On November 29, 2007 the SEC charged Daniel N. Jones and Azure Bay Management, LLC (”Azure Bay”) with fraud in connection with their management of The Addington Fund LP, a private hedge fund. According to the Commission, under Jones’s management the Fund sank in value from $2.1 million to $200,000 while Jones represented to investors that the Fund was profitable, sending them false account statements and taking excessive, unearned fees from the Fund. 

Jones is a resident of Battle Creek, Michigan.  The SEC’s action against him is pending in the United States District Court for the Western District of Michigan.  The Court has issued a temporary (more…)

On November 26th, the SEC secured a federal court order temporarily restraining Alex Rabinovich, Rabinovich & Associates, LP, an unregistered investment company and broker-dealer managed by Rabinovich, and Joseph Lovaglio, from continuing to engage in a fraudulent offering of securities.  The SEC alleges that the defendants have raised at least $550,000 from at least twenty-three investors, many of them senior citizens. 

According to the SEC the defendants operating out of a storefront boiler room in Brooklyn, selling limited partnership interests in Rabinovich & Associates, without telling prospective investors (more…)

While in New York today, I picked up the local newspapers.  The front page of the New York Post bears a banner headline reading Bad Heir Day, Inside the DA’s Case against Brooke’s Son.  The story inside centers around the criminal prosecution of Anthony Marshall, the only son and heir of philanthropist Brooke Astor.  According to the DA, Marshall took advantage of his mother’s Alzheimer’s disease to loot tens of millions of dollars from an estate worth an estimated $120 million.  Marshall pleaded ‘not guilty.’  Today’s Wall Street Journal included a story entitled How to Ensure Relatives Don’t Rip You Off. 

Both stories point out the importance of adding at least one layer of independent accountability to your plans to protect your finances.  (more…)

Are you active in a church, temple, or mosque?  Do you have any interests outside of work?  Do you trace your heritage to another country?  Few would answer “no” to all of these questions.  Answering “yes” to any of them makes you a target for affinity fraud.  NASAA, the North American Securities Administrators Association, puts affinity fraud at the top of its list of the top ten scams operating today. 

The SEC defines affinity fraud this way:  “Affinity fraud refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. The fraudsters who promote affinity scams frequently are - or pretend to be - members of the group.” 

Christians bond around their shared faith in Jesus.  As hard as it is for the devout of any religion to comprehend, an affinity fraudster thinks no more of feigning belief in God (more…)

The Securities and Exchange Commission today filed suit against Eric Majors of South Africa and Joshua N. Wolcott of Denver, Colorado, alleging that they fraudulently offered and sold more than eight million shares of unregistered stock in Maximum Dynamics, Inc. (”Maximum)”, an alleged international projects management company headquartered in Colorado Springs, Colorado.

According to the SEC, chief executive officer Majors and former chief financial officer Wolcott issued millions of Maximum shares in the names of alleged consultants in Mexico using false consulting contracts.   The SEC claims that the individuals in Mexico had sold their identities (more…)

Massachusetts Secretary of the Commonwealth William Galvin has filed charges against Morgan Stanley & Co. and several of its brokers alleging violation of the state’s do-not-call rule.  The complaint is important beyond the charges against the individual brokers and their wire house employer.

Galvin’s complaint reveals how brokers troll for leads and how vulnerable every investor is to being targeted by aggressive brokers scrambling for access to the financial assets of senior citizens and baby boomers.  According to the complaint, the brokers improperly accessed CareerBuilder.com and downloaded resumes containing sensitive personal and financial information in order to solicit business on behalf of Morgan Stanley.

If you remember what you learned in history class about what happened at Sutter’s Mill in California in 1848 and thereafter, you’ll have a good idea of the mental state of the (more…)

Joe Borg, Alabama’s Top Securities Cop, has issued a press release identifying a new scam operating in Alabama.  State borders cannot contain a scam that fraudsters find effective.  Expect to see this scam where you live.

It operates like this:  The promoter will draw people in by offering an incentive for participating in a ‘financial planning survey,’ supposedly being conducted by a well known Wall Street firm.   In cases reported so far, promoters have offered a payment of $1,000 and $250 per year thereafter for participating in the ’survey.’ The promoter stresses that the investor has no obligation beyond participating in the survey. Participating in the survey, though, requires submitting information (more…)

This is the next in a series of posts on what investors can learn from Jordan Belfort’s memoir The Wolf of Wall Street.  It would be easy to conclude that Belfort’s firm, Stratton Oakmont, was an aberration, something akin to the Black Death - bad while it lasted but not something we need fear today.  Please don’t make that mistake.The brokerage firm you are currently using (yes, even that one) may have more in common with  Stratton Oakmont than with the image your firm portrays in its slick television and print ads.  Securities industry ad campaigns often bear about as much resemblance to the truth as road kill does to a rose.

It’s all about sales.  (more…)

The Securities and Exchange Commission today filed charges against Detroit-area resident Edward May and his company E-M Management Co. LLC alleging that they ran a $250 million fraud for nine years between 1998 and July 2007. According to the SEC, May and E-M defrauded 1,200 investors, many of them senior citizens by falsely representing that they had contracts to provide telecommunications services to several Las Vegas hotels.  May and E-M used “investment seminars” to attract potential investors, touting deals with such major hotel chains and casinos as Hilton, MGM Grand, Motel 6, Tropicana and Sheraton.  The SEC claims that no such deals or contracts ever existed.

The alleged scheme took in investors from several states, including Michigan, California, Florida, Illinois, New York, Ohio and New Jersey.  The case is pending in the U.S. District (more…)

The SEC has announced an emergency enforcement action against “James Thomas Webb and several companies that he owns and controls, alleging that they engaged in a real estate-based fraudulent investment scheme that raised at least $8.4 million from more than 80 investors.”  At the SEC’s request, the U.S. District Court for the Southern District of Florida froze Mr. Webb’s assets as well as those of his wife and several companies Webb controls.

According to the Commission’s complaint, Webb solicited investors to invest in a real estate scheme, falsely representing that he would generate returns from renovation and resale of distressed properties in several states.  (more…)