May 19, 2016

Former UBS Trader is Helping Prosecutors Pursue Forex Rigging Cases Against Individuals

Bloomberg reports that according to sources, Matt Gardiner, a former UBS Group AG (UBS) trader who was part of the instant-messaging group the federal government identified when obtaining guilty pleas from Barclays PLC (BARC), Royal Bank of Scotland (RBS), UBS, Citigroup (C), and JPMorgan Chase & Co.(JPM) over currency-rate manipulation, is working with prosecutors to pursue certain individuals over the rigging allegations. The Cartel chat room to which Gardiner belonged existed from at least 12/07 through 1/013.

According to prosecutors, traders who were part of the chat room communicated in code to share information about orders made by clients and to coordinate euro-dollar trades so that they could make more money. Having someone like Gardiner working with the government could help prosecutors understand what the traders were doing together. It’s unknown at this time whether his cooperation is part of a prosecution deal he may have reached.

His former firm, UBS, was granted immunity from antitrust charges because it was the first financial institution to report the market misconduct. Meantime, the banks whose traders were in the Cartel have turned over chat transcripts to the U.S. Department of Justice and foreign authorities. A lot of the chats occurred right before daily fixes, which is the short period of time when data providers are able to get a picture of trading in order to establish daily rates.

To date, no individuals who were part of this Cartel have been chart.

Our securities lawyers represent investors seeking to recoup their money that they lost due to fraud, negligence, or other wrongful misconduct. Contact The SSEK Partners Group today.

Ex-UBS Trader in ‘Cartel’ Said to Help U.S. in Currency Probe, Bloomberg, April 22, 2016

Forex traders at heart of ‘Cartel’ chat rooms, Financial Times, November 13, 2014

May 18, 2016

M & T Bank Settle Fraud Case for $64M

M & T Bank (MTB) will pay the U.S. government $64M to resolve a lawsuit about housing loans. The case stems from a whistleblower case filed by an ex-M & T underwriter accusing the bank of underwriting fraud. Following its investigation, the Department of Justice said that M & T had awarded loans that failed to meet certain Federal Housing Administration (FHA) requirements.

As part of the deal reached, M & T Bank admitted that between 1/07 and 12/11, it certified mortgage loans that were insured by the FHA even though they did not satisfy the Department of Housing and Urban Development’s (HUD) underwriting requirements and failed to adhere to the federal government’s quality control requirements. M & T Bank also admitted that before 2010, it did not preview every Early Payment Default loan, which are loan that become 60 days past due during the first six months of repayment, nor did it review an adequate FHA loan sample between ’06 and ’11 even though this was an HUD requirement.

M & T also established a quality control process that let it generate preliminary major errors that were much lower than what that rate would have been if the preliminary major error rate were determined more appropriately. The bank did not abide by HUD’s self-reporting requirements even after identifying that a number of FHA insured loans had these “major errors.” It wasn’t until 2008 that it began to self-report loans with errors.

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May 17, 2016

Wells Fargo to Pay UBS $1M Over Broker Departure

A FINRA arbitration panel has ordered Wells Fargo Advisors LLC (WFC) to pay UBS Financial Services Inc. $1.1M to resolve a claim involving financial adviser David Kinnear who went to work for the Wells Fargo & Co. brokerage arm after leaving the UBS Group AG (UBS) unit. UBS claims that Kinnear stole thousands of client and business records, as well as proprietary information, after resigning from the firm.

The Wall Street Journal reports that according to a source, Kinnear downloaded the data and distributed it to clients. UBS contends that the compensation Kinnear received at Wells Fargo was related to his ability to successfully bring UBS clients with him. UBS also claims that Kinnear owes it promissory notes.

Wells Fargo denies UBS’s allegations. It submitted a counterclaim accusing the firm of unfair completion, including preventing clients from moving from UBS to Wells Forgo.

