading volume for the common stock of IceWEB, Inc. (OTCBB: IWEB). FINRA also sanctioned Christopher Wynne, Johnson’s supervisor, suspending him for two years in all capacities, barring him in a principal capacity, and fining him $25,000. Joseph Mahalick, another broker who worked with Johnson and Wynne, was suspended for six months and fined $20,000 for falsifying firm records and has been barred from the securities industry in a separate action. Johnson, Wynne and Mahalick all worked for Meyers Associates L.P. in that firm’s Chicago branch office during the time period of the misconduct.

FINRA found that over an eight-day period, Johnson manipulated the market for IWEB by recommending that certain of his customers buy at increasingly higher and artificially inflated prices while also recommending his other customers sell their shares, frequently matching trades between the customers. FINRA found that among Johnson’s motives for manipulating the stock was the fact that he wanted to obtain business from the issuer for which he would anticipate receiving compensation in connection with a future private offering. Johnson coordinated a campaign with a stock promoter to attempt to increase the stock’s share price to a level that would allow for the exercise of certain warrants.

FINRA also found that Johnson and Wynne sent customers IWEB sales materials that omitted information concerning material conflicts of interest and material risks concerning IWEB’s business, and contained misleading, exaggerated and unwarranted information. Moreover, Johnson disclosed confidential information to potential purchasers concerning another offering.

In addition to the IWEB scheme, FINRA found that Johnson committed fraud by recommending that certain of his customers purchase shares of another penny stock without disclosing to them that he was liquidating his own personal positions of the security from his own brokerage accounts.

In addition, FINRA’s investigation found that to cover up Johnson’s violations of state securities registration requirements, Johnson, Mahalick and Wynne agreed to the practice of entering false information on more than 100 order memoranda, indicating that Wynne or Mahalick was responsible for the account or transactions, instead of Johnson.

In settling this matter, Johnson, Wynne and Mahalick neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options. The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide. If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses. Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.

Categories: Broker Fraud and Investor Protection.

Attention Investors in American Growth Fund II

SEC Charges Lending Company and Brokerage Firm with Fraud

On February 3, 2016, the Securities and Exchange Commission charged a Manhattan-based lending company and its owner with repeatedly lying to investors purchasing high-yield securities. The SEC also charged the brokerage firm that acted as the placement agent and two of its executives.

The SEC alleges that American Growth Funding II LLC and Ralph Johnson promised investors 12-percent annual returns and falsely claimed its financial statements were being audited each year. AGF II, which raises capital from investors to provide loans to businesses, also made misrepresentations in offering documents about its management and concealed details about deteriorating loan values that could imperil full payment of the promised returns to investors. The company’s placement agent Portfolio Advisors Alliance and its owner Howard Allen and president Kerri Wasserman allegedly knew the offering documents were inaccurate yet continued using them to solicit sales of AGF II securities.

According to the SEC’s complaint filed in federal district court in Manhattan:

In a private placement offering, AGF II raised approximately $8.6 million from investors from March 2011 to December 2013.

The company represented in offering documents that its financial statements had been audited and would continue to be audited each fiscal year. Johnson knew this statement was false. No audit of AGF II’s financials occurred until 2014.

The offering documents represented that AGF II was governed by a Board of Managers comprised of Johnson and two other individuals when, in fact, the two individuals never agreed to serve in any managerial capacity.

Johnson caused AGF II to send out monthly account statements to investors that concealed the precariousness of its business. The company failed to disclose that it could not have possibly paid investors their stated account balances because the majority of AGF II’s loans were likely uncollectible at the time.

While PAA acted as the placement agent, Allen became aware by no later than June 2012 that AGF II’s offering documents were not accurate. But he continued using them to solicit investors without informing them the financial statements were unaudited.

Allen informed Wasserman that AGF II’s offering documents contained false information, but Wasserman took no action and the firm’s brokers continued using misleading documents to solicit investors.

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options. The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide. If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses. Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.

