June 23, 2016

Massachusetts Fines Seven Broker-Dealers Over Proxy Voting Fraud Involving Realty Capital Securities

Secretary of the Commonwealth of Massachusetts William Galvin is ordering seven brokerage firms to pay $238K in fines for their involvement in the proxy fraud committed by Realty Capital Securities. The broker-dealers are:

· Voya Financial Advisors Inc. (VOYA)
· Invest Financial Corp.
· FMN Capital Corp.
· Platinum Wealth Partners Inc.
· Newbridge Securities Corp.
· TKG Financial
· Pariter Securities


Galvin claims that brokers at the firms worked with RCS to cast the bogus proxy votes involving American Realty Capital Healthcare Trust II and American Realty Capital Trust V—both nontraded real estate investment trusts—and Business Development Corp. of America, which is a nontraded business development company. The state’s securities division claimed that RCS employees pretended to be shareholders so they could cast proxy votes to the benefit of management. The votes were key in the merger between American Realty Corp., which is a Real Capital Securities affiliate, and Apollo Global Management. The deal was linked to a larger deal of $378M between AR Capital and Apollo.

Continue reading "Massachusetts Fines Seven Broker-Dealers Over Proxy Voting Fraud Involving Realty Capital Securities " »

June 17, 2016

HSBC Holdings to Pay $1.575B In Mortgage Lending Lawsuit

HSBC Finance Corp., an HSBC Holdings Plc. (HSBC) unit, will pay $1.575B to settle a shareholder class action securities case that was brought in 2002. The case involves Household International, the consumer finance business that HSBC purchased in 2003. Household International is now HSBC Finance.

Household shareholders accused the company of inflating its share price by hiding its poor lending practices and bad quality loans. When Household consented to pay U.S. state regulators $484M to resolve predatory lending claims in 2011, its share price dropped by over 50%.

HSBC became the defendant against claims by Household shareholders when it purchased the company for $14.2B. That deal eventually led to write-downs for tens of billions of dollars for bad loans in the wake of the subprime mortgage crisis.

Shareholders won a $2.46B judgment against the British Bank in 2013. In May 2015, however, a federal appeals court tossed the award and demanded a new trial to decide whether “nonfraud factors” that were specific to the firm played a part in the Household's share price dropping.


Continue reading "HSBC Holdings to Pay $1.575B In Mortgage Lending Lawsuit" »

June 14, 2016

Securities Crimes: Ex-Pharmaceutical Executive Martin Shkreli Pleads Not Guilty to New Criminal Charge & Andrew Caspersen’s Lawyer Says Former Wall Street Trader is a Gambling Addict

Martin Shkreli, the former chief executive of Retrophin Inc., has pleaded not guilty to a new charge of conspiracy. Shkreli was arrested last year for allegedly plotting to bilk the pharmaceutical company to cover up losses sustained by investors in his hedge funds. He was let go as CEO two years ago.

Shkreli had already been charged with seven counts of fraud and conspiracy. This latest charge of securities fraud conspiracy accuses him of not disclosing to the U.S. Securities and Exchange Commission that he owned certain Retrophin shares. Prosecutors claim that he concealed the fact that he was in control of a number of free trading or unrestricted shares in Retrophin by distributing the shares to contractors and employees so that the 5% ownership threshold, which would have required for him to notify the SEC, would not be triggered. Shkreli also is accused of allegedly telling employees to move chunks of their Retrophin shares to cover debts that he owed.

Also pleading not guilty to this latest charge is Shkreli's ex-attorney Evan Greebel who was the outside counsel of Retrophin at the time of the alleged scheme. Greebel also faces numerous criminal charges.

The two men are accused of allegedly lying to investors about the poor performances of MSMB Capital Management, Elea Capital Management, and MSMB Healthcare, all hedge funds, from ’06 to ’12. They also allegedly took money from Retrophin to pay bad market bets of the MSMB funds.

Continue reading "Securities Crimes: Ex-Pharmaceutical Executive Martin Shkreli Pleads Not Guilty to New Criminal Charge & Andrew Caspersen’s Lawyer Says Former Wall Street Trader is a Gambling Addict " »

June 13, 2016

Libyan Fund Accuses Goldman Sachs of Financial Exploitation

In the High Court in London, the trial in the lawsuit brought by the Libyan Investment Authority (LIA) against Goldman Sachs (GS) is under way. The sovereign wealth fund claims that in 2008 the Wall Street bank misled it about a number of derivatives transactions, causing it to lose $1.2B when the contracts matured five years ago. The transactions are tied to Citigroup (C) stock and other companies' stmck.

Court filings state that LIA had wanted to buy stakes in global companies that it could potentially partner up with in the future for development. The sovereign wealth fund was set up in 2006 to manage money from the country’s oil fields after Libya was taken off the U.S. government’s list of states that were considered terrorist sponsors.

Goldman made over $200M on the transactions. Meantime, the Libyan fund lost its investment when the economic crisis caused stock prices to drop.

Goldman disputes the allegations made by the Libyan Investment Authority, which claims that it was an unsophisticated investor that the firm took advantage of, persuading it to invest in transactions that it didn’t want or understand. In court, a lawyer for the sovereign wealth fund accused Goldman of using gifts, trips to Morocco, London, and Dubai, training programs, and an internship for the brother of the deputy executive officer of the fund to get the fund to invest.

Continue reading "Libyan Fund Accuses Goldman Sachs of Financial Exploitation" »

June 12, 2016

SEC Bond Cases: Illinois Mayer Settles Municipal Bond Fraud Charges for $10K, Ethiopia’s Electric Utility Pays Over $6M to Resolve Bond Offering Violations, and Miami , Fla. Likely to Come Under Scrutiny in Civil Trial

Mayor of Harvey, Illinois Barred From Future Involvement In Muni Bond Offerings
Eric J. Kellog, the mayor of Harvey, Illinois, will pay $10K to resolve the Securities and Exchange Commission’s case accusing him of municipal bond fraud. As part of the settlement, Kellog has agreed to never take part in a muni bond offering again.

According to the Commission, Mayor Kellogg was tied to a number of fraudulent bond offerings made by the city of Harvey. Investors thought their money would go toward building a Holiday Inn hotel when, instead, at least $1.7M in bond proceeds were diverted to cover the city’s payroll and pay for operational costs that had nothing to do with the hotel construction project.

Kellogg was in charge of Harvey’s operations. His signature was on key offering documents used by the city of Harvey to sell and offer the municipal bonds. The SEC said that the mayor was liable for fraud as a control person under the Securities Exchange Act.

By settling, Kellog is not denying or admitting to the SEC findings.


Ethiopia’s Electric Utility Pays Over $6M to Settle SEC Municipal Bond Case
In other bond fraud news, the SEC has reached a settlement with the Ethiopian Electric Power over charges that the foreign electric utility did not register the bonds that it sold and offered to U.S. residents who were of Ethiopian descent. EEP will pay almost $6.5M to resolve the case accusing it of violating U.S. securities laws.


Continue reading "SEC Bond Cases: Illinois Mayer Settles Municipal Bond Fraud Charges for $10K, Ethiopia’s Electric Utility Pays Over $6M to Resolve Bond Offering Violations, and Miami , Fla. Likely to Come Under Scrutiny in Civil Trial" »

June 8, 2016

Tennessee Investment Advisory Firm Accused of Trying to Collect Extra Fees from Hedge Funds

The Securities and Exchange Commission is charging Hope Advisors Inc. and owner Karen Bruton with scheming to get two hedge funds that they managed to pay them extra fees. The private hedge funds are HDB Investments LLC and Hope Investment LLC.

The purported misconduct was discovered by the regulator’s Atlanta office, which was examining the Nashville, Tennesse-based firm and Bruton. The regulator claims that Hope Advisors and Bruton sought to get around the funds’ fee structure, which lets the firm receive fees from the funds only if their profits for the month exceeds previous losses. The firm and Bruton are accused of orchestrating a number of trades that would let the funds make a bigger gain closer to the end of the month and guarantee a big loss early on at the start of the next month.

