Tag Archives: Stockbroker fraud

Pagartanis Loss Recovery

If you were a victim of Steven Pagartanis please call 1-866-817-0201.  The Law Offices of Jeffrey Pederson, PC is a firm that specializes in suits concerning securities brokers.

Pagartanis, the former Lombard and Cadaret broker from Long Island, N.Y., pleaded guilty Monday, December 10, 2018, in federal court to conspiracy to commit mail and wire fraud for running a Ponzi scheme over 18 years

Investors have recourse when investment professionals turn bad.

Investors have recourse when investment professionals turn bad.

Steven Pagartanis victims invested over $13 million and saw actual losses of more than $9 million,  according to the U.S. Attorney’s office.

This former licensed securities broker solicited elderly victims to invest in real estate-related investments, including those affiliated with publicly traded companies and an international hotel conglomerate, according to the Department of Justice. Pagartanis promised his investors returns consistent with conservative investments-that their principal would be secure and earn a fixed return of 4.5% to 8% annually.

The victims wrote checks payable to an entity secretly controlled by Mr. Pagartanis at his direction, according to the government. He utilized a network of bank accounts to launder the stolen funds, which he used to pay personal expenses, buy luxury items and make the phony interest or dividend payments to other victims, according to the Department of Justice. He faces up to 20 years in prison.

Recovery of these losses will focus on the employers of Pagartanis.  These employers are required to have supervisory safeguards in place to prevent such actions.  FINRA, the Financial Industry Regulatory Authority, has rules that require licensed brokerages to take steps to monitor and detect private securities transactions away from the firm.  Consequently, liability exists even if such actions were not taking place right under the nose of the firms.  FINRA offers an arbitration forum to recover such losses.

The SEC also filed a civil suit concerning this matter in May 2018.

Jeffrey Pederson is an attorney who helps investors recover losses from brokerage firms through the FINRA arbitration process.

Sean Kelly Theft

If you were an investor of Sean Kelly, previously of Center Street Securities, Capital Financial Services, and Lion’s Share Financial, please call 1-866-817-0201.  We are currently investigating his theft of investor funds.

Kelly, a Georgia stock broker, is facing criminal and SEC charges alleging that he stole at least $1 million from a dozen clients.  These clients include elderly widows and military veterans.  Kelly stole their savings and used the money for luxuries including Super Bowl tickets and vacations.

Sean Kelly, 49, of Marietta, Ga., and a stockbroker for Center Street Securities Inc., also is accused of falsely presenting himself to clients as both a brokerage firm and an investment advisor, according to the U.S. Securities and Exchange Administration.

Investors have recourse when investment professionals turn bad.

Investors have recourse when investment professionals turn bad.

The financial fraud of Kelly should have been foreseen by his employers.  The record of Kelly shows a broker with significant financial problems.  He has a history of multiple tax liens, a bankruptcy, and what is described as a “continuation of a prior bankruptcy.”

The U.S. Attorney’s Office for the Northern District of Georgia has filed criminal charges against Kelly and placed him under arrest, according to the SEC.

The SEC Complaint indicates that the fraud was fairly simple.  Kelly would have his clients make checks out to Lion’s Share.  The Complaint goes on state that Kelly used Lion’s Share as “his personal piggy bank.”

There has also been a temporary restraining order entered.  Such an order freezes the assets of Kelly.

Kelly, who has been a stockbroker for about 18 years, has been stealing money from clients since at least 2014, using recruiting techniques such as offering free tax preparation services for veterans and holding free retirement planning seminars in assisted living facilities, according to the SEC.

The theft could be well-above the $1 million currently estimated.   The number is reliant upon the documents the SEC has been able to obtain from the investigation of Kelly.  There are likely many more investors who will need to bring actions on their own to obtain recovery of their losses.

Brokerage firms have a duty to investigate and monitor outside business activities such as the activities of Kelly.  Further, FINRA requires securities brokerages to carry fidelity insurance.

Kelly’s use of Lion’s Share was well known to his employers.  Insufficient safeguard’s existed to protect the investors.

John Simoncic Investment Fraud

The Financial Industry Regulatory Authority (“FINRA”) barred John Scott Simoncic from the securities industry.  Mr. Simoncic had most recently been a broker for Financial West Group.  Please call 1-866-817-0201 for a free consultation if you were an investor of Mr. Simoncic.

