Securities Fraud Blog | Find out if your broker is liable for your losses

TAG | broker theft from customers

Jun/11

16

BOYNTON BEACH MAN CHARGED WITH MAIL FRAUD IN “PONZI” SCHEME

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It was anounced on Florida’s Office of Financial Regulation, that on June 3, 2011 there was a filing of a Criminal Information against defendant Anthony F. Cutaia, 65, of Boynton Beach, Florida.  Cutaia made his initial appearance in federal court, and was released on a personal surety bond.  
 
The news-release states that the Information charges Cutaia with nine counts of mail fraud, in violation of Title 18, United States Code, Section, 1341.  More specifically, the Information alleges that Cutaia was the managing member and beneficial owner of CMG Property Investment Group, LLC, which purportedly engaged in commercial real estate investment.  Cutaia was also the host of “Talk About Mortgages and Real Estate,” a television and radio program. 
 
From March 2003 through December 2006, Cutaia entered into Contract Participation Agreements with investors according to the charges.  These contracts stated that investors’ money would be used solely to purchase real estate contracts in Palm Beach and Broward Counties and that CMG would not collect commissions or fees until the properties were sold and a profit was made.  In fact, however, Cutaia allegedly invested little of the investors’ money in real estate and instead used the investors’ money to make payments to pre-existing investors and to pay his own business and personal expenses.  
Have you or your family members become an alleged victim or Anthony F. Cutaia? Protect yourself and your investments from the unscrupulous brokers and brokerages who turn your investments into Ponzi schemes. Call a Securities Arbitration Lawyer at Soreide Law Group, PLLC, for a free consultation on how to potentially recover your investment losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

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Jun/11

14

FRAUD CHARGES BROUGHT BY SEC IN SILICON VALLEY REAL ESTATE INVESTMENT SCHEME

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On the U. S. Securities and Exchange Commission’s website, it was announced that the Securities and Exchange Commission (SEC) charged Mountain View, Calif.-based JSW Financial Inc. and five officers for defrauding investors in two real estate funds, alleging that the firm used investor funds to prop up the officers’ own failing real estate development projects while concealing the loss of $17 million of investors’ money.

In the article it says that the SEC alleges that from 2002 to 2008, JSW and its predecessor, Jim Ward & Associates (JWA), created two real estate investment funds – Blue Chip Realty Fund and Shoreline Investment Fund – and told investors that their money would be used to make loans secured by residential real estate. In reality, according to the SEC, the firms’ officers used most of the money to make unsecured and undocumented loans to entities that the officers themselves controlled, which were suffering mounting losses and protracted delays on Silicon Valley real estate development projects. Meanwhile, as the enterprise collapsed, investors continued receiving monthly statements showing steady growth in the value of their portfolios.

In the SEC’s complaint, filed in federal district court in San Francisco, names as defendants founder James S. Ward and Edward G. Locker (both of Ohio) and David S. Lee, Richard F. Tipton and David C. Lin (all Silicon Valley residents). The complaint alleges that JSW and JWA, through these individual officers, breached their fiduciary duties by misusing investors’ money to benefit the officers rather than the funds. The SEC also alleges that the officers concealed millions of dollars in losses from Blue Chip and Shoreline investors by sending fraudulent account statements claiming that the Funds were earning more than 10% in annual profits, until the scheme collapsed in November 2008 and the officers finally revealed to investors that nearly all of the Blue Chip and Shoreline loans were unsecured. The SEC also alleges that Ward and Locker together took $900,000 of investor money to purchase homes for themselves.

On the SEC’s website it was announced that the SEC’s complaint charges JSW, Ward, Lee, Locker, Tipton and Lin with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also charges JSW with violating Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 (Advisers Act) and Rule 206(4)-8 thereunder, and charges Ward, Lee, Locker, Tipton and Lin with aiding and abetting violations of Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. The SEC seeks injunctive relief and disgorgement of ill-gotten gains against JSW, Ward, Lee, Locker, Tipton and Lin, as well as monetary penalties against the five officers. The complaint also seeks disgorgement of ill-gotten gains and appointment of a receiver over Blue Chip and Shoreline as relief defendants.

