Articles Tagged with securities fraud

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On February 25, 2019, the SEC took action against against the operators of a South Florida investment fund and its principals. One principal had a felony record. The charges were filed  against Castleberry Financial Services Group LLC and its  president, T. Jonathon Turner and another officer, Norman M. Strell.

The SEC alleged that investors were defrauded  of $3.6 million.

The SEC alleged that Castleberry mis-represented to investors it had hundreds of millions invested in local  properties and businesses. High yields were offered, claiming that a large insurer, CNA and Chubb “bonded” the investments.  CNA and Chubb had no connection with Castleberry. CNA’s and Chubb’s logos were also misappropriated.

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A biotech company employee was charged today with insider trading by the SEC. The SEC alleged that the employee had foreknowledge of the withdrawal of certain products from consideration by the US Food and Drug Administration. Securities and Exchange Commission v. Joseph Frank Vacante, No. 19-civ-1616 (S.D.N.Y. filed Feb. 21, 2019)

Joseph Frank Vacante, formerly employed at Trinity Biotech, PLC agreed to pay more than $140,000 to settle the SEC’s charges.

The SEC alleged that, on September 29, 2016, Vacante learned that the FDA had recommended that Trinity withdraw two biotech drugs which Vacante identified as vital to the company. The SEC Complaint was dated September 2019.  The complaint alleged Vacante twice communicated with his broker on the same day in efforts to sell Trinity American Depository Receipts (ADRs).

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On February 7, 2019, the Securities and Exchange Commission (SEC) charged the owner of an online gaming company, Kizzang LLC, with fraudulently raising  $9 million from 50 individuals.

The SEC alleged that Robert Alexander represented  that investors would be returned 10 times capital invested and that Alexander had his own millions at stake in Kizzang, had made a $50 million charitable donation, and that he was the creator of a significant video game.

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Former Senior Attorney at Apple Attorney Caught Insider Trading

On February 14, 2019 insider trading charges were advance against the Apple lawyer responsible for supervising insider trading at that company.    The charges were brought by the SEC.

As alleged, in house compliance attorney,  Gene Daniel Levoff (who formerly acted as Apple’s global head of corporate law and corporate secretary), was privy to insider information as to Apple’s quarterly earnings announcements. Levoff had a prime position who regularly reviewed Apple’s numbers prior to public release.

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 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.

“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.

According to the Financial Institutions Regulatory Authority, a complaint was filed in 2016 against broker Hank Mark Werner of Northport, New York, charging him with securities fraud for churning the account of his customer, a 77-year old blind widow. The FINRA complaint alleged that Werner churned the widow’s accounts over a three-year period. $243,000 in commissions were charged with $184,000 in losses.

Werner had been the elderly widow’s broker and that of her deceased blind husband for 21 years. After the customer’s husband passed away, Werner aggressively traded  traded the widow’s account to generate excessive commissions for himself. Werner exercised control over each account and recommended every trade. The widow customer followed  Werner’s recommendations. Because she was blind and severely debilitated, requiring in-home care, the customer relied completely on Werner to accurately report account activity and performance.

Churning involves unauthorized trading of any account for the purpose of generating commissions for the broker’s benefit. Many other factors are considered. Expert witnesses many times are called at hearing. Some if the components are control of the account by the broker, annual turnover and the commission to equity ratio. The Law offices of Anthony M. Abraham, Esq., PC  has pressed many claims of this nature. http://www.BrokerFraud.Net.  Here is a snapshot of interesting aspects of this case: