Securities Lawyer Blog | Victim of Fraud?

TAG | ponzi scheme losses

Mar/13

6

Did You Invest with Jason T. Knapp of Dawson James Securities?

Comments off · Posted by Securities Lawyer in FINRA

Soreide Law Group, PLLC, had begun an investigation on behalf of clients of Jason T. Knapp, formerly employed by Dawson James Securites. Knapp was charged with allegedly running a Ponzi scheme through SteepleChase Group. Knapp allegedly promised his clients, many from New York and Florida, unrealistic returns of 18 to 20 percent. Knapp was registered with Dawson James Securities from September, 2008, through June, 2012. There are questions as to whether Dawson James properly supervised Knapp while he was registered with the brokerage firm.

Jason T. Knapp was arrested in New York, and charged with second degree grand larceny, a felony, for allegedly stealing $60,000 from a personal friend from Indian Lake, New York. Knapp allegedly took money from clients and friends to invest in SteepleChase, but instead of investing the money, he was using that money to pay other, earlier investors, and for his own personal use. Basically, it was a Ponzi scheme.

Call and speak to a lawyer, at no cost, if you were a client of Jason T. Knapp of Dawson James Securities. Soreide Law Group, PLLC, represents investors nationwide before the Financial Industry Regulatory Authority (FINRA) and can be reached at 888-760-6552.

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Jun/12

22

Thomas Hammond, Fair Oaks, CA, Barred by FINRA

Comments off · Posted by Securities Lawyer in FINRA

 

Thomas Brown Hammond (CRD #2389080, Registered Representative, Fair Oaks, California)

was barred from association with any FINRA member in any capacity.  Hammond consented to the described sanction and to the entry of findings that he solicited both his brokerage firm customers and customers of his consulting business to invest funds in a fictitious private portfolio that would earn a steady interest rate in excess of their current investments, then converted those funds for his own use.

Hammond stole at least $546,650 from customers at his member firm and his consulting business. At least $492,250 was taken from Hammond’s customers at his firm.

FINRA’s findings stated that when his customers inquired about their investments, Hammond sometimes provided bogus updates of their investments, either orally or through false one-page account summaries.

One customer wanted to cash out $58,000 in the private portfolio, so Hammond told the customer it would take seven days for the money to be available. Hammond returned $48,000 to that client the next week. The money was fraudulently obtained from another customer.

(FINRA Case #2011026683401 )

This information was on FINRA’s website under “Disciplinary and Other FINRA Actions, June, 2012.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented numerous clients nationwide. Call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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May/12

25

Ponzi Scheme May Have Targeted Ft. Lauderdale’s Gay Community, Wilton Manors

Comments off · Posted by Securities Lawyer in FINRA

In a May 24th, 2012, article from Ft. Lauderdale’s Sun-Sentinel, Jon Burstein writes that an investment adviser from Ft. Lauderdale, and others, exploited trust and friendships within the Ft. Lauderdale gay community of Wilton Manors to help fuel a multimillion-dollar investment fraud, according a lawsuit brought this week by a group of investors.

There were fourteen residents of Broward County who alleged fell prey to accused Ponzi schemer George Elia. A well-known figure in Wilton Manors, Jim Ellis, and his daughter, Janet Ellis, vouched for Elia’s success as a day trader. These investors lost about $2.5 million to Elia, who is now in federal lockup facing a wire fraud charge.

According to the Sun-Sentinel article, the investors filed suit in Broward Circuit Court against Elia, Elia’s wife, the Ellises and Elia’s business, International Consultants & Investment Group Limited Corp. They are the second group of investors to sue Elia. A California family filed a $4 million lawsuit against Elia in October that led to a judge freezing his businesses’ bank accounts.

Burstein writes that Elia fled to the Mediterranean island of Cyprus, where he was born, in January and appeared to be out of the reach of U.S. authorities. But in March, he flew back to Las Vegas to find U.S. marshals waiting for him at the airport.  The SEC has also filed a civil lawsuit against him accusing him of raising more than $11 million using lies and bogus financial statements.

The Sun-Sentinel article adds that this latest lawsuit alleges the Ellises provided Elia with access to the Wilton Manors community: Jim Ellis was active in the nightlife scene and Janet Ellis worked as the property manager of Wilton Station condo development.
“Each of the plaintiffs was courted by Jim and Janet and regaled with false stories/demonstrations of a lavish lifestyle made possible by Jim and Janet’s supposed investments with Elia,” according to the lawsuit filed Tuesday.

Ellis said in a February interview that he was a victim of Elia like all the other investors.

