Tag Archives: Colorado

Eric Sampson Loss Recovery

We are actively pursuing actions to recover losses incurred by victims of Eric Sampson.  Victims are primarily investors of Sampson’s My Investment Advisor (“My IA”).  If you are a victim, please call 1-866-817-0201 for a free and confidential initial consultation.

Sampson operated at different times out of St. George, UT, Washington, UT, Greenwood Village, CO and Colorado Springs, CO.  Investments sold by Sampson that are considered fraudulent include Golden Assets, LLC, Shooks Run, LLC, The Hills at Santa Clara, and Wright Indoor Comfort.

At all relevant times, Sampson was a licensed securities broker, working first for Girard Stock handcuffsSecurties and subsequently World Choice Securities.  The practice of Sampson was a hybrid brokerage investment advisory practice that he controlled and that was made aware to his employers.  In such a situation, the investment advisory is required by pay the brokerage for supervision.  The brokerage, in turn, is charged with ensuring that the advisory is not selling investments fraudulently.

Federal criminal charges are currently pending against Sampson.  There is also currently a case against Sampson and My IA by Utah regulators.

As stated in the Federal criminal action, “It was the object of [Sampson's] scheme and artifice to defraud for defendant Sampson to fraudulently obtain money from his MY IA clients through false statements, misrepresentations, deception, fraudulent conduct, and omissions of material facts, and thereafter cause the money to be diverted for defendant SAMPSON’s personal use and benefit.”

Attention Investors of Western International

If you lost money investing with Western International, please call 1-866-817-0201.  The initial consultation with an attorney is free.  Jeffrey Pederson represents investors nationwide in securities brokerage disputes.

NYSE pic 2Western recently entered into a regulatory settlement where it neither admitted not denied the following facts.  Those facts are that from January 1, 2011 to November 5, 2015 (the “Relevant Period”), Western failed to establish, maintain and enforce a supervisory system to ensure that representatives’ recommendations regarding certain ETFs (exchange traded funds) and also failed to comply with certain securities laws in the sale of these ETFs.

In addition, Western allowed its representatives to (1) recommend Non-Traditional ETFs without performing reasonable diligence, the required level of investigation into the investments, to understand the risks and features associated with the investments, and (2) recommend NonTraditional ETFs that were unsuitable, either due to the known high level of risk in the investments or inherent complexity, for certain customers based on their ages, investment objectives and financial situations.

Non-Traditional ETF’s, such as the ETFs that were sold by Western, are designed to return a multiple of an underlying index or benchmark, such as the VIX or S&P, the inverse of that index or benchmark, or both, over the course of a day. As a result, the performance of Non-Traditional ETFs over periods of time longer than u single trading session “can differ significantly from the performance of their underlying index or benchmark during the same period or time.” Because of these risks and the inherent complexity of these products, FINRA has advised broker-dealers and their representatives that Non-Traditional ETIls “are typically not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”

We have spoken to a number of investors who have suffered similar losses and believe that such investments were intended for highly sophisticated investors only, such as hedge fund managers, and could not be legitimately sold to retail investors.  So if your were investing for retirement and were sold such investments, you likely have grounds for recovery.

Losses in Inverse VIX ETNs and ETFs

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Investments connected to the VIX index were known to be highly speculative.

We are a firm that specializes in investor loss recovery.  Investors of Inverse VIX Exchange Traded Notes (ETNs) and Inverse VIX Exchange Traded Funds (ETFs), including VelocityShares Daily Inverse VIX Short-Terms ETN (XIV), the ProShares Short VIX Short-Term Futures ETF (SVXY), and the LJM Partners’ Preservation and Growth fund (LJMIX and LJMAX) may have grounds for the recovery of their losses.

If you were sold an Inverse VIX ETN please call 1-866-817-0201 for a free and confidential consultation with an attorney.

