Kari Bracy – Future Income Payments (FIP)

Leave a reply

Kari M. Bracy, formerly of NY Life, recently lost her securities license rather than cooperate in an investigation into her sale of unapproved investments in future income payment streams. These investments are alleged to be part of an elaborate Ponzi scheme. Our firm represents individuals in such suits and other Ponzi-type frauds. Call 1-866-817-0201 for a free and confidential consultation.

On December 30, 2019, in connection with an investigation by the regulator FINRA, the Financial Industry Regulatory Authority, of Bracy’s sale of a Future Income Payments, LLC’s (“FIP”) structured cash flow investment comprised of pension streams, FINRA staff sent a request to Bracy directing her to appear for on-the-record testimony on January 16, 2020 pursuant to FINRA Rules. On December 31, 2019, Bracy acknowledged during a telephone call with FINRA staff that she received request letter and did not intend to appear for testimony.

FINRA is the regulator that is charged by the Securities and Exchange Commission with the oversight of all securities brokers in the United States. The failure to cooperate led FINRA to bar Bracy from the securities industry.

FIP diverted new investor funds flowing into the business to fund payments to earlier investors in order to keep the scheme operational, which is the definition of a Ponzi scheme. When FIP ceased doing business in early 2018, investors were owed approximately $300 million.

This is not the first time Bracy has faced legal issues concerning these FIP investments. An investor initiated suit against NY Life concerning Bracy’s sale of these FIP investments in future income streams. The investor filed for arbitration with FINRA in July 2018.

That lawsuit, which alleged damages in the amount $142,000, settled for $80,000. The investor alleged that in December 2017 her investment in FIP, a private securities transaction, was misrepresented as a conservative and safe investment with a 7.5% annual return for ten (10) years. The FIP investment is not a conservative investment and was known to be highly aggressive and inappropriate for most, if not all, investors.

Paul Petrillo of Thrivent

Leave a reply

Paul W. Petrillo (“Petrillo”) of Thrivent Financial and Thrivent Investment Management (“Thrivent”) has been barred from the securities industry by the regulator FINRA, the Financial Industry Regulatory Authority. Allegations leading to the bar concern Petrillo’s execution of investor trades away from Thrivent and sales of private securities.

Between August 1, 2013 and April 2, 2017, Petrillo placed 333 orders to buy or sell securities, at his discretion, in twelve customers’ outside securities accounts without notifying Thrivent of his authority to do so or the executing firm of his association with Thrivent. Petrillo also opened a family trust securities account over which he had trading authority away from Thrivent in October 2013 but did not notify the Firm of the account’s existence. By virtue of this misconduct, he violated NASD and FINRA rules.

Regulatory rules prevent the use of outside accounts to conduct business because of the likelihood of fraud. When a trade is made by a broker at an outside brokerage account it prevents a brokerage from supervising the trade. There are very few reasons to make such a trade other than to avoid supervision.

The sale of private securities is also of concern. Such securities are only suitable to a small section of the investing public and, as such, can only be sold to limited investors. These securities also have limited transparency and often need the review of a brokerage to confirm legitimacy. Heightened commissions of such investments make them attractive to brokers.

Petrillo also provided false information to regulators during the investigation. On September 19, 2018, FINRA asked Petrillo to identify any investor accounts in which he traded away from Thrivent, aside from one customer about whom FINRA already knew and in whose account Petrillo had previously admitted to trading. Petrillo deliberately failed to inform FINRA about 11 customer accounts in which he effected trades away from his firm. This was done despite rules requiring the disclosure of such accounts to FINRA. Petrillo’s response was therefore false.

Thrivent was aware of the Petrillo’s propensity to engage in such actions. In October 2017, Thrivent also entered into a settlement concerning the inappropriate use of discretion by Mr. Petrillo. Thrivent paid the investor $33,000 to settle such claims.

If you were an investor of Petrillo’s and believe he may have executed securities trades for you away from Thrivent, please call 1-866-817-0201. Consultations are free and confidential.

Gabe Hynes

Leave a reply

On December 16, 2019, in connection with a regulatory investigation by the Financial Industry Regulatory Authority (FINRA) of Gabriel W. “Gabe” Hynes’ sale of Future Income Payments, LLC’s structured cash flow investments comprised of pension streams, FINRA staff sent a request to Hynes for on-the-record testimony. Hynes acknowledged that he received FINRA’s request and will not appear, thus not contest, the allegations.

As a result, Hynes was barred from the securities industry by FINRA. This means that he can no longer act as a securities broker and must leave Kestra.

Hynes has previously had significant regulatory problems. In 2017, he consented to the sanctions in the form of a suspension and a $10,000 fine, and to the entry of findings that he purchased securities issued by privately-held companies costing a total of $90,000. The findings stated that these transactions were outside the regular course and scope of his employment with his member firm. As a result, Hynes was required to provide written notice to the firm before participating in them, but he failed to provide the firm with any notice. The findings also stated that Hynes opened an account at another member firm and maintained the account throughout his association with his firm.

His employer at the time, NY Life, allowed Hynes to resign when his involvement in these private and undisclosed securities transactions came to light. After leaving NY Life Gabe Hynes moved to Kestra.

Jeffrey Pederson is a private attorney that assists in the recovery of funds lost by brokers like Gabe Hynes. For a free consultation, please call 1-866-817-0201.

Attention Dennis Mehringer Investors

Leave a reply

If you were an investor with Dennis Mehringer call 1-866-817-0201 for a free and confidential consultation with a private attorney.

On October 18, 2019, the Financial Industry Regulatory Authority (FINRA) barred Mr. Mehringer from the securities industry when he failed to defend charges that he handled his investor accounts inappropriately.

Mehringer was previously named a defendant in a FINRA regulatory complaint, a legal action brought by the national regulatory body overseeing securities brokers, alleging that he made unsuitable recommendations that caused a customer to engage in excessively expensive short-term trading and intra-day switching of mutual fund Class A shares.

“Unsuitable” recommendations are recommendations of securities transactions or purchase of strategies that are inconsistent with the risk tolerance or investment objectives of an investor. They can also be when a broker makes trades with the objectives of increasing the broker’s commission. That is what happens with short-trading of mutual funds. The high commissions of mutual funds are repeatedly charged so that there is little to no chance for the investments to make a reasonable return. This is sometimes referred to as churning.

The FINRA complaint alleges that Mehringer repeatedly recommended, and caused the investor to engage in, short-term purchases and sales of 84 mutual fund Class A positions (involving the sale of shares within a year of purchasing them) in five of the customer’s accounts.

In 47 of the 84 purchase transactions, investors paid front-end sales loads ranging from four to five percent. All but 17 of these 84 mutual fund positions were held for less than six months, and approximately 35 of them were held for less than three months. Mehringer received $169,735 in commissions from the transactions. Mehringer recommended the short-term mutual fund trading and the intra-day mutual fund switching alleged above without reasonable grounds to believe that the recommendations were suitable for the investor.

Given the long-term nature of Class A mutual fund share investments, along with the costs and commissions incurred in connection with frequent trading and switching between the mutual funds and mutual fund families, Mehringer’s short-term trading was unsuitable for any customer. The complaint also alleges that Mehringer exercised discretion in the same customer’s accounts without obtaining the customer’s written authorization and his member firm’s approval to do so.

The actions of Mehringer are currently the subject of eleven arbitration suits brought by his investors against either him or his former employers.

Attention James T. Booth Investors

Leave a reply

If you were an investor of James T. Booth previously of LPL and Invest Financial, please call 1-866-817-0201. Initial consultations are free and confidential.

The Department of Justice (DOJ) announced an Indictment charging Booth with securities fraud, wire fraud, and investment adviser fraud charges in connection with his years-long scheme to defraud customers of his financial services firm, Booth Financial Associates (“Booth Financial”) which is affiliated with LPL Financial and Invest Financial. Throughout Booth’s scheme, he solicited money from clients of Booth Financial and falsely promised to invest their money in securities offered outside of their ordinary advisory and brokerage accounts. Instead, he used nearly all of the money to pay personal and business expenses. In total, Booth fraudulently obtained approximately $5 million from his investors.