According to the court records, Elia funneled at least $2.3 million from International Consultants bank accounts into companies controlled by him and his wife, Darlene, and withdrew at least $242,000 in cash in 2010 and 2011.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

 

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Nov/11

30

Due Diligence on Private-Placements Labeled ‘Sloppy’

Comments off · Posted by Securities Lawyer in FINRA

In a November 25, 2011, article in InvestNews.com, Bruce Kelly writes that broker-dealers who sold billions of dollars in allegedly fraudulent private placements failed massively in their due-diligence responsibilities to investors, according to the assessment of forensic accountant and expert witness Gordon Yale, who has worked on more than 50 legal claims brought by investors against broker-dealers stemming from the failed deals. The clients bought private placements issued by DBSI Inc., Medical Capital Financial Corp. and Shale (Provident) Royalties.

The Securities and Exchange Commission, SEC, had charged Medical Capital Financial and Provident Royalties with fraud in 2009; DBSI filed for bankruptcy protection in 2008.

Kelly writes that broker-dealers’ due diligence showed incredible “sloppiness,” according to Mr. Yale, a certified public account and principal of Yale & Co.

“It was basically the same recklessness with which major investment banks conducted their mortgage-backed-securities business, but it was done by middle- or lower-tier firms and [with] a different set of products. You need to understand the underlying business and management’s representations about the performance of that business, and then begin performing due-diligence procedures that are either going to corroborate those representations or not,” Mr. Yale said.

“Another failure was that everyone seemed to rely on the fact that [MedCap] payments had been made in a timely way,” he said.

THEY “PAY TILL THEY DON’T”

“The word was, “They’re paying.’ So what? That’s how all Ponzi schemes work. They pay till they don’t,” said Mr. Yale, who has served as an expert witness for a dozen different plaintiff’s lawyers in lawsuits stemming from more than $100 million in claims. The overwhelming majority were settled, and Mr. Yale testified in only one.

The investor won that claim last year, with an award of $1.2 million in damages and legal fees against Securities America Inc.and an affiliated broker.

The broker-dealers that sold $3.6 billion in MedCap notes, Shale Royalties preferred shares, and DBSI tenant-in-common exchanges, partnerships and notes have said that they performed appropriate due diligence. In several regulatory actions that involved fines or restitution to investors, the B-Ds neither admitted nor denied the findings. Regulators, however, recently have issued fines and sanctions that support Mr. Yale’s assertion.

The InvestmentNews.com article said that in September, for example, the Financial Industry Regulatory Authority Inc. levied a $10,000 fine and a six-month suspension against Brian Boppre, former president of Capital Financial Services Inc. Capital Financial was a leading seller of both Medical Capital Financial and Provident Royalties, and Mr. Boppre “knew of an issuer’s failure to make payments to its investors and was also aware of other indications of the issuer’s problems but approved the offering as a product available for the firm’s brokers to sell to their customers,” according to Finra. Mr. Boppre also “failed to conduct adequate due diligence of the offerings before allowing firm brokers to sell this security,” according to Finra.

WE ARE “SEEING A SHIFT’

One due-diligence executive said that broker-dealers have made some changes in the wake of the private-placement failures and are working more closely with third-party due- diligence analysts. “From an industry standpoint, we’re seeing a shift in trying to bring some standards as it relates to how these deals should be structured,” said Anthony J. Chereso, president of FactRight LLC.

“It’s an absolute necessity. There also needs to be some clarity as to what Finra and the regulators are expecting of the broker-dealers,” Mr. Chereso said. “We need to have the broker-dealers more involved in the process of managing the due diligence.”

“We encourage the broker-dealers to participate in the on-site visits [to companies issuing private placements] with us, to walk along with us in the due-diligence process. That way, they will know firsthand what some of the potential issues are,” said Yale.

After the SEC in July 2009 alleged that Medical Capital and its leading executives had committed fraud, executives with Securities America insisted that they performed “industry-leading” due diligence on private placements that they sold.

“It’s untrue, because basically what Securities America did, I believe, was to rely on management representations made by Medical Capital or rely on third-party due diligence that relied on management representations,” he said.

“Securities America continually enhances its policies and procedures in order to best serve its customers,” said Janine Wertheim, senior vice president and chief marketing officer of Securities America, who didn’t directly address Mr. Yale’s comments.

“One of the problems is that many of the firms relied on third-party due-diligence vendors,” Mr. Yale said.

“They viewed those reports as the end of the process, rather than the beginning. There’s a notice to [Finra] members, 05-48, that basically says you can outsource any function, but you can’t outsource your responsibility for compliance with federal securities laws or regulations,” Mr. Yale said.