These investments were suitable for very few investors.   The sale of unsuitable investments is a form of negligence and possibly fraud.   These investments carry such a high level of risk and are so complicated that they were likely not suitable for any retail (non-institutional) investor.   “Unless you were a hedge fund manager you should not have been sold these funds.” If you were recommended such investments as part of a retirement savings portfolio you have grounds to recover your losses.  The makers of these funds have acknowledged that the fund was for hedge fund managers only, and not individual investors.

Starting on February 2 and continuing through February 6, investors saw portfolios implode due to investments in obscure products that tracked market volatility.  Such investments tracked the VIX index.  The VIX index is a complicated monitor of investment market volatility or “investor fear.”  An “inverse VIX” investment is an investment that benefits from stable markets but loses value quickly in times of volatility.  The losses in the inverse VIX investments mounted quickly until NASDAQ halted the trading of these investments on February 6, with some suffering losses of almost all value in just a few days.

For example, VelocityShares XIV plummeted 80 percent in extended trading on February 5, 2018.  This is a security issued by Credit Suisse this tracks the inverse of the VIX index tracking market volatility.  As the market rose and sank the value of XIV dropped sharply.  Such sudden drops have a cascading impact that can lead to margin calls and other losses.

Of particular concern, though any sale of such an investment to a retail investor is concerning, are investors who purchased such shares through the following brokerage firms:  Credit Suisse, Fidelity, Merrill Lynch, and Wells Fargo.

The dramatic losses was foreseeable to securities brokerages, often referred to as securities “broker-dealers.”  The regulator that oversees broker-dealers, FINRA, the Financial Industry Regulatory Authority, issued its latest warning in a string of warnings on October 2017 to broker-dealers about VIX and inverse VIX investments.  FINRA identified such investments speculative and warned the “major losses” could result from such investments from a failure to understand how such investments work.  For example, many are short-term trading vehicles that can degrade over time.

FINRA also warned all financial advisers that VIX ETNs may be unsuitable for non-institutional investors and any investor looking to hold investment as opposed to actively trading the investment.   While this warning occurred in October 2017, similar warnings were issued in 2012.  That same month, FINRA fined Wells Fargo for unsuitable recommendations of similar volatility investingstockphoto 1funds.

FINRA stated in 2012 in a Regulatory Notice, RN 12-03, that heightened supervision is required of any broker who sells such complex investments, and specifically identified the need for brokerage firms to oversee any recommendation of an investment based upon the VIX.

While all short VIX trading is suspect and potentially recoverable, the following investments are of particular concern:  XIV, SVXY, VMIN, EXIV, IVOP, LJMIX, LJMAX, XXV, and ZIV.

FINRA is conducting sweep investigations of all brokerages that sold any and all of these investments to retail investors.  ‘The sweep is part of Finra’s continuing focus on the suitability of sales of complex products, including leveraged and volatile products, to retail customers,’ stated FINRA.

In addition to suitability, there is also concern that due diligence by these brokerages should have revealed that the index was subject to manipulation.  This was recently reported by the Financial Times of London.  A scholarly report from researches at the University of Texas in 2017 identified the mechanism for manipulating the VIX.  FT reports that the Securities and Exchange Commission is currently investigating such allegations.

Investors suffering losses in such investments may have valid claims despite the warnings contained in the prospectus.  These investments should not have been offered to any retail investors.

PedersonLaw has represented investors in similar actions in most of the 50 states either directly or pro hac vice.

Recovery of Woodbridge Loss

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Woodbridge investors believed real estate ensured the safety of their investments.

Investors of Woodbridge may have the ability to recover the losses they sustained.  Please call 1-866-817-0201 or 303-300-5022 for a free consultation with a private attorney concerning potential loss recovery.

Regulators have charged the Woodbridge Group of Companies with operating a Ponzi scam.  This creates liability on the part of those advisors selling Woodbridge.

There were glaring issues in these Woodbridge investments for an extended period of time.    These issues should have been discovered during reasonable due diligence by the brokers and agents selling the Woodbridge investments.  These investments should have been recognized as not being suitable for any investor.

