Regulatory Violations

June 30, 2017

The Securities and Exchange Commission today filed fraud charges against the clandestine founder of a purported Bitcoin platform and a chain of co-working spaces located in former bars and restaurants, alleging that he bilked investors in both companies while hiding his connection given his checkered past with regulators in the U.K.  The SEC alleges that Renwick Haddow, a U.K. citizen living in New York, created a broker-dealer and did not register the firm with the SEC as required under the federal securities laws.  Haddow allegedly used sales representatives to cold call potential investors and sell securities in Bitcoin Store Inc. and Bar Works Inc. According to the SEC’s complaint, offering materials presented to investors in both companies touted the backgrounds of senior executives who do not appear to exist.  The materials also misrepresented other key facts about both companies’ operations.  Haddow allegedly diverted more than 80 percent of the in funds raised by the broker-dealer for the Bitcoin Store, and sent more than $4 million from the Bar Works bank accounts to one or more accounts in Mauritius and $1 million to one or more accounts in Morocco. SEC

June 22, 2017

The Securities and Exchange Commission today announced additional charges in an enforcement investigation involving the improper handling of American Depositary Receipts (ADRs) by a Wall Street firm’s securities lending desk. The SEC’s order finds supervisory failures by Anthony Portelli, a former managing director and head of operations at broker-dealer ITG Inc.  Portelli supervised ITG’s securities lending operations and was responsible for the firm’s compliance with “pre-release agreements” for ADR transactions.  ADRs are U.S. securities that represent foreign shares of a foreign company.  Before obtaining a “pre-released ADR” to lend to a customer, brokers like ITG must own, or determine that a customer owns, the number of foreign shares that corresponds to the number of shares the ADR represents.  Under Portelli’s watch, personnel on ITG’s securities lending desk failed to take reasonable steps to determine whether the proper amounts of foreign shares were owned and held by ITG’s customers.  This failure opened up the possibility that the ADRs could be used improperly for short selling or dividend arbitrage. SEC

June 5, 2017

The Securities and Exchange Commission today charged  a Salt Lake City-based brokerage firm with securities law violations related to its alleged practice of clearing transactions for microcap stocks that were used in manipulative schemes to harm investors. To help detect potential securities law and money laundering violations, broker-dealers are required to file Suspicious Activity Reports (SARs) that describe suspicious transactions that take place through their firms.  The SEC’s complaint alleges that Alpine Securities Corporation routinely and systematically failed to file SARs for stock transactions that it flagged as suspicious.  When it did file SARs, Alpine Securities allegedly frequently omitted the very information that formed the bases for Alpine knowing, suspecting, or having reason to suspect that a transaction was suspicious.  As noted in the complaint, guidance for preparing SARs from the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) clearly states that “[e]xplaining why the transaction is suspicious is critical.” SEC

July 20, 2017

The U.S. Commodity Futures Trading Commission (CFTC) announced today the settling of charges against Respondents Arthur Toole IIIof Atlanta, Georgia, and his companies, Billionaire Investor Group (BIG), a Texas limited liability company, The Toole Group Inc. (Toole Group), a Texas corporation, and Catalyst Traders LLC (Catalyst), a Georgia limited liability company, for misappropriating commodity pool funds, fraudulent misrepresentations, commingling pool funds, and acting as an unregistered commodity pool operator. The CFTC Order finds that from in or about February 2011 through at least January 2016, Toole incorporated his companies in Texas and Georgia, all of which operated as separate, consecutive commodity pools and which primarily traded Chicago Mercantile Exchange Euro FX futures and E-Mini Dow futures contracts. The Order further finds that Toole solicited over $375,000 from pool participants for the three commodity pools and misappropriated over $244,000 from the pools for personal and non-trading expenses. Pool participants suffered net losses amounting to $293,141, according to the Order. The Order also finds that Toole misrepresented trading results and the pools’ assets under management and commingled funds from all three pools with non-pool property. CFTC