Categories: Broker Fraud and Investor Protection.

FINRA Fines E.S. Financial Services nka Brickell Global Markets, Inc.

E. S. Financial Services, Inc., nka Brickell Global Markets, Inc. (CRD #104316, Miami, Florida) submitted an AWC in which the firm was censured and fined $275,000. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it charged customers a transaction fee and a custody fee in addition to a commission on fixed income transactions. The findings stated that the foregoing charges were not reasonably related to any direct handling-related services it performed, or handling-related expenses it incurred in processing transactions, but rather, were effectively additional commissions for it. The findings also stated that the firm failed to deliver prospectuses to customers who had purchased commercial paper of its affiliate. The findings also included that the firm failed to establish, maintain and enforce a supervisory system and WSPs regarding email review and to ensure prospectus delivery. FINRA found that the firm allowed persons without trading authority in a brokerage account opened by a Central American bank to direct trading in the account. The firm failed to establish, maintain and enforce a supervisory system or WSPs to prevent unauthorized trades in the Central American bank brokerage account. FINRA also found that the firm maintained inaccurate books and records reflecting that transactions were solicited, when in fact, the transactions were unsolicited. In addition, FINRA determined that the firm inaccurately computed its customer reserve formula which resulted in hindsight deficiencies and inaccurate Financial and Operational Combined Uniform Single (FOCUS) reports. (FINRA Case #2015045608701)

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options.  The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide.  If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses.  Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.

Categories: Broker Fraud and Investor Protection.

FINRA Fines and Suspends Michael Anthony Jump

Michael Anthony Jump (CRD #1146669, Somonauk, Illinois) submitted an AWC in which he was fined $10,000, suspended from association with any FINRA member in any capacity for two months and required to pay $6,889, plus interest, in disgorgement of commissions. Without admitting or denying the findings, Jump consented to the sanctions and to the entry of findings that he negligently misrepresented information pertaining to the fees associated with replaced variable annuities (VAs) on forms submitted to his member firm. The findings stated that Jump represented that the fees associated with the old VAs were higher than they actually were. The findings also stated that Jump made unsuitable recommendations with respect to VA exchanges when he recommended that his customers liquidate VAs they were holding, and use the proceeds to purchase new VAs.  Jump failed to make a reasonable assessment of the advantages and disadvantages of the recommended exchanges. Jump failed to understand that the income rider feature of the existing VAs could have been cancelled without affecting the viability of the existing VAs. Jump did not have a reasonable basis for recommending that these customers enter into the VA exchanges.  The suspension is in effect from September 21, 2015, through November 20, 2015. (FINRA
Case #2014039222501)

Jump was registered with INVESTMENT PLANNERS, INC. since June 2008.

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options.  The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide.  If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses.  Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.

Categories: Broker Investigations and Investor Protection.

FINRA Bars Patrick Landon Garrett

Patrick Landon Garrett (CRD #2045288, Franklin, Tennessee) submitted an AWC in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Garrett consented to the sanction and to the entry of findings that on multiple occasions, he intentionally and knowingly misrepresented to his brokerage customer the value of her account. The findings stated that Garrett misrepresented to the customer that her account value was approximately $200,000 more than the value showing on her printed and online account statements. Garrett told the customer that those statements were inaccurate because of settlement date issues. The findings also stated that as a result of Garrett’s recommendation, the customer purchased shares of an initial public offering (IPO) of a new company; and in the following months, the company’s share price began to decline, resulting in unrealized investment losses in the customer’s account. To recover some of the customer’s unrealized investment losses, Garrett told the customer that he would make her whole by reversing the IPO transaction in her account, which he claimed would result in a refund of her initial investment amount. Garrett attempted to make the customer whole by misusing funds from the joint account of a husband and wife to purchase most of the first customer’s IPO shares from the customer at the customer’s initial purchase price. Garrett recommended the company’s shares to the husband and wife, and misrepresented to one of them that he could get shares at the current market value, which Garrett claimed was a good price. Unbeknownst to the husband and wife, Garrett purchased shares of the company in the customers’ joint account at a higher price than the current market price. As a result, the joint account customers suffered an immediate investment loss of over $34,000. The findings also included that Garrett processed the transactions in the customers’ accounts as trade errors. In order to do so, Garrett submitted to his member firm trade correction and cancellation forms that falsely claimed that the first customer’s purchase of the shares was the result of a trade error. The firm approved and processed the transactions in the customers’ accounts based on this false documentation. As a result, the customer’s purchase of the IPO shares was cancelled without any loss to her account or any loss to Garrett, notwithstanding the substantial decrease in share price. Garrett disclosed the events and conduct to the first customer and the firm. The firm, thereafter, reimbursed the customers for their losses. (FINRA Case #2014040147501)