If you feel you or a family member has become an alleged victim of  JSW Financial Inc., Jim Ward & Associates, James Ward, Edward Locker, David Lee, Richard Tipton , David Lin, or a similar situation, call a Securities Arbitration Lawyer for a free consultation on how to recover your investment losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Jun/11

14

INVESTMENT ADVISER, FUND MANAGER, AND TWO INDIVIDUALS WITH CHARGED BY SEC WITH SECURITIES FRAUD INVOLVING CLIENT FUNDS

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Recently on the US Securities and Exchange Commission’s website, they announced the filing of a civil injunctive action in U.S. District Court in Los Angeles, California against MAM Wealth Management, LLC (MAM), MAMW Real Estate General Partner, LLC (MAMW), Alex Martinez and Ralph Sanchez, alleging fraud in connection with client investments in a $10.3 million risky real estate venture.

According to the Commission’s complaint, from July 2007 through March 2009, Martinez, a MAM and MAMW principal, and Ralph Sanchez, a MAM registered representative and MAMW principal, had 50 of their advisory clients invest in MAM Wealth Management Real Estate Fund, LLC (Fund). The complaint alleges that Martinez and Sanchez misrepresented to some clients that the Fund was a safe, relatively liquid investment, was earning 9% per year, and would show profits in three years. The complaint alleges that they used their discretionary authority over other clients’ funds to invest them in the Fund, even though it was unsuitable for their conservative investment goals. The complaint alleges that many accounts were retirement accounts and that the Fund was an unsuitable investment for clients who did not have the ability and willingness to accept the risks of losing their entire investment. The complaint further alleges that the defendants caused the Fund to use client funds to make risky mortgage loans.

On the U.S. Securities and Exchange Commission’s website they write that there was a complaint alleging that the defendants have violated the antifraud provisions of the federal securities laws, including violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder by MAM, MAMW, Martinez and Sanchez and Sections 206(1) and 206(2) of the Investment Advisers Act by MAM and Martinez and aiding and abetting violations of Sections 206(1) and 206(2) of the Investment Advisers Act by Sanchez. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and monetary penalties.

If you feel you or a family member has become an alleged victim of  MAM, MAMW, Alex Martinez, Ralph Sanchez or any of their brokers, or a similar situation, call a Securities Arbitration Lawyer for a free consultation on how to recover your investment losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Jun/11

6

Broker-Dealers Often Keep Insurance Licenses After Being Fired

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In an article from InvestmentNews.com, May 29, 2011, Bruce Kelly writes that Neal Smalbach was fired by a broker-dealer in 2008 for selling securities while he was unregistered, an infraction that got him suspended by the Financial Industry Regulatory Authority Inc. (FINRA) for six months, according to the organization’s BrokerCheck system. It was the second time that a securities firm had let him go. Though he no longer had a securities license, Mr. Smalbach still had a license to sell insurance, and made good use of it — at least for himself, authorities said.

Kelly writes that on April 29, Mr. Smalbach was arrested in Florida by the Pinellas County sheriff and charged with one count of insurance fraud and one count of organized fraud. Each count carries a maximum of five years in prison, along with a potential $5,000 fine. The charges of insurance fraud against Mr. Smalbach, who also has 37 pending customer disputes from his time as a broker, according to BrokerCheck, highlight a persistent problem in the investment advice business:

Registered representatives who permanently or temporarily lose their license to sell stocks, bonds and mutual funds often retain a license to sell insurance.

Although state agencies that regulate insurance agents and securities brokers try to work together to keep an eye on brokers who get fired from either side of the industry, regulators are sometimes limited in their authority because of a lack of information sharing about reps and agents, observers said.

A common criticism among registered reps is that insurance agents who lose a license to sell securities products often sell equity-indexed annuities, an insurance product that is nonetheless marketed as an investment that can compete with a mutual fund or variable annuity.

“It’s been an issue, and still is, among states,” said Joseph Borg, director of the Alabama Securities Commission. “If you’ve been kicked out of one end of the financial markets, you probably don’t need to be in another.”