The U.S. Securities and Exchange Commission (SEC) had been investigating Woodbridge since 2016.  Woodbridge, the Sherman Oaks, California-based Woodbridge, which calls itself a leading developer of high-end real estate, had been under the microscope of state regulators even longer.   The focus of these regulators was the possible fraudulent sale of securities.

On December 21, 2017,  the SEC charged the Woodbridge Group of Companies with operating a $1.2 billion Ponzi scheme that targeted thousands of investors nationwide.  “The only way Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money,” per Steven Peikin of the SEC.

Prior to the charge, in January 2017, the SEC served a subpoena on Woodbridge for relevant electronic communications.  Woodbridge failed to respond to this subpoena.  This left the SEC to seek court intervention to compel Woodbridge to produce potentially damaging documentation the SEC believes existed.  The SEC filed its allegation that Woodbridge is a Ponzi scheme within weeks of its access to Woodbridge’s documents.

Through court filings, the SEC states that Woodbridge “has raised more than $1 billion from several thousand investors nationwide” and it “may have been or may be, among other things, making false statements of material fact or failing to disclose material facts to investors and others, concerning, among other things, the use of investor funds, the safety of the investments, the profitability of the investments, the sales fees or other costs associated with the purchase of the investments.”

Shortly after the issuance of the order sought by the SEC Woodbridge declared bankruptcy.  This filing does not extinguish the rights of investors.  These investors have claims against the brokers and advisors selling the investments.

Woodbridge has additionally stated that it has also received inquiries from about 25 state securities regulators concerning the alleged offer and sale of unregistered securities by unregistered agents.

The Woodbridge Group of Companies missed payments on notes sold to investors the week of November 26, 2017, and December 5, 2017 filed chapter 11 bankruptcy.  The company blamed rising legal and compliance costs for its problems.

Woodbridge said it had settled three of the state inquiries and was in advanced talks with authorities in Arizona, Colorado, Idaho and Michigan when it filed for Chapter 11 protection.

The company’s CEO, Robert Shapiro, resigned on December 2  but will continue to be paid a monthly fee of $175,000 for work as a consultant to the firm.

Those at Woodbridge are not the only ones responsible for investor losses.  The Colorado Division of Securities is considering sanctions against investment advisor Ronald Caskey of Firestone, Colorado.  Caskey is the host of the Ron Caskey Radio Show.  James Campbell of Campbell Financial Group in Woodland Park, Colorado and Timothy McGuire of Highlands Ranch, Colorado are also the subject of regulatory investigations by the state regulator.  The Colorado Division of Securities has also begun investigating Jerry Kagarise of Security 1st Financial of Colorado Springs.  Another seller of Woodbridge in the Springs area is Carrier Financial.

These and other Colorado investment advisors have raised approximately $57 million from 450 Colorado investors.  Woodbridge continued to solicit investors through these advisors, in addition to radio and online ads, through October 2017, just prior to the bankruptcy filing.

While the regulatory actions will do little to compensate the damaged investors, these actions support private civil actions for recovery by investors.  We are investigating and in the process of bringing suit against Colorado investment advisors selling Woodbridge investments, and would like to share what we have learned with other investors in Colorado and nationwide.

Rueters is the source of some of the information contained herein.

Wells Fargo Losses

If you suffered losses with Wells Fargo in ETP investments or other investments that you understood to have only low to moderate risk, please call 1-866-817-0201 for a free and confidential consultation with an attorney.

Wells FargoFINRA, the regulator that oversees securities brokerages, ordered Wells Fargo on Monday to pay investors $3.4 million after its advisers recommended “unsuitable” investments known as volatility-linked products that were “highly likely to lose value over time.”

Wells Fargo pushed its investors into these investments, volatility-linked ETPs, as hedges, to protect against a market downturn. In fact, these investments are unsuitable for such a strategy.  The investment are, in reality, “short-term trading products that degrade significantly over time,” regulators said, and “should not be used as part of a long-term buy-and-hold” strategy.  The recommendation of such unsuitable investments is a form of negligence, and could be seen as reckless enough to be considered fraud.

