Articles Posted in Securities Fraud

Securities arbitration is a method of resolving disputes between investors and their brokers or brokerage firms, which is governed by the Financial Industry Regulatory Authority (FINRA). FINRA is a self-regulatory organization that oversees the securities industry and provides a forum for resolving disputes between investors and their brokers or brokerage firms.

Securities arbitration through FINRA is a legal process that allows investors to seek redress for claims arising out of their investment accounts, such as fraud, breach of fiduciary duty, unsuitable investment recommendations, selling away or other misconduct. Securities arbitration is generally faster and less expensive than going to court, and the decision of the arbitrator is final and binding on both parties. It is important for investors to understand their rights and legal options if they believe they have been the victim of misconduct by their broker or brokerage firm.

To initiate a securities arbitration through FINRA, an investor must file a Statement of Claim with FINRA, which sets forth the facts and legal basis for the claim. The Statement of Claim must be filed within six years from the occurrence or event giving rise to the claim. However, the occurrence or event that gives rise to a claim is usually considered the date of damages, or the date a reasonable investor knew or should have known about the claim. While brokerage firms usually argue it is the date of purchase, most arbitration panels disagree with that analysis.

shutterstock_85873471-300x200Advisor Heath Goldstein (Goldstein), currently employed by brokerage firm Western International Securities, Inc. (Western International) has been subject to at least 9 disclosures and customer complaints.  According to a BrokerCheck report the customer complaints concern alternative investments such as direct participation products (DPPs) like business development companies (BDCs), non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and private placements.  In Goldstein’s case at least three of the complaints occurred from the sale of GWG Holdings L-Bonds.  GWG went into bankruptcy.  The attorneys at Gana Weinstein LLP represented nearly 100 investors who suffered losses in GWG.

GWG’s business focused on the acquisition of life insurance policies in the secondary market.  GWG was offered to investors even though the company had no significant operating history and no profits.  Until 2018, GWG’s sole business was to borrow money to buy life insurance policies in the secondary market at prices that are less than the face value of the insurance benefits payable upon the death of the insureds.  GWG would then hold the policies until maturity and collect the face value upon the insured’s death.

The contours of the GWG bonds are as follows:

  • Brokers Earned up to 8% commissions. From GWG’s prospectus “The total amount of the selling commissions…in the course of offering and selling L Bonds will not exceed 8.00% of the aggregate gross offering proceeds….”  GWG Prospectus (Sept. 5, 2019).
  • GWG bonds are inadequately secured. While GWG claims that the L Bonds are secured by insurance portfolio, in the prospectus, the life insurance policies held by DLP IV and Life Trust “do not serve as direct collateral for the L Bonds” and have been “pledged as direct collateral securing” other debt obligations senior to L Bond investors.
  • GWG bonds are “auto-renewable.” Like a magazine subscription, unless an L bond investor gives notice ahead of the maturity date that they wish to redeem their investment, the bond is renewed automatically and replaced with a new one with the same terms and interest rate then being offered by GWG.  This feature forces investors to be vigilant as expiration approaches.
  • GWG bonds are unlisted. This means the bonds are not tradable on any stock exchange.  Because there is no market for the L Bonds there is no way for an investor to regularly gauge the value of an L Bonds or the credit worthiness of GWG based on market sentiment.
  • GWG bonds are not rated. L Bonds were not credit rated by any credit rating agency nor were they insured.

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shutterstock_143448874-300x199The law offices of Gana Weinstein LLP are currently investigating claims that advisor Steven Rodemer (Rodemer) has been accused by his former employer and a financial regulator of taking money from a client account for his personal use among other allegations.  According to records kept by The Financial Industry Regulatory Authority (FINRA) Rodemer was terminated by his prior employer, Stifel, Nicolaus & Company, Incorporated (Stifel, Nicolaus) concerning his theft and misappropriation of client funds.  If you have been a victim of Rodemer’s alleged misconduct our firm may be able to assist you in recovering funds.

In December 2019 Stifel, Nicolaus terminated Rodemer after alleging that he took money from a client account for his personal use without authorization.

Thereafter, in March 2020, FINRA brought a regulatory action and fount that Rodemer consented to sanctions and findings that he refused to provide on-the-record testimony requested by FINRA during its investigation into the conduct disclosed in a Form U5 submitted by his member firm. FINRA determined that the firm submitted the Form U5 terminating Rodemer for taking money from a client account for his personal use without authorization.