According to the InvestmentNews.com article, Mr. Smalbach, 48, was selling mortgage insurance policies that promise to pay the balance of a policyholder’s mortgage in the event that he or she dies, according to Jeremy Powers, an assistant state attorney in Florida’s Fifth Judicial Circuit. But instead of mortgage insurance, Mr. Smalbach’s clients were, in fact, sold whole-life policies that were worth no more than $20,000.

“Somebody who’s had the level of problems that [Mr.] Smalbach appears to have had would create a risk for consumers,” Mr. Powers said. “The activities alleged in this case are pretty serious and had the potential to create multiple hundreds of thousands of dollars in victim losses.”

 Smalbach, whose sales practices were profiled last month by the St. Petersburg (Fla.) Times, serve as a backdrop to efforts by lawmakers in Washington and regulators across the country to create a single fiduciary standard for investment advisers, registered reps and insurance agents. This year, a law went into effect in Florida that gives the state’s Department of Financial Services the power to revoke an insurance agent’s license immediately if the agent has his or her securities license revoked.

“Fraud is fraud,” said Nina Ashley, a department spokeswoman.

Kelly reminds us that when confronted with a broker whose securities license had been pulled — but who maintained an insurance license — regulators’ hands are, at times, tied. To take actions against a broker’s insurance license, Ms. Ashley said a specific insurance violation has to be found. “That didn’t always exist,” she said.

Florida already has used the new law to revoke the insurance license of a broker who misrepresented information when selling securities to a senior citizen, Ms. Ashley said. In February, the Florida Office of Financial Regulation permanently barred Jeffrey Donner on charges that he failed to disclose to clients that their accounts would automatically be billed advisory fees of 30% annualized, according to a statement from the agency. Approximately $40,000 in management fees were deducted from clients’ accounts. While Mr. Donner neither admitted nor denied the findings, Florida regulators revoked his insurance license this month according to the InvestmentNews.com article.

THEY ARE FINDING LOOPHOLES

We’ve learned that Mr. Smalbach, however, still has a license to sell insurance products such as life and health policies, and variable annuities, according to the Florida Department of Financial Services’ website.

The broker in question exploited another loophole in the law when he sold stock in a firm called Transfer Technology International Corp., whose shares are currently listed at less than a penny a share. At least a dozen elderly investors, some in their 80s and 90s, bought nearly $1 million of the stock from Mr. Smalbach, according to the St. Petersburg Times. Although he didn’t have a securities license, Mr. Smalbach was an employee of Transfer Technology and could sell shares in the company to accredited investors legally, the newspaper reported.

THEY ARE SMOOTH OPERATORS

Bruce Kelly writes that one longtime client of Mr. Smalbach who invested in the Wesley Chapel, Fla.-based company was Bob Fox, 78, of Sebring, Fla. A client of Mr. Smalbach’s for over a decade, Mr. Fox said he has lost $100,000 in his Transfer Technology investment.

“He was a really smooth talker,” Mr. Fox said, adding that Mr. Smalbach often hurried him through paperwork when buying an investment.

Mr. Smalbach’s former accountant, Robert Ferreira, corroborated Mr. Fox’s statement said the ex-broker often rushed clients through the process of buying investment products, including variable annuities.

“His method was to say, “Sign here, fill in this and that — I’m in a hurry and will fill in the rest at the office,’” Mr. Ferreira said.

If you or a family member have purchased policies through Neal Smalbach or other brokers and experienced a similar situation, contact an insurance fraud attorney for a free consultation on how to potentially recover your investment losses.  To speak with an attorney, call 888-760-6552, or visit stockmarketlawsuit.com. 

We stand up and fight for the rights of consumers. Soreide Law Group, PLLC, representing Insurance Fraud Victims in Federal Court, State Court and before the Financial Industry Regulatory Authority (“FINRA”).

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May/11

30

Have you Purchased Church Bonds from Mainsail Asset Management, LLC?

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Soreide Law Group, PLLC, is currently investigating the purchase of church bonds from John Lovejoy or the Mainsail Asset Management, LLC, of Scottsboro, AL. 