There are multiple allegations concerning multiple investors against Mr. Simoncic.  They include the unauthorized and excessive trading in client accounts.  Allegations also include the sale of unsuitable investments.  This is the sale investments to an investor that are inconsistent with the risk an investor was willing to assume.

Between August 2014 and March 2016, Simoncic executed 54 of the 97 trades in a single customer account in inverse and/or leveraged Exchange Traded Funds (ETFs), an investment vehicle somewhat similar to a mutual fund.  The investor did not have an understanding of the ETFs Simoncic traded in her account; she did not understand how inverse and leveraged ETFs worked, the risks associated with the extended time Simoncic held the ETF positions in her account, or that her account was concentrated in one particular volatility ETF, the ProShares Ultra VIX Short-Term Futures ETF (UVXY), for over nine months.

Such ETFs are especially dangerous.  Although leveraged and/or inverse ETFs seek daily investment results, Simoncic held the ETF positions in the investor’s account for multiple trading sessions. For example, Simoncic executed 37 transactions in shares of the ProShares UltraShort S&P 500 (SDS), an inverse double-leveraged ETF, with holding periods generally ranging from four to 97 days. These transactions in the SDS resulted in an overall loss of more than $15,000. Simoncic also concentrated 93 percent of the investor’s portfolio in shares of UVWY, the ProShares Ultra VIX Short-Term Futures—a risky, double-leveraged and speculative ETF—for 295 days, that resulted in losses that exceeded $20,000. Thus, approximately $35,000 of the investor’s total losses of approximately $60,000 related to ETF trading.

Mr. Simoncic has previous regulatory actions and customer complaints that should have alerted his employer.  We believe that the former employers of Mr. Simoncic are responsible for investors losses.

 

Andrew Todd Yocum Loss Recovery

Investors of Andrew Todd Yocum may be entitled to recovery of their losses.  Mr. Yocum is a former broker of Morgan Stanley and Summit Brokerage.  He has entered into regulatory settlements with both the Financial Industry Regulatory Authority (“FINRA”) and Florida regulators.   If you have suffered investment losses as a result of investing with Yocum please call 1-866-817-0201 for a free and confidential consultation with a private attorney.

In 2015, FINRA, the national regulatory agency that oversees securities brokers and brokerages, commenced an investigation into Yocum.  It alleged the he effected unauthorized securities transactions, exercised discretion over portfolios without written authorization, and recommended unsuitable concentrated purchases of energy sector securities to senior investors.

Unsuitable investments are investments that are either too risky or otherwise do not fit the investor’s profile.  Such investments generally enrich the broker at the expense of the investor.

Yocum did not contest the charge by FINRA. Ultimately, FINRA barred him from practicing as a securities broker.

On May 4, 2017, Yocum was found by Florida regulators to have committed similar offenses.  Those offenses being the failure to get appropriate authorization from his clients and the recommendation of unsuitable securities.  Yocum neither admitted, nor did he deny, the findings.

Yocum entered the securities industry in September 2002 when he became associated with a FINRA member firm.  All securities brokerage firms in the United States must be members of FINRA.  FINRA is a self-regulatory organization that the Securities and Exchange Commission has empowered to oversee securities brokerages.

The former employers of Yocum have been sued over 30 times for their failure to supervise the portfolios of investors and ensure protection from the securities violations described above.

Yocum first became registered with FINRA through that firm on November 28,2002. YocumNYSE pic 1 remained registered with FINRA through an association with two member firms between 2002 and 2009.  Neither of these firm from that time period were identified in the FINRA investigation.

On June 1, 2009, Yocum became a broker with Morgan Stanley. On October 6, 2015, Morgan Stanley filed a Uniform Termination Notice for Securities Industry Registration. The reason for Yocum’s termination from Morgan Stanley was listed as “[a]llegations concerning acting on verbal discretion.”

Subsequent to his termination with Morgan Stanley, Yocum became affiliated with Summit.  On March 3, 2016, that firm filed a Form with FINRA noticing the regulator that it was terminating Yocum’s association as of March 1, 2016. Since March 1, 2016, Yocum did not re-associate with another FINRA member firm.

Please call the number above to speak to an attorney who handles investment disputes against brokerages such as Morgan Stanley and brokers such as Yocum.

Investor Losses with Cadaret Grant

Investors suffering losses with Cadaret Grant may have recourse.  Please call 1-866-817-0201 for a free and confidential consultation.

