Firm News

Gana LLP Files Complaint on Behalf of Five Customers Against JP Turner and National Securities Concerning Ralph Calabro’s Churning

August 12, 2014 | by Staff Attorney

Gana Weinstein LLP has recently filed securities arbitration case on behalf of a group of five investors against J.P. Turner Company, L.L.C. (JP Turner) and National Securities Corporation (National Securities) concerning the alleged complete lack of supervision at JP Turner and National Securities to monitor and prevent Ralph Calabro (Calabro) from churning customer accounts.

As a background, Calabro was expelled from the securities industry when on November 8, 2013, the SEC issued an order (SEC Order) finding that JP Turner registered representatives including Calabro, Jason Konner, and Dimitrios Koutsoubos churned customer accounts and Executive Vice President (EVP), Michael Bresner (Bresner), as head of supervision, failed to supervise the representative’s activities.

The SEC alleged that JP Turner knew that numerous accounts had a cost-to-equity ratio greater than 20%, a number sufficiently high to establish an inference of churning requiring close supervision and corrective action. The reports of these accounts resulted in an report being emailed to principals and the compliance office for review including Bresner. The SEC found that the average number of accounts being reviewed for high costs was shockingly high for each quarter in 2008-2009 and was between 300 and 325 accounts and included more than 100 JP Turner registered representatives. Even though these accounts bore the hallmarks of churning, Bresner testified that he could not recall closing an account, personally contacting any JP Turner customers, or even imposing a trading limitation.

Gana LLP Files Customer Complaint Against JHS Capital Concerning Broker Joe Alijaj

August 11, 2014 | by Staff Attorney

The law office of Gana Weinstein LLP recently filed a securities arbitration on behalf of an investor against JHS Capital Advisors, LLC f/k/a Pointe Capital, Inc. (JHS Capital) concerning allegations that the broker recommended unsuitable investments, churned the account, and ultimately depleted the claimant’s assets.

The claimant is sixty-one years old and spent the majority of his career running seed companies. The claimant alleged that he had little understanding of the stock and bond markets. The complaint alleged that Enver Rahman “Joe” Alijaj (Alijaj), a broker with JHS Capital, cold called claimant and aggressively pursued the opportunity to manage claimant’s money. The complaint alleged that prior to opening his account with JHS, claimant never maintained a brokerage account. The claimant alleged that he explained to Alijaj that he wanted to focus on preservation of his capital.

In reliance on Alijaj’s assurances, the claimant alleged that he provided the broker with a substantial portion of his net worth. Rather than comply with the claimant’s investment needs, the complaint alleged that Alijaj took advantage of the claimant’s inexperience by investing the funds in unreasonably volatile stocks and excessively traded (churned, a type of securities fraud) his account to generate excessive commissions. According to the complaint, within days of opening the account, Alijaj leveraged the account and actively traded speculative small cap stocks in unsuitable investments including A-Power Energy Generation Systems Ltd. (APWR), Silicon Motion Technology Corp (SIMO), and Yingli Green Energy Holdings Co. (YGE).

Gana LLP Files Puerto Rico Municipal Bond Claim Against UBS On Behalf of Client

August 9, 2014 | by Staff Attorney

The law offices of Gana Weinstein LLP has recently filed securities arbitration case on behalf of an investor against UBS Financial Services, Inc. and UBS Financial Services, Inc. of Puerto Rico (UBS) involving allegations that UBS’ misleading sales tactics and inappropriate recommendations surrounding Puerto Rico bonds in the Claimant’s portfolio. According to the complaint, UBS encouraged a 26 year-old unemployed single mother to invest her life savings in just three Puerto Rico municipal bonds—Puerto Rico Employees Retirement System Bonds (ERS Bond), Puerto Rico Commonwealth Public Buildings Authority Bonds (Commonwealth Bond), and Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority (AFICA) Industrial Revenue Refunding Bonds (AFICA Bond). In addition, the complaint alleged that UBS recommended that the Claimant take out significant loans to leverage up her investment in these three bonds that were all hovering just above junk status.

The Claimant is a 26 year-old single mother, dedicates all of her time towards caring for her eighteen-month-old daughter. Unfortunately, the Claimant’s father passed away in October 2010 causing Claimant to receive life insurance proceeds from his passing. The Claimant used some of those proceeds to pay off the debts that she had accrued over the years and sought to use the remaining portion to invest for the future of her and her daughter.

Claimant alleged that UBS completely disregarded the risks inherent to the Puerto Rico municipal bonds and constructed a portfolio comprised solely of these soon-to-be-defunct securities. Claimant’s brokers Ramon M. Almonte (Almonte) and Juan E. Goytia (Goytia), recommended an approximate 130% concentration, through the use of leverage, in municipal debt. Claimant alleged that the bonds were portrayed as safe, secure, fixed-income securities that would preserve her principal while providing tax-free income. Contrary to UBS’ portrayal, the bonds recommended are volatile investments carrying a multitude of risks. According to the complaint UBS’ unsuitable recommendations and inappropriate asset allocation ultimately cost the Claimant most of her money.

