Articles Posted in Investor Fraud

shutterstock_136504499Gana LLP is investigating the LJM Preservation and Growth Fund (Ticker Symbols LJMAZ, LJMCX, LIMIX). The LJM Funds relied extensively on a strategy that is designed to profit from calm markets. The LJM Preservation and Growth Funds collapsed and lost more than 80% of its value as a result of last week’s market volatility. The combonation of LJMAZ, LJMCX and LIMIX at one point collectively held over $800 million in assets CNC reached out to Chicago-based LJM Partners, Inc. – the funds managers, and no comment was made.

According to its annual report to shareholders, LJM explained that it options “to deliver solid returns while maintaining risk parameters.” LJM also suggested that it used techniques to mitigate losses in extreme market conditions. The fund was designed to take advantage of the spread between realized and implied volatility. According to CNBC, “LJM Preservation and Growth Fund had been run by Anthony Caine, a veteran of the 1990s technology boom who later founded LJM, and Anish Parvataneni, a former trader for well-known investor Ken Griffin’s Citadel.”

According to reports, LJM was infused with almost $400 million in new capital in 2017 alone.

shutterstock_173509961-300x200According to records kept by The Financial Industry Regulatory Authority (FINRA), former Capitol Securities Management (Capitol Securities) employee Teryl Trenchard (Trenchard) in under investigation for fraud.  In March 2017 FINRA initiated its investigation into Trenchard for fraud.  On the same day Capitol Securities terminated Trenchard for the same reason.  Thereafter, in July 2017 a customer filed a complaint alleging breach of fiduciary duty, conversion, and unsuitable investments causing $700,000 in damages.  The claim is currently pending.

Thereafter, in September 2017 another customer alleged that from 2005 to March 15, 2017 Trenchard engaged in misappropriation, forgery, fraud, and unauthorized trading in unsuitable transactions.  The customer alleged $1,800,00 in damages.  The claim is currently pending.

At this time it is unclear the extent and scope of Trenchard’s securities violations and the exact details of the fraud under investigation.  Trenchard’s CRD lists a business called Market Technician’s Association and no other businesses.

Brokerage firms are responsible for implementing supervisory procedures to review and approve fund transfers and wires to ensure that funds are not being used for wrongful purposes or being converted.

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shutterstock_94332400-300x225According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Alonza Barnett (Barnett), in March 2017, was barred from the industry by FINRA after FINRA requested documents and information and he failed to request termination of his suspension within three months of the date of the Notice of Suspension drawing an automatic bar from association with any FINRA member in all capacities.  Previously, Barnett was registered with Ameritas Investment Corp. (Ameritas).

In February 2017 a customer filed a complaint alleging that for a 15 year period Barnett engaged in conversion of funds, breach of fiduciary duty and constructive fraud, and violation of the North Carolina Investment Advisors Act.  The claim appears to involve private securities.  The claim alleged $1,750,000 in damages and is currently pending.

At this time it is unclear the extent and scope of Barnett private securities activities.  Barnett CRD lists that he is engaged in fixed insurance products and operates a d/b/a called Dacthler Wealth Management as an outside business activity.  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”.

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shutterstock_185913422-300x200In early September, we reported that the investment lawyers of Gana LLP were investigating allegations by the Securities and Exchange Commission (SEC) finding that Sonya Camarco (Camarco) misappropriated over $2.8 million in investor funds from her clients and customers.

In a separate but parallel action, Colorado state authorities have arrested Camarco on charges that she stole $850,000 from clients. According to news sources, a Colorado grand jury indicted Camarco on six counts of securities fraud and seven counts of theft on September 21. Authorities say Camarco operated her scheme between January 2013 and May 2017. An SEC investigator allegedly traced nearly 130 checks from Camarco’s clients’ accounts to a post office box she controlled. Camarco is accused of using the money to pay her own credit card bills and taxes, and to buy real estate.

LPL terminated Camarco in August 2017 “for depositing third party checks from client accounts into a bank account she controlled and accessing client funds for personal use.”

According to BrokerCheck records, beginning in approximately 2004 and continuing through at least August 2017, Camarco allegedly used investor accounts to pay hundreds of thousands of dollars in credit card bills, took cash advances on investor accounts, transferred investor funds directly to her personal bank account, and funneled investor funds into her personal bank accounts. Camarco allegedly spent investor funds on the purchase of a house and the payment of her personal mortgage.