Cadaret entered into a regulatory settlement with the Financial Industry Regulatory Authority on September 11, 2018.   Cadaret agreed to pay an $800,000 fine.  It also agreed to a censure and to review and change its policies to detect inappropriate sales practices by its brokers.  One focus was on the sale and exchanges of variable annuities.

Invest photo 2Cadaret failed to employ sufficient compliance personnel to adequately supervise its brokers.  Brokers have many incentives to recommend investments that are too aggressive or otherwise unsuitable for an investor.  Sufficient compliance personnel are needed and required by regulators to protect investors from this known risk.

All licensed securities brokers have a legal obligation to recommend only suitable investments.  Investments are all known to have a certain range of risk when recommended.  Certain investments are known to have higher risks than others.  Investments that can increase sharply in value can sometimes decrease equally as fast.  Investments can only be recommended when the risk the investment poses is consistent with the risk consistent with the investor.  For example, a retired individual should only be recommended investments with little to no risk.  So when such an individual loses 20% or more of portfolio value in a year, the portfolio was likely unsuitable when first recommended.

As a result of its insufficient compliance, Cadaret had only three compliance people overlooking weekly trades, or “blotter reviews.”  Such reviews are needed to detect over-concentration of portfolios, such as portfolios being invested too heavily in either one investment, a single industry, or being too heavily weighted in a single investment vehicle, such as stocks or annuities.  Such concentration is unsuitable because it greatly increases the level of risk in the portfolio.

The blotter review also protected investors from broker churning.  This is an action where a broker puts his/her own interest ahead of the investor.   Excessive trades are made that work more to generate commissions for the broker than to protect the interests of the investor.

Churning depends on the cost of the exchange.  With products such as variable annuities, churning can happen with a single exchange.  One of the issues faced by Cadaret is from the replacement of one variable annuity with another.  There are very few circumstances where variable annuity exchanges are justified.

Cadaret’s supervisory procedures also required examiners in the compliance department to conduct periodic inspections of branch offices to detect and prevent violations by registered representatives in those locations. However, Cadaret employed an insufficient number of compliance examiners for this purpose. For instance, in 2014, the Firm tasked three compliance examiners with inspecting over 400 geographically-disperse branches. As a result, these inspections were conducted in a manner not reasonably designed to identify violative activity.

Jeffrey Pederson has represented investors across the United States in suitability suits.  These suits are largely handled through FINRA arbitration.  Please call for consultation.

Charles Bloom of Chelsea Financial

Please call 1-866-817-0201 if you were an investor with Charles Bloom of Chelsea Financial.  Bloom operated primarily in the West Palm and Royal Palm areas of Florida, but likely has investors nationwide.  We have reason to believe that Bloom engaged in a pattern of inappropriate behavior in the portfolios of his investors.

In October 2017, FINRA, the regulator that oversees securities brokers, commenced an investigation into allegations that Bloom engaged in an unsuitable pattern of trading in at least three customer accounts.

All securities brokers are required to know their investors and only recommend investments Invest photo 2that are consistent, or suitable, with the investors risk tolerance and investment objectives, among other things.  Brokers have many incentives to recommend investments that are too risky or otherwise unsuitable for investors.  This motivation can lead to large losses by an investor.  As such, the recommendation of unsuitable investments is considered to be a form of fraud.

In connection with the FINRA investigation, on June 21, 2018, FINRA sent a request to Bloom for on-the-record testimony. Brokers are required to cooperate with FINRA investigations into misconduct.  As stated in a phone call with FINRA staff on July 3, 2018, Bloom acknowledges that he received FINRA’s request and would not cooperate.

Ultimately, Bloom surrendered his license and accepted a bar from the securities industry as a result of the allegation.  However, this allegation is just the latest in a long list of allegations.  The record  of Bloom shows prior regulatory actions, a 20-day suspension, and two customer suits.  This raises the question of why Bloom was hired and why he was not given appropriate supervision in light of his history.

We represent investors in securities industry arbitration proceedings across the country.  Please call for a free and confidential consultation.

 

Recovery of CLO Losses

CLO (Collateralized Loan Obligation) investors may have recovery avenues for their losses.  These complex investments are only suitable for the most sophisticated investors willing to assume the high risk of these investments.  Investors who are less sophisticated or who seek only investments or looking for only moderate risk investments cannot legally be sold these investments.  For a consultation, please call 1-866-817-0201.

