Articles Posted in Firm News

dreamstime_s_24782834-258x300The law offices of Gana Weinstein LLP represents a group of 23 claimants that have been awarded $3 million by a FINRA arbitration panel after 18 days of hearing and litigation that stretched over three years.  At hearing the evidence showed that Spire Securities, LLC (Spire Securities) and the firm’s principal officers including its CEO David Blisk (Blisk) and CCO Suzanne McKeown (McKeown) failed to supervise their registered representative Patrick Churchville (Churchville).

Despite the overwhelming evidence of the firm’s failure to supervise Blisk continues to defend his conduct instead of instituting necessary reforms to his practice.  In addition, Blisk has made several false statements of fact to the media in his continuing attempts to exonerate himself and his firm.

Blisk told AdvisorHub “’We think the award is outrageous and inappropriate,’ said Blisk, noting that the majority arbitrators appeared to ignore the firm’s claims that the Ponzi scheme began after Churchville left Spire in 2011. “We can’t supervise after somebody leaves us, and we don’t have to be fraud investigators.”

False on all counts.  First the only thing that is outrageous is that Blisk and Spire Securities could not produce a single opening account form, subscription agreement, or account statement for any of the 23 claimants who invested over $10 million in Churchville’s fraud on Spire Securities watch.  Claimants repeatedly asked Respondents to provide any evidence that the firm monitored Churchville’s activities for supervision without response.  Blisk had no evidence that Claimants investments, which were overconcentrated in private equity funds, was suitable.  Further, Respondents did not even know what Churchville’s funds were invested in and claimed that brokerage firms can blindly approve products that they have no understanding of.

Finally, Blisk falsely claims that Churchville did not commit fraud on Spire Securities watch.  Claimants proved that Churchville directed and ordered the theft of over $900,000 from one of the Claimants over Spire Securities’ email servers.  In addition, Claimants introduced numerous emails that showed $750,000 had been stolen from the private equity funds while Churchville fraudulently told investors the same investment was producing fantastic returns.  Claimants also showed that Chuchville stole over $200,000 in investor funds to pay administrative expenses that had been overdue for over a year after the service provider questioned whether Churchville was going out of business.  Finally, Claimants produced evidence that Churchville’s auditor had concerns over the private equity fund’s valuation and could not find evidence to back up Churchville’s claimed returns.

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shutterstock_59949436-300x286The law offices of Gana Weinstein LLP are pleased to announce that a group of 23 claimants have been awarded $3 million by a FINRA arbitration panel after 18 days of hearing and litigation that stretched over three years.  The case involved important investor protections concerning broker private securities transactions and outside business activities that firms must supervise and has been picked up by news outlets.

At hearing the evidence showed that Spire Securities, LLC (Spire Securities) and the firm’s principal officers including its CEO David Blisk (Blisk) and CCO Suzanne McKeown (McKeown) failed to supervise their registered representative Patrick Churchville (Churchville).  Due to the firm’s non-existent supervision Churchville was able to unsuitably invest his clients in his own private equity funds and misappropriate client funds.  Chuchville was later barred from the securities industry and in March of 2017 the United States District Court of Rhode Island sentenced Churchville to 84 months in federal prison for his crimes.

Churchville conducted his fraudulent activities through private equity funds he ran and controlled through a disclosed outside business activity and registered investment advisory practice.  Claimants showed that the private equity securities were private securities transactions that the firm was required to supervise.  Claimants proved that while Blisk and McKeown approved of Churchville’s activities but that the firm relied on Churchville to supervise himself.

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shutterstock_57938968-200x300The law offices of Gana Weinstein LLP filed a claim on behalf of a retired 66 years old widow concerning the mismanagement of her retirement savings.  The case alleged that Wells Fargo representative Allen Wilson (Wilson) recommended an overconcentration in unsuitable structured products that caused devastating losses to the Claimant’s portfolio jeopardizing her retirement.

Claimant alleged that she and her husband met Wilson in 2001 and for some time her savings were concentrated mostly in corporate and municipal bonds.  The Claimant alleged that she told Wilson that she was retired, collected social security, and wanted additional income from her accounts to cover expenses while preserving principal.  However, Wilson began recommending very complex structured products that the ordinary investor would not be able to understand.  These structured products were alleged to not be appropriate investments for income and a desire for preservation of capital.

The structured products at issue referenced two different bond yield curves and one stock market index in order to compute both if interest is owed paid and how much.  As alleged, a probability and statistics degree is needed to even begin to comprehend the probabilities of payment on this instrument.

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shutterstock_155271245-300x300The securities lawyers of Gana Weinstein LLP recently filed a complaint on behalf of a client alleging that Laidlaw & Company (UK) Ltd. (Laidlaw) recommended the investor purchase a micro cap stock underwritten by the firm in violation of the securities laws.  According to newsources and public filings Laidlaw has been involved in the fraudulent promotion of numerous small and micro cap stocks to their clients in violation of their duties to their clients to disclose conflicts of interests.  These violations also include potentially facilitating pump-and-dump schemes.

