Securities Arbitration Lawyers Blog

FINRA Suspends Registered Individuals for Violations of FINRA Rules – 3

December 30, 2014 | Silver Law Group

According to FINRA Disciplinary actions for November, 2014, the following individuals were suspended from FINRA for failing to comply with a FINRA arbitration award or settlement agreement pursuant to FINRA rules:

NAME	FORMER EMPLOYERS
Niyukt Raghu Bhasin	NSM Securities, Inc.
Niyukt Raghu Bhasin	Max International Broker/Dealer Corp.
William Dean Chapman, Jr.	Alexander Capital Advisers
Ronald Moschetta	Todd and Company, Inc.
Ronald Moschetta	Strasbourger Pearson Tulcin Wolff Inc.
Arthur James Penna	Eagle One Investments, LLC
Arthur James Penna	ING Financial Partners, Inc.
Wayne Timothy Roys	First National Capital Markets
Wayne Timothy Roys	Key Investment Services LLC
Matthew Albert Ryer	Avenir Financial Group
Matthew Albert Ryer	Blackwall Capital Markets, Inc.
Matthew A. Tarrance	Wells Fargo Advisors, LLC
Matthew A. Tarrance	Merrill Lynch, Pierce, Fenner & Smith Inc.

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Commodity Trader Paul Greenwood Sentenced to a Decade in Federal Prison for Billion-Dollar Investment Scam

December 26, 2014 | Silver Law Group

The U.S. Commodity Futures Trading Commission (CFTC) has announced that New Yorker Paul Greenwood, who operated a billion dollar investment scam where he misappropriated at least $500 million from investors, was sentenced to 10 years in federal prison for charges related to his participation in the scam.

The criminal charges arose from Greenwood’s illegal solicitation and theft of investors’ money. According to CFTC findings, from at least 1996 to 2009, Greenwood and a co-Defendant solicited more than $7.6 billion from institutional investors, including charitable and university foundations and pension and retirement plans. The Defendants defrauded victims by falsely depicting that all investor funds would be employed in a single investment strategy that consisted of index arbitrage. However, investors money was transferred to another entity from which Greenwood and the co-Defendant stole funds.

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers routinely handle NFA arbitrations and CFTC claims. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases are handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

FINRA bars Aegis Capital Corp Broker Malcom Segal from Securities Industry Over Allegations of Outside Business Activities

December 26, 2014 | Silver Law Group

The Financial Industry Regulatory Authority (FINRA) recently barred former Aegis Capital Corp.(Aegis) broker Malcom Segal (Segal) alleging that Segal may have engaged in unauthorized transfers of funds from customer accounts to an outside business activity (a/k/a “selling away“).

Segal was a broker for Aegis from 2011 until July 2014 when he was terminated by Aegis for failing to cooperate with an internal investigation into a customer complaint alleging he made unauthorized wire transfers from a customer’s account. Segal operated from Boynton Beach, Florida and Langhorne, Pennsylvania.

Aegis appears to be distancing itself from Mr. Segal by alleging he was not operating with Aegis’ permission. Frequently referred to as selling away, firms may still be liable for a broker’s actions because it has a duty to properly monitor and supervise its employees.

Federal Judge Refuses to Dismiss Clearing Firm Claims against Pershing

December 26, 2014 | Silver Law Group

A Federal Judge has denied Pershing LLC’s request to dismiss all claims against it for serving as the clearing firm in Allen Stanford’s multi-billion dollar Ponzi scheme. According to the Complaint, Pershing allegedly aided the scheme perpetrated through Stanford Group Co. U.S. and the Judge held that “Pershing’s role as a clearing broker is no impediment to imposing liability. … Plaintiffs make a number of allegations that, when viewed in a light most favorable to plaintiffs, support a reasonable inference that Pershing knew of the underlying fiduciary breaches.” The court found that the plaintiffs sufficiently pled substantial assistance to Stanford and participation in breach of fiduciary duty.

The Plaintiffs allege as clearing broker for the Stanford businesses between December 2005 and December 2008, Pershing was integral to the fraud, completing the sale of at least $500 million of the bogus investments while holding all of the cash and securities of Stanford customer. According to the Complaint, Pershing ignored obvious red flags in the way Stanford conducted business, including the offshore transfers of funds and high salaries Stanford paid brokers, in favor of continuing the lucrative relationship. Despite internal concerns about the validity of Stanford’s business and abundant red flags, Pershing held off from filing a suspicious activity report with regulators and continued to participate in the purchase and sale of the dubious investments, the complaint claims.