Garrett was registered from  06/2000 – 02/2014 with ROBERT W. BAIRD & CO. INCORPORATED (CRD# 8158) – NASHVILLE, TN

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options.  The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide.  If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses.  Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.

Categories: Broker Fraud, Broker Investigations, and Investor Protection.

FINRA Bars Kenneth Enlo Crosser

Kenneth Enlo Crosser (CRD #4589397, Ottumwa, Iowa) submitted an AWC in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Crosser consented to the sanction and to the entry of findings that he refused to appear for FINRA-requested testimony during the course of an investigation into allegations that he was involved in the sale of structured settlement cash flow instruments
to investors without providing his member firm with prior written notice and receiving firm approval to engage in this activity. (FINRA Case #2013037328701).

Mr. Crosser also has two customer complaints.

Crosser was formerly registered with:

06/2013 – 10/2013 GIRARD SECURITIES, INC. (CRD# 18697) – OTTUMWA, IA
02/2012 – 06/2013 CAMBRIDGE INVESTMENT RESEARCH, INC. (CRD# 39543) – OTTUMWA, IA
02/2010 – 02/2012 ROYAL ALLIANCE ASSOCIATES, INC. (CRD# 23131) – OTTUMWA, IA
04/2003 – 02/2010 PROEQUITIES, INC. (CRD# 15708) – OTTUMWA, IA
If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options.  The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide.  If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses.  Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.
Categories: Broker Investigations, Investor Protection, and Securities Broker Misconduct.

FINRA Fines and Suspends Philip Dunwoody Cox, Jr.

Philip Dunwoody Cox Jr. (CRD #2858433, Atlanta, Georgia) submitted an AWC in which
he was assessed a deferred fine of $10,000, suspended from association with any FINRA
member in any capacity for three months, and required to pay deferred disgorgement of
commissions received in the amount of $5,238.40, plus interest. Without admitting or
denying the findings, Cox consented to the sanctions and to the entry of findings that he
marked a total of 966 order tickets in 26 customer accounts as unsolicited when he had
solicited each order by bringing the relevant security or transaction to the customer’s
attention. The findings stated that the mismarked order tickets involved leveraged and
inverse exchange-traded funds (ETFs). Cox mismarked the order tickets in contravention
of his member firm’s WSPs, which prohibited registered representatives from soliciting
leveraged and inverse ETFs. By mismarking the order tickets, Cox caused the firm’s books
and records to be inaccurate.

The suspension is in effect from September 8, 2015, through December 7, 2015. (FINRA
Case #2013038830501).

Cox was registered with STERNE AGEE FINANCIAL SERVICES, INC. (CRD# 18456) – DACULA, GA from March 2010 until October 2013.

If you have suffered investment losses as a result of your broker’s or brokerage firm’s misconduct, contact the Law Offices of Place & Hanley, LLC to discuss your legal options.  The Law Offices of Place & Hanley, LLC is dedicated to helping investors nationwide.  If you have lost money as a result of your broker’s recommendations, you may be entitled to recover your investment losses.  Contact our office toll free at (866) 318-4725 for a complimentary initial consultation.

Categories: Broker Fraud, Broker Investigations, and Investor Protection.