Recently, one of Laidlaw’s clients, Barry Hoing (Hoing), was charged by The Securities and Exchange Commission (SEC) for generating $27 million through a “classic pump-and-dump scheme.” The SEC’s allegations focus on stocks including BioZone Pharmaceuticals (now Cocrystal Pharma) (COCP), MGT Capital (OTC: MGTI), and MabVax Therapeutics (OTC: MBVX).   However, other public filings reveal Hoing was also involved in other stocks including Riot Blockchain (RIOT), PolarityTE (PTE formerly COOL), and Marathon Patent Group (MARA).  In addition, Laidlaw was involved in other securities offerings including Aethlon Medical, Actinium, Boston Therapeutics, 5G Investment, Alliaqua, Aspen Group, Brazahav Resources, Fusion Telecoms International, Protea Biosciences Group, Aeolus Pharmaceuticals, Medovex Corp, Relmada Therapeutics, Sevion Therapeutics, Spectrascience, and Spherix.

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shutterstock_160071281-300x168The securities lawyers of Gana Weinstein LLP recently filed a complaint on behalf of a client alleging that Kalos Capital, Inc. (Kalos Capital) and Andrew C. Long (Long) failed to supervise Long’s recommendations and investment activity through his d/b/a business Granite Retirement & Tax (Granite Retirement).  The complaint alleges that Long, a partner of Granite Retirement, along with others in the organization such as Adam Craig Hendrix (Hendrix), constructed an investment plan for the Claimant that violated multiple securities laws.

The complaint alleges that the Claimant successfully sold his business, was 71 years, and sought investment advice from Long and Hendrix.  The Granite Retirement partners recommended that Claimant invest nearly $7 million or over 90% of his savings in illiquid investments.  In some cases these investments turned out to be investment frauds.  The Claimant alleged that the sole purposes of the investments was to enrich the partners of Granite Retirement to the detriment of Claimant.  In total, the claimant alleged that Long and Granite Retirement sought to profit by over $400,000 from the investments recommended while the Claimant lost millions.

Astonishingly, the outrageous commissions charged to Claimant were not sufficient for Long.  The Claimant alleged that Granite Retirement entered into a promissory note in order to extract another $300,000 in the form of a promissory note from Claimant in violation of the securities laws.  The remaining investments were in a numerous annuities, non-traded real estate investment trusts (Non-Traded REITs), private placements, equipment leasing, and oil and gas private placement programs.

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shutterstock_106111121-300x300The law offices of Gana Weinstein LLP have filed complaints before The Financial Industry Regulatory Authority (FINRA) on behalf of multiple clients against brokerage firm Comprehensive Asset Management and Servicing, Inc. (CAMAS) concerning Tamara Steele’s (Steele) recommendation to invest in Behavior Recognition Systems (BRS) (n/k/a Giant Gray, Inc.).  The Claimants alleged Steele was registered with CAMAS and that CAMAS failed to supervise Ms. Steele’s sales of BRS or conduct due diligence and that BRS turned out to be a vesicle for investment fraud.  BRS raised tens of millions from investors while its owner, Ray Davis (Davis), allegedly misappropriated a sizable portion of investor funds.  The complaints allege that Steele solicited her clients to investment millions in BRS.

On September 14, 2018, the Securities and Exchange Commission (SEC) filed a complaint alleging that Steele sold approximately $13 million of BRS to more than 120 advisory clients without disclosing that Steele and her firm, Steele Financial, Inc. received commissions of up to 18 percent from the sales.

BRS was a software development company based in Houston, Texas that focused on technology that could analyze video content by imitating learning and memory processes of the human brain.  BRS was founded in 2005 by Davis and he served as BRS’ Chairman of the Board until September 2015 and CEO until August 2014.  In or around 2013 BRS’ revenues plummeted and its net operating losses increased substantially.  By 2014 BRS’ total sales were only $765,000 and the firm suffered a net loss of $37.7 million.

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shutterstock_170949320-300x199The law offices of Gana Weinstein LLP recently filed a complaint before The Financial Industry Regulatory Authority (FINRA) on behalf of a couple against brokerage firm Comprehensive Asset Management and Servicing, Inc. (CAMAS) and Tamara Steele (Steele) concerning Steele’s recommendation to invest substantial sums in Behavior Recognition Systems (BRS) (n/k/a Giant Gray, Inc.).  The Claimants alleged that CAMAS failed to supervise Ms. Steele’s sales of BRS or conduct due diligence and that BRS turned out to be a vesicle for investment fraud.  BRS raised tens of millions from investors while its owner, Ray Davis (Davis), allegedly misappropriated a sizable portion of investor funds.  Upon information and belief, Steele solicited her clients to investment millions in BRS.

BRS was a software development company based in Houston, Texas that focused on technology that could analyze video content by imitating learning and memory processes of the human brain.  BRS was founded in 2005 by Davis and he served as BRS’ Chairman of the Board until September 2015 and CEO until August 2014.  In or around 2013 BRS’ revenues plummeted and its net operating losses increased substantially.  By 2014 BRS’ total sales were only $765,000 and the firm suffered a net loss of $37.7 million.