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shutterstock_187532306-300x200There is a need for strong protection of the elderly investing population. About one out of every five Americans 65 years and older has been a victim of financial abuse.  The elderly are estimated to lose up to $2.9 billion per year from scams.   In fact, these figures are likely lower than the actual incidence of fraud since only reported accounts of frauds are considered and seniors are “less likely” to report being scammed.

Elders are abused by a variety of persons including family members, caregivers, scam artists, financial advisers, fiduciaries (such as agents under power of attorney and guardians), and others.  Usually the person is already in a position of trust or is able to acquire a high level of trust due to the diminished capacity of the victim.

Now a new survey of state securities regulators by the North American Securities Administrators Association (NASAA), released on National Senior Citizens Day, shows that more need to be done in order to protect seniors from financial fraud.  The NASAA’s polled its members and represents the views of securities regulators who are local state regulators of investment advisors.

The findings include that 97 percent feel that most cases of senior financial fraud go undetected rather than being discovered causing serious problems for seniors.

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shutterstock_24531604-200x300Our firm is investigating claims made by The Financial Industry Regulatory Authority (FINRA) and the Securities Exchange Commission (SEC) against broker Richard Cody (Cody) that involves potentially millions in either stolen client funds or misrepresentations concerning the state of their accounts.  Cody is a formerly associated broker with brokerage firms Westminster Financial Securities, Inc. (Westminster), Concorde Investment Services, LLC (Concorde Investment), and IFS Securities (IFS).  Cody conducted his business through his advisory firm Boston Investment Partners.  According to brokercheck, Cody has been subject to three regulatory events, two investigations, and 15 customer disputes among other disclosures.

The SEC’s complaint lays out an astonishing scheme to defraud investors.  The SEC alleged that Cody would tell retired clients that their accounts were flourishing and making money when in fact they were dwindling to near-zero balances.  The SEC tells the tale of three clients who were lied to by Cody about their rapidly depleting retirement accounts through monthly deductions that were unsustainable.

Further, to make the scheme work Cody fabricated account statements, told clients they were withdrawing investment gains rather than depleting their principal, and sent a doctored document to indicate that a financial firm was holding an annuity on behalf of one client.  Cody’s conduct occurred over a 12 year period in which Cody was registered as a broker with five different independent firms.

In addition, Cody was suspended from the securities industry by FINRA from January 7, 2013 to January 6, 2014 for allegedly sending clients inflated account statements while at Westminster and Concorde.  Despite the suspension Cody continued to manage his accounts and violate the terms of the suspension by turning the accounts over to his wife Jill who was also registered with Westminster Financial and Concorde Investment.

During his suspension, Cody used personal email accounts to communicate with clients about investment strategies that then forward recommendations to Jill to execute trades.  Cody is also alleged to have forged client signatures to move their accounts to IFS.  Jill Cody was later the subject of separate FINRA sanction for her facilitation of Cody’s conduct.

Finally, Cody was fired by IFS Securities, his seventh and last employer, in September of 2016 on allegations of selling away and forgery.

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shutterstock_184929191Our firm is investigating claims made by Securities and Exchange Commission (SEC) against broker Peter Kohli (Kohli), DMS Advisors, Inc. (DMS Advisors), and Marshad Capital Group, Inc. (Marshal).  See SEC v. Peter R. Kohli, et al, (E.D. Pa.). According to the SEC, from 2012 through 2015 Kohli lied to induce over 120 investors to invest at least $3.2 million in entities owned or controlled by Kohli.  Kohli was a registered representative of Trustmont Financial Group, Inc. (Trustmont) from July 2010 until May 2015 out of the firm’s Leesport, Pennsylvania office location.  In April 2015 Trustmont permitted Kohli to resign for accepting loans from a client.

The SEC allged that Kohli launched the DMS Funds that consisted of four emerging markets mutual fund series.  Kohli allegedly solicited his own customers and clients to invest in the funds using prospectuses and other documents that contained misrepresentations overstating DMS Funds’ sophistication and ignored key risks associated with the investments.  The SEC alleged that as the fund collapsed due to Kohli’s recklessness, Kohli engaged in three other frauds in an effort to keep the funds afloat.  One such alleged fraud was that Kohli made material misrepresentations in connection with the sale of warrants 10 purchase Marshad stock – an entity Kohli controlled. In addition, the SEC accused Kohli of misappropriating investor money that he solicited for the purported purpose of making investments into one of the finds and instead used the money to pay fund expenses. Finally, the SEC accused Kohli of lieing to investozs in connection with the sale of Marshad promissory notes in a desperate attempt to raise money to cover fund expenses and delay the DMS Funds’ collapse.

