Archive

May 9, 2016

The CFTC ordered Cunningham Commodities, LLC, based in Chicago, Illinois, and its head accountant, Salvatore Carmen Russo, to pay a penalty of $150,000 for failing to immediately report a customer's segregated account deficiency.  CFTC

May 6, 2016

Liberty Reserve founder Arthur Budovsky was sentenced to 20 years imprisonment and to pay a $500,000 fine for running a massive money laundering enterprise through his company's virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity.  According to the indictment, Liberty Reserve billed itself as the Internet’s “largest payment processor and money transfer system” and allowed people all over the world to send and receive payments using virtual currency.  But Liberty Reserve grew into a financial hub for cybercriminals around the world, trafficking the criminal proceeds of Ponzi schemes, credit card trafficking, stolen identity information and computer hacking.  DOJ

April 15, 2016

New Jersey-based Freedom Mortgage Corporation agreed to pay $113 million to resolve allegations it violated the False Claims Act by knowingly originating and underwriting single family mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements for the FHA insurance program.  DOJ

April 11, 2016

Goldman Sachs agreed to pay $5.06 billion to settle charges relating to alleged misconduct in the sale of its residential mortgage-backed securities or what the government described as "serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail."  Whistleblower Insider

April 29, 2016

Accounting firm Santos, Postal & Co. P.C. and one of its partners, Joseph Scolaro, will pay collectively about $59,000 to settle charges that they conducted deficient surprise custody examinations of SFX Financial Advisory Management Enterprises and did not adequately consider fraud risk factors.  Santos Postal was hired to conduct surprise examinations of client assets at investment advisor SFX Financial.  The SEC charged that Santos Postal performed inadequately as SFX’s president secretly stole money from accounts belonging to professional athletes.  SEC

March 30, 2016

Chung Yu Yeung (aka Louis Yeung), former vice president of Eastern Tools and Equipment Inc., a California wholesale equipment company that sold portable generators to retailers across the country, pleaded guilty to fraud charges in connection with a bank fraud scheme.  Yeung admitted that he and his co-conspirators defrauded Pasadena-based East West Bank in connection with a line of credit for Eastern Tools by misrepresenting to the bank Eastern Tools’ accounts receivable and its financial statements.  Eastern Tools ultimately defaulted causing more than $9 million in losses to the bank.  DOJ

March 25, 2016

The SEC brought fraud charges and obtained asset freezes against New Jersey fund manager John Bivona and his firms Saddle River Advisors and SRA Management Associates for marketing shares in promising pre-IPO tech companies in the Bay Area while stealing $5.7 million and diverting millions more to other improper and undisclosed uses.  The SEC alleges that Bivona used money raised through his firms to pay off earlier investors, prop up other funds, and pay family-related expenses.  He secretly steered the lion’s share of misappropriated funds to his nephew Frank Mazzola who was barred from the securities industry in a prior SEC enforcement action.  The SEC alleges that while Bivona raised more than $53 million from investors, the money he siphoned away for undisclosed uses left his firms continuously short of the cash needed to buy the shares promised to investors.  SEC

March 15, 2016

Kansas-based municipal advisor Central States Capital Markets, its CEO, and two employees will pay about $437,327 collectively to settle charges that they breached their fiduciary duties by failing to disclose a conflict of interest to a municipal client.  According to the SEC’s order, while Central States served as a municipal advisor to a client on municipal bond offerings in 2011, two of its employees, in consultation with the CEO, arranged for the offerings to be underwritten by a broker-dealer where all three worked as registered representatives.  Central States did not inform the client of its relationship to the underwriter or the financial benefit it obtained from serving in dual roles.  In three offerings, Central States received 90 percent of the underwriting fees the client city paid to the broker-dealer.  The case is the SEC’s first to enforce the fiduciary duty for municipal advisors created by the 2010 Dodd-Frank Act which required these advisors to put their municipal clients’ interests ahead of their own.  SEC

March 14, 2016

Three AIG affiliates, Royal Alliance Associates, SagePoint Financial, and FSC Securities Corporation, will pay $9.5 million to settle SEC charges of steering mutual fund clients toward more expensive share classes so the firms could collect more fees.  An SEC investigation found that the firms placed clients in share classes that charged fees for marketing and distribution despite the clients being eligible to buy shares in fund classes without those additional charges.  As a result, the firms collected approximately $2 million in extra fees.  The firms failed to disclose this conflict of interest.  The SEC’s order also alleged that the firms failed to monitor advisory accounts on a quarterly basis to prevent reverse churning.  The firms had compliance policies and procedures to ensure that fee-based advisory accounts that charged an inclusive fee for both advisory services and trading costs remained in the best interest of clients that traded infrequently, but failed to implement those policies and procedures.  SEC

March 11, 2016

The SEC charged California businessman Daniel Nase with raising money from investors through unregistered offerings of common stock in his Bakersfield, California-based company, BIC Real Estate Development Corp., and using the funds for personal expenses.  Nase tried to cover up the theft after learning of the SEC’s investigation by investing stolen assets back into the company to make it appear he was increasing his equity stake in it.  SEC