The SEC said that if it weren’t for the fraudulent trades, Hope Advisors would have earned almost no incentive fees for close to two years. Instead, claims the Commission, the firm managed to avoid realization of over $50M in losses while making millions of dollars in fees that they should have never been paid.

Continue reading "Tennessee Investment Advisory Firm Accused of Trying to Collect Extra Fees from Hedge Funds" »

June 7, 2016

SEC Reaches $12.7M RMBS Fraud Settlement in Case Involving Ginnie Mae

The U.S. Securities and Exchange Commission said that First Mortgage Corporation (FMC) and six of its executives will pay $12.7M to resolve charges accusing them of running a RMBS fraud scam to bilk investors. The Government National Mortgage Association, also known as Ginnie Mae, guaranteed the residential mortgage-backed securities. The mortgage lending company is the one that issued the Ginnie Mae RMBS and the securities were backed by loans that FMC had originated.

According to the regulator, from 3/11 to 3/15, FMC’s top executives withdrew performing loans from Ginnie Mae residential mortgage-backed securities by making false claims that they were delinquent so that it could sell them into newly issued RMBS and make a profit. The mortgage company’s improper and deceptive use of a Ginnie Mae rule giving issuers the choice to rebuy loans that had been delinquent for at least three months caused the prospectuses of the original RMBS to become misleading and false.

The SEC also claims that FMC purposely held back on depositing the checks of borrowers who were late on their loans by making false claims to Ginnie Mae and investors that these loans had stayed delinquent when they were, in fact, current. In its complaint, the regulator said that FMC’s top management approved these actions.

Continue reading "SEC Reaches $12.7M RMBS Fraud Settlement in Case Involving Ginnie Mae" »

June 6, 2016

T. Rowe Price to Pay Fund Shareholders, Clients About $194M Over Dell Buyout Voting Mistake

Mutual fund company T-Rowe Price Group Inc. (TROW) will pay $194M to clients because of a proxy-voting mistake it made in 2013 during the management buyout of Dell Inc. The payments will be made to a number of institutional client accounts, two trusts, four U.S. mutual funds, and one fund located overseas.

Among the funds to benefit the most are the:

· T. Rowe Price Equity Income Fund (PRFDX)

· T. Rowe Price Science & Technology Fund (PRSCX), which is expected to be affected the most because it has a greater number of Dell shares as a percentage of all its assets.

· T. Rowe Price Institutional Large-Cap Value Fund (TILCX)

Shareholders will not get cash as part of this payout. Instead, they will see the results in the performance bump of the impacted portfolios.

Continue reading "T. Rowe Price to Pay Fund Shareholders, Clients About $194M Over Dell Buyout Voting Mistake" »

June 4, 2016

Citibank Settles Libor, Euroyen Tibor, and YenLibor Rigging Allegations With $425M Fine

Citibank (C) is the first U.S. bank to settle allegations of benchmark interest rate manipulation. To resolve the Commodities Futures Trading Commission claims that it manipulated the London Interbank Offered Rates (LIBOR), Citibank will pay $250M. It will pay $175M to resolve Euroyen Tibor and Yen Libor rigging claims. Also settling charges within this case are Citibank Japan Ltd (CJL) and Citigroup Global Markets Japan Inc. (CGMJ).

The CFTC claims that between ’07 and ‘12 Citigroup had specific traders input false information so their trading positions would benefit. It also claims that the bank’s affiliates issued false reports related to dollar Libor rates and ISDAFIX benchmark rates during the financial crisis so that its reputation would be protected.

Citigroup Global Markets Japan is charged with trying to rig Euroyen TIBOR and Yen LIBOR. Citibank Japan Ltd. is accused of engaging in false reporting related to the Euroyen TIBOR so that derivatives trading positions priced according to Euroyen TIBOR and Yen LIBOR would purportedly benefit.

