Articles Posted in Securities Fraud

Rabobank NA Admits to Anti-Money Laundering Deficiencies, Will Pay Nearly $369M
Rabobank National Association, a subsidiary of Rabobank UA (RABO), has pleaded guilty to felony conspiracy for obstructing the Department of the Treasury’s Office of the Comptroller of the Currency’s examination of the bank while hiding that its anti-money laundering program had certain deficiencies. Now, the firm will pay almost $369M for not preventing illicit funds from going through the bank.

With its guilty plea, Rabobank is admitting that it conspired with a number of its ex-executives to try defrauding the US by “unlawfully impeding” the OCC’s efforts to regulate the California subsidiary, including obstruction of an OCC examination of the bank’s branches throughout the state. Rabobank acknowledged that because of deficiencies in its AML program, the bank made it possible for hundreds of millions of dollars from Mexico and other places to be deposited in its rural bank branches and then allowed to money to move via checks, wire transfers, and withdrawals. Federal regulators were not notified even though they should have been.

During a 2012 OCC examination, Rabobank executives purposely tried to “hide and minimize” its AML program deficiencies so as to avoid new sanctions. Rabobank was already sanctioned in ’06 and ’08 for failures that were “nearly identical” to the ones at issue now. Late last year, ex-Rabobank VP George Martin reached a deferred prosecution deal with the US government for aiding and abetting the bank in not having an AML program that met Bank Secrecy Act requirements.

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BNP Paribas USA (BNP), A BNP Paribas unit, will pay $90M to settle a criminal case alleging foreign currency price manipulation. It also pleaded guilty by admitting that it conspired to fix prices for Eastern European, Central European, African, and Middle Eastern (CEEMEA)currencies between 9/2011 and 7/2013.

According to the US Justice Department, the BNP Paribas unit engaged in rigging prices through fake trades, orchestrated trades, and by quoting specific prices to certain customers, all on an electronic trading platform. The settlement also settles investigations conducted by the New York State Department of Financial Services and the US Federal Reserve.

In a statement, BNP Paribas USA said that it regretted “the past misconduct” that resulted in this case. The unit will now cooperate with the US government’s ongoing investigation into currency rigging involving the FX market. The bank joins Barclays Plc (BARC), JPMorgan Chase & Co. (JP), Citigroup (C), UBS Group AG (UBS), and Royal Bank of Scotland Group Plc (RBS) in pleading guilty to currency rigging in US probes. Together, the six banks have agreed to pay over $2.8B in fines.

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Deutsche Bank Securities Inc. and Deutsche Bank AG (DB) will pay a $30M civil penalty to resolve charges brought by the Commodity Futures Trading Commission accusing them of spoofing. According to the regulator, from at least 2/2008 through 9/2014, DB AG, with the help of a number of precious metal traders, sought to rig the price of precious metals futures contracts that were traded on the Commodity Exchange, Inc.

The CFTC’s order said that the traders worked alone and with each other to buy or sell these contracts while planning all along to cancel them before they were executed after a smaller offer was made on the opposite side of the market. The spoof orders were purportedly made to give the impression of market depth in order to generate trading interest.

The regulator found that through the traders’ actions, Deutsche Bank AG sought to not only rig the price of precious metals futures contracts but also to profit from these manipulations. The CFTC said the firm worked with one trader in Singapore who made orders and trades to “trigger customer stop-loss orders.”

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After backing Outcome Health, an advertising company, Goldman Sachs Investment Partners (GS) and other investors are among those suing the startup for fraud and to get their money back. The lawsuit, filed a couple of months ago, comes in the wake of allegations that investors were fooled by inflated information financial performances and were charged for ad space that they never received. Outcome denies any wrongdoing.

It wasn’t too long ago that the company was generating high profits and revenue, while investors were told that their returns were guaranteed. Just last spring, institutional investors, including Goldman, infused $478M into the ad company, which streams pharmaceutical advertising onto tablets and flatscreens at doctor offices.

According to the Wall Street Journal, there had been red flags even back then. The newspaper noted how even the “savviest investors” can miss or ignore warnings. For example, Outcome already had a lot of debt, including $325M for a loan. It also lacked an independent board to conduct oversight and its co-founders were poised to make an “unusually large payout.”

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The US Supreme Court has agreed to hear the appeal of an investment adviser who is challenging the liability findings against him in a securities fraud case presided over by a US Securities and Exchange Commission administrative law judge (ALJ). Raymond Lucia, also a former radio host, was accused of misleading prospective investors about his “Buckets of Money” investment strategy by claiming the methodology he used was back-tested when that was not the case. This created a false sense of security especially among retirees who were told that their money would grow.

An SEC ALJ found him liable for fraud, including that he violated the Investment Advisers Act. Lucia was not only barred from the securities industry but also ordered to pay a $300K fine. He appealed the ruling.

Lucia also questioned whether it was constitutional for the SEC to hire administrative law judges and if they should instead by appointed rather than brought in through human resources. In 2016, The U.S. Court of Appeals for the District of Columbia Circuit turned down Lucia’s appeal, finding that contrary to his contention, SEC judges are not officers with the power to make decisions but are, in fact, employees. Also, the Commission has to approve their rulings.

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Meyers Associates is Fined by FINRA Over Misleading Sales Literature
The Financial Industry Regulatory Authority is ordering Meyers Associates, now called Windsor Street Capital, to pay a $75K fine for a number of securities violations, including sending sales literature that was misleading via email and not supervising books and records preparations. The firm’s principal, Bruce Meyers, is now barred from working as a firm supervisor or principal.

According to the regulator’s National Adjudicatory Council, Meyers Association has been named in 16 disciplinary actions this century. It paid about $390K in sanctions for different issues, including issuing false statements, supervisory deficiencies, omissions related to a securities offering, improper review of emails, inadequate maintenance of books and records, and not reporting customer complaints in a timely manner. Last year, the US Securities and Exchange Commission turned down Meyers’ appeal of a FINRA securities ruling that prevented him from serving as firm CEO.

Ex-RBS Trader Banned and Fined £250,000 for Manipulating Libor
The UK’s Financial Conduct Authority has banned ex-Royal Bank of Scotland Group (RBS) trader Neil Danzinger from the securities industry and ordered him to pay a $338,000 over allegations that he rigged the London interbank offered rate (Libor). According to the regulator, Danziger, a former RBS interest rate derivatives trader, “routinely” asked RBS Libor submitters to modify the rate to benefit his trading positions. He also allegedly factored in certain trading positions when serving as a submitter and on more than one occasion got a broker to help him to rig other banks’ yen Libor submissions.

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Ex-CFO of ArthroCare Gets Prison Term for $750M Securities Fraud
Michael Gluck, the ex-CFO of ArthroCare Corp., is sentenced to over four years in prison for his role in a $750M financial fraud. Gluk pleaded guilty to securities fraud and conspiracy to commit wire fraud last year.

Gluk, ex-ArthroCare CEO Michael Baker, and others are accused of artificially inflating revenue and sales in an effort to keep the medical device company’s stock price up. As a result, shareholders sustained more than $750M in losses.

Baker was sentenced to 20 years behind bars. Gluk had previously been sentenced to 10 years in prison after he was convicted in 2014 for his role in the scam. However, a federal appeals court overturned the conviction, hence his new plea agreement and sentence. He also must forfeit nearly $678K and pay a $50K fine.

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The US Securities and Exchange Commision has awarded $16M to two whistleblowers—$8M each—for the crucial information and help they provided in bringing a successful securities enforcement action. If you consider that a whistleblower may be eligible for 10-30% of funds collected when the monetary sanctions of the SEC action that the individual helped to bring is greater than $1M, the sanctions imposed in this latest case must have been significant.

According to the regulator, one whistleblower reported a “particular misconduct” that became central to the SEC’s enforcement action. The other whistleblower provided additional key information and continued to cooperate with the agency during its probe. The latter’s contributions reportedly saved the Commission time and resources.

These latest awards bring the amount awarded to SEC whistleblowers—49 of them—to over $175M. Alleged wrongdoers accused in the regulators’ cases have been ordered to pay $1B in financial remedies, including over $671M in disgorgement.

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SEC Files Fraud Charges Against Oyster Bay, NY

The US Securities and Exchange Commission has filed municipal securities fraud charges against the New York City of Oyster Bay along with John Venditto, who was a former supervisor of the town. According to the regulator, the Long Island Town and Venditto defrauded investors through 26 municipal securities offerings from 8/2010 to 12/15. A parallel criminal action has been brought against the ex-town supervisor.

The regulator’s complaint claims Oyster Bay and Venditto hid a number of side deals with a businessman who ran concession stands and restaurants at local facilities. Part of the deals included agreeing to “indirectly guarantee” a number of private loans totaling over $20M to this vendor. “Gifts, bribes, kickbacks, and political support” also were allegedly involved.

Day Trader is Accused of Unauthorized Trades to Inflate Stock Prices and Make Illegal Profits
The US Securities and Exchange Commission has filed civil charges against Joseph P. Willner accusing him of accessing over 100 brokerage accounts and making unauthorized trades. Meantime, prosecutors in NY, as well as the US Justice Department, have filed criminal charges against him.

The SEC contends that Willner used the allegedly unauthorized trades to inflate a number of companies’ stock prices. He then traded in these same securities in his accounts and made at least $700K in illicit profits.

Willner is accused of fraud and market rigging. The Commission wants back ill-gotten gains in addition to interest, penalties, and a permanent injunction.

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