Articles Posted in Uncategorized

In its complaint, the US Securities and Exchange Commission has submitted a civil junctive action accusing Malachi Financial Products, Inc. and its principal Porter B. Bingham, of municipal bank fraud targeting Rolling Fork, Mississippi. According to the regulator, Malachi and Bingham charged the city too much for municipal advisory services involving a muni bond offering from October 2015.

Rolling Fork had hired Malachi in the capacity of municipal adviser in 2015 because of a proposed bond offering to pay for a number of improvement projects in the city. The SEC contends that after the closing of the offering, the firm and its principal submitted two invoices to the bond trustee, one—for $33,000—was for services that were never rendered and had never been authorized by the Mississippi city. The other, for $22K, was in line with what Malachi and Rolling Fork had agreed upon.

Bingham purportedly did not disclose to Rolling Fork that he had received $2,500 from Anthony Stovall, who worked for Bonwick Capital Partners. LLC, prior to Malachi recommending to the city that it retain Stovall’s firm as an underwriter for the bond offering. Rolling Fork went on to hire the underwriting firm because of the recommendation.

Continue reading

The US Securities and Exchange Commission has filed civil charges against Train Babcock Advisors LLC, lawyer Robert Gaughran, and accountant Kevin Clune related to an over $9M institutional fraud targeting a charitable foundation set up by an elderly widow in 1991. The organization, which focuses on improving healthcare and education, was set up using assets from her estate after she died in 2001.

To resolve the civil charges, Train Babcock Advisors will pay over $1.7M in disgorgement plus interest and penalties. It also has consented to withdrawing its SEC registration as an investment adviser. The firm is in the process of shutting down operations.

The $9M fraud was masterminded by former Train Babcock Advisors John Rogicki, who pleaded guilty to criminal charges in October. Earlier this month, he was sentenced to 30 to 90 months behind bars. Rogicki was also ordered to pay the foundation over $6.7M.

Continue reading

Shawn Baldwin, a Chicago investment manager, is charged with eight counts of wire fraud. Baldwin, who owns a number of investment-related firms, is accused of fraudulently obtaining over $10M from at least 17 individual investors and corporate lenders between 2006 and May 2017.

According to the criminal indictment accusing him of financial fraud, Baldwin made false claims about his professional success and connections, including that his firm was affiliated with professional advisors and compliance officers with whom it, in fact, had no ties. He also allegedly misrepresented the seriousness of disciplinary actions that he had been subject to by regulators. Among these were that he was permanently barred from offering investment advice or securities in the state of Illinois, as well as that the Financial Industry Regulatory Authority had taken away his professional registrations eight years ago. In 2006, the National Association of Securities Dealers barred his firm, CMG Institutional Trading, for failing to meet the US Securities and Exchange Commission’s requirements regarding capital.

Baldwin is accused of telling investors that their money would go into investment products when, in reality, he allegedly used their funds for his own use. He purportedly tried to hide his investment scam by generating fraudulent account statements that didn’t accurately reflect the value of customers’ funds. He also made it appear as if he was involved in profitable business deals and was setting up new contacts that would lead to money from IPOs. In truth, claim prosecutors, Baldwin knew he wouldn’t be able to pay back investors because he had either spent or lost their money.

Ex-Philadelphia Eagles Player Who Bilked Former Coaches is Sentenced to 40 Years
Merrill Robertson Jr., a former Philadelphia Eagles football player, will serve 40 years in prison for a $10M fraud that bilked investors. Among his investor fraud victims were coaches he knew from when he played football at the University of Georgia and the Fork Union Military Academy.

The SEC also filed a case against him in a parallel civil case. According the regulator, Robertson, Sherman C. Vaughn Jr., and their Cavalier Union Investments diverted almost
$6M of investors’ money to pay for their own expenses and repay earlier investors.

Investment Advisers Accused of Mislead Investors About Conflicted Transactions
The US Securities and Exchange Commission has filed charges against Mohlman Asset Management, LLC, Mohlman Asset Management Fund, LLC, and Louis G. Mohlman, accusing them of misleading investors and engaging in conflicted transactions. Mohlman and the two investment advisers managed two private funds.

Continue reading

FINRA Orders JPMorgan Securities to Pay $1.25M
The Financial Industry Regulatory Authority said that J.P. Morgan Securities LLC (JPM) will pay $1.25M for not conducting proper background checks—or, in certain instances, conducting them but not in a timely enough manner—from 1/2009 through 5/2017 on 8,600 of its associated persons that were non-registered. According to the self-regulatory organization, this included the failure to properly fingerprint about 2,000 non-registered associated persons. The lapses kept the brokerage firm from knowing whether these individuals should be disqualified from employment.

Meantime, other non-registered associates persons who were fingerprinted were only screened for criminal convictions as they related to federal banking laws, as well as to list that was “internally created.” Still, said FINRA, four people who warranted disqualification due to a prior criminal conviction were allowed to work as non-registered associated persons.

Under federal securities laws, breakage firms must fingerprint certain associated staff even if they are employed in a non-registered manner because they could still pose a risk to customers otherwise. Fingerprinting allows for the identification of folk convicted of past crimes that may disqualify them from working for a firm in an associated role.

Continue reading

Credit Suisse AG (CS) has agreed to settle currency rigging charges brought by New York’s Department of Financial Services by paying $135M. According to the state regulator, from at least ’08 to ’15, the Zurich-based bank violated NY banking law and engaged in other “unlawful conduct” that “disadvantaged customers.”

The consent order states that Credit Suisse did not put into place controls over its FX business that were “effective.” Also, its traders are accused of the “inappropriate sharing” of information with other banks that could have resulted in exchange rate rigging, coordination of trades, and a rise in the “ bid/ask spreads” that were offered to the bank’s forex customers. The DFS probe said that these actions were geared toward creating more profit for Credit Suisse, while decreasing its losses and harming not just its own customers but the marketplace. Meantime, other banks that it may have colluded with also sought to profit.

Credit Suisse is one of several banks whose traders are accused of gathering in chat rooms to rig currency prices. According to Bloomberg, traders from Barclays PLC (BARC), JPMorgan Chase & Co. (JPM), and Citigroup (C) are waiting for their trials over allegations that they sought to manipulate currencies. To date, banks accused of currency rigging have paid $5.8M to the US Justice Department to settle charges.

Continue reading

Bernard L. Madoff Investment Securities LLC trustee Irving H. Picard announced that a settlement has been reached for $687M with Thema International Fund for its ties to the multibillion-dollar Madoff Ponzi Scam. Now, a court must approve the agreement.

According to Bloomberg, the “Irish investment fund funneled $1.1B” to the Ponzi scam that bilked thousands of investors, including those who were with offshore feeder funds, of billions of dollars over several decades. The $687M is representative of all the funds transferred from Madoff’s securities firm to Thema International prior to the former’s collapse, in addition to 19.26% of the withdrawals beyond that time period.

Thema International Fund belongs to a number of offshore entities with ties to Madoff friend and Austrian banker Sonja Kohn and the Benbasset family of Switzerland. Picard contends that Kohn and the Benbassets granted Madoff key access to funds as his Ponzi scam began to fail.

Continue reading

Lord Abbett is suing Valeant Pharmaceuticals contending that the defendant violated New Jersey’s RICO law. The institutional investor is claiming $80B in losses. By invoking the state’s RICO law, Lord Abbett could seek a penalty three times greater than the actual losses it allegedly suffered when the pharmaceutical company’s share price went down.

According to the mutual fund company, it purchased Valeant’s debt securities at a price that was artificially inflated after the pharmaceutical company provided it with information that wasn’t correct. Now, Lord Abbett is alleging violations of RICO law in NJ, which is where Valeant is headquartered.

The institutional investor is not the only party to file a RICO case against Valeant. The other complaints are primarily over allegations that the pharmaceutical company committed fraud by engaging in business practices that were deceptive, including charging too much for drugs. These plaintiffs are claiming hundreds of millions of dollars of losses.

Continue reading

In Manhattan appeals court, a panel for the Appellate Division, First Department ruled that Ambac Assurance Corp. must prove all common law fraud elements in its mortgage-backed securities case against Countrywide Home Loans. The insurer, which underwrote 17 residential mortgage-backed securitizations, filed its RMBS fraud lawsuit against Bank of America’s (BAC) Countrywide in 2010.

Bank of America purchased Countrywide in 2008. That same year, the bank settled civil fraud charges related to questionable mortgage practices from before the 2008 financial crisis by agreeing to pay $16.65B to state and federal authorities.

According to the RMBS fraud case, Ambac put out insurance policies that were irrevocable and without conditions when it guaranteed a number of principal payments plus interest to investors that backed Countrywide RMBSs. The financial guaranty insurer is now accusing Countrywide of breaking warranties and contractual representations involving securitizations and its business practices, as well as of putting out false statements about its loans and operations and, as a result, fraudulently compelling Ambac to issue certain policies.

Continue reading

Bloomberg reports that according to sources, the US Securities and Exchange Commission has launched a probe into Statim Holdings. Inc., an Atlanta, Georgia-based financial firm, after the latter told investors in its main hedge fund that there was no risk of financial losses for investing. The regulator’s investigation comes in the wake of a state probe by the Georgia Securities Division. Statim is helmed by Joseph A. Meyer.

Meyer told investors in the Arjun fund’s main share class that they would never sustain financial losses. However, they have to commit their funds for a decade or lose 50% of their principal should they decide for early redemption.

The hedge fund manger has said that he uses a computerized system that he designed and he invests the bulk of clients’ funds in Treasury bonds. In 2015 Bloomberg News placed Arjun at number eight in its list of hedge funds that had assets ranging from $250M and $1B. BarclaysHedge has given 17 awards to Arjun.

Continue reading