The financial industry is governed by rules concerning whether certain investments can be sold to investors.  One such limitation is that securities broker, financial advisors and investment advisors may only sell investments that are suitable, or investments that are consistent with an investors level of sophistication, investment objectives and tolerance for risk.  Complex investments that carry a high risk potential are unsuitable for your average investor looking for growth or income with a tolerance for moderate risk.

investingstockphoto 1As identified by FINRA, the Financial Industry Regulatory Authority, a CLO is very complex and risky investment.   A CLO is a security made up of loans to corporations that usually have relatively lower credit ratings. Leveraged buyouts, in which a private equity firm typically borrows money to purchase a controlling stake in a company, are a common for CLO loans. After the loans are made, they’re sold off to a manager, who bundles them together and then manages the consolidations, buying and selling loans as he or she sees fit.

A CLO manager raises money to buy the loans by selling debt and equity stakes to outside investors in slices of the total collection according to risk level.

FINRA gives an example to demonstrate how tranches work.  Think of everyone who owns a piece of the loan pool as standing in a long line. Those at the front of the line would get repaid first if any of the loans in the pool go into default, but they receive lower interest payments than those at the back of the line. The people further back are paid more for taking a greater risk that they would not be repaid in the event of losses in the underlying loan pool.

Typically, a CLO includes both debt tranches and equity tranches. The debt tranches are similar to bonds – they have credit ratings and offer regular coupon payments for a period of several years. Interest rates may be set or “floating,” meaning they vary with prevailing interest rates.

Debt tranches have first dibs on payments from the underlying loans, though here again, there are important differences within the group. Senior tranches have a higher-priority claim to payments (and receive lower interest payments) than junior tranches (which receive higher interest payments).

Equity tranches are the riskiest piece of the CLO puzzle. They have no credit ratings, are last in line for payment, and thus are the first to suffer losses if the underlying loan portfolio falters. Though equity tranche investors are simply paid whatever cash is left over after the debt investors have received their interest payments, they typically earn a higher return than debt tranche investors do.

FINRA is not alone.  The Wall Street Journal has also identified these investments as risky and complex.  The Journal points out that the race to provide higher returns has led to an even greater sales of such investments, and that such investments hit a record in 2017.

Unless you are a very sophisticated investor willing to speculate the money invested in CLOs, you should seek legal representation for losses sustained.

Attention Kenny Kim, IFG Investors

If you were an investor of Kyusun “Kenny” Kim of IFG, please call 1-866-817-0201 to speak to an attorney about your rights for recovery.  Most cases are handled on a contingency basis, where the attorney does not receive fees unless there is a recovery.

Mr. Kim has been accused, and ultimately barred from the securities industry, by regulators  for systematically committing securities violations in the accounts of senior investors for the time period of 2006 through 2015.  He is accused of both of recommending unreasonably risky, or unsuitable investments, to senior investors, and of falsifying the documents of the investors to allow him to convey to his supervisors that the recommendations were suitable.

Invest photo 2As a broker, Mr. Kim’s actions are governed by the Financial Industry Regulatory Authority (FINRA).  FINRA has a suitability rule that requires that a broker have a reasonable basis for believing that a recommended transaction or investment strategy is suitable for the customer based on the customer’s investment profile, which includes, among other factors,
the customer’s age, financial situation and needs, investment experience, and risk
tolerance.

Kim was selling alternative investments to seniors.  Alternative investments are investment other than stocks, bonds and mutual funds.  They include REITs that do not trade on a stock exchange and structured notes.  Though structured notes may look like bonds or mutual funds, such investments contain a derivative component that make the investment extremely risky and speculative in nature.  An investor may need to speak to an attorney just to confirm an investment is actually a structured note.  Such recommendations were improper for investors with conservative or moderate risk tolerances.

Adding to the risk, Kim improperly recommended that many of the investors unreasonably concentrate their portfolios in these alternative investments.  This only increased the level of speculation in the portfolio.

This is only the latest chapter in a long history of regulatory actions and customer lawsuits.  FINRA has indentified 23 investor lawsuits, either filed or threatened, concerning Kim.

While Mr. Kim has been expelled from the securities industry, this does little to compensate investors who have lost their life savings.  Jeffrey Pederson has represented investors across the country in similar suits in front of FINRA.  Please call for a free and confidential consultation.

 

Christopher Wendel Investors

If you are an investor suffering losses with Christopher Wendel, please 1-866-817-0201 for a free consultation.  Mr. Wendel has been implicated in the improper sale of Woodbridge  notes and other securities violations.  Jeffrey Pederson has represented investors nationwide in cases concerning Woodbridge and other similar securities actions.

