Archive

January 30, 2018

The Securities and Exchange Commission obtained a court order halting an allegedly fraudulent initial coin offering (ICO) that targeted retail investors to fund what it claimed to be the world’s first “decentralized bank.” According to the SEC's complaint, filed in federal district court in Dallas on Jan. 25 and unsealed late yesterday, Dallas-based AriseBank used social media, a celebrity endorsement, and other wide dissemination tactics to raise what it claims to be $600 million of its $1 billion goal in just two months. AriseBank and its co-founders Jared Rice Sr. and Stanley Ford allegedly offered and sold unregistered investments in their purported "AriseCoin" cryptocurrency by depicting AriseBank as a first-of-its-kind decentralized bank offering a variety of consumer-facing banking products and services using more than 700 different virtual currencies.  AriseBank’s sales pitch claimed that it developed an algorithmic trading application that automatically trades in various cryptocurrencies. SEC

January 18, 2018

UK-based financial services company HSBC Holdings plc agreed to pay a $63.1 million criminal penalty and $38.4 million in disgorgement and restitution, for a total payout of roughly $100 million, to resolve charges that it engaged in a scheme to defraud two bank clients through a multi-million dollar scheme commonly referred to as “front-running.” DOJ

December 21, 2017

The Securities and Exchange Commission today announced charges and an asset freeze against a group of unregistered funds and their owner who allegedly bilked thousands of retail investors, many of them seniors, in a $1.2 billion Ponzi scheme. SEC investigators filed this action to prevent further dissipation of investor assets after obtaining court orders in September and November in subpoena enforcement actions that forced the unregistered companies to open their books. According to the SEC’s complaint, unsealed today in federal court in Miami, Florida, Robert H. Shapiro and a group of unregistered investment companies called the Woodbridge Group of Companies LLC formerly headquartered in Boca Raton, Florida, defrauded more than 8,400 investors in unregistered Woodbridge funds. SEC

December 19, 2017

The Securities and Exchange Commission today charged a Wall Street stockbroker with illegally accepting more than $1 million in undisclosed kickbacks for giving certain customers preferential access to lucrative IPOs, enabling them to reap major trading profits in the secondary markets. The SEC alleges that Brian Hirsch subverted allocation policies and procedures at two brokerage firms where he worked on the wealth syndicate desk, making long-running arrangements with certain customers to give them larger allocations of coveted public offerings being marketed by the firms.  In most instances, the customers sold their stock into the market as soon as possible to turn a substantial profit at the expense of the firms’ other brokerage customers and the issuers’ interests in raising capital from long-term investors. SEC

December 11, 2017

The Securities and Exchange Commission today charged a former day trader with making more than $1 million in illegal insider trading profits as part of a ring that allegedly stole confidential information from investment banks and clients so they could trade in advance of secondary stock offerings. The SEC alleges that Joseph Spera schemed with former colleagues, posing as legitimate portfolio managers to induce investment bankers to bring them ''over the wall'' and share nonpublic details about upcoming secondary offerings while agreeing not to disclose the information to others or trade before the offerings were announced.  Spera and the others involved allegedly violated those agreements and tipped each other with confidential information that enabled them to trade for a profit ahead of public announcements. SEC

December 6, 2017

The Securities and Exchange Commission today continued its crackdown on brokers who defraud customers, charging two New York-based brokers with making unsuitable trades that were costly for customers and lucrative for the brokers.  The case follows similar charges of excessive trading by brokers brought in January, April, and September. The SEC’s complaint, filed in federal court in Manhattan, alleges that Zachary S. Berkey of Centerreach, New York, and Daniel T. Fischer of Greenwich, Connecticut, conducted in-and-out trading that was almost certain to lose money for customers while yielding commissions for themselves.  According to the complaint, 10 customers of Four Points Capital Partners LLC, where Berkey and Fischer previously worked, lost a total of $573,867 while Berkey and Fischer received approximately $106,000 and $175,000, respectively, in commissions. SEC

December 4, 2017

The Securities and Exchange Commission announced it obtained an emergency asset freeze to halt a fast-moving Initial Coin Offering (ICO) fraud that raised up to $15 million from thousands of investors since August by falsely promising a 13-fold profit in less than a month. The SEC filed charges against a recidivist Quebec securities law violator, Dominic Lacroix, and his company, PlexCorps. The Commission's complaint, filed in federal court in Brooklyn, New York, alleges that Lacroix and PlexCorps marketed and sold securities called PlexCoin on the internet to investors in the U.S. and elsewhere, claiming that investments in PlexCoin would yield a 1,354 percent profit in less than 29 days. The SEC also charged Lacroix's partner, Sabrina Paradis-Royer, in connection with the scheme. The charges are the first filed by the SEC's new Cyber Unit. SEC  The case was resolved in October, 2019.

January 3rd, 2018

New York announced that 49 states, the District of Columbia and 45 state mortgage regulators reached a $45 million settlement with New Jersey-based mortgage lender and servicer PHH Mortgage Corporation. The settlement resolves allegations that PHH, the nation’s ninth largest non-bank residential mortgage servicer, improperly serviced mortgage loans from January 1, 2009 through December 31, 2012. The agreement requires PHH to adhere to comprehensive mortgage servicing standards, conduct audits, and provide audit results to a committee of states. The settlement does not release PHH from liability for conduct that occurred beginning in 2013. NY, FL For an earlier federal settlement, see here.

December 22nd, 2017

California announced a $125 million settlement with the Royal Bank of Scotland (RBS), an international financial conglomerate, over misrepresentations about residential mortgage-backed securities sold to California’s public employee and teacher pension funds, CalPERS and CalSTRS, respectively. Mortgage-backed securities are complex investments which include thousands of mortgage loans of potentially varying quality, where the buyer typically relies on assurances that the loans have been carefully screened and are not too risky. An investigation conducted by the Attorney General’s Office found that the descriptions of these mortgage-backed securities to investors failed to accurately disclose the true characteristics of many of the underlying mortgages, and that due diligence to remove poor quality loans from the investments was not adequately performed. RBS was aware of the misrepresentations but failed to correct them. This resulted in millions in losses to CalPERS and CalSTRS. CA

December 20, 2017

The Commodity Futures Trading Commission (CFTC) obtained three related Consent Orders of Permanent Injunction against Defendants Mintco LLC of Delray Beach, Florida, and its owners Stuart Rubinof Fort Lauderdale, Florida, and Richard Q. Zimmerman of Wellington Florida, finding that all Defendants engaged in illegal off-exchange precious metals transactions and further that Rubin and Mintco engaged in fraud with respect to these same precious metals transactions. CFTC