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shutterstock_180341738-200x300The law offices of Gana Weinstein LLP are currently investigating claims that advisor Lance Armstrong (Armstrong) was terminated by his firm and then barred from the securities industry over allegations that he engaged in multiple loans with customers among other allegations.  According to BrokerCheck records, Armstrong was formerly registered with The Financial Industry Regulatory Authority (FINRA) member firm Raymond James Financial Services, Inc (Raymond James).  If you have been a victim of Armstrong’s alleged misconduct our firm may be able to assist you in recovering funds.

In November 2019 FINRA barred Armstrong finding that Armstrong consented to the sanction and findings that he refused to appear for on-the-record testimony as requested by FINRA in connection with its investigation of his activities. FINRA stated that Armstrong’s member firm filed a Form U5, disclosing that it had discharged him after he solicited and accepted multiple loans from customers in connection with an undisclosed outside business activity.

According to Armstrong’s publicly disclosed records the only outside business activities disclosed including Coopcade Capital LLC and First Hope Bank.  It is unclear at this time whether FINRA’s allegations concern these entities.

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shutterstock_102242143-300x169Advisor Jeffrey Dixson (Dixson), currently employed by Madison Avenue Securities, LLC (Madison Avenue) has been subject to at least seven customer complaints and one regulatory action during the course of his career.  According to a BrokerCheck report the customer complaint concerns alternative investments such private placements and direct participation products (DPPs) like non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have represented dozens of investors who suffered losses caused by these types of high risk, low reward products.

One private placement that a large number of clients of Madison Avenue were sold is GPB Capital Holdings (GPB Capital) related investments.  GPB Capital is facing multiple accusations of being a Ponzi scheme, an ongoing U.S. Securities and Exchange Commission (SEC) and FBI investigations, and even GPB’s chief compliance officier being indicted for illegally obtaining information on the SEC’s investigation.  Now even Volkswagen and Toyota are threatening to pull the plug on GPB Capital auto dealerships.  While advisors have been telling investors to do absolutely nothing and just hang in there – this is nothing more than just additional poor advice.  In November 2019 GPB Capital’s admitted that no financial audit would occur anytime in the near future.  In sum, investors now know there is nothing to hang onto.  By the day, advisor recommendations to do nothing appear to be completely self-serving, out of the loop, and not in the interest of the investor.

In November 2019 a customer complained that Dixson violated the securities laws by alleging that Dixson engaged in sales practice violations related to investments made between 2016 to the present in various alternative investments and fixed index annuities that were alleged as unsuitable. The allegations include Oregon Securities Law, breach of fiduciary duty, negligence and elder abuse.  The claim alleges $150,000 in damages and is currently pending.

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shutterstock_168326705-199x300According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Katherine Nishnic (Nishnic), currently associated with Centaurus Financial, Inc. (Centaurus), has been subject to at least eight customer complaints during her career.  The majority of the customer complaints against Nishnic concern allegations relating to unsuitable recommendations in structured products. The law offices of Gana Weinstein LLP are currently representing investors, including Centaurus investors, who were surprised to find out that the “bonds” that were recommended by their advisors have almost completely stopped paying interest while plummeting in value.

What many investors in this situation did not realize was that they were not sold bonds at all but instead complex structured products that go by a variety of names including steepener notes, adjustable rate market notes, spread linked notes, or structured notes.  Regulators have already stated that it is improper to sell these investments as a fixed income substitute or to compare them to bonds in terms of producing a revenue stream.  However, in our firm’s experience it appears that many brokers have been selling structured products as bond alternatives.

Structured products range in risk from benign to extreme.  However, most structured products produce inferior risk/return profiles than ordinary debt or equity instruments because the brokerage firms that issue these products seek to profit from the spread between the payment to investors and the amount of money the brokerage firm can make from the issuance.  When dealing with complex structured products most investors will lack the ability to understand the merits of investments nor are they appropriate for investors seeking a fixed or reliable income and have a desire for preservation of capital.

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shutterstock_120556300-300x300The law offices of Gana Weinstein LLP are currently investigating claims that advisor Michael Carter (Carter) was discharged by his employer after being accused of misappropriating client funds.  According to BrokerCheck records, Carter is formerly registered with The Financial Industry Regulatory Authority (FINRA) member firm Morgan Stanley.  In addition, Carter disclosed three customer complaints related to misappropriating funds. If you have been a victim of Carter’s alleged misconduct our firm may be able to assist you in recovering funds.

In July 2019 Morgan Stanley discharged Carter after alleging that he was terminated after allegations of misappropriation of funds occurred.

In September 2019 FINRA filed a regulatory action alleging that Carter consented to the sanction and findings that he failed to provide documents and information requested by FINRA during the course of an investigation after FINRA received a tip relating to allegations of misconduct made by Morgan Stanley.

