Securities Lawyers Blog

FINRA Sanctions Michael Wurdinger and Anil Vazirani Over GWG Debenture Sales

August 1, 2014 | by Staff Attorney

The law offices of Gana Weinstein LLP are investigating claims concerning allegations made by the Financial Industry Regulatory Authority (FINRA) that Michael Wurdinger (Wurdinger), from approximately February 2012, to February 2013, Wurdinger failed to adequately supervise sales of GWG Renewable Secured Debentures (GWG), an illiquid and high-risk alternative investment in violation of NASD Rule 3010 and FINRA Rule 2010. As a result of FINRA’s investigation Wurdinger was suspended for six months.

Wurdinger was associated as a securities principal with Center Street Securities, Inc. (Center Street) from June 2009, until April 2013, when he resigned. Since November 4, 2013, Wurdinger has been associated as with Wells Fargo Advisors, LLC. Center Street has 84 registered representatives and 67 branches offices nationwide.

As a background, GWG Holdings, Inc. purchases life insurance policies on the secondary market at a discount to the face value of the policies. Once purchased, GWG pays the policy premiums until the insured dies. GWG then collects the face value of the insurance benefit and the company hopes to earn returns by collecting more upon the maturity of the policies than it has paid to purchase the policy and service the premiums. FINRA found that the company has a limited operating history and has yet to be profitable.

James Applewhite Fined Over Allegations of Unauthorized Discretionary Trading

July 31, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned financial advisor James Applewhite (Applewhite) concerning allegations that from about January 2010, through October 2012, Applewhite exercised discretion by effecting approximately 171 transactions in eight customer accounts without obtaining prior written authorization from the customers and without having the accounts accepted as discretionary accounts as required by NASD Rule 2510(b). FINRA found that the discretion was generally exercised pursuant to a strategy previously agreed upon with the customers. Nonetheless, FINRA alleged the firm did not permit discretionary trading, except for managed accounts, with pre-approved written discretion. As a result FINRA found that Applewhite violated NASD Rule 2510(b) and FINRA Rule 2010.

Applewhite entered the securities industry in November 1983. During all periods mentioned in the FINRA finding he was associated with Wells Fargo Advisors, LLC. Applewhite’s employment with Wells Fargo ended on October 22, 2012. Thereafter, Applewhite became registered with BB&T Securities, L.L.C f/k/a Scott & Stringfellow, LLC.

The allegations made against Applewhite constitute unauthorized trading. Unauthorized trading occurs when a broker sells, buys, or exchanges, securities without the prior consent or authority from the investor. Unless an investor gives discretion to make trades, the broker must first discuss all trades with the investor before executing them. Even if the a customer verbally grants a broker discretion such an agreement is not valid under industry rules The SEC has found that unauthorized trading also constitutes securities fraud due to its fraudulent nature. No omission of information could be more material than the failure to inform the investor of his or her own purchases and sales.

James Bracey Barred Over Allegations of Taking Loans from Customers

July 29, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) barred from the financial industry broker James Bracey (Bracey) concerning allegations that in or about February 2008, Bracey, received a $175,000 loan from a customer without notifying Multi-Financial, now known as Cetera Advisor Network LLC. FINRA alleged that on multiple occasions between 2009 and 2011, Bracey renegotiated the interest payments on the customer’s loan. FINRA also found that in December 2009, while associated with Multi-Financial, Bracey falsified a customer’s written wire transfer instructions in order to execute an unauthorized fund transfer from a customer’s brokerage account to that customer’s personal bank account outside of Multi-Financial. FINRA determined that Bracey caused the creation and maintenance of inaccurate books and records through the falsifying the customer’s wire transfer.

FINRA also alleged that between October 31, 2001 and April 30, 2012, Bracey failed to timely notify Multi-Financial, and later LPL Financial LLC, of two separate outside business activities. FINRA also found that in October 2004, after soliciting 17 investors to purchase securities away from Multi-Financial, Bracey failed to provide written notice to or firm approval to engage in private securities transactions in violation of NASD Rules 3040 and 2110. FINRA’s allegations are consistent with a “selling away” violation in which a broker solicits investors to invest in unapproved investments. Finally, FINRA found that between 2004 and 2012, Bracey willfully failed to timely disclose material information to Multi-Financial and LPL Financial in order to update his Form U4 concerning two liens and two creditor compromises.