Investors have recourse when investment professionals turn bad.

“As alleged, James Booth convinced his clients that he would deliver solid and secure returns on their investments. Instead, as alleged, Booth delivered only lies and deceit, and bilked some 40 clients of nearly $5 million. Booth is now in federal custody and will have to answer for his alleged crimes,” stated the DOJ.

The DOJ further stated, “In an elaborate scheme of false promises and deception, it is alleged that Booth attained almost $5 million by luring investors to move their assets with the guarantee of safer investments and higher returns. Instead, Booth allegedly pocketed the money. ”

Booth provided investors fabricated account balances and statements to prevent investors from seeking a return of their money, and to induce additional investments. He further concealed the truth from investors by using money obtained from new investors to make redemption payments to previous investors, in a Ponzi-like fashion.

When Stockbroker Emails are Hacked

Leave a reply

Stockbrokers and brokerage firms have responsibilities to safeguard client information and their funds. So when information is hacked, information in the possession of the broker or elsewhere, or an identity stolen, there are responsibilities they have to compensate their injured investors. If you have suffered damages as the result of a hacking please call 1-866-817-0201.

An example of this is the regulatory action against securities broker Lori Thompson. On December 14, 2018, Thompson received an email from an imposter purporting to be a customer “ML”. This email was in response to an earlier email chain between Thompson and ML, requesting that UBS, Thompson’s employer, send $68,740.55 from ML’s brokerage account to a third party (“Third Party A”).

That same day, Thompson completed a client contact attestation form that falsely attested that she spoken with ML to confirm the disbursement request, when, in fact, she had not spoken with ML. Thompson received two additional emails from an impostor purporting to be ML on December 28, 2018 and January 10, 2019, requesting that two checks be sent to Third Party A and two checks be sent to another third party (Third Party B”) for a total of $298,646.92.

On each occasion, Thompson issued the checks and completed client contact attestation forms, falsely attesting that she had spoken to ML to confirm the disbursement requests when she had not.

The third parties did not have authorization to make the withdrawals and these funds were lost. Had appropriate procedures been followed these losses would have never occurred.

Brokers have safeguards that they must take. There are verifications that must be made, in addition to the attestation described above, and systems that must be put in place to protect against cyber criminals. Failure to do so is negligence. If your identity was stolen or your information hacked and lost funds as a result, please call to speak to a licensed attorney.

Attention Mediatrix Investors

Leave a reply

The SEC on September 18, 2019 announced that it has filed an emergency action in federal court in Denver, Colorado and obtained an asset freeze against three individuals in connection with an alleged fraudulent, ongoing international trading program, Mediatrix Capital, that has placed at risk more than $125 million of investor funds. Allegations include that Mediatrix, despite assertions that it has not lost investor money in five years, has been operating a Ponzi scam and inducing investors fraudulently.

Mediatrix is an investment manager and trading advisor. It is not a hedge fund, but a manager of outside funds, and purports that its operations as being conducted in the Bahamas.

An action has been brought by the SEC in Colorado. Colorado has jurisdiction over Mediatrix due to owner and CEO Michael Young’s home in the Denver, Colorado area. Despite the fact that Mediatrix operates out of the Bahamas, American investors may have the opportunity to pursue losses in the federal or state court in Colorado.

According to the SEC’s complaint, beginning in March 2016, Mediatrix Capital Inc. and its three owners, Michael S. Young, Michael S. Stewart, and Bryant E. Sewall, induced investors to invest by falsely representing that their money would be invested using a highly profitable algorithmic trading strategy that had never experienced an unprofitable month and had returned more than 1,600 percent since inception. In truth, the complaint alleges, the defendants’ trading strategy consistently lost money-losing more than $18 million from its trading in 2018 alone. In addition to repeatedly misrepresenting the profitability of the trading, the complaint alleges defendants also misled investors by falsifying account statements and making Ponzi-like payments, all while misappropriating more than $35 million of investor money for defendants’ personal use, including to purchase luxury properties and vehicles.