Libor, along with the Tokyo Interbank Offered Rate (Tibor), is what banks use to establish the cost of borrowing from one another. Libor is also used to set the rates on mortgages, credit cards, derivatives, and other financial products.

Continue reading "Citibank Settles Libor, Euroyen Tibor, and YenLibor Rigging Allegations With $425M Fine" »

June 3, 2016

Madoff Investors Eligible For $4B Payout & Stanford Fraud Victims Settle With Law Firm for $35M

At least 25,280 claimants who were the victims of Bernard Madoff’s Ponzi scheme can expect to receive payouts for almost $4B in losses they sustained from the fraud. For these investors, they’ve been waiting to get at least some of their money back for nearly eight years.

It was in December 2008 that Madoff’s $64.8B Ponzi scam was discovered. It turns out that the 78-year-old money manager was an equal opportunity fraudster, bilking retail investors, wealthy investors, institutional investors, celebrities, and others alike.

The nearly $4B in payouts is being overseen by Richard Breeden of the Madoff Victim Fund and is separate from the payouts issued by Irving Picard, who is the trustee in charge of compensating former customers of Bernard L. Madoff Investment Securities LLC.

With the Madoff Victim Fund, claims include those brought by “indirect” investors whose accounts were at the hedge funds and other entities known as “feeder funds.” These funds would send investors’ money to Madoff. Thousands of victims that lost $17.5B have been seeking to avail of this fund.

Continue reading "Madoff Investors Eligible For $4B Payout & Stanford Fraud Victims Settle With Law Firm for $35M" »

June 1, 2016

Female Executive Accuses Bank of America of Misleading Trading Clients, Including Citigroup and Blackstone

Megan Messina is suing Bank of America (BAC). She is a managing director at the bank’s structured credit products division. In her lawsuit, Messina claims that the bank tried to get rid of her when she questioned the way some clients were treated and complained about the sexism she allegedly experienced. She also contends that clients such as Citigroup (C) and Blackstone Group LP (BX) were misled by her employer.

According to Bloomberg, in her complaint, Messina provides examples of alleged misconduct at the bank, including coworkers front-running trades made by clients, such as Citigroup, while keeping information from other clients, such as Blackstone. Messina claims that Bank of America apologized to client Anchorage Capital Group after the bank purposely provided the firm with false information. Bank of America also purportedly apologized to Pimco for “doctoring” trading records.

Continue reading "Female Executive Accuses Bank of America of Misleading Trading Clients, Including Citigroup and Blackstone " »

May 28, 2016

Ex-Dean Foods Board Member, Pro Golfer Phil Mickelson, and Professional Sports Gambler Are Named in Insider Trading Case

The Securities and Exchange Commission has filed civil charges against professional sports gambler William Walters. He is accused of making $40M from an illegal stock tip given to him by former Dean Foods Company board member Thomas C. Davis. The regulator said that Davis, who owed Walters money, gave him insider information about the company prior to market-moving events.

Professional golfer Phil Mickelson, who is a relief defendant in the case, allegedly traded in Dean Foods securities based on Walter’s recommendation. Mickelson then purportedly took the nearly $1M he made from the trading to help repay the gambling debt he owed to Walters. As a relief defendant, Mickelson is not being charged with insider trading or accused of wrongdoing. He will, however, have to pay back the money he made from trading in Dean Foods securities.

As to why Mickelson won’t be prosecuted, The New York Times reports in the article “How to Get Away with Insider Trading,” this is because of U.S. insider trading laws, which bars trading on nonpublic information only if the information has been used or obtained wrongly. This allows parties involved later on in the “chain of information” to benefit from such rules.

Walters and Davis, however, are charged in this case. The SEC’s complaint said that the illegal trading took place over five years.

Continue reading "Ex-Dean Foods Board Member, Pro Golfer Phil Mickelson, and Professional Sports Gambler Are Named in Insider Trading Case" »

Contact Us

(800) 259-9010

Our Other Blog

Recent Entries