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On 28 May 2019, the SEC (The Securities and Exchange Commission) charged investment adviser Stephen Brandon Anderson with fraud. The specific fraud was overcharging of advisory fees to his clients.

Anderson owned River Source Wealth Management, LLC, a registered investment adviser in North Carolina. River Source’s primary revenue was customer advisory fees. Customer agreements provided that those fees would be based on each customer’s assets under management. River Source is now out of business.

According to the SEC, in 2015 and 2016, Anderson overcharged his clients. The amounts were about 40% more than the agreed fees. Anderson also misled his clients about the reason he transferred their assets from River Source’s asset custodian, falsely stating that it was his decision when the asset custodian ended the relationship with River Source after noting irregular billing practices.

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On May 3, 2019 FINRA (The Financial Industry Regulatory Authority) published a Notice and Warning to member firms concerning fraudulent imposter broker websites, designed to fool investors into transmitting funds to thieves.

Anthony M. Abraham, Esq., PC has been involved in several cases in which impostor Websites were used to steal entire IRA accounts. In one case, an investor from Perth, Australia, called that he wired the entire balance of his retirement account to a broker in Hong Kong, who promised half price shares in the then new Alibaba IPO. The website was a fake; so were investment advisor internet listings for a purported “Investment Advisor” in New York State (the reason we were called in NYS). All funds were lost; the case could not ne pursued in the USA when the money was wired into Hong Kong, never to be seen again. The investor was wiped out.

FINRA therefore issued a Warning Notice to Member Firms.

Three penny-stock companies and their CEO – Cherubim Interests, Inc. (CHIT), PDX Partners, Inc. (PDXP), Victura Construction Group, Inc. (VICT), and Patrick Jevon Johnson  were the subject of an SEC action to enforce  subpoenas this week. SEC v. v. Cherubim Interests, Inc., PDX Partners, Inc., Victura Construction Group, Inc., and Patrick Jevon Johnson, No. 2:18-mc-00175 (C.D. Cal. filed December 21, 2018)

According to the SEC’s application as described in Litigation Release 24380 dated 26 December 2018,  on December 21, 2018 The SEC announced it sought enforcement of its subpoenas in the   U.S. District Court for the Central District of California.

The subject of the investigation is to determine whether individuals or entities engaged in a potential pump-and-dump scheme. The securities implicated were CHIT, PDXP, and VICT.

The Associated Press reported a binary options scam involving 4 Israeli women. The scam was multimillion-dollars in amplitude which resulted in Federal charges in Maryland against four women who worked for Israeli company. The FBI affidavit stated that over $99 million may have been scammed in one year alone.

The scam, of course, commenced with a sales pitch and script: You will succeed in “95% of your trades” if you hand over your money. According to an FBI Affidavit, the saleswomen stated: “If you win, I win.”

The Binary Options scam, of course, was securities fraud under Section 10 of the Securities Exchange Act of 1934.http://www.BrokerFraud.Net

In a release from the U.S. Attorney’s Office in New York, a New York Real Estate Developer Michael D’Alessio pled guilty in a federal court to master minding a real estate fraud involving luxury developments, The projects were located variously in Manhattan, Westchester and the Hamptons. The Developer then lied on Federal Bankruptcy filings.

$58 Million was collected in the Ponzi. The Ponzi involved the sale of interests in Limited Liability Companies, supposedly involved in real estate development, to victim investors. A Ponzi scheme is a plan to collect moneys from unsuspecting investors, stealing a portion of the funds, then returning alleged high rates of return to earlier investors using the funds from later investors. Investors are almost always promised a fictitious above market rate of return. The most recent “huge” Ponzi was the Bernard L. Madoff Securities LLC Ponzi.http://www.BrokerFraud.Net. That one involved a gross amount of $65 Billion, but with approximately $20 billion of initial investors funds being involved.

The Release and related court documents stated that D’Alessio served as the president of a real estate development firm involved with residential and commercial projects.

The Financial Institutions Regulatory Authority (FINRA) has ejected broker Mark Kaplan from the securities industry. Kaplan was found to have churned the account of a 93 year old client.

According to the Letter of Acceptance, Waiver and Consent agreed to by Kaplan, the 93 year old was stricken with dementia.

The churning occurred over  4 years. $723,000 in trading losses occurred. Kaplan reportedly generated a like amount of commissions and mark ups for himself and his employer, Vanderbilt Securities.

On December 19, 2018, the SEC announced additional charges against an additional 13 individuals and 10 companies for unlawfully selling securities of Woodbridge Group of Companies LLC to retail investors.

Woodbridge collapsed into bankruptcy in December 2017. The SEC previously  charged the owner, the company and others of operating a $1.2 billion Ponzi scheme. Top sales agents were also accused.

The supplemental defendants, all 13, of selling more than $350 million of unregistered securities to about 4,400 investors. The defendants told the purchasers that the Notes were “safe” Investments.

“Churning” of a brokerage account occurs when a stock broker buys and sells stocks to generate commissions for himself without regard to the interests of the customer. It is the equivalent of theft.

In January 2018 a FINRA panel has awarded an investor the entire amount of the investor’s claim, $1.67 million in compensatory and punitive damages against her broker.

The specific legal claims were churning, unauthorized trading, unsuitable trading, breach of fiduciary duty and failure to supervise.

December 25, 2018

According to The Financial Industry Regulatory Authority (FINRA) former advisor Scott Kozak (Kozak). has been accused by his former firm and barred by FINRA over unapproved securities.  Kozak has four customer complaints on his record.

The charge was “selling away” securities, not approved by the broker Kozak was affiliated with. The activity occurred between July 2011 and March 2017. Kozak was associated previously with Cetera Advisors LLC (Cetera) in Highlands Ranch, Colorado.

A Ponzi scheme  is a financial scam where early investors are paid returns with money from later investors rather than legitimate investment returns. A big time Ponzi scheme occurred in Fla. recently. The most recent “huge Ponzi” was Bernard L. Madoff Securities, LLC, involving as much as $65 Billion. Well, this one was $1.2 Billion which is still bad enough.

A Villages, Florida, resident and four companies were charged in an enormous Ponzi scheme by the SEC for unlawfully selling securities of Woodbridge Group of Companies LLC to unsuspecting clients. The SEC previously charged the now bankrupt company, Knowles Systems, Inc., its principal and others with operating a  $1.2 billion Ponzi scheme.

One defendant is Lynette M. Robbins, a cosmetologist who lived with Theodore F. Leutz at 731 Evans Way in the Villages. The Wall Street Journal reported that Knowles Systems Inc. and Robbins, its chief executive and owner, was the highest earning agent for Woodbridge. A SEC report said she received at least $8.1 million in commissions. Other Florida-based defendants sold more than $243 million of its unregistered securities to about 1,600 retail investors.