Wendel solicited investors to purchase promissory notes in Woodbridge Mortgage Investment Funds, a purported real-estate investment fund.  Wendel did not provide notice to SA Stone Wealth Management, his employer, prior to participating in these private securities transactions, nor did he obtain approval from SA Stone.  Despite the lack of notice, SA Stone had a duty to investigate and approve securities sales to prevent its representatives from “selling away.”

Invest photo 2Investment firms are liable for not following FINRA’s strict guidelines concerning the monitoring of representatives to ensure the representatives do not sell unapproved investments, such as Woodbridge.  Common knowledge within the securities industry is the fact that representatives often seeks to sell investments that are unapproved for either the higher commissions or illegal kickbacks that the investments provide.  The problem is that the increased compensation is because the investments either are financially unsound or, in some cases, based upon fraud.

Additionally, 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.

In 2018, FINRA found that Wendel violated FINRA Rules by providing a false written response and testimony concerning one of the private securities transactions.

This is not the first time Mr. Wendel has been accused of handling the funds of others improperly.  The record of Mr. Wendel shows the six private lawsuits have been initiated concerning his actions.  He has also previously been investigated by SA Stone for the sale of unapproved securities, a common form of fraud.  He was also terminated for the sale of securities that were unapproved by SA Stone.   We believe those securities were Woodbridge securities.  SA Stone apparently allowed several months to elapse before taking action concerning the sale of Woodbridge.

Recovering Woodbridge Losses of Peter Holler

If you were an investor with Peter Holler and invested in Woodbridge notes, please call 1-866-817-0201 about options to recover losses.

We believe Holler and his employer have the bulk of responsibility for these losses.  During the relevant period when Holler sold Woodbridge, which coincides with his time working for Securities Services Network (SSN), Holler solicited investors to purchase promissory notes in Woodbridge Mortgage Investment Funds, a purported real-estate investment fund. Ultimately, Holler sold approximately $1.39 million in Woodbridge notes to 19 individuals, nine of whom were SSN customers. He received $49,790 in commission in connection with these transactions.

Woodbridge has been identified as a $1.2 billion Ponzi scheme by the Securities and Exchange Commission (SEC ).  The allegations are that Woodbridge gave notes to investors for funds to be used as hard money loans to be used in the development of real property.  Instead the funds were co-mingled by Woodbridge and used to pay earlier investors.   Woodbridge became insolvent shortly after the SEC brought its action.

LandmarkRecovery from the Woodbridge bankruptcy may be difficult.  Woodbridge and its subsidiaries are in bankruptcy proceedings in federal court in Delaware.  The Woodbridge notes were largely unsecured despite assertions to the contrary by those soliciting the notes.  As a general rule, bankruptcy are where unsolicited claims are extinguished.  Holler and SSN had a duty to know these facts prior to investing an investors and disclosing to the investors this incredibly high risk of loss.

These Woodbridge investments were not properly reported to his employer and his employer either turned a blind eye or failed to do the requisite supervision to monitor against such outside business activity.  As a result, the investments were sold though they were not suitable to be sold to any investor.  This creates potential liability on the part of both Holler and SSN.

The regulator FINRA brought an action against Holler for his sale of Woodbridge.  This regulatory action echos the concern that the Woodbridge investments and their sale were not appropriately vetted.

FINRA rules state, “prior to participating in a private securities transaction, [a broker] shall provide written notice to the member with which he is associated describing in detail the proposed transaction and the person’s proposed role therein and stating whether he has received or may receive selling compensation in connection with the transaction.” FINRA Rule 3280(e) defines a private securities transaction as any securities transaction outside the regular course or scope of an associated person’s employment with a member. FIN RA Rule 20 I 0 requires associated persons, in the conduct or their business, to observe high standards of commercial honor and just and equitable principles of trade.

The record  of Holler indicates that he and his former employer, Securities Services Network, currently facing two investor suits over the sale of Woodbridge notes.   Both suits suits were filed subsequent to the bankruptcy of Woodbridge in December 2017.

Securities Services Network previously terminated Holler in August 2017 for the sale of Woodbridge notes.  BrokerCheck identifies that Holler was terminated because the Woodbridge sales were unapproved by the firm.  Despite this, Securities Services Network

We represent a number of investors across the country in obtaining recovery of Woodbridge losses.  Please call for a free consultation.