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SEC Charges California-Based Fraudster With Selling “Insider Tips” on the Dark Web

On March 18, 2021, the Securities and Exchange Commission charged James Roland Jones with running a fraudulent online scheme to market “insider tips” on the dark web.  The dark web enables users to access the internet anonymously and is frequently used as a marketplace for illegal activity.  This is also referred to as the “black market.”

In late 2016 and 2017, Jones, utilizing the dark web, sought to acquire non-public, inside information that for his own use.  He later sought the non-public information in order to sell it.  Although Jones never acquired inside information, he attempted to deceive others into believing he had the information and that it was for sale.

Several clients paid in bitcoin and purchased the alleged tips based on the information Jones provided. The Securities and Exchange Commission charged Jones with violating anti-fraud provisions.

This case demonstrates that the SEC can and will go after securities law violators wherever they operate, including the dark web.  If you have not hired an attorney and wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

SEC Charges Investment Adviser and Others With Defrauding Over 17,000 Retail Investors

On February 4, 2021, the Securities and Exchange Commission charged three individuals and their associated companies with operating a Ponzi-like scheme that allegedly raised over $1.7 billion from securities issued by GPB Capital.  The SEC also charged GPB Capital with violating the whistleblower protection rules.

 

The SEC’s complaint alleges that David Gentile, the owner and CEO of GPB Capital, and Jeffry Schneider, the owner of GPB Capital’s placement agent Ascendant Capital, lied to investors about the source of money used to make an 8% annualized distribution payment to investors.  According to the complaint, these defendants along with Ascendant Alternative Strategies, which marketed GPB Capital’s investments, told investors that the distribution payments were paid exclusively with monies generated by GPB Capital’s portfolio companies.  As alleged, GPB Capital actually used investor money to pay portions of the annualized 8% distribution payments.  GPB Capital and Gentile with assistance from Jeffrey Lash, a former managing partner at GPB Capital, also allegedly manipulated the financial statements of certain limited partnership funds managed by GPB Capital to perpetuate the deception by giving the false appearance that the funds’ income was closer to generating sufficient income to cover the distribution payments than it actually was.

Jane Norberg, Chief of the SEC’s Office of the Whistleblower, added, “Whistleblower protections are a cornerstone of the SEC’s whistleblower program.  The charges filed today reinforce the Commission’s commitment to protecting whistleblowers from retaliation and attempts to stifle the free flow of information to the Commission about possible securities law violations.” If you wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

Alabama Securities Commission issued a Cease and Desist order against Mail-Shops and Ronald Scott

On December 1, 2020, the Alabama Securities Commission issued a Cease and Desist order against Mail-Shops and Ronald Scott.  The Commission sought to put a stop to the Respondents’ solicitation of Alabama residents to invest in a variety of sectors, including real estate, oil, coal, electricity, automotive, aviation, and manufacturing. MailShops and Scott sent mass phishing emails to Alabama residents. In the emails, Scott indicated that for more details about the projects and cash distributions, interested investors should “get in touch… ASAP For further proceedings and funding.”

As of December 2, 2020, Alabama’s registration files revealed no efforts to register either Mail-Shops or Ronald Scott.  Doing business in Alabama as an unregistered investment advisor is a violation of Alabama law.  As a result of their illegal conduct in Alabama, the Respondents were ordered to cease and desist from further violations of Alabama law.

This case illustrates how easily vulnerable adults can be exploited through simple email communications.  If you have elderly friends or relatives who may be vulnerable, please take whatever steps you can to protect them from this type of exploitation.  If you wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

The SEC Charged the CEO of Allied Energy Services, LLC with Fraud for Running a Ponzi Scheme

On July 30th, 2020, the Securities and Exchange Commission charged Clarence Dean Alford with defrauding at least 100 investors in a ponzi scheme, which he operated through Allied Energy Services, LLC (“Allied”), where he was CEO. Alford is also a former Georgia state legislator and former member of the Georgia Board of Regents. Alford sold at least $23 million worth of two types of promissory notes to at least 100 investors, claiming that the funds from one brand of note would be used to fund a waste-to-energy conversion plant in Augusta, GA, while funds from the other brand of note would be used to fund Allied’s solar program. The promissory notes were sold between January 2017 and September 2019.

Alford claimed that Allied was a robust and thriving energy company, when in reality it was struggling. In 2016, the company began providing retrofit lighting services, which became its primary source of revenue, not energy production.