Volatility-linked ETPs are complex products that most investors do not understand and, as such, they rely upon their adviser, who should be a trained professional, to understand.   Certain Wells Fargo representatives mistakenly believed that the products could be used as a long-term hedge on their customers’ equity positions to help safeguard against a downturn in the market. In fact, volatility-linked ETPs are generally short-term trading products that degrade significantly over time and should not be used as part of a long-term buy-and-hold investment strategy.

FINRA issued Regulatory Notice 17-32 shortly after announcing the settlement with Wells Fargo to remind firms of their sales practice obligations relating to these products. Wells Fargo had previously been on notice to provide heightened supervision of complex products such as ETPs in Regulatory Notice 12-03, and were advised, along with all other brokerages, to assess the reasonableness of their own practices and supervision of these products.

FINRA found, “Wells Fargo failed to implement a reasonable system to supervise solicited sales of these products during the relevant time period.”  The complete news release of the FINRA action can be found at the following link.

Loss Recovery from H. Beck

Investors with H. Beck may have grounds for recovery for investment losses in ETFs and other investments.

H. Beck recently consented to a settlement with regulators.  The settlement stated that from at least July 2008 until June 2013, H. Beck failed to properly supervise the sale of nontraditional ETFs and failed to properly supervise the recommendations made by its financial advisors. As a result, H. Beck violated NASD Rules 2310, 3010(a) through (b), and 2110, and FINRA Rules 2111, 3110(a)-(b), and 2010.

Between 2008 and 2011, H. Beck’s financial advisor James Dresselaers recommended to the Firm’s customer, EB, investments in several nontraditional exchange-traded funds (“ETFs”) and stocks issued by companies in the metals and mining sector. These recommendations were unsuitable for EB, a professional athlete with no investment experience, a moderate risk tolerance, and an investment objective of long-term growth. EB suffered losses of more than $1.1 million on these investments.

NASD Rule 3010(a)-(b) and FINRA Rule 3110(a)-(b) require every investment brokerage to establish and maintain a system and procedures to supervise the activities of its financial advisors that is reasonably designed to achieve compliance with securities laws and regulations and applicable NASD/FINRA rules.

FINRA rules require that financial advisors only recommend investments to suitable investors.  So if an investment poses too much risk, or possesses other characteristics that are inconsistent with the wants and needs of the investor, it is a violation to recommend that investment to such an investor.  This is commonly referred to as a “suitability” violation.

This is not the first time H. Beck has been penalized by regulators over non-traditional investments.  In March 2015, H. Beck was censured and fined $425,000 for failing to properly supervise the sale of unit investment trusts (UITs), failing to properly supervise the preparation of account reports sent to investors, and failing to enforce its own written supervisory procedures relating to financial advisors’ outside email accounts, which is a significant protection against fraud. Dresselaers also has a history of customer disputes.   This is concerning since Dresselaers is listed as the top executive at H. Beck.

Such regulatory findings and prior disputes evidence wide-spread supervisory problems at H. Beck and support private claims by investors.

Kris Etter of IMS Securities

If you have suffered investment losses with Kris Etter of IMS Securities, particularly if you suffered losses in UDF, please call 1-866-817-0201 for a free consultation with an attorney.  We have suit filed against IMS and are currently investigating whether other claims may exist.

It is believed that Etter had an undisclosed conflict of interest in his recommendations of UDF.  Upon information and belief, Mr. Kris Etter sold a substantial amount of UDF to his clients and is the son of Todd Etter.  Todd Etter is the Chairman of UDF IV, one of the top officers of the company.  Mr. Todd Etter also serves as Chairman of the general partner of UDF I and UDF II and Executive Vice President of the general partner of UDF III.  This creates a substantial conflict of interest in UDF recommendations by Kris Etter.

Kris Etter and IMS also failed to properly investigate UDF before recommending it, likely because of the Etter conflict and the heightened commission paid by UDF.  IMS is one of the top four leading sellers of UDF IV in the United States.