The SEC’s complaint, filed in federal district court in Colorado on September 12, 2019 and unsealed today, charges all defendants with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933, as well as with violating the registration provisions of Section 5(a) and 5(c) of the Securities Act.

The SEC’s complaint also charges Mediatrix Capital, Young, Stewart, and Sewall with violations of the antifraud provisions of the Investment Advisers Act of 1940. The SEC has also charged 20 relief defendants who allegedly received profits from the fraud.

The SEC’s continuing investigation is being conducted by Jeffrey D. Felder and Tracy W. Bowen of the SEC’s Denver Regional Office and supervised by Kimberly L. Frederick and Jason J. Burt. The litigation is being led by Stephen C. McKenna and Mark D. Williams and supervised by Gregory A. Kasper. The SEC appreciates the assistance of the U.S. Commodity Futures Trading Commission, the U.S. Attorney’s Office for the District of Colorado, the Federal Bureau of Investigation, and the U.S. Marshals Service. The SEC also appreciates the assistance of the UK Financial Conduct Authority, the Czech National Bank, the New Zealand Financial Markets Authority, the Securities Commission of The Bahamas, the Central Bank of Armenia, and the Cayman Islands Monetary Authority.

Jeffrey Pederson is a licensed Colorado attorney. If you have questions about Mediatrix or the ability to pursue recovery of losses in Colorado, please call 1-866-817-0201.

Attention Stokesbary Investors

Leave a reply

If you were one of the investors of Arlyn Roy Stokesbary, formerly of Thrivent Investment Management, please call 1-866-817-0201. Initial consultations with an attorney are free and confidential.

The Financial Industry Regulatory Authority (FINRA) accused Stokesbary of a large number of unauthorized trades in the accounts of his investors. FINRA is the regulatory arm of the New York Stock Exchange and the NASDAQ, and is overseen by the SEC. FINRA alleged that Stokesbary took such fraudulent actions in the accounts of 20 separate investors. The actual number may be much higher.

In August 2017, Thrivent identified Stokebary trading for two unrelated investors within several minutes of each other, actions which raise a red flag that appropriate authorization was not obtained. Stokesbary confessed to his employer, Thrivent, that he did not speak to either customer prior to the trades. Thrivent warned him of the need for contemporaneous authorization of trades, but did not fire him at the time.

Unauthorized trading is a form of fraud. A broker can enrich himself at the expense of his investor when the broker makes unauthorized trades. As such, a broker cannot exercise such control over an account absent written authorization.

Unfortunately, the warning from Thrivent was not heeded. FINRA identifies that shortly thereafter, Stokesbary effected an additional 109 trades without contacting investors on the day of the trade. Once again, this number may be much higher.

On September 20, 2018, Thrivent disclosed that it terminated the employment of Stokesbary. Thrivent stated the termination was for his “failing to discontinue improper trading practices [in customer accounts] after being educated.”

Thrivent, and its predecessor Lutheran Brotherhood had been the employer of Stokesbary since 1987.

FINRA suspended Stokesbary for 15 days from the industry and imposed a $5000 fine.

Investors holding accounts at Thrivent should contact an attorney if they believe that Stokesbary effectuated trades in their accounts.

Attention Investors of Daniel Maughan

Leave a reply

If you were an investor of Danial Maughan call 1-866-817-0201 for a free and confidential consultation with an attorney concerning your rights and avenues of recovery.

Daniel G. Maughan, while associated with Financial West Group churned and excessively traded a customer’s trust account. From October 2010 through January 2015 , Maughan executed approximately 1,648 trades, with a principal value of all purchases and sales in excess of $70 million, in the accounts of his investors.

FINRA brought suit concerning these actions in August 2019. The regulatory settlement reached in October 2019 was an agreed sanction to bar Maughan from association with any securities firm in any capacity. This leaves the victims of Maughan to their independent rights