Financial and Investment Fraud

October 17, 2018

Two individuals formerly employed by Deutsche Bank, Matthew Connolly and Gavin Campbell Black, have been convicted of conspiracy and wire fraud for their roles in the manipulation of the London Interbank Offered Rate (LIBOR).  Connolly was the supervisor of Deutsche Bank’s Pool Trading Desk in New York; Black was a derivatives trader in London. In 2015, Deutsche Bank paid a $775 million fine for its role in the LIBOR manipulation scheme.  DOJ

October 17, 2018

A former financial advisor turned online sportswear retailer has been convicted of numerous counts of fraud for running a $20 million Ponzi scheme. Between 2014 and 2017, Dawn Bennett allegedly convinced investors to invest in her company, DJB Holdings, by misrepresenting its financial health and the investment risks. With the money she obtained from 46 investors, many of them elderly, Bennett paid legal expenses and repaid earlier investors. After the fraud was discovered, Bennett allegedly arranged to have priests in India perform protective spells on her behalf. Unfortunately for her, the spells did not work as intended, and she now faces a lifetime in prison. USAO MD

October 17, 2018

An investment advisor who owned and operated an investment firm called CM Capital Management LLC has plead guilty to running a Ponzi scheme that defrauded 53 investors of $6.1 million over the course of 13 years. In at least 13 of those cases, the investors with Edward Lee Moody, Jr.'s firm were elderly people who had entrusted him with their life savings. Instead of investing the funds on his clients' behalf, Moody used them to buy securities for himself, as well as buy a home, make car payments, and travel. To cover his tracks, he paid earlier investors using funds obtained from newer investors and created falsified statements that showed earned returns. Yet the reality was that in most of those cases, Moody hadn't even opened brokerage accounts for his clients, let alone buy securities on their behalf. He now faces a sentence of decades in prison at his sentencing in February. USAO EDVA

October 16, 2018

Nomura Holding America Inc. and its affiliates have agreed to pay a civil penalty of $480 million to settle claims that it knowingly misled investors of its residential mortgage-backed securities (RMBS) in the years leading up to the financial crisis of 2008. From 2006 to 2007, Nomura allegedly marketed falsely to investors that its due diligence process was "industry leading," despite knowing that many of the loans it sold did not comply with regulations, or had not even gone through their due diligence process. Among the investors defrauded were Fannie Mae, Freddie Mac, retirement funds, and university endowments. USAO EDNY

October 16, 2018

Sudhakar Reddy Bonthu, a former manager at Equifax, was sentenced to 8 months of home confinement and fined $50,000 for insider trading related to Equifax's massive data breach in 2017. As a member of a team tasked with quickly developing an online user interface for 100 million possible victims of a data breach at an unnamed company, Bonthu quickly guessed that the company in question was the one he worked for. In violation of company policy as well as federal law, Bonthu then allegedly bought a large quantity of Equifax stock, specifically put options, which allowed him to profit if the value plummeted within a two week period. Six days later, Equifax announced the breach and its stock value plummeted, netting Bonthu more than $75,000 in fraudulently gained profits. USAO NDGA

October 12, 2018

Former commodity traders Yuchun "Bruce" Mao, Kamaldeep Gandhi, and Krishna Mohan have been charged with commodities fraud and spoofing in a scheme that cost investors on the Chicago Mercantile Exchange (CME) and Chicago Board of Trade (CBOT) over $60 million in losses. Over the course of two years, the three allegedly placed thousands of orders and canceled them before execution in order to drive up demand. When defendant Gandhi moved onto another firm, he allegedly continued placing spoof orders. Along with defendant Mohan, Gandhi has agreed to plead guilty to the charges; no word yet on how Mao will plead. CFTC; DOJ; USAO SDTX

October 11, 2018

A Washington couple will serve time in federal prison for defrauding investors of $12.7 million over the course of 7 years. Delving into their ties to various religious organization, Laurence Hong and Grace Hong convinced more than 55 clients to invest their life savings in a hedge fund that they called Pishon Holdings, by claiming that Laurence had experience investing vast sums of money on behalf of wealthy families and Grace had experience working for an investment firm. In fact, Laurence, also known as Sung Hong, had just completed a nearly 3 year sentence for investment fraud when he began the new scheme. With the funds they stole from investors, the couple paid for rent on a house, bought a yacht and multiple luxury vehicles (including an Aston Martin, BMW, Lamborghini, and Maserati), and went on extravagant family vacations to the Bahamas and Beverly Hills. Laurence will now serve another 15 years in prison, and Grace, also known as Hyun Joo Hong, will serve 6 years. They have also been ordered to pay restitution of more than $12.7 million. USAO WDWA

October 9, 2018

HSBC will pay a $765 million civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) to settle claims that it misrepresented the quality of assets in residential mortgage-backed securities (RMBS) that HSBC packaged and sold to investors between 2005 and 2007.  HSBC was also alleged to have misrepresented the due diligence procedures it followed in reviewing loans for securitization, claiming to follow more stringent procedures than it actually did follow.  USAO Colorado.

October 9, 2018

Darrell Smith, who had worked as an investment advisor in Northern Iowa, was sentenced to nearly 15 years in prison following a guilty plea for charges arising from his fraudulent  diversion of funds from his clients to bio-energy and ethanol companies that he owned and/or controlled.  Smith stole over $2.4 million from client accounts, and has been ordered to pay restitution of over $ 1 million.   DOJ

October 3, 2018

Nippon Chemi-Con, a manufacturer of  electrolytic capacitors, was sentenced to pay a $60 million criminal fine for its role in a price-fixing conspiracy. The company pleaded guilty to conspiring with others to suppress and eliminate competition for electrolytic capacitors from at least 2001 to 2014.  DOJ