In addition to the slew of violations alleged by FINRA, Bracey has been the subject of at least three customer complaints and terminated by three brokerage firms. The customer complaints against Bracey concern private placements (direct participation programs), equipment leasing investments, unsuitable investments, non-traded real estate investment trusts (REITs), and misrepresentations in the sale of securities.

Advanced Equities Fined Over Failure to Disclose Material Information Concerning Fisker Automotive Private Placements (Part II)

July 29, 2014 | by Staff Attorney

As we recently posted, our firm has covered the failures concerning the sale and recommendation of Advanced Equities private placement since the SEC brought charges against the firm. We also represent numerous clients who have unfortunately invested in these products that were alleged to have been sold as “late-stage private equities” by First Allied Securities brokers among others.

Recently, FINRA fined Advanced Equities $250,000 concerning allegations that between approximately November 1, and December 1, 2011, AEI, failed to identify material information and correct omissions of material facts made by the issuer in connection with a private placement offering.

As a background, Fisker Auto was an American automobile maker that manufactured hybrid electric vehicles. Shares in the company were sold through limited liability companies to accredited investors. In or around September 2009, Fisker Auto obtained a “loan facility” in the approximate amount of $529 million, which was overseen by the United States Department of Energy (DOE). Under the terms of the loan facility agreement, Fisker Auto could seek reimbursement costs associated with the production of two cars if the company was in compliance with certain financial covenants and project milestones. Those covenants generally included milestones requiring that Fisker Auto to achieve a certain level of earnings, sell a particular number of automobiles, and complete certification requirements related to safety and environmental matters.

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.

Advanced Equities Fined Over Allegations of Failure to Disclose Information Concerning Fisker Automotive Private Placements

July 25, 2014 | by Staff Attorney

Our firm has covered the supervisory and due diligence failures concerning the sale and recommendation of Advanced Equities private placement since the SEC brought charges against the firm and its principals for selling one of its products by making material misrepresentations to investors. We also represent numerous clients who have unfortunately invested in these products that were alleged to have been sold as “late-stage private equities” by First Allied Securities brokers among others. Below are posts with additional information concerning these products.

Investor Alert: Brokers Matthew Bell and Craig Josephberg Indicted in CodeSmart Holdings (OTC: ITEN) Scam

July 23, 2014 | by Staff Attorney

Gana Weinstein LLP is investigating claims were brought by securities and exchange commission (SEC) against Matthew Bell (Bell) and Craig Josephberg (Josephberg) in connection with participation in a $300 million securities fraud market manipulation scheme. The SEC brought charges against Abraxas J. Discala (Discala), Marc E. Wexler (Wexler), and Ira Shapiro (Shapiro), for manipulating the stock price of sale of CodeSmart Holdings (OTC: ITEN), Cubed, Inc. (OTC: CRPT), StarStream (OTC: SSET) and The Staffing Group, Ltd. (OTC: TSGL).

According to the complaint, in 2013, Discala and Wexler conspired with Bell and Josephberg, both registered representatives with different brokerage firms, to inflate the price of the stock of CodeSmart. The SEC found that Discala, Wexler, Bell, and Josephberg then profited by selling their shares at inflated values at the expense of Bell’s clients and Josephberg’s customers.

Bell was taken into custody by the FBI and appeared in federal court in San Antonio. In Court, Bell was informed of a 10-count indictment returned in Brooklyn, New York, and was released on bond. Bell has a long history of customer complaints and two firm terminations.

Gana LLP Investigates Broker Angelo Talebi’s Investment Activities: Attention Iranian Investors in California

July 23, 2014 | by Staff Attorney

The law offices of Gana Weinstein LLP are investigating claims that broker Angelo Talebi (Talebi) made misrepresentations regarding investments in alternative investments such as Real Estate Investment Trusts (REITs) and oil and gas limited partnerships. Upon information and belief, Talebi is targeting Iranian investors in California. According to Talebi’s BrokerCheck, at least 13 customer complaints have been filed regarding Talebi’s sales practices in FINRA arbitration. Some of the complaints also allege that Talebi unsuitably invested clients in various investments including variable annuities and private placements including KBS 1 REIT, Leaf Equipment finance, Inland American Real Estate Trust, Atlas Resources. Another complaint alleges unsuitable equity investments and excessive use of margin.