This is an important court decision for any customer considering pursuing claims against a clearing broker. In many instances, clearing brokers provide all back office support for small or poorly capitalized broker-dealers. Although clearing firms frequently try to get claims against them dismissed claiming they only performed ministerial tasks, the reality is the clearing firms offer substantial assistance to the introducing firms including the extension of margin or other financing arrangements. As the Pershing case highlights, clearing firms are also in a position to see red flags of misconduct or aid and abet the misconduct of the introducing firm.

SEC Charges Boiler Room with Being a Fraud Targeting Seniors

December 22, 2014 | Silver Law Group

The Securities and Exchange Commission alleged New York-based Premier Links, Inc., its former president, and two cold callers formed a fraudulent boiler room scheme targeting retirees and elderly to invest in speculative or high risk companies with limited or no real chance of making a profit.

The SEC alleges that Dwayne Malloy, Chris Damon, and Theirry Ruffin victimized vulnerable older investors using investors’ money for their own personal gain. Premier Links Inc. cold called investors using high-pressure sales tactics to convince seniors to invest in companies which would soon have initial public offerings (IPOs). They never disclosed to the investors that only a small fraction of the money would be transmitted to the promoted companies, and Premier Links diverted investor funds to other entities controlled by the sales representatives or other associates for their own use and benefit.

Premier Links, Malloy, Damon, and Ruffin were never registered with FINRA or as stockbrokers and fraudulently obtained over $8 million from more than 300 victims across the USA by building a relationship of purported trust and confidence with them. The SEC alleges that the defendants rarely even invested the money in the companies they were pitching.

GL Capital Partners Chief Executive Officer Charged with Securities Fraud

December 22, 2014 | Silver Law Group

Daniel Thibeault, chief executive of GL Capital Partners, a brokerage firm which specialized in alternative investments, was arrested on securities fraud charges after the FBI accused him of a fraudulent scheme to divert some $12.6 million from a fund he was overseeing.

Mr. Thibeault allegedly took out fictitious loans to gain access to money in an alternative mutual fund, known as the Beyond Income Fund. Mr. Thibeault co-managed the fund, which invested in consumer debt. Alternative investments are frequently investments which are not directly tied to a stock or bond index.

Over $35 million dollars of loans had been issued from the fund. Mr. Thibeault allegedly took over $12 million dollars through an intermediary. The money from the loans made through the intermediary, Taft Financial Services, did not go to individual borrowers, however, but to a GL-controlled bank account, according to the FBI.

FINRA Fines 10 Firms $43.5 Million for Conflicts of Interest by Research Analysts in Advance of an IPO

December 17, 2014 | Silver Law Group

The Financial Industry Regulatory Authority (FINRA) fined 10 brokerage firms a total of $43.5 million for allowing their analysts to solicit investment banking business and for offering favorable research coverage in connection with the 2010 IPO of Toys R Us.

Firms and fines:

Barclays Capital	$5 million
Citigroup Global Market	$5 million
Credit Suisse	$5 million
Goldman Sachs	$5 million
JP Morgan Sec	$5 million
Deutsche Bank	$4 million
Merrill Lynch	$4 million
Morgan Stanley	$4 million
Wells Fargo	$4 million
Needham & Co.	$2.5 million

For the complete FINRA Press Release, click here. These allegations are remarkably reminiscent of claims investors made against FINRA firms relating to the collapse of technology stocks in 2000 including allegations that FINRA firms used its research analysts as cheerleaders for its investment banking departments publishing biased research to help boost IPO’s. A decade later, it does not appear that much has changed on Wall Street.

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Former LPL Broker Travis Wetzel Pleads Guilty to Defrauding an Elderly Client

December 8, 2014 | Silver Law Group

Travis Wetzel of Frederick, Maryland has pleaded guilty to wire fraud relating to a fraudulent scheme to steal over 1.2 million dollars from an elderly client’s annuity account.

