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Financial and Investment Fraud

This archive displays posts tagged as relevant to financial and investment fraud. You may also be interested in the following pages:

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October 23, 2019

Gary Frank was sentenced to 17.5 years in prison following a guilty plea on charges related to his fraudulent business scheme.  Frank claimed to run a multi-million dollar company, Legal Coverage, Ltd., through which employers could offer legal services as part of their employee benefits package.  Based on these misrepresentations -- in fact, the company had very little revenue -- Frank obtained over $30 million in loans from financial institutions, which he used to fund his own extravagant lifestyle.  Frank was also ordered to pay restitution of $33.7 million.  USAO EDPA

October 21, 2019

Devumi, LLC and owner German Calas, Jr., have agreed to a $2.5 million judgment to settle the FTC’s first ever charges against the sale of fake indicators of social media influence, such as followers, subscribers, views, and likes.  The defendants allegedly enabled customers to deceive potential clients about their social media clout by filling tens of thousands of orders for fake LinkedIn followers, Twitter followers, YouTube subscribers, and YouTube views.  Due to the defendants’ inability to pay, upon payment of $250,000, the remaining monetary judgment will be suspended.  FTC

October 10, 2019

A Maryland-based man has been sentenced to 22 years in prison for his role in a $396 million Ponzi scheme, the largest ever charged in Maryland.  Unbeknownst to hundreds of victim investors, the consumer debt portfolios they invested in through Kevin Merrill and co-conspirators Jay Ledford and Cameron Jezierski were fake, with Merrill, Ledford, and Jezierski going to great lengths to keep up the illusion.  The trio created imposter companies and bank accounts, fake documents, and invited would-be investors to tours of their Texas “office.”  By the time they were arrested in 2018, the scheme had raked in over $396 million, with another $260 million pending.  As part of his sentence, Merrill has also been ordered to pay restitution of at least $189 millionUSAO MD; SEC

October 2, 2019

Multi-level marketing company Advocare International, L.P., together with its former CEO Brian Connolly and several former Advocare distributors, have entered into a $150 million settlement with the FTC, which charged Advocare with being an unlawful pyramid scheme that pushed distributors to focus on recruiting new distributors rather than retail sales to customers.  Defendants made deceptive earnings claims, and provided others with the means and instrumentalities to do the same.  Defendants are ordered to return monies to distributors and are banned from all future multi-level marketing.  FTC

October 2, 2019

Brokerage firms BGC Financial LP and GFI Securities LLC will pay $15 million and $10 million, respectively, to the CFTC, and $7.5 million and $5 million, respectively, in penalties under New York's Martin Act based on the admitted practices of their brokers in posting sham bids and offers on foreign exchange options in emerging markets currencies referred to as EFX options.  This so-called "flying" of prices was done to create a false appearance of greater liquidity in the EFX options market. In addition, the brokers engaged in the "printing" of fake trades on EFX options, falsely representing that trades had occurred at particular levels and prices in an effort to induce follow-on trades at the same levels.  In addition to the monetary penalties, the brokerage firms have agreed to additional compliance, monitoring, and oversight.  CFTCNY

October 2, 2019

Brokerage firm Lek Securities Corp. and its CEO Sam Lek will pay almost $2 million to resolve allegations that they facilitated the manipulative trading scheme of Ukraine-based customer Avalon FA, Ltd.  Lek provided Avalon with the means to engage in "layering" and other cross-market manipulation.  Layering involves placing and canceling orders to signal inaccurate prices.  Avalon also engaged in other practices to buy and sell stocks to artificially impact options prices.  Lek Securities will pay a $1 million penalty plus $526,000 in disgorgement and interest; Sam Lek will pay a $420,000 penalty.  Defendants have admitted the facts alleged and Lek Securities has agreed to retain an independent compliance monitor.  SEC

October 1, 2019

Six financial institutions, each registered or provisionally-registered swap dealers, have been ordered to pay penalties to the CFTC for their failure properly report swap data to a swap data repository as required, and/or for their failure to adequately supervise in connection with swap data reporting.  HSBC Bank USA, N.A. will pay a $650,000 fine;  Société Générale International Limited will pay a $2.5 million fine; The Northern Trust Company will pay a $1 million fine; NatWest Markets Plc will pay  $850,000; The Bank of New York Mellon will pay $750,000, and PNC Bank, National Association will pay $300,000CFTC

October 1, 2019

RBC Capital Markets, LLC, a registered futures commission merchant and subsidiary of the Royal Bank of Canada, will pay $5 million to resolve charges by the CFTC that RBC engaged in improper, fictitious, exchange for physical wash transactions (Wash EFPs), despite an earlier consent order between RBC and the CFTC regarding wash sales and fictitious transactions.  In the present action, the CFTC also found that RBC failed to meet its supervisory obligations, resulting in its failure to detect at least 385 Wash EFPs.  CFTC

October 1, 2019

Matthew D. Webb of Houston, Texas, and his employer, broker Classic Energy LLC, will pay over $1.5 million to resolve charges that Webb used material, nonpublic information from Classic customers to make trades in Webb's proprietary trading account.  In addition, Webb failed to disclose to Classic customers that he was acting not only as a broker, but also as a trading counterparty.  Classic Energy was also found to have multiple supervision and recordkeeping failures.  CFTC
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