Gana LLP Successfully Represented TapImmune Inc. in a Commercial Arbitration Suit

July 28, 2014 | by Staff Attorney

As reported, the law offices of Gana Weinstein LLP successfully represented TapImmune Inc. (TapImmune) in a contentious commercial litigation proceeding before the American Arbitration Association. TapImmune is a publically traded company that develops innovative vaccine technologies for the treatment of cancer and infectious disease including breast cancer.

The complaint TapImmune filed against Michael Gardner alleged that Gardner induced TapImmune to enter a very lucrative agreement where Gardner would receive a significant amount of stock in TapImmune in exchange for raising funds for the company. Thereafter, Gardner denied that he had agreed to raise funds for TapImmune.

The arbitrator found that Gardner made false representations to TapImmune in order to induce the company into the agreement and did not fully provide the services he was hired to perform. Moreover, the arbitrator concluded that Gardner did not intend to perform the stated services at the time he was hired. Further, the arbitrator found that Gardner knew that TapImmune would be hindered in its business efforts through his compensation arrangement.

Gana LLP Files Claim Against JHS Capital Advisors Concerning Broker Enver Alijaj’s Activities

July 7, 2014 | by Staff Attorney

On June 27, 2014, Gana Weinstein LLP filed a statement of claim against JHS Capital Advisors, LLC, formerly known as Pointe Capital Inc, on behalf of an Arkansas couple. The claims stem from the misconduct of Enver R. “Joe” Alijaj, a former Pointe Capital financial advisor who has worked at several different firms and has a record laden with customer complaints and FINRA violations. The statement of claim brought by Gana Weinstein LLP on Claimants’ behalf alleges (1) unsuitable recommendations, (2) failure to supervise, (3) breach of fiduciary duty, (4) fraudulent misrepresentation, and (5) breach of contract.

Around July 2008, Claimants, a couple from Arkansas nearing retirement, received a cold call from Mr. Alijaj—a broker with Respondent JHS. (A cold call is the solicitation of potential customers who were not anticipating such an interaction. Cold calling is a technique whereby a salesperson contacts individuals who have not previously expressed an interest in the products or services that are being offered). Mr. Alijaj aggressively pursued the Claimants’ business, promising them that he would preserve their retirement capital while providing them with increased returns.

Mr. Alijaj allegedly persuaded Claimants to give him approximately $250,000, which they believed was being safely and practically invested to accommodate their needs. Instead, Mr. Alijaj put all of Claimants’ funds into just three extremely thinly traded and highly volatile stocks. The three stocks were A-Power Energy Generation Systems Ltd. (“APWR”), Silicon Motion Technology Corp (“SIMO”), and Yingli Green Energy Holdings Co. (“YGE”). By January 2009, only five months after Mr. Alijaj made the purchases, APWR, SIMO, and YGE were each down 81%, 66%, and 59% respectively. At no point during this five-month freefall did Mr. Alijaj adjust the Claimants’ accounts or even communicate to them an explanation for the price depreciation or potential remedial action.

Adam Gana Publishes Article on the Problems with Securities Laws in New York

June 23, 2014 | by Staff Attorney

The Fordham Journal of Corporate and Financial Law will be publishing an article written by Adam Gana and Michael Villacres. The article is entitled Blue Skies for America in the Securities Industry… Except for New York: New York’s Martin Act and the Private Right of Action. The article addresses the origins and legislative history of New York’s securities regulations and compares the regulations to that of other states. The article then explores the disadvantages to New York’s retail investing public. Finally and most importantly, the article recommends changes to the law that will truly help protect investors in the state of New York.

The article will appear in the summer 2014 edition of the Fordham Journal.

Gana LLP Files Claim Against First Allied Securities on Behalf of Luxtera Investors

June 2, 2014 | by Staff Attorney

The law offices of Gana Weinstein LLP filed a complaint with the Financial Industry Regulatory Authority (FINRA) on behalf of four investors against First Allied Securities, Inc. (First Allied) concerning broker Amram a/k/a Rami Yahalom’s solicitation and sale of Advanced Equities private placements. According to the complaint, First Allied and Yahalom sold the investors AE Luxtera Investments II, LLC (Luxtera), a private placement in a technology start-up company by misrepresenting Luxtera’s prospects and failing to conduct even basic due diligence on the company before recommending the investment to clients.

In the context of a Regulation D offering, FINRA requires broker-dealers to conduct a reasonable investigation of the issuer and the securities they recommend in offerings. The investors alleged that First Allied failed to meet FINRA’s due diligence requirements and made representations that were misleading. The investors alleged that Yahalom and First Allied marketed Luxtera and other private placements as “late stage equities” that were a mere 12-36 months from going public through an IPO. Luxtera was also allegedly sold to customers under the false premise that the company would provide “Higher near-term investment returns than the public equity markets” while providing “Greater short-term liquidity and lower risk profiles.”

