Articles Tagged with Success Trade

shutterstock_140321293Certain groups have been particularly vulnerable to advisors who engage in investment fraud. Among those groups well known are senior citizens who may have diminished capacity. Another group that serves as a common target are affinity frauds. In an affinity fraud the scammer preys upon members of a group or community such as members of certain religions or ethnic communities.

However, lessor known common victims of investment fraud schemes are professional athletes. Athletes are often preyed upon by bad advisors because they possess attributes that tend to allow the advisor to take advantage of their client. Athletes tend to be unsophisticated in the area of securities and investing often never having previous investment experience prior to going pro. In addition, athletes have busy schedules and demands on their time that do not allow the athlete to closely monitor or investigate each recommendation being made to them. Accordingly, athletes tend to place their trust in their professional advisor that they know what they are doing. Finally, athletes represent large, multi-million dollar opportunities to fraudsters.

In a recent OnWallStreet article, the unfortunate tales of several athletes were told. Among those athletes whose story were mentioned was Doug Mirabelli who recently won his arbitration dispute with Merrill Lynch where the firm was ordered to pay more than $1.2 million. The award came after Mirabelli and his wife claimed that their income portfolio, comprised of equities pledged against Merrill Lynch-owned mortgages, suffered losses that caused a liquidation. Their financial advisor Phil Scott was accused of providing “inappropriate investment advice” for securities including investments in Alliance Resource Partners, Apollo Investment Corp. and Copano Energy LLC.

Financial Advisor Michael DeRosa (DeRosa) has been barred by the Financial Industry Regulatory Authority (FINRA) concerning allegations that he refused to provide testimony to the regulator concerning his involvement in Success Trade Securities, Inc.’s (Success Trade) sale of promissory notes (STI Notes).

As we previously reported, FINRA filed a complaint against Success Trade and its CEO and President Fuad Ahmed (Ahmed) accusing them of improperly selling $18 million worth promissory notes.  The promissory notes were issued to 58 investors and were sold primarily to NFL or NBA sports athletes.

FINRA alleged that the STI Notes were part of ponzi scheme to raise capital and funds for Success Trade’s operations while purportedly offering investors 12-26% returns.  FINRA alleged that investors were not made aware of the risks of investing in the STI Notes.  Success Trade was financially insolvent and could only meet its ongoing expenses by selling more STI Notes and by continuing the scheme.  The viability of the company was a crucial risks that need to be disclosed to investors.  Success Trade and Ahmed also failed to register the STI Notes under Regulation D as required.

The Financial Industry Regulatory Authority (FINRA) has filed a complaint against Success Trade Securities, Inc (STS) and its CEO and President Fuad Ahmed (Ahmed) accusing them of improperly selling $18 million worth promissory notes.  The promissory notes were issued by STS’ parent company Success Trade, Inc. (STI) to 58 investors.   The notes were sold primarily to sports athletes in the NFL or NBA.

The FINRA complaint alleges that the STI notes were part of ponzi scheme to simply raise capital and fund STS’ operations while purportedly offering investors 12-26% returns.  The investors were not aware of the risks of investing in the STI notes.  For example, STS was at all times financially insolvent and could only meet its ongoing expenses by selling more STI notes and by continuing the scheme.  Crucial risks such as the viability of the company are material risks that need to be disclosed to investors.  The complaint also alleges that STS and Ahmed failed to register the STI notes as a private placement offering as required under Regulation D.

Problems with the notes began to emerge once the STI notes became due in 2012 through 2013.  At that time, STS and Ahmed solicited noteholders to roll over or extend the terms of the STI notes at higher interest rates or offered customers an equity interest in STS.  The complaint also alleges that in connection with the rollover and extended note sales the firm failed to disclose to some investors that the firm is financially unable to repay the notes that have become due.

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