From 1999 through December 2012, Talebi was associated with LPL Financial LLC (LPL Financial). Thereafter, until April 2014, Talebi was a registered representative of Royal Alliance Associates, Inc. Currently, Talebi is associated with Independent Financial Group, LLC.

The investment products that Talebi is alleged to have inappropriately recommended to clients are part of a growing industry trend of placing investors heavily in alternative investments and illiquid products. Many times brokers tell investors that these products are more stable and predictable than the stock market. After the financial crisis many investors were receptive to these sales pitches. However, brokers sometimes fail to disclose that the stability of these investments is artificially generated by the lack of disclosure and trading market for these products. In the cases of REITs and oil and gas private placements investors may only learn years after investing that the value of these assets has fallen substantially and some investors do not know of their losses until the investment goes completely bust.

SEC Alleges Broker Craig Josephberg Involved in a $300 Million Market Scheme of CodeSmart Stock (Part II)

July 22, 2014 | by Staff Attorney

In our prior post, our offices, Gana Weinstein LLP, noted its investigation of the July 17, 2014, claims brought by securities and exchange commission (SEC) against Craig Josephberg in connection with his participation in a $300 million securities fraud market manipulation scheme. The SEC brought charges against Abraxas J. Discala (Discala), Marc E. Wexler (Wexler), Matthew A. Bell (Bell), Craig L. Josephberg (Josephberg), and Ira Shapiro (Shapiro), for manipulating the stock price of four publically traded companies, CodeSmart Holdings, Inc. (CodeSmart), Cubed, StarStream Entertainment Inc., and the Staffing Group, Ltd.

According to the complaint, in 2013, Discala and Wexler conspired with registered representatives Bell and Josephberg to inflate the price of the stock of CodeSmart. The SEC found that Discala, Wexler, Bell, and Josephberg then profited by selling their shares at inflated values at the expense of Bell’s clients and Josephberg’s customers.

Josephberg has a long and troubled regulatory, criminal activity, debts, customer complaints, among a host of other supervisory “red flags” of potential misconduct in the handling of his clients. Josephberg entered the securities industry in 1996. Thereafter, he was associated with eight different firms including Maxim Group LLC, ICM Capital Markets, LTD, vFinance Investments, Inc., Halcyon Cabot Partners, LTD. (Halcoyon), and most recently Meyers Associates, L.P. (Meyers Associates). Indeed, when Josephberg was terminated from Halcoyon he was under investigation by the firm for sales practice violations including the selling of unsuitable securities, unauthorized trades, and securities fraud in connection with the sale of penny stocks including VHGI and Cell Therapeutics.

Gana LLP Investigates Craig Josephberg’s Alleged $300 Million Market Scheme

July 21, 2014 | by Staff Attorney

The law offices of Gana Weinstein LLP are investigating the July 17, 2014, claims brought by securities and exchange commission (SEC) against Craig Josephbergin connection with his participation in a $300 million securities fraud market manipulation scheme. According to the SEC, Abraxas J. Discala (Discala), Marc E. Wexler (Wexler), Matthew A. Bell (Bell), Craig L. Josephberg (Josephberg), and Ira Shapiro (Shapiro), assisted in manipulating the stock price of four publically traded companies, CodeSmart Holdings, Inc. (CodeSmart), Cubed, StarStream Entertainment Inc., and the Staffing Group, Ltd.

According to the complaint, in 2013, Discala and Wexler served as the CEO and President of OmniView Capital Advisors LLC (OmniView) conspired with registered representatives Bell and Josephberg to inflate the price of the stock of CodeSmart. The SEC found that Discala, Wexler, Bell, and Josephberg then profited by selling their shares at inflated values at the expense of Bell’s clients and Josephberg’s customers.

The SEC alleged that defendants accomplished their scheme following CodeSmart’s reverse merger into a public shell company in May 2013, whereby Discala and his associates, including Wexler, Bell, and Josephberg, obtained control of 3,000,000 shares of CodeSmart. Later in May 2013, the SEC found that Discala and Wexler flooded the market with CodeSmart’s shares and found ready buyers in Bell’s advisory clients and Josephberg’s brokerage customers.