Under the Protocol for Broker Recruiting, brokers are only allowed to bring the names and contact information of clients that they serviced while having worked at a firm when moving to another brokerage firm.

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May 16, 2016

HSBC Settles Yen Libor Rigging Lawsuits With Investors

Investors and HSBC Holdings PLC (HSBC) and HSBC Bank PLC have settled two proposed anti- trust class action lawsuits accusing the banks of fixing yen-denominated Libor rates. The first lawsuit, which was filed in 2012, contends that lead plaintiff Jeffrey Laydon lost thousands of dollars in 2006 while shorting derivatives involving the Euroyen Tokyo Interbank Offered Rate. Laydon said that the banks on the Tibor and London Interbank Offered Rate Panel, including Deutsche Bank (DB), JPMorgan (JPM), and Mizuho Bank, conspired together to rig the rates through the submission of estimates that they had agreed upon.

A district court judge dismissed the antitrust, vicarious liability, and unjust enrichment allegations but allowed for the claims accusing the banks of violating the Commodity Exchange Act through price manipulation. Last year, the judge dismissed ICAP PLC (IAP), Resona Bank Ltd., and Mizuho as defendants of the case after finding that they and the markets operator lacked sufficient contact with the Second Circuit or the U.S. Laydon was then allowed to add Tullet Prebon PLC (TLPR), Lloyds Banking Group PLC (LYG), ICAP Europe LTD., and Martin Brokers UK Ltd. as defendants. In an amendment to the complaint, Laydon said he was asserting antitrust, CEA, RICO, unjust enrichment, and vicarious liability claims against the added defendants.

The second lawsuit also names several banks as defendant. Sonterra Capital Master Fund ltd. is claiming that HSBC and others manipulated the Tibor, Yen Libor, and derivatives that are Euroyen-based.

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May 13, 2016

Securities News: $5.95B RMBS Lawsuit Against Moody’s is Reinstated, Barclays Traders Remain on Trial, And Former Bank CEO Enters Guilty Plea to Fraud Charges

1st Circuit Reinstates Lawsuit Against Moody’s
The First Circuit Court of Appeals has reinstated the $5.9 billion residential mortgage-backed securities fraud case brought by the Federal Home Loan Bank of Boston against Moody’s Investor’s Service, Inc. and Moody’s Corp. The bank claims that the credit rating agency knowingly issued false ratings on certain RMBSs that it had purchased.

A district court judge in Massachusetts had dismissed the lawsuit citing lack of personal jurisdiction. The judge also held that the court could not move the lawsuit to a different court where jurisdiction would be proper because cases dismissed for lack of jurisdiction could only be transferred if the dismissal was for lack of subject matter jurisdiction, not personal jurisdiction.

Now the First Circuit has vacated that ruling and found that transferring a case that has dismissed for lack of personal jurisdiction is also allowed. It is moving the RMBS case to the district court, which will decide whether to move the case to New York.


Former Barclays Trader Pleaded Guilty to Libor Rigging
According to prosecutors in the U.K., ex-Barclays Plc. (BARC) trader Peter Johnson pleaded guilty to conspiracy to manipulate the London interbank offered rated in 2014. The government announced the guilty plea this week after lifting a court order that had prevented the plea from being reported until now. The disclosure comes as the criminal trial against five of Johnson’s former Barclays co-workers into related allegations is underway.

The defendants on trial are Jay Merchant, Stylianos Contogoulas, Alex Pabon, Ryan Reich, and Jonathan Matthew. They have pleaded not guilty to the charge of conspiracy to commit fraud. The U.K.’s serious fraud office claims that the men acted dishonestly when they turned in or asked others to submit rates for Libor.