The bottom fell out for UDF when it was revealed in December 2015 to be a Ponzi scheme. The offices were raided by the FBI, received a Wells notice, unable to release quarterly reports and was ultimately delisted for a time. Reasonable investigation into the investment of other financial firms revealed that the illegitimacy of the investment. Had IMS done sufficient due diligence it would have likewise discovered that the investment was not suitable for any investor. Instead, IMS and Etter turned a blind eye to the problems of UDF and instead focused on the profits that it was receiving from this high commission product.

The individual ultimately in charge of all IMS offices is the CEO of IMS, Jackie Wadsworth.  Ms. Wadsworth has seven customer complaints naming her for insufficient supervision of representatives under her oversight. These complaints largely concern the inappropriate recommendation by her representatives of unsuitable variable annuity and REIT investments, just like the investments sold clients of Kris Etter and IMS.

As reported in Investmentnews.com in August 2016, the balance sheet of IMS is tilted heavily toward high-commission products like variable annuities and non-traded REITs. Approximately 86% of its revenue of IMS in 2015 came from commissions from such products.

Losses with First Financial Equity (FFEC)

If you have suffered investment losses with First Financial Equity Corp. (“FFEC”) please call for a free consultation with an attorney at 1-866-817-0201.  Recent actions of FINRA, the financial industry regulator, indicate that investors may have been harmed by the actions of this firm.

FFEC and its chief compliance officer entered into a settlement with FINRA regulators  on March 8, 2017 concerning the lapses in supervision.  The alleged lapses allowed a variety of different fraudulent activity to occur throughout FFEC and in particular the Scottsdale, Arizona branch.  FINRA asserted that the chief supervisor of FFEC, the chief compliance officer, had not adequately supervised and that the firm did not have adequate supervisory procedures.

The most obvious result of the lack of supervision is the 26 customer complaints of broker John Schooler.  These complaints, many of which evolved into arbitration lawsuits, involved his inappropriate trades in oil & gas investments and TIC investments.

One issue alleged to be a result of the inadequate supervision is the sale of unsuitable ETFs.  Unsuitable securities are those which are not consistent with the wants and needs of an investor.  Usually, an investment is unsuitable if it puts at risk funds not earmarked for risk, or otherwise is inconsistent with who the client is as an investor.

In the case of FFEC, its brokers recommended and invested its customers in aggressive ETFs, including leveraged and inverse ETFs.  Such investments are known to be high risk, yet the brokers recommended the investments to individuals who did not express a desire for high risk investments.  Worse, many of these investments were purchased by the FFEC brokers for accounts where the brokers were given discretion and not given the required supervisory review.

To ensure suitability, FFEC brokers were required to obtain sufficient information about their investors to evaluate the investments that would be suitable.  The settlement states that this was not done.

Another issue alleged to have been caused by the lack of supervision is churning/excessive trading.  This occurs any time trades are made which the costs and fees are of an amount that the trades benefit the adviser more than the investor.

Southeast Investments, N.C. and Frank Black

We represent investors and have successfully pursued Southeast Investments and Frank Black to judgment.  The arbitration resulted in a nearly full award of investment losses plus an award of attorney fees.  To speak to a lawyer for a free and confidential consultation about losses with Southeast or Black please call 1-866-817-0201.

Black and Southeast are in trouble again.   This time by FINRA regulators.  FINRA’s Department of Enforcement alleges that Respondent Southeast Investments, acting through Respondent Frank Harmon Black, and Black violated FINRA Rules 8210, 4511, and 2010 in the provision of false documents to FINRA and giving false testimony in a regulatory interview during an investigation into whether the Firm had conducted required inspections of branch offices.

One of the false documents was a list of 43 branch inspections Black claimed he performed, including the dates he purportedly conducted the inspections. Respondents also provided five false branch office inspection checklists that Black claimed he completed during the inspections. Enforcement also alleges that for more than five years Respondents failed to ensure that Southeast preserved all business-related emails by permitting registered representatives to use private email providers.