Alford sent at least one investor a “Solar Business Plan”, which detailed the plan for Allied’s fake solar business. In it, Alford fraudulently claimed that Allied had partnered with major international solar companies in an effort to solicit investments.

Alford sent approximately $5.79 million of funds from the promissory notes to his personal bank accounts. He used the funds to buy a Tesla and a house in Utah, to pay off credit card bills, withdrew over $51,000 in cash, and made almost $14,000 in political contributions. He also used funds to finance his other business ventures. The scheme eventually collapsed. Allied has since ceased operations and voluntarily filed Chapter 7 bankruptcy in February 2020.

Whether one is a broker, CEO, former politician, or any other occupation, the potential for fraud is always there. If you wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

Alabama Securities Commission filed a Cease and Desist Order Against John Paul Maroney and two of his Florida companies

On June 25th, 2020, the Alabama Securities Commission filed a Cease and Desist Order against John Paul Maroney and his companies Harbor City Capital Corp. and Harbor City Digital Ventures, Inc. Based out of Melbourne, FL, Maroney advertises unrealistic returns on investments that, in fact, do not exist. The Securities Exchange Commission has no records of any of Maroney’s companies or the bonds he offers; the Alabama Securities Commission does not have any records either. Maroney is not registered as a broker or investment advisor in the State of Alabama. Maroney advertised an 18% annual return on investment, along with other fraudulent investments.

What is most surprising about this case is that despite the Cease and Desist Order, Harbor City Capital’s website is still live and soliciting investments. The website currently lists a bond titled HCCF-4.  HCCF-4 guarantees a 12% return on the one-year bond with no risk to the principal. Harbor City Capital Corp. is not listed in Sunbiz as a Florida entity.  The website states, “Pocket 12% Yield With ZERO Risk To Your Principal.”  So where are our regulators when we need them?

If you wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

 

Stockbroker Exploits Elderly WWII Veteran

On June 12, 2020, the SEC filed a Complaint alleging multiple instances of fraud against Frederick M. Stow, a Tennessee-based broker at Raymond James & Associates, Inc. The SEC alleges that Stow stole over $900,000 from one of his clients, a World War II. The elder exploitation victim was Stow’s client for nearly 40 years, electing to remain with Stow whenever Stow relocated to another firm. Between October 2015 and April 2019, Stow sold securities in his client’s IRA and subsequently forged wire transfer Letters of Authorization in order to transfer the sales proceeds into his own account. The client passed away in March 2019 at the age of 98. Following his passing, the executor of the estate repeatedly requested explanations for the suspicious wire transfers. Stow then confessed his theft to his supervisor and was terminated by Raymond James. The SEC also alleges that Stow stole $32,000 from a separate client in April 2019.

Elder exploitation of this nature is not uncommon in the financial services industry.  Numerous stockbrokers have been imprisoned as a result of their greed.  It is only because of an estate executor’s due diligence that this theft was discovered.  For ideas on how you can help your friends or relatives avoid being a victim of this type of crime, feel free to call me.

If you wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

COVID-19 PUMP AND DUMP

On June 9, 2020, the SEC filed a Complaint alleging that Jason C. Nielsen operated a “pump and dump” scheme, thereby defrauding other investors. Nielsen knowingly posted false statements on investment forums in regard to the stock of a biotechnology company, Arrayit Corporation. A “pump and dump” scheme is when an investor buys stock in a given company and subsequently lies about the company’s affairs in order to “pump” up the value of his investment, and then proceeds to “dump” his shares after their value has gone up. Nielsen allegedly made approximately $137,000 from this scheme.

Nielsen, through his posts on investment forums, proclaimed that Arrayit had developed a COVID-19 blood test and that the test had gotten emergency approval from the FDA. Neither was true. Nielsen owned about 10% of Arrayit’s common stock. His false and/or misleading claims defrauded investors. On top of this, Nielsen also allegedly utilized a tactic known as “spoofing,” where an investor places orders for large amounts of a company’s stock and then cancels them, creating the appearance of an increase in demand.

The SEC charged Nielsen with violating the antifraud provisions of the federal securities laws, and seeks permanent injunctions, civil money penalties, a penny stock bar, and disgorgement with prejudgment interest.

If you wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

SEC Awards Record Payout of Nearly $50 Million to Whistleblower

On June 4, 2020 the SEC announced a nearly $50 million whistleblower award to an individual who alerted the agency of firsthand observations of misconduct by a company that resulted in a successful enforcement action that returned a significant amount of money to harmed investors.  This is the largest amount ever awarded to one individual under the SEC’s whistleblower program.