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May 12, 2016

JPMorgan to Pay $150M to Pension Funds Over London Whale-Related Losses

A U.S. district court judge has approved a settlement reached at the end of last year between JPMorgan Chase & Co. (JPM) and pension funds related to trades made by Bruno Iksil, who earned the nickname “London Whale” because of his huge market-moving positions in credit derivatives. In their class action securities case, the plaintiffs accused the firm of using its chief investment office in London as a secret hedge fund and hiding up to $6.2M in losses.

Even though the office was supposed to be primarily for managing risk, the plaintiffs believe that it was making high-risk trades for profit, including trading in complex credit derivatives. Depositors’ money was purportedly used in secret for making certain trades. Shareholders claim that JPMorgan knew about the increased risks it was taking and hiding them.

JPMorgan has not admitted to wrongdoing by settling this deal. However, it was also fined over $1B by regulators in the U.K. and the U.S. for management deficiencies related to the London Whale scandal.

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May 11, 2016

SEC Says Pennsylvania Financial Adviser Bilked Professional Athletes

The U.S. Securities and Exchange Commission is filing fraud charges against Louis Martin Blazer III, a Pittsburgh-based financial adviser. Blazer founded Blazer Capital Management—a firm that works with high-net worth individual clients and professional athletes. He allegedly took money out of the accounts of these athletes without their permission so he could issue Ponzi-like payments and invest in movies.

The SEC contends that Blazer took about $2.35M from five clients and invested in two movie projects. One client had even rejected the opportunity to invest in the films and still Blazer purportedly took $550K from this person’s account and invested the funds. After the client found out about the authorized investment and demanded his money back, Blazer allegedly used from another athlete’s account to pay the other client back, forging the second client’s signature on documents to initiate the transfer of $650K. He used $550K of that to pay back the first client. He purportedly used the remaining $100K to invest in a music venture on behalf of Blazer Capital.

When SEC examiners discovered the unauthorized transactions made in clients’ accounts, Blazer allegedly lied about them and turned over false documents that he had created to conceal his misconduct. He said that clients had authorized the transactions.

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May 10, 2016

Ex-Deutsche Bank Broker Found Guilty for Insider Trading Related to Operation Tabernula Probe

Martyn Dodgson, a former Deutsche Bank AG (DB) broker and managing director, and Andrew Hind, an accountant, were convicted of insider trading in London. The Financial Conduct Authority said that that Dodgson and another broker gave insider information about certain business deals to Hind, who then passed on the information to two other traders. They allegedly made $10.7M from trading half a dozen stocks in what is being called the largest insider trading case in the U.K.

The probe into the insider trading allegations, known as Operation Tabernula, has been going on for nine years. Already, three other convictions have been rendered related to the investigation. According to prosecutors, those involved employed conventional techniques and modern technology to conceal their trades. For example, they would meet at Indian restaurants where they’d hand over money in envelopes. They also purportedly used pay-as-you-go phones and encrypted memory sticks.

After investigators planted a bug in the office of day trader Benjamin Anderson, a conversation was recorded involving Iraj Parvizi, another day trader, in which Dodgson was described. Anderson and Parvizi, who were both acquitted of criminal charges, claimed that they had no reason to believe that the tips they were receiving was insider information.

It was in 2014 that former Moore Capital Management LLC trader Julian Rifat pleaded guilty to insider trading in an offshoot probe of this investigation. He admitted to sharing insider information that he received while employed at the firm to associate Graeme Shelley, who then traded to benefit the two of them. Shelley, who was formerly with Novum Securities, also pleaded guilty to insider dealing with Rifat and associate Paul Milsom, who entered his own guilty plea.

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May 7, 2016

Four Credit Suisse Bankers Accused of Unauthorized Trading in Rich Clients’ Accounts, Bank of America Settles Mortgage Case for $190M, and Goldman Sachs to Pay Illinois Pension Fund $272M

Bank of America to Pay Federal Home Loan Bank of Seattle $190M
Bank of America Corp. will pay $190M to resolve mortgage-backed securities fraud charges brought by the Federal Home Loan Bank of Seattle. The SEC filing stated that the settlement was reached last month and that most of it was previously accrued. The lawsuit alleged misstatements and omissions during the issuance of MBSs.