“In many instances, the issuer paid those third-party due-diligence providers,” he said. “To believe that due-diligence functions stops with some independent — or purportedly independent — provider is a mistake.”

ACCOUNTANTS

To perform true due diligence, firms must use accountants to dig into the offering documents, Mr. Yale said.

“Why didn’t Securities America impose a third-party, independent CPA firm to verify the results of the [MedCap] loan pool histories? That was supposedly the primary business,” he said. “Or why didn’t they hire a CPA to look at the loan files? That’s state-of-the-art due diligence.”

“That’s what any private-equity firm would do and a whole lot more,” Mr. Yale said. “Neither Securities America nor any other firm whose documents I’ve seen ever did that.”

One third-party due-diligence analyst who wrote reports about Medical Capital Financial was “almost wringing his hands over Medical Capital investments in health-care-related businesses, particularly owner-occupied real estate,” Mr. Yale said.

The analyst, whom Mr. Yale declined to identify, “stated in his reports that this was not their expertise. The next-most-obvious question is: What did the financial statement say about those investments, and how are they performing?” he asked.

“So you need to go look at the investments that are disclosed in the footnotes to the financial statements, and you see a bunch of them are delinquent. Where was the follow-up?” Mr. Yale said as written by Bruce Kelly for InvestmentNews.com.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have experienced losses with these or other stockbrokers/brokerages, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Oct/11

26

Ex-Brokers from Edward Jones Under FBI Investigation Over Alleged Ponzi Scheme

Comments off · Posted by Securities Lawyer in FINRA

The FBI is investigating two former Edward Jones brokers based in South Dakota for their role in a “selling-away” case that involved raising money from clients who invested in an alleged Ponzi scheme writes Bruce Kelly in a September 28, 2011, article in InvestmentNews.com.

Kelly writes that according to Jones, a client brought the matter of Gibraltar Partners Inc. to the firm’s attention in March. As a result of its investigation, during which the company learned that the Justice Department was in the middle of a criminal investigation of Gibraltar Partners, Edward Jones fired the brokers, Jones spokesman John Boul wrote in an e-mail.

“A small number of Edward Jones clients have invested money in this scheme, away from the firm,” Mr. Boul wrote. “The firm is currently negotiating settlements with these clients.”

Edward Jones is one of the largest brokerage firms in the country. It has more than 12,000 brokers, most of them operating from one- or two-man offices. “Selling away” is one of the most common difficulties independent and franchisee broker-dealers face in their oversight of registered reps. Such reps typically operate in one- or two-man offices and have no branch manager looking over their shoulders on a day-to-day basis. Cases typically involve a broker selling a financial product that the broker-dealer did not approve or know about, with the investment vehicle blowing up and harming the client’s portfolio.

The InvestmentNews.com artcle goes on to say that a group of investors in June sued Gibraltar Partners in U.S. District Court in the Southern District of New York, alleging that Gibraltar and others, including the Rahfco Funds LP, were running an alleged Ponzi scheme. Investors are seeking $100 million in damages in that suit. Jones was not named in that lawsuit. Gibraltar Partners could not be reached to comment.

The names of the former Jones brokers allegedly involved in the matter were not revealed by Jones.  “Other investors who are not clients of Edward Jones also invested in Gibraltar” and that the firm is cooperating with federal and state authorities.

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you feel you have become a victim of these brokers associated with Edward Jones or other brokerages, by investing in the alleged Ponzi Scheme, Gibralter Partners, Inc., call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Oct/11

7

ATTENTION CLIENTS OF GARY LANE:

Comments off · Posted by Securities Lawyer in FINRA

 
Gary Harrison Lane has been accused of improprieties in his client’s accounts. These accusations relate to the sale of government debt and or notes. Our investigation revealed that Gary Lane may have been involved in the sale of what could ultimately prove to be a ponzi scheme.
 
If the investigation later proves that Gary Lane was in fact selling ficticious notes to customers, this could result in criminal charges being filed. Gary Lane has worked for Banc of America Investment Services in Reno, Nevada, from July 99 through October 2009 and for Merrill Lynch in Reno, Nevada, from October 2009 through March 2011, where he was ultimately terminated for the alleged improprieties.
 
Our private investigators are actively looking into the investments sold by Gary Lane. If you were a client of Gary Lane, Soreide Law Group in interested in speaking with you. Please contact attorney Lars Soreide directly at 888-760-6552 or visit us on the web at www.securitieslawyer.com
 

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