If you or a family member have purchased church bonds from John Lovejoy or Mainsail Asset Mangement, LLC, call Soreide Law Group, PLLC, for a free consultation about potentially recovering your investment losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

28

Multiple Chinese Companies Listed on U.S. Stock Exchanges Shut Down by SEC

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Throughout 2010, the Security and Exchange Commission (SEC) began an investigation into Chinese companies in the United States that became public through a process called “reverse mergers.”  The term, reverse merger, is also referred to as a reverse takeover or RTO. In an RTO, a Chinese company is acquired by an American “shell” company. An American shell company is a company which already has stock trading in the U.S., but the company does not operate a business or own assets. These Chinese companis merge into the shell. Through this process, the Chinese company can be brought public without the regulatory scrutiny of the Initial Public Offering (IPO) process in the United Sates.

On February 1, 2011, the SEC charged eight individuals and three RTO companies – China Digital, Global Peopleline and m-Wise – in a $33 million fraud. The SEC alleges that defendants engaged in schemes to pump up the price and trading volume  then dumped (sold) millions of shares of these securities into the market making millions of dollars in profits, leaving unsuspecting investors with shares worth next to nothing. Other such examples include China Energy Savings Technology, Fuwei Films, and China Water and Drinks.

The U.S. exchange trade officials have halted the trading of four Chinese companies brought public by WestPark Capital of California. WestPark brought the following four Chinese based companies public: NIVS IntelliMedia (NIV), China Intelligent Lighting and Electronics (CIL), China Century Dragon Media (CDM), and China Electric Motor (CELM). Allegedly to inflate their income statements and assets on their balance sheets.

If you or a family member have lost money in a Chinese company stock listed on a U.S. stock exchange call Soreide Law Group, PLLC, for a free consultation about potentially recovering your investment losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

25

Lloyd V. Barriger, Monticello, New York Investment Adviser, Charged with Multi-Million Dollar Fraud by SEC

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On May 13, 2011, it was reported on the SEC’s website that the Securities and Exchange Commission filed a civil injunctive action charging Monticello, New York investment adviser Lloyd V. Barriger with fraud in connection with two upstate New York real estate funds he managed – the Gaffken & Barriger Fund, LLC (the G&B Fund or the Fund), and Campus Capital Corp. (Campus). According to the complaint, the G&B Fund raised approximately $20 million from January 1998 until March 2008, and Campus raised approximately $12 million from October 2001 until July 2008. The Commission charged Barriger with defrauding the funds and their investors and prospective investors to whom he offered and sold interests in these funds.

The SEC complaint alleges that Barriger defrauded the G&B Fund itself by (a) allocating the Preferred Return to investors when the Fund did not have sufficient income to justify the allocation; and (b) by, when the Fund lacked the income to support those allocations and payments causing the Fund to pay cash distributions of the Preferred Returns to those Fund investors who requested them, and to redeem investors at values reflecting the purported accrued 8% per year Preferred Return.

Also, the SEC’s complaint, filed in federal court in Manhattan, alleges that from at least July 2006 until March 5, 2008, when he froze the Fund and disclosed to investors its true financial condition, Barriger defrauded investors and prospective investors in the G&B Fund by misrepresenting that the Fund was a relatively safe and liquid investment that paid a minimum “Preferred Return” of 8% per year. The complaint further alleges that Barriger made these misrepresentations knowing, or recklessly disregarding, that the Fund’s actual performance did not justify these performance claims, and without disclosing information about the Fund’s true performance and financial condition – which rapidly deteriorated in 2007 and early 2008 as Barriger continued to raise money from new and existing investors.

Lastly, the complaint alleges that Barriger defrauded Campus and its prospective investors by causing Campus to inject a total of nearly $2.5 million into the G&B Fund between August 2007 and April 2008 at a time when the G&B Fund was in distress, and by raising money for Campus without disclosing to investors his use of Campus’s assets to prop up the ailing G&B Fund. The complaint also alleges that Barriger caused Campus to engage in other transactions that personally benefitted Barriger, none of which he disclosed to prospective Campus investors.

On the Securities and Exchange Commision’s (SEC) website, the complaint alleges that Barriger violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

It was reported that in its complaint, the SEC seeks a final judgment permanently enjoining Barriger from future violations of the foregoing provisions and ordering him to pay civil penalties and disgorgement of ill-gotten gains with prejudgment interest.

This information was obtained from the SEC’s website.