Our law firm has significant experience bringing cases on behalf of defrauded victims when their advisors engage in receiving loans from clients or selling fraudulent securities sales through OBAs.  The sale of unapproved investment products – is a practice known in the industry as “selling away” – a serious violation of the securities laws.  In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm.  Sometimes those investments have some legitimacy but often times these types of investments can end up being Ponzi schemes or the advisor can be engaging in the conversion of funds.

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shutterstock_160304408-300x199The law offices of Gana Weinstein LLP are currently investigating claims that advisor Kerry Hoffman (Hoffman) engaged in undisclosed outside business activities (OBAs) and investment sales that were not approved by his brokerage firm.  Hoffman, formerly registered with LPL Financial LLC (LPL Financial) and Union Capital Company (Union Capital) was subject to charges of securities fraud by The Securities and Exchange Commission (SEC) according to records kept by The Financial Industry Regulatory Authority (FINRA).  In addition, Hoffman disclosed two customer complaints and three employment termination for cause.

In July 2019 the SEC charged Hoffman along with Thomas Conwell (Conwell) for fraudulently selling securities to retail investors.  The SEC’s complaint alleges that from July 2015 through July 2018, Conwell and Hoffman raised over $3.3 million from approximately 46 investors through the sale of unregistered GT Media, Inc. securities. The SEC alleged that Conwell is no stranger to securities fraud and was previously enjoined by the SEC and criminally convicted for stealing money from investors.  In the case of GT Media, the SEC alleged that investors received numerous false representations including that two Fortune 500 companies were seeking to acquire GT Media and that GT Media would soon conduct an initial public offering.  The SEC claims that Conwell misappropriated $161,500 from investors for his his personal expenses. The SEC also alleged that Hoffman solicited advisory clients to invest in GT Media securities without disclosing his financial conflicts of interest, including his compensation from GT Media and his short-term loans to GT Media that were repaid using investor funds.

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shutterstock_25054879-300x200The law offices of Gana Weinstein LLP are currently investigating claims against broker Nick Son (Son), currently associated with Aegis Capital Corp. (Aegis) out of New York, New York.  According to a BrokerCheck report, Son has been subject to at least seven customer disputes during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Son’s customer complaints concern allegations of unauthorized trading, unsuitable investments, and misrepresentations among other claims.

In February 2018 a customer filed a complaint alleging that Son violated the securities laws by making unauthorized trading and unsuitable investment recommendations.  The customer requested $224,968 in damages.  The dispute is currently pending.

In April 2016 a customer alleged that in March 2016, Son engaged in high pressure sales tactics and misrepresentations causing $65,984 in damages.  The claim was denied.

Advisors are not allowed to engage in unauthorized trading.  Such trading occurs when a broker sells securities without the prior authority from the investor. All brokers are under an obligation to first discuss trades with the investor before executing them under NYSE Rule 408(a) and FINRA Rules 2510(b).  These rules explicitly prohibit brokers from making discretionary trades in a customers non-discretionary accounts. The SEC has also found that unauthorized trading to be fraudulent nature because no disclosure could be more important to an investor than to be made aware that a trade will take place.

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shutterstock_143685652-300x300The attorneys at Gana Weinstein LLP are currently investigating reports that advisor Nicolas Barrios (Barrios) engaged in undisclosed outside business activities (OBAs) that were not approved by his brokerage firm resulting in potential fraudulent investments.  Barrios, formerly registered with UBS Financial Services Inc. (UBS) out of Winter Haven, Florida was barred from the financial industry according to records kept by The Financial Industry Regulatory Authority (FINRA).  In addition, Barrios disclosed at least four customer complaints and one employment termination for cause.

In April 2019 UBS terminated Barrios for cause alleging that he was discharged after stating during a firm review: (1) he arranged for client to invest away from firm in private company; (2) he personally invested in that company without firm approval; and (3) he used personal email to communicate with client’s family in an attempt to evade firm detection.  UBS claims to have subsequently learned that at least seven of Barrios’ clients moved money from UBS accounts to outside bank accounts from which they wrote checks to an entity with which Barrios is affiliated

In June 2019 FINRA found that Barrios consented to the sanctions and findings that he failed to provide FINRA with requested documents and information in connection with FINRA’s investigation into allegations that Barrios mismanaged and committed fraud with respect to a customer’s account. Accordingly, Barrios was automatically barred from the securities industry.

At this time it is unclear what OBA Barrios engaged in that FINRA was investigating.  Barrios’s public disclosures state that he was involved in a auto boat broker dealer business.  It is unclear if these OBAs were the subject of FINRA’s investigation.

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