Securities Lawyers Blog
The Financial Industry Regulatory Authority (FINRA) has permanently barred broker Mark Christopher Hotton (Hotton) alleging that the broker engaged in numerous and repeated frauds including forgery, falsification of documents, conversion, misuse of funds, manipulating account records, churning, unauthorized trading, false testimony, and providing false information and documents to FINRA.
FINRA alleged that starting from at least 2006, Hotton engaged in numerous fraudulent investment schemes to steal at least $5,932,000 from his brokerage customers. FINRA admitted that due to the complexity of the fraud that it had not been able to track down Hotton’s entire use and receipt of ill-gotten funds. According to FINRA, Hotton converted funds from his customers by using his control over the bank accounts of various corporate entities to divert funds that his customers believed were being invested in legitimate businesses.
Fom November 2002 until November 2005, Hotton was associated with Ladenburg, Thalmann & Co., Inc., From November 2005 until February 2009, Hotton was associated with Oppenheimer & Co., Inc. (Oppenheimer). While at Oppenheimer, Hotton focused on clients with an average net worth of between $1,000,000 and $20,000,000. Thereafter, Hotton was a registered representative of American Capital Partners, LLC until August 2010. From September 2010 until March 2012, Hotton was associated with Alexander Capital, L.P. Finally, from February 2012 until May 2012, Hutton was associated with Obsidian Financial Group, LLC. Obsidian terminated Hotton’s registration on May 31, 2012.
FINRA stated that Hotton’s schemes varied widely. In some instances, Hotton converted funds by persuading his customers to purchase securities that simply did not exist. Other times, Hotton persuaded customers to invest in seemingly legitimate businesses, but then used the customers’ funds to pay back prior investors while converted some of the funds for his own personal use. In order to support Hotton’s schemes, FINRA stated that the broker forged signatures on letters of authorization, lied on third-party wire request forms, and created fictitious investments among other actions to conceal and carry out his illegal conduct.
Hotton’s schemes are alleged to have involved forged, fabricated, and false documents, fictitious transactions, fictitious securities, false statements, and false and misleading account statements and summaries. To further obscure misconduct, Hotton allegedly provided false information to his customers and to his member firm. In one instance, Hotton is accused of having made an unauthorized loan to a customer, in violation of NASD Rules 2370 and 2110, in order to prevent his scheme from unraveling.
As Hotton’s fraudulent schemes began to unravel, Hotton even wired funds directly from one customer’s brokerage account to the accounts of other investors who were demanding to be repaid. FINRA found that Hotton’s wide-ranging frauds to convert customer funds violated NASD Rules 2330 and 2110 and FINRA Rule 2010. Also as part of Hotton’s scheme, FINRA alleged that Hotton hid his ownership and control over the entities he was directing his customers’ funds into. In so doing, FINRA found that Hotton violated NASD Rules 3030, 2110 and IM-1000-1, and FINRA Rule 2010. In addition, FINRA alleged that Hotton caused at least $2,584,078 to be wired from the brokerage accounts of his customers at Oppenheimer to Hotton’s outside business activities companies and individuals with whom Hotton was affiliated.
Further, FINRA found that Hotton lost millions of dollars in customer accounts by engaging in fraudulent churning and excessively trading client accounts, exercising discretion without authorization, trading without authorization, and recommending unsuitable transactions in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, NASD Rules 2120, 2310, 2510, IM-2310-2, and 2110, and FINRA Rules 2020 and 2010.
FINRA also alleged that Hotton lied to regulators and his member firm by willfully failing to disclose customer arbitrations, settlements, and civil actions on his. In addition, during FINRA’s investigations, Hotton allegedly repeatedly lied under oath during on-the-record testimony, provided false written responses to FINRA’s requests for information, and provided FINRA with forged and 4 fabricated documents. Hotton’s false statements to FINRA violated NASD Rules 8210 and 2110 and FINRA Rules 8210 and 2010.
Some of the alleged fraudulent investment vehicles utilized by Hotton on unsuspecting investors include Pioneer Ventures, Atlantic Senior Associates, Trinity Management Consulting Corp., Bon-Ton Department Stores. Hotton also allegedly was also either employed by or accepted compensation from the following business entities: Atlantic Senior Associates, LLC; Coastal Partners Associates, LLC; Coastal Partners Storage, LLC; Pioneer Venture, LLC; Trinity Management Consulting Corp.; LAN Utilities Electric, Inc.; and Canyon Brothers Construction LLC.
The attorneys at Gana Weinstein LLP are experienced in investigating claims of fraud and outside business activities. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free of charge and the firm is only compensated if you recover.