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shutterstock_97819226The securities lawyers of Gana LLP are investigating a customer complaint filed with The Financial Industry Regulatory Authority (FINRA) against broker Robert Rotunno (Rotunno).  According to BrokerCheck records Rotunno has been subject to at least six customer complaints.  The customer complaints against Rotunno allege securities law violations that including unsuitable investments, churning, and excessive trading among other claims.

The most recent complaint was filed in July 2016 alleging $80,000 in damage stemming from churning and unsuitable investments.  The complaint settled for $20,000.

Rotunno is currently associated with National Securities Corporation (National Securities), a firm recently featured in a study ranking brokerage firms by incidents of misconduct.  According to a study conducted by the Securities Litigation and Consulting Group entitled “How Widespread and Predictable is Stock Broker Misconduct?” the incidents of investor harm at National Securities is extraordinarily high.  The study ranked National Securities as the third worst brokerage firm finding that brokers at the firm had over a 31% misconduct rate.  The study stated that investors should stay away from National Securities “Given their coworkers’ disclosure record as of 2014, 83.7% of the brokers at these six firms would be in the highest risk quintile as defined in the FINRA study and should be avoided by investors. The BrokerCheck reports for most of the brokers at these six firms should prominently display a skull and crossbones warning.”

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shutterstock_177082523The securities fraud lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Christopher Cowans (Cowans).  According to BrokerCheck records Cowans has been the subject of at least nine customer complaints and one regulatory action.  The customer complaints against Cowans allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

In December 2014, the State of Massachusetts required Cowans brokerage firm, Arthur W. Wood Company, Inc. (Arthur W. Wood), to agree to a heightened supervision plan for Cowans in light of the fact that Cowans “has been the subject of twelve customer complaints…alleging…making excessive trades…”

The most recent complaint was filed in December 2015 alleging that Cowans engaged in excessive trading from March 2011 until December 2013 causing $600,000.  The complaint is still pending.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time.  Often times the account will completely “turnover” every month with different securities.  This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades.  Churning is considered a species of securities fraud.  The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions.  A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements.  Certain commonly used measures and ratios used to determine churning help evaluate a churning claim.  These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

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shutterstock_94632238In May 2016 the Department of Justice (DOJ) filed a five-count indictment in New York against nine defendants including Jared Mitchell, the Managing Partner of Mitchell & Sullivan Capital LLC; Richard Brown, a registered broker with Chelsea Financial Services; Christopher Castaldo, the Chief Executive Officer of Stock Traders Press Inc. and the President of Wall Street Buy Sell Hold Inc.; Gerald Cocuzzo, also known as “Gerry,” a registered broker formerly with Newbridge Securities Corporation; Naveed Khan, also known as “Nick,” a registered broker formerly with Meyers Associates, L.P.; Herschel Knippa III, also known as “Tres,” the owner and Head Trader at Kenai Capital Management LLC; Maroof Miyana, a registered broker formerly with Legend Securities; Pranav Patel, a registered broker formerly with Dawson James Securities; and Louis Petrossi, the founder and Chief Executive Officer of the Wealth Research Institute.

The DOJ’s charges involve the unlawful sale and activity related to stock ForceField Energy Inc. (ForceField), a publicly-traded company under the ticker symbol “FNRG.”  The charges include securities fraud, conspiracy to commit securities fraud, wire fraud, money laundering and making a false statement to law enforcement officials in connection with the fraudulent market manipulation of the stock.

The DOJ alleged that the defendants employed of scheme together with dishonest registered brokers to perpetrate an elaborate but fraudulent scheme built on lies, kickbacks and manipulated trading activity.  The defendants essentially used a company with no business operations and little revenue and deceived the market and their clients into believing it was worth hundreds of millions of dollars through unauthorized trades and deceptive promotions.

The defendants are alleged to have abused their positions as stock promoters, brokers, or investor relations to push up the stock’s price in a fraudulent fashion costing investors approximately $131 million in losses.

The specific allegations concerning the corrupt brokers focuses on that in October 2014, a ForceField executive hired Mitchell to distribute kickbacks to corrupt registered broker dealers, including Brown, Cocuzzo, Khan, Miyana, and Patel, in exchange for their purchasing of ForceField stock in their clients’ brokerage accounts.  In order to pay the brokers bribes, ForceField paid Mitchell a ten-percent commission or a kickback for purchases of ForceField stock generated by the corrupt brokers using offshore entities and bank accounts.  Mitchell then is alleged to have shared the ten-percent commission with those who had stuffed their clients’ brokerage accounts with ForceField stock.  Investors were never disclosed the secret kickbacks that were received for making the ForceField purchases.

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