Hallas, a former stockbroker representative at a number of New York City broker-dealers, including PHX Financial, Santander, and Forefront Capital, is alleged by the SEC to have violated the multiple federal securities laws. Investors should speak to a private attorney about their rights. We at PedersonLaw are currently investigating this matter. Please call 1-866-817-0201.
The allegations contained in the SEC complaint are as follows:
First, Hallas is alleged to have purchased and sold daily leveraged Exchange-Traded Funds and Notes (ETFs and ETNs) in his customers’ accounts, knowingly or recklessly disregarding that these products were unsuitable for such customers. Hallas had no reasonable basis for recommending daily leveraged ETFs and ETNs. This constitutes a violation of the suitability requirement that a broker must only recommend investments that are suitable in light of an investors risk tolerance, objectives and that are within an investors level of sophistication.
Second, Hallas is alleged to have stolen funds from investors. Under the guise of soliciting funds from one of his customers for investment purposes, misappropriated a total of $170,750 from that customer.
The products in which Hallas invested his customers’ hard-earned savings were daily leveraged ETFs and ETNs, and are characterized by a significant degree of volatility and risk. As alleged in the SEC complaint, these products were unsuitable, and Hallas had no reasonable basis for these recommendations.
ETFs are investment companies and ETNs are unsecured notes. Daily leveraged ETFs and ETNs seek to deliver a multiple, the inverse, or a multiple of the inverse of the performance of an underlying index or benchmark over the course of a single trading day. To accomplish their investment objectives, daily leveraged ETFs and ETNs pursue a range of investment strategies, though the strategies are mostly speculative, and only appropriate for investors willing to take the highest level of risk.
The strategies include swaps, futures contracts, and other derivative instruments. These products are inherently risky, complex and volatile, and are only appropriate for sophisticated, high-risk investors.
Unfortunately, Hallas’s customers were unsophisticated and not suitable for such investments. The investors had limited or no investing experience and their incomes, net worth levels, and assets were modest. “The risk and volatility in daily leveraged ETFs and ETNs was inconsistent with the investment profiles of Hallas’s customers, yet Hallas purchased and sold a total of 179 daily leveraged ETF and ETN positions in their accounts from September 2014 to October 2015.”
Hallas’s investors paid a total of approximately $128,000 in commissions and fees in connection with the purchase and sale of these 179 positions. The net loss across these 179 positions was approximately $150,000.
Hallas purchased and sold 22 different daily leveraged ETFs and ETNs in his customer accounts. These products sought to double or triple the performance, or the inverse of 2 Case 1:17-cv-02999 Document 1 Filed 04/25/17 Page 3 of 17 the performance, of over a dozen different underlying indices, including the S&P 500 VIX ShortTerm Futures Index, an investment based upon a volatility index, as well as certain gold mining, oil and gas and Russian, Chinese and Brazilian stock indices.
Finally, in a what the SEC has described as a “brazen and fraudulent scheme,” Hallas misappropriated $170,750 from an unsophisticated investor, who the SEC describes as “a truck driver with no trading or finance experience and no retirement resources outside of the funds that he provided to Hallas.” The investor transferred funds to Hallas with the understanding that Hallas would make investments on his behalf; instead, Hallas spent Customer’s A’s funds on personal expenditures – a fact that he concealed from the investor.
A comprehensive article on the deeds of Mr. Hallas can be found in Investmentnews.com.
To speak to a private attorney about the recovery of losses with Mr. Hallas, call 1-866-817-0201 for a free and confidential initial consultation.