The Securities and Exchange Commission has awarded more than $500 million to whistleblowers since the inception of the agency’s whistleblower program in 2011.   This award is the largest individual whistleblower award since the inauguration of the program.   The whistleblower program was established by Congress to incentivize whistleblowers with specific, timely and credible information about federal securities laws violations to report to the SEC.  The Commission emphasizes, that no money has been taken or withheld from harmed investors to pay whistleblower awards.  The informant’s award is based on a percentage of the money collected in fees and sanctions paid by the violators they uncovered, and if they provided the SEC with original, timely, and credible information that leads to a successful enforcement action.  Whistleblower awards can range from 10% to 30% of the money collected when the monetary sanctions exceed $1 million.

As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not discloses information that could reveal a whistleblower’s identity.   Whistleblowers have proven to be a critical tool in the enforcement arsenal to combat fraud and protect investors.  If you believe you have information of a material nature that would be helpful to the SEC’s mission, David A. Weintraub, P.A. may be able to represent you in connection with your whistleblower claim.

 

Merrill Lynch Sanctioned By FINRA

On June 4, 2020, FINRA issued a press release detailing wrongdoing in the handling of mutual funds by Merrill Lynch, Pierce, Fenner & Smith Inc and the resulting settlement.  FINRA found that Merrill Lynch did not have an adequate system for ensuring that customers received mutual fund sales charge waivers and fee rebates.  Customers were entitled to these funds through rights of reinstatement offered by mutual fund companies. Mutual fund companies often offer customers waivers on up-front sales charges when they repurchase shares of either the same fund that they invested in before, or another fund in the same family. Merrill Lynch customers paid approximately $6 million in improper sales charges and fees between April 2011 and April 2017. The firm relied on a rudimentary alert system to determine whether or not a customer was owed waivers/rebates, but it was nowhere near adequate.

The up-front sales charges which Merrill Lynch customers were improperly charged for typically go to Merrill Lynch’s brokers, who have an incentive to charge customers as much as they can. In this instance, FINRA lauded Merrill Lynch for its openness in its investigation, but this does not always happen. As a result of its violations, Merrill Lynch agreed to a censure and approximately $7.25 million in restitution plus interest.

If you have not hired an attorney and wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.

Stifel, Nicolaus & Co. to Pay Around $1.9 Million in Restitution to More than 1,700 Customers

On May 28, 2020 FINRA announced that it has ordered Stifel, Nicolaus & Co., to pay approximately $1.9 million in restitution, plus interest, to more than 1,700 customers in connection with early rollovers of Unit Investment Trusts (UITs).  FINRA also fined the firm $1.74 million for providing inaccurate information to customers related to rollover costs incurred, and for related supervisory violations.  The Letter of Acceptance states that Stifel failed to establish and maintain a supervisory system and enforce written supervisory systems that were reasonably designed to achieve compliance with FINRA’s suitability rule regarding early rollovers of UITs.

A Unit Investment Trust (UIT) is an SEC-registered investment company that offers investors shares or units in a fixed portfolio of securities in a one-time public offering.  A UIT’s maturity date is often 15 to 24 months at which point the underlying securities are sold and the resulting proceeds are paid to investors.  UITs impose a variety of upfront sales charges.  A registered representative who recommended the sale of a customer’s UIT before its maturity date and used the sale proceeds to purchase a new UIT would cause the customer to incur greater sales charges than if the customer had held the UIT until maturity.  Because of the long-term nature of UITs, their structure, and their costs, short term trading of UITs may be unsuitable.

FINRA’s investigation found that from January 2012 through December 2016, Stifel executed approximately $10.9 billion in UIT transactions – $935.2 million of which were early rollovers.  It was also uncovered that the firm’s supervisory system and procedures were not reasonably designed to supervise the suitability of those early rollovers.  As a result, Stifel failed to identify that its representatives recommended potentially unsuitable early rollovers that, collectively, may have caused customers to incur approximately $1.9 million in sales charges that they would not have incurred had they held the UITs until their maturity date.  Additionally, Stifel sent approximately 600 letters to customers that contained inaccurate information or were missing information about the costs incurred by customers in connection with early UIT rollovers or switches.

In settling this matter, Stifel neither admitted or denied the charges, but consented to the entry of FINRA’s findings.

If you have not hired an attorney and wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL  33324.  By phone: 954.693.7577 or 800.718.1422.