If you or a family member have become a victim of the alleged fraudulent schemes of Lloyd V. Barriger, Gaffken & Barriger Fund, LLC, or Campus Capital Corp., call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover you losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

7

Jennifer J. Guelinas Barred by FINRA

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Jennifer J. Guelinas (CRD #2814512, Registered Representative, Valparaiso, Indiana)

On FINRA’s website it was announced that they had submitted a Letter of Acceptance, Waiver and Consent in which she was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Guelinas consented to the described sanction and to the entry of findings that she converted at least $500,000 from the brokerage accounts of senior citizen customers of
her member firm by signing, without authorization, wire transfer requests which resulted in the conversion of the funds from the customers’ accounts to outside bank accounts she controlled and to third parties; the customers did not authorize the transfers.

The findings included that Guelinas received compensation from a rental apartment she owned
and failed to disclose the real estate investments, the compensation from the investments
or the rental income to her member firm. FINRA found that Guelinas failed to disclose
material information on her Form U4.

The findings also stated that Guelinas, without authorization, signed wire transfer requests, real
estate purchase agreements and a promissory note on senior citizen customers’ behalf.
The findings also stated that Guelinas arranged and participated in real estate investments
with senior citizen customers of her member firm and received compensation.

(FINRA Case #2010025098101)

If you have become a victim of the alleged fraudulent schemes of Jennifer J. Guelinas, call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover you losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

6

FINRA Sanctions Daniel A. Contreras

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Daniel A. Contreras (CRD #4151950, Registered Principal, Ontario, California) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Contreras consented to the described sanction and to the entry of findings that he engaged in private securities transactions by recommending that customers invest in promissory notes, which were not approved investments of his member firm.

The FINRA findings stated that Contreras failed to provide written notice to his firm describing in detail the proposed transactions and his proposed role therein, and stating whether he had received, or might receive, selling compensation in connection with the transactions.

 The findings also stated that the company that issued the promissory notes filed for Chapter 13 Bankruptcy, and all of Contreras’ customers lost their entire investment. The findings also included that Contreras borrowed approximately $65,000 from his customers, contrary to his firm’s written procedures prohibiting registered representatives from borrowing money or securities from any prospects or customers, including non-firm prospects/customers, and Contreras failed to pay back the money he borrowed.

This information was obtained on FINRA’s website.

If you have been a victim of these alleged fraudulent schemes of  Daniel A. Contreras, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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May/11

5

Thomas Anthony Chrestman Fined and Suspended by FINRA

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Thomas Anthony Chrestman (CRD #1135841, Registered Representative, Cordova, Tennessee) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $20,000 and suspended from association with any FINRA member in any capacity for three months. Without admitting or denying the findings, Chrestman consented to the described sanctions and to the entry of findings that he engaged in pre-arranged trading of collateralized mortgage obligation (CMO) bonds in a trading account of his member firm.

The findings stated that Chrestman effected CMO bond transactions in the firm’s trading account for which a registered principal/trader or another trader, whose transactions the principal also coordinated, was the contra-party. The findings also stated that the transactions were pre-arranged and directed by the registered principal, who set the price of the bonds and, simultaneously, agreed to repurchase them from Chrestman at a specified time, at an agreed-upon price that provided Chrestman with a profit. The findings also included that Chrestman participated in the pre-arranged trading with the registered principal because the principal asked that he do so; Chrestman was not familiar with all of the risks and attributes of the “inverse floater” CMOs that he was trading with the principal, and did not ascertain whether the transaction prices were at or away from the current market.

FINRA found that the registered principal consistently repurchased, or caused the
repurchase of, the bonds within a short time after Chrestman acquired them, the
transactions were not without risk and an increasing number of the transactions occurred at prices away from the current independent market. FINRA also found that had the principal failed to repurchase those CMO bonds, the firm’s trading account would have owned them at a price exceeding the price the firm was likely to obtain in an open-market sell transaction.
The suspension is in effect from March 21, 2011, through June 20, 2011. (FINRA Case
#2008012444204).

This information was obtained on FINRA’s website.

If you feel you have been a victim of these alleged fraudulent schemes of  Thomas Anthony Chrestman, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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