SEC Alleges Broker Craig Josephberg Involved in a $300 Million Market Scheme of CodeSmart Stock (Part II)

shutterstock_184149845In our prior post, our offices, Gana LLP, noted its investigation of the July 17, 2014, claims brought by securities and exchange commission (SEC) against Craig Josephberg in connection with his participation in a $300 million securities fraud market manipulation scheme. The SEC brought charges against Abraxas J. Discala (Discala), Marc E. Wexler (Wexler), Matthew A. Bell (Bell), Craig L. Josephberg (Josephberg), and Ira Shapiro (Shapiro), for manipulating the stock price of four publically traded companies, CodeSmart Holdings, Inc. (CodeSmart), Cubed, StarStream Entertainment Inc., and the Staffing Group, Ltd.

According to the complaint, in 2013, Discala and Wexler conspired with registered representatives Bell and Josephberg to inflate the price of the stock of CodeSmart. The SEC found that Discala, Wexler, Bell, and Josephberg then profited by selling their shares at inflated values at the expense of Bell’s clients and Josephberg’s customers.

Josephberg has a long and troubled regulatory, criminal activity, debts, customer complaints, among a host of other supervisory “red flags” of potential misconduct in the handling of his clients. Josephberg entered the securities industry in 1996. Thereafter, he was associated with eight different firms including Maxim Group LLC, ICM Capital Markets, LTD, vFinance Investments, Inc., Halcyon Cabot Partners, LTD. (Halcoyon), and most recently Meyers Associates, L.P. (Meyers Associates). Indeed, when Josephberg was terminated from Halcoyon he was under investigation by the firm for sales practice violations including the selling of unsuitable securities, unauthorized trades, and securities fraud in connection with the sale of penny stocks including VHGI and Cell Therapeutics.

Such charges would almost certainly deter or result in enhanced supervision by any subsequent employer of Josephberg. Enter, Meyer Associates. Recently, our offices noted that the Meyer Associates brokerage firm has an unusual number of disclosure events, including customer complaints, against the firm and its associates. According to FINRA, approximately twelve percent of registered representatives have some form of disclosure on their record. However, in the case of Meyer Associates forty seven out of seventy five, or nearly sixty-three percent, of their brokers have a marked-up history as revealed by BrokerCheck. Even more disturbingly, is the fact that of those forty seven brokers, they have an average of 4.5 disclosure events per broker.

Josephberg’s activities and alleged involvement in the CodeSmart scheme appears to be par for the course at Meyer Associates. According to Josephberg’s BrokerCheck, he has had at least six customer complaints filed against him. Those claims involve unauthorized trading, unsuitable investments, and excessive use of margin. In addition, in 2007, the state of Illinois revoked Josephberg’s securities license and ordered a fee to be paid. Moreover, in 2006, the NASD found that Josephberg opened approximately 28 accounts for sever hedge fund clients in order to market time mutual funds. Josephberg also has two criminal matters disclosed including a charge of trafficking in controlled substances. Finally, Josephberg also has two tax liens against him in amounts owing the IRS over $300,000.

The attorneys at Gana LLP are experienced in representing investors concerning unfair practices by their financial advisors. Our consultations are free of charge and the firm is only compensated if you recover.