According to the complaint, in late 2013 Steele recommended BRS to the couple notwithstanding BRS’ failing business model and its CEO’s unsuccessful past.  Steele pitched Claimants on an investment in BRS as an opportunity to earn income between 8% and 12%. Claimants alleged that the primary source of most of the Claimants investment in BRS came from their accounts managed by Steele through her advisory firm – Steele Financial Inc.  The complaint alleges that Steele was so confident in BRS that she initially recommended the Claimants borrow money from a bank to invest in BRS.

shutterstock_93851422-300x240The securities fraud attorneys at Gana Weinstein LLP have recently filed a complaint with The Financial Industry Regulatory Authority (FINRA) on behalf of clients alleging that Erryn Barkett (Barkett) engaged in securities fraud by selling unapproved investments and inappropriate and costly alternative investments and private placements to the clients.  The claim was brought against brokerage firm Next Financial Group, Inc.  (Next Financial) alleging that the firm failed to supervise Barkett’s misconduct.  Barkett is currently associated with LPL Financial LLC (LPL).

According to Barkett’s brokercheck records Barkett has been subject to one regulatory complaint, four customer complaints, and has six financial disclosures.  The regulatory complaint involves allegations that Barkett solicited multiple investors to invest in an unapproved security called Voyager Financial Group, LLC.

Barkett has disclosed at least 11 outside business activities.  These activities include Barkett’s d/b/a Barkett Allen Capital LLC.  In addition, Barkett disclosed his involvement with SkyPix, LLC, BAS, LLC, Flagship Properties, LLC, Sunnyside Ranch, LLC, Produce Insight Panel, and Wheelman, LLC.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  Often times brokers who engage in this practice use outside businesses in order to market their securities.  In this case the claimants alleged that Barkett solicited them to invest in several business ventures including SkyPix and a land deal.

shutterstock_183525509-300x200The securities fraud attorneys at Gana Weinstein LLP have recently filed a complaint on behalf of a client alleging that Dean Mustaphalli (Mustaphalli) engaged in securities fraud.  The claim was brought against brokerage firms Sterne Agee Financial Services, Inc. (Sterne Agee) and Interactive Brokers LLC (Interactive Brokers) alleging that the firms failed to supervise Mustaphalli’s misconduct.

The complaint alleges that starting in December 2009, Mustaphalli established a securities related outside business activity (OBA) in the form an advisory firm and a hedge fund.  Mustaphalli registered the investment advisor with the SEC under the name Mustaphalli Advisory Group, LLC (MAG) until December 2014.  Subsequently, Mustaphalli filed a From D with the SEC in January 2011 for a hedge fund called Mustaphalli Capital Partners Fund, L.P. (MCPF) and opened an account for the fund.

The complaint alleged that Mustaphalli failed to inform Sterne Agee of his transactions through MCPF although Mustaphalli did disclose the MAG RIA.  The complaint also alleges that in or around mid-2014 Mustaphalli transferred MAG’s accounts and the MCPF account to Interactive Brokers.  Also around May 2013 FINRA began investigating Mustaphalli’s, MAG’s, and MCPF’s activities.  In December 2014, FINRA suspended Mustaphalli for two years and imposed a fine and disgorgement for engaging in private securities transactions through MCPF without notifying Sterne Agee.  Dep’t of Enforcement v. Dean Mustaphalli, AWC No.  2013036880302 (Dec. 15, 2014).

shutterstock_25054879The investment attorneys of Gana Weinstein LLP have brought a claim on behalf of an investor who suffered substantial losses due to investment recommendations made by his Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) advisor, Craig Kinard (Kinard) a proprietary Merrill Lynch fund called the MLCXX6LSER Index (MLC Index).  The fund is also referred to as “The Merrill Lynch Commodity Index eXtra—(Excluding Precious Metals) Excess Return Index.”  The MLC Index was run at Merrill Lynch by Guido Graff (Graff), Director of Ultra Structured Solutions at Merrill Lynch. 

The complaint alleged that the MLC Index is one of the most complex investment products that could be sold to a retail investor and consequently is suitable for very few investors.  The strategy involves extreme leverage, commodities, derivatives, options, and swaps risk.  Any investor without significant prior experience in all of these categories will not be able to understand the risks or likely performance of the investment under different market conditions.  Indeed, in this case the risks and expected performance of the MLC Index proved to be too great a challenge even for the fund managers to understand.  In addition, to these problems the MLC Index was offered by Merrill Lynch to clients subject to enormous costs and fees.

The MLC Index is an absolute return strategy investment fund in the long-short commodity arbitrate space.  Absolute return investing seeks to produce positive returns over time regardless market conditions.  Even when markets are falling, an absolute return fund is advertised to still have the potential to make money.  Arbitrage strategies attempt to benefit from an assumed correlation between different market instruments or different markets.