It was just earlier this year that Bank of America’s Merrill Lynch and 10 other banks agreed to pay over $63M to resolve accusations that they misrepresented residential mortgage-backed securities to the Virginia Retirement System and the state of Virginia.


Judge Approves $270M Mortgage-Backed Securities Fraud Settlement Involving Goldman Sachs
A federal judge has approved the proposed settlement between Goldman Sachs (GS) and lead plaintiff NECA-IBEW Health & Welfare Fund, as well as 400 bondholders and another electrical union pension fund. The Illinois pension fund for electrical workers brought the case in 2008, accusing the firm of leaving out key information and making false statements about the mortgages it sold into 17 trusts the year before.

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May 6, 2016

Hedge Funds Continue to See Investor Exodus

According to Bloomberg, in the last two quarters, investors have withdrawn nearly $17M from hedge funds—that’s more money than what they invested in the funds. They’re also calling on struggling funds to reduce the fees of 2% of assets and 20% of profits that they’re usually charged. The reason for their actions is that hedge funds haven’t been doing so well lately as they’ve failed to keep up in the bull market.

Hedge fund-related losses were $537M in the first quarter. That’s a significant decline from last year’s first quarter which saw a $246M profit.

Investors are not alone in their dissatisfaction. Some of the biggest financial players in the world haven’t had the kindest words to say about the funds.

Just this April, billionaire Warren Buffet told investors at the yearly Berkshire Hathaway shareholder meeting to stay away from the hedge funds because of the poor returns and high fees. Speaking at the Milken Institute Global Conference earlier this week, Cohen spoke about what he perceived was a “lack of talent” in the hedge fund industry. Cohen formerly ran SAC Capital Advisors before he was forced to plead guilty to securities fraud.

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May 4, 2016

Bank of America, Citigroup, JPMorgan Chase, Credit Suisse, Deutsche Bank, and Other Banks Settle ISDAFix Rigging Case for $324 Million

Seven big banks have resolved a U.S. lawsuit accusing them of rigging ISDAFix rates, which is the benchmark for appraising interest rate derivatives, structured debt securities, and commercial real estate mortgages, for $324M. The banks that have reached a settlement are:

· Barclays PLS (BCS) for $30M (In 2015, Barclays paid $115M to U.S. Commodity Futures Trading Commission to resolve charges of ISDAfix rigging.)
· Bank of America Corp. (BAC) for $50M
· Credit Suisse Group AG (CS) for $50M
· Citigroup Inc. (C) for $42M
· JPMorgan Chase & Co. (JPM) for $52M
· Deutsche Bank AG (DB) for $50M
· Royal Bank of Scotland Group plc (RBS) for $50M


The deal must be approved by a Manhattan federal court. The defendants had sought to have the case dismissed, but US District Judge Jesse Furman in Manhattan refused their request. stating that the case raised “plausible allegations” that the defendants were involved in a conspiracy together.

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May 3, 2016

Turing Pharmaceuticals Founder May Face More Securities Fraud Charges

Martin Shkreli, the founder of Turing Pharmaceuticals AG, has asked a judge to wait before scheduling his criminal trial on charges of securities fraud. Shkreli, 33, says he may be subject to more charges.

He is accused of bilking investors of Retrophin Inc., which is a drug company that he also ran, and certain hedge funds. He allegedly used up to $11M of assets from that company to repay hedge fund investors who lost money.

Shkreli also is accused of lying to investors regarding the amount of money he oversaw and about his track record as a money manager. Now, Shkreli may face charges involving the distribution of stock in Retrophin, as well as a private placement deal that helped to finance the company. Also charged over the alleged securities scam is ex-corporate attorney Evan Greebel, who allegedly aided Shkreli with his scam and helped him hide the fraud.

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