However, according to the complaint, these representations were misleading and false. The complaint alleged that First Allied sought to raise $43 million for Luxtera based on a $175 million valuation that was 22 times Luxtera’s projected 2008 revenues. In addition, the investors alleged that while First Allied knew that Luxtera had only achieved $1 million in sales as of November 30, 2008, their broker provided them with a slide-show presentation that projected 2009 sales as high as $89,447,500 and 2010 sales could reach $341,883,000. The complaint alleged that First Allied lacked a good faith basis to believe that Luxtera would experience 8,945% sales growth in one year and 34,188% sales growth over the next two years when the company was then suffering losses in excess of $30 million a year.

How to Sell Restricted Stock Under Rule 144

May 13, 2014 | by Staff Attorney

There are many instances where an individual or corporation receives shares of stock by private placement, as opposed to purchasing the stock from the open market. Often times, the stock certificates received by private placement are stamped with a legend outlining applicable restrictions on the resale of that stock. This legend establishes the regulatory limitations surrounding the corporation or individual’s ability to resell the securities. This legend must be removed before one can legally effectuate the resale of the stock. Generally, the securities must either be registered with the Securities and Exchange Commission (SEC) or sold pursuant to an exemption from registration. Only after the securities are registered or are shown to be exempt, may a transfer agent remove the restrictive legend—and only upon the removal of the restrictive legend may the underlying securities sold.

In the United States, the resale exemption most often relied on is Rule 144 of the Unites States Securities Act of 1933. Rule 144 allows the resale of restricted stock to be sold to the public without a registration statement being filed if a number of conditions have been met. These conditions vary depending on (1) whether the issuing company is a reporting or non-reporting issuer; (2) whether the holder is arms-length, and thus considered a “Non-Affiliate”; or a director, officer or significant shareholder, and thus considered an “Affiliate”; and (3) the length of time the securities have been held.

Removing the restrictive legend involves extensive communications with the transfer agent of the issuer of the securities being held and the broker dealer where the stockholder seeks to deposit those securities. The certificate holder will need to provide a number of documents including, but not limited to, a seller’s representation letter, the original stock certificates, a medallion signature guarantee, a legal opinion letter, and in some cases, a Form 144 for the proposed transaction.

Gana LLP Files Churning Case Against RBC and Morgan Stanley on Behalf of Client

April 7, 2014 | by Staff Attorney

The law offices of Gana Weinstein LLP recently filed a complaint against RBC Capital Markets, LLC (RBC) and Morgan Stanley Smith Barney, LLC (Morgan Stanley) accusing their registered representative Bruce Weinstein (Weinstein) of churning (excessive trading) and making unsuitable recommendations. In addition, the complaint alleged that the brokerage firms failed to properly supervise Weinstein’s activities.

The claimant alleged that he is the owner of a small business who had very little investment experience with stocks, bonds, or any other investment products. In addition, the claimant has no other financial or investment training and is generally unsophisticated in financial matters. The complaint also alleged that Weinstein knew that the claimant was providing the broker with approximately 100% of his liquid assets. The claimant alleged that even though he did not tell the broker that he desired to speculate with 100% of his liquid assets, Weinstein incorrectly marked claimant’s investment objective as speculation. Claimant alleged that the broker also incorrectly selected his investment experience in options, stocks, and bonds as being 20 years. In fact, the claimant had no options trading experience.

According to the complaint, Weinstein immediately began executing a highly leveraged and excessive trading investment strategy in claimant’s account. The claimant alleged that Weinstein’s trading was made without authorization or prior notice to the client. The claimant alleged that the broker’s trading generated exorbitant commissions for himself while providing no material benefit to his client. For example, in the May 2011, the claimant alleged that his account lost 44.8% of its value in a single month. During this month, it was alleged that the broker excessively day traded options such as Apple causing losses of $23,228 in Apple options or nearly 21% of the claimant’s entire liquid net worth.

Gana LLP Files Complaint Against H. Beck on Behalf of Client For Unsuitable Investment

April 4, 2014 | by Staff Attorney

The law offices of Gana Weinstein LLP recently filed a complaint against H. Beck, Inc., on behalf of a client accusing the investment advisory firm of making unsuitable recommendations and failing to properly supervise one of its representatives.

The Claimant in this case is a retired sixty-three year old from Hawaii, who sought to safely invest what was left of his retirement funds, after being hit hard in the down market of 2008. H. Beck, through one of its advisers, offered him high, risk-free returns, which the Hawaii native readily accepted. H. Beck, through one of its advisers, took nearly two-thirds of Claimant’s retirement savings and put them into the Inland American Real Estate Investment Trust (Inland) and the Lease Equipment Finance Fund 4 (LEAF).

LEAF is a limited partnership. Limited Partnerships are investment vehicles formed to acquire, operate, and sell assets for the benefit of the partners. Investors in Limited Partnerships, also known as limited partners, are entitled to receive distributions of operating cash flow as well as distributions from the sale or financing of assets as outlined in the partnership’s limited partnership agreement. Unlike stocks and bonds, Limited Partnerships are not listed on an exchange. They are illiquid assets with a relatively limited secondary market. Consequently, reliable pricing information is typically very difficult to obtain.