According to the government press release, Wetzel processed financial distribution documents for his investment advisory firm located in Rockville, Maryland. According to his plea agreement, from July 2010 to September 2012, Wetzel took a total of approximately $1,282,224 from an annuity account of an elderly client without the client’s knowledge, and used the money for his personal benefit. Wetzel knew that the client was elderly, whose age and physical condition would facilitate repeatedly taking money from the client’s account. Wetzel also laundered some of the money he took by transferring the money to other bank accounts he controlled.

We are currently involved in multiple cases against brokerage firms for mismanagement of elderly investors’ accounts and/or improper conflicts of interest between the financial advisor and the customer. We routinely work closely with estate planning attorneys to help resolve disputes between family members regarding the management of an elderly family member’s financial affairs and we are frequently consulted regarding the improper sale of securities or mismanagement of the portfolio by a fiduciary, trustee or other trusted advisor.

Two Florida Businessmen Plead Guilty to a $20 Million Dollar Ponzi Scheme

December 8, 2014 | Silver Law Group

Donald Ray Babb and Ralph Ruth each face a maximum 20 years in federal prison after pleading guilty to operating a $20 million dollar Ponzi scheme.

The scheme lasted from June 2006 through the end of 2013 primarily targeting older investors including several government workers costing many investors their life savings after suffering a total loss of their investments. The victims’ money was primarily used to pay earlier investors and to purchase real estate and luxury items for the Ponzi schemers.

According to news reports, between June 2006 and December 2013, Babb and Ruth orchestrated a scheme in Brevard County that defrauded approximately 180 investors out of almost 20 million dollars. Doing business as Southeast Mutual Insurance and Investment LLC, Capstar Industries LLC, and First Merchant Capital LLC, Babb and Ruth falsely represented their businesses as licensed financial institutions whose deposits were insured by the Federal Deposit Insurance Corp. Many investors thought they were buying bank products such as Certificates of Deposits and savings accounts. Ponzi schemes targeting elderly investors are on the rise. In the instant case, some investors were in their 80’s and were solely looking for preservation of capital. Many elderly investors are being defrauded in Ponzi schemes which are promoted by offering investment products which offer a high rate of return without taking any stock market risk.

Silver Law Group is Investigating NSM Securities, Inc.

December 3, 2014 | Silver Law Group

NSM Securities, Inc. (CRD #134357, West Palm Beach, Florida) and Niyukt Raghu Bhasin (CRD #2282048, Wellington, Florida) submitted an Offer of Settlement to FINRA in which NSM Securities (“NSM”) was expelled from FINRA membership. Bhasin was barred from association with any FINRA member in any capacity. NSM and Bhasin consented to the FINRA sanctions and that the firm, acting through and at the direction of its founder, owner, President and Chief Executive Officer (CEO) Bhasin, derived most of its revenue from actively and aggressively trading stocks in the commission-based accounts of its retail customers. This practice is frequently referred to as churning. Bhasin allegedly put his firm’s profits over the duties owed to its customers and chose not to enforce a supervisory system effective for the firm’s business. NSM, through Bhasin, failed to establish, maintain and enforce a system, including written supervisory procedures (WSPs), to supervise its core activity, an active and aggressive investment strategy. The firm, through Bhasin, failed to monitor for, detect and prevent churning, excessive trading, related violations of Regulation T, and unsuitable investment recommendations, and failed to adequately review e-mail, adequately handle customer complaints or place questionable brokers who were the subjects of multiple FINRA arbitrations or customer complaints and arbitrations on heightened supervision.

FINRA also stated that in implementing Bhasin’s active and aggressive trading strategy, and in order to generate commissions, the firm committed multiple margin violations and the related FINRA rules governing the extension of credit or margin. Specifically, the firm, acting through its brokers, made a practice of allowing customers to buy securities in cash accounts where the cost to buy the securities was met by the sale of the same securities, known as free-riding. All of these actions ultimately led to an environment which allowed brokers to churn customer accounts to make a profit for the firm. NSM specifically targeted Indian investors preying on sharing cultural similarities. This is frequently referred to as affinity fraud.

FINRA also found that the firm, through Bhasin, failed to institute adequate procedures for cold-calling prospective customers. As a result, the firm, through its brokers and other representatives, initiated telephone solicitations to persons whose numbers were on the firm’s do-not-call list and/or the national do-not-call list. (FINRA Case #2011027667402)