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Page 4 of 78

July 29, 2022

Aegis Capital Corp., and two of its former representatives, Alan Z. Appelbaum and Paul F. Gallivan will pay around $2.5 million total for making materially false and misleading statements and making unsuitable investment recommendations, namely, variable interest rate structured products. Appelbaum, Gallivan, and 14 Aegis brokers recommended these highly complex and risky products to customers with “moderate” risk tolerance, despite having investment timelines inconsistent with the VRSP maturity dates. The targeted customers’ financial needs were disregarded, as were their risk tolerance, investment objectives, age, investment experience, and liquidity needs. SEC

Tagged in: Financial and Investment Fraud, Misrepresentations, Securities Fraud,

July 28, 2022

Jaeson Birnbaum, disbarred attorney and owner of now-bankrupt litigation finance firm, Cash4Cases, will spend 3 years in prison for defrauding investors, in addition to paying over $2.6 million in restitution, and forfeiting another $2.6 million in fraud proceeds. Birnbaum offered sham “Investor Security Agreements,” allowing investors to share in recoveries from lawsuits supposedly purchased by Cash4Cases. Birnbaum netted over $3 million in investors’ funds through his fraud, misappropriated client funds for personal use, and directed his employee to falsify the company’s books and records to show already-paid-out funds as still available to be pledged as collateral to new investors. USAO SDNY

Tagged in: Accounting Fraud, Criminal Proceedings, Financial and Investment Fraud, Ponzi Schemes, Regulatory Violations, Securities Fraud,

July 15, 2022

An anonymous whistleblower was awarded $3 million based on SEC findings that the individual, who was solicited to invest in a product, expeditiously contacted the SEC to report misrepresentations regarding the product.  That report prompted the Commission to open an investigation, during which the individual provided additional assistance.  SEC

Tagged in: Financial and Investment Fraud, SEC Whistleblower Reward Program, Securities Fraud,

July 11, 2022

Attorney Shimon Rosenfeld was ordered to pay over $7 million in disgorgement and prejudgment interest and will spend 6 months in prison for defrauding real estate investors. For a period of nearly four years, from May 2014 to March 2018, Rosenfeld solicited investors for a pooled real estate investment fund whose profits would be split with the investors. Instead, Rosenfeld misappropriated the funds to trade securities in his personal brokerage account, resulting in a $6 million loss of investor funds. SEC

Tagged in: Financial and Investment Fraud, Ponzi Schemes, Securities Fraud,

June 29, 2022

UBS Financial Services Inc. has agreed to pay $25 million in connection with a complex investment strategy that it ran from 2016 to 2017.  Though it marketed and sold YES, or Yield Enhancement Strategy, to some 600 investors, UBS did not adequately inform those investors about possible risks, nor provide its financial advisors with enough training and oversight to counteract those risks.  SEC

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, Misrepresentations, Securities Fraud,

June 14, 2022

Energy Capital Partners Management LP will pay a $1 million penalty and has paid back more than $3.3 million to a private equity fund it advises, for allocating a disproportionate share of expenses to the fund, a violation of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940, and Rule 206(4)-7 and 206(4)-8. ECPM should have either disclosed the disproportionate allocation or not have allocated them in this manner. SEC

Tagged in: Securities Fraud,

June 14, 2022

Weiss Asset Management LP will pay $6.9 million for its Rule 105 violation, i.e., short selling stocks and then purchasing the same stocks in public offerings. Weiss sold short the stocks, despite the stocks being under a 5-day restricted period. Weiss regularly miscalculated the applicable restricted period and dismissed internal red flags alerting them to the potential noncompliance. SEC

Tagged in: Securities Fraud,

June 13, 2022

Charles Schwab & Co., Inc., Charles Schwab Investment Advisory, Inc., and Schwab Wealth Investment Advisory, Inc. will pay $187 million for violating the antifraud provisions of the Investment Advisers Act of 1940. Mandated disclosures for Schwab Intelligent Portfolios—Schwab’s robo-adviser product—stated that the amount of cash in the robo-adviser portfolios utilized a “disciplined portfolio construction methodology,” and would seek “optimal return[s].” Instead, Schwab swept cash from the robo-adviser portfolios to its affiliate bank, loaned it out, and kept the difference between the interest it earned on the loans and the interest it paid to the robo-adviser clients. This resulted in customers making less money while taking on the same amount of risk. SEC

Tagged in: Financial and Investment Fraud, Misrepresentations, Securities Fraud,

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