July 18, 2017

The Commodity Futures Trading Commission (CFTC) today announced that a federal district court has unsealed a civil CFTC Complaint with the Middle District of Florida on July 10, 2017, charging Jason B. Scharf of Valley Village, California, a worldwide web of companies he controlled, including CIT Investments LLC, a Nevada limited liability corporation; Brevspand EOOD, a Bulgarian business entity; CIT Investments Ltd., a Marshall Islands business entity; CIT Investments Ltd., an Anguillan business entity; and A & J Media Partners, Inc., a California corporation, together with affiliate marketers Michael Shah and his company Zilmil, Inc., both of Jacksonville, Florida, with unlawfully soliciting and accepting more than $16 million in connection with illegal binary options contracts. Scharf also does business as Citrades.com and AutoTrading Binary.com, according to the Complaint. In addition, the Complaint charges Scharf, Shah, and Zilmil with acting as Futures Commission Merchants (FCM) and Commodity Trading Advisors (CTA) without being registered with the CFTC, as required. CFTC

July 11, 2017

The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Susan C. Bucklew of the U.S. District Court for the Middle District of Florida entered an Order of Final Judgment by Default against Defendants Anthony J. Klatch II, Lindsey Heim, and their company Assurance Capital Management, LLC (ACM) for defrauding pool participants in a commodity pool they operated, misappropriating pool participants’ funds, and other violations of the Commodity Exchange Act and CFTC Regulations. The Order requires that Klatch, Lindsey Heim, and ACM jointly pay $459,613 in restitution and a $1,509,552 civil monetary penalty. The Order also requires that Klatch pay an additional $96,873 in restitution and a $335,456 civil monetary penalty for two additional fraudulent schemes he carried out. CFTC

July 11, 2017

The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the U.S. District Court for the Eastern District of New York against Defendants Daniel Winston LaMarco and his company, GDLogix Inc., charging them with off-exchange foreign currency derivatives (forex) fraud, commodity pool fraud, and failure to register with the CFTC, as required. LaMarco previously resided in Huntington, New York, and GDLogix’s last known principal place of business was in Huntington, New York. Neither Defendant has ever been registered with the CFTC. CFTC

June 27, 2017

The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Huafu HK Co. Ltd. (Huafu), a corporation based in Hong Kong, for failing to file CFTC Form 304 reports, reporting its call cotton purchases and sales when it held or controlled at least 100 cotton futures positions. The CFTC previously issued a market Advisory reminding cotton market participants wherever they are located of their ongoing obligation to comply in a timely manner with applicable reporting obligations (see CFTC Staff Advisory No. 13-14, Obligation of Reportable Market Participants to File CFTC Form 304 Reports for Call Cotton in a Timely Manner as Required by Commission Regulation 19.02, May 8, 2013). The CFTC Order requires Huafu to pay a $225,000 civil monetary penalty and prohibits it from committing future violations of CFTC Regulation 19.02, as charged. CFTC

June 13, 2017

The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Jose E. Martinez of the U.S. District Court for the Southern District of Florida entered a Consent Order against North American Asset Management, LLC (NAAM) of Fort Lauderdale, Florida, its owner and president Alexi Bethel of Miami, Florida, and its owner and managing director Steven Labadie of Lake Worth, Florida. The Order finds that NAAM, Bethel, and Labadie engaged in illegal, off-exchange transactions in precious metals with retail customers on a leveraged, margined, or financed basis and requires them, jointly and severally, to pay restitution of $648,759.60 and a $977,430.47 civil monetary penalty. The Order also imposes permanent trading and registration bans against NAAM, Bethel, and Labadie and prohibits them from further violating the Commodity Exchange Act (CEA), as charged. The Order stems from a CFTC civil enforcement action filed against NAAM, Bethel, and Labadie on January 15, 2016, charging them with engaging in illegal, off-exchange precious metals transactions (see CFTC Complaint and Press Release 7331-16). CFTC

May 30, 2017

The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Cecilia M. Altonaga of the U.S. District Court for the Southern District of Florida entered a final Order of Default Judgment (Order) against Defendants Kelvin Burgos and his company K.B. Concepts Group, LLC d/b/a Apex Asset Advisors, LLC (K.B. Concepts) for engaging in illegal, off-exchange precious metals transactions. Burgos, a resident of Florida, was the owner and principal of K.B. Concepts, which operated its metals business under the name Apex Asset Advisors, LLC. The Court’s Order stems from a CFTC civil enforcement action filed against the Defendants on September 20, 2016 (see CFTC Complaint and Press Release 7448-16). The Court’s Order requires Burgos and K.B. Concepts to pay, jointly and severally, $121,591.10 in disgorgement and a $364,773.30 civil monetary penalty. The Order also imposes permanent trading, solicitation, and registration bans against Burgos and K.B. Concepts, and prohibits them from engaging in illegal, off-exchange precious metals transactions, as charged. CFTC