Under an “honor system” set up by Respondents, registered representatives were obligated to send copies of their emails to the Firm to review and retain. For this conduct, Southeast is charged by FINRA regulators, pursuant to FINRA documents, with willfully violating Section 17(a) ofthe Securities Exchange Act of 1934 and Exchange Act Rule 17a-4. Southeast and Black are also charged with violating NASD Rule 3110 and FINRA Rules 4511 and 2010.

The resulting penalty was just short of a quarter million dollars.  Frank Black was expelled from the securities industry.

The FINRA order can be found at the following link.

Jeffrey Pederson is a private attorney representing investors, having represented investors in FINRA arbitrations across the country.  Please call for a consultation if you have lost funds as a result of actions you suspect may be inappropriate.

 

Oil / Gas Investment and Tax Loss

Oil StockSome Energy, Oil and Gas investments can only legally be sold to a limited section of the investing public.  If you suffered losses we may be able to  help.  Contact us at 303-300-5022 or 1-866-817-0201 (toll-free) for a free consultation.

Oil and gas investors do not have to sit and watch their life savings diminish.  These investors have rights though many are unaware of the recourse they have for such losses.

Many investors have received high pressure sales of oil and gas investments.  Brokers and other investment professionals like to sell these types of investments because they usually pay a very high commission.  These commissions can be 10 to 20 times higher than the commission on your average stock sale.  The high commissions will often cause these individuals to ignore the rules in the sale of such investments. The two rules that are usually ignored are those concerning accreditation and suitability.

blog_gulf_mexico_oil_rigOil and gas limited partnerships can generally only be sold to “accredited” investors.  Such investors are individuals whose liquid net worth, their net worth excluding their home, is in excess of $1 million. The second rule that is commonly violated in the sale of such investments is the suitability rule.  Oil and gas investments are known by investment professionals to generally be very high risk investments.  Investments need to be consistent with the level of risk that an investor is willing or able to take.  For example, a person approaching or in retirement or who cannot otherwise afford to take high levels of risk with their investments could not legally be offered an oil and gas investment.

Likewise, an individual who expresses a desire for conservative or moderate investments would not be a suitable investor. There are many other rules that can potentially be violated in the sale of oil and gas investments.

Problems exist not just with the investment losses, but also with the tax consequence of investing in these companies.  This tax consequence is referred to as CODI.  A detailed description is found in the following Link to Forbes.   In short, these investments are partnerships.  When debt is defaulted upon by a partnership, and the lender “writes off” the debt, the write off means that the owners (the investors) are taxed as if they received the amount written off as income.  Considering some limited partnerships defaulted on billions in loans, the tax obligation of investors is substantial.

If you have any questions, please feel free to give us a call.  These rules apply no matter if you invest in individual oil or gas investments or invest through a mutual fund or master limited partnership (MLP).

Common oil and gas investments we see recoverable losses include Linn Energy (“LINE” or “LNCO”) and more information can be found at www.jpedersonlaw.com/blog/linn-energy-losses/, Williams Companies (“WMB”), Penn West Petroleum (“PWE”), BP Prudhoe Bay Royalty Trust (“BPT”), Breitburn Energy Partners, LP (“BBEP”), Hawthorne, SandRidge Energy, Williams Ridgewood Energy, Apco, Atlas Energy, Midstates Petroleum, Peabody Energy, Resolute Energy, XXI Energy, Nobel, Permian Basin, and Breitling Energy.  Some of these losses may be recoverable by class action while others may require individual FINRA arbitration suits.

More information on SandRidge can be found at this link.

Oil Stock IIJeffrey Pederson is an attorney who works with investors to recover losses in FINRA arbitration and has represented investors in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut , Florida, Hawaii, Illinois, Indiana, Massachusetts, Montana, New Jersey, New Mexico, New York, North Carolina, Maryland, Minnesota, Missouri, Montana, North Dakota, Rhode Island, Texas, Utah, and Wyoming, in FINRA arbitration actions against securities brokerage firms for unsuitable investments.  Please call for a confidential and free consultation.