Archive for May, 2009

Divorce of Employee Leads to Closure of Pioneering Hedge Fund

Friday, May 29th, 2009

When David Zilkha left Microsoft, he went to work for Pequot Capital Fund, then a $15 billion hedge fund.  Shortly thereafter Pequot founder Arthur Samberg made a timely purchase of Microsoft stock.  The SEC wondered whether Zilkha had passed along inside information.  The SEC investigated off and on before eventually deciding not to file charges.  (more…)

SEC Uncovers Alleged $50 Million Fraud

Thursday, May 28th, 2009

On May 19, 2009, the U.S. Securities and Exchange Commission (SEC) filed a civil injunctive action charging Guillermo David Clamens, FTC Capital Markets, Inc., a registered broker-dealer he controls, (”FTC”), and Lina Lopez, an FTC employee, with a fraudulent scheme to engage in tens of millions of dollars of unauthorized securities trading through the accounts of two FTC customers. Clamens and Lopez defrauded FTC’s customers in part to conceal their prior fraudulent sale of $50 million in non-existent notes to a Venezuelan bank through another Clamens-controlled entity, Emerging Markets. When the fictitious notes held by the Venezuelan bank purportedly came due in August 2008, Clamens misappropriated $50 million from FTC’s customers to fund the redemption. In addition, the Complaint alleges that Emerging Markets is an unregistered broker-dealer. (more…)

Trusting the County Sheriff

Wednesday, May 27th, 2009

Its human nature to trust certain people — your loved ones or someone in a position of power.  How about your local sheriff?  Because he or she is someone who fights crime on your behalf and protects your family, you naturally trust him or her.  But don’t be so sure… (more…)

Follow the Money - Hedge Fund Managers

Tuesday, May 26th, 2009

The U.S. Securities and Exchange Commission (SEC) has charged Wisconsin-based Wealth Management LLC, and its principals, James Putman and Simone Fevola, with securities fraud in connection with investment pools that the defendants operated.  Among the SEC’s allegations is that the defendants inflated the supposed returns for the funds in order to maximize the compensation to the hedge fund managers. (more…)

SEC Halts Alleged CD Scam Run Through Phony Savings & Loan Company

Friday, May 22nd, 2009

Investor’s Watchdog has been warning of an uptick in scams centered on certificates of deposit.  Last week, the SEC alleged that two northern-California men have been running one such scheme.  Specifically, the SEC charged  Bich Quyen Nguyen, Johnny E. Johnson, and their entities, Sun Group and Sun Investment Savings and Loan with raising more than $9 million by selling supposed certificates of deposit. (more…)

Charting New Territory

Friday, May 22nd, 2009

For the first time, a federal grand jury has indicted a stockbroker - David McFadden, formerly of Securities America, Inc. - for allegedly conspiring to defraud elderly investors.   Jessica Papini of the Wall Street Journal has covered the story.  Her latest piece in the WSJ reads in part as follows:

“This is a very unusual case,” said Joseph Fogel of Fogel & Associates, who isn’t involved in the case. In prior cases where brokers were charged with placing their clients in unsuitable investments or misrepresenting returns, firms paid the investors’ money back and were fined.

According to the complaint, McFadden made misrepresentations and omissions related to his qualifications, the diversification of stocks, and the potential investment returns.  This included telling clients he was a certified public accountant (CPA) although he hasn’t been licensed as such since 1987.   

In another impressive article, Ted Griggs of The Advocate, also following the McFadden story, wrote that McFadden also told his clients that his firm, Diversified Financial Services, employed other CPA’s as well. 

McFadden’s alleged unsuitable investment scheme is said to have cost his retired clients millions of dollars. In 2006, the NASD (now know as FINRA) fined Securities America and barred McFadden from the industry. And now, if he is convicted in the federal case, McFadden faces up to five years in prision and a fine of up to $250,000. 

So, the securities regulators and law enforcement are trying to set a new precedent:

This prosecution provides a warning to all brokers that, in egregious cases of customer fraud, sanctions may not end with Finra’s barring the broker from the securities industry, but may, instead, end up with jail time,” said James Eccleston, head of the securities group at Shaheen, Novoselsky, Staat, Filipowski & Eccleston PC.

But as the securities fraud battle continues, brokers will continue to misrepresent and omit material facts in order to gain your business.  It is the investor’s job to check out the broker and his firm and decide whether they are legit or not.  Ask Investor’s Watchdog for help— IW will uncover all customer complaints, and review the broker’s education and employment credentials for you.

A Timeless Story

Thursday, May 21st, 2009

Jessica Anderson of Kiplinger’s Personal Finance spoke to Ponzi victims, Peggy and Sam Niblett.  The Niblett’s told Anderson their story of being defrauded by Ulric Sweesy in an oil and gas scheme. Thousands of American investors have similar stories. (more…)

SEC Halts Another Alleged Oil and Gas Scam

Wednesday, May 20th, 2009

The U.S. Securities and Exchange Commission (SEC) has charged Colorado Springs-based Wellco Energy, LLC (”Wellco”), its principal, Justin William Rifkin, and salesmen Patrick Looper, Richard Pacheco, and Dustin White, with securities fraud in connection with an alleged oil and gas scheme.  (more…)

SEC and CFTC Halt Alleged Scam Involving Commodities Futures

Tuesday, May 19th, 2009

The U.S. Securities and Exchange Commission (SEC) has charged Gordon A. Driver (”Driver”) - of Las Vegas and Hamilton, Ontario - and his company Axcess Automation, LLC (”Axcess”) with securities fraud, claiming that the defendants raised $14.1 million from about 100 investors by promising weekly returns of up to 5 percent from trading in futures. (more…)

SEC Halts Alleged Scam Before It Can Claim More Victims

Monday, May 18th, 2009

The U.S. Securities and Exchange Commission (SEC) has charged Paul G. Bultmeyer, Arthur J. Piacentini, Sherbourne Capital Management, Ltd. and Sherbourne Financial, Ltd. with securities fraud in connection with an alleged scheme involving the sale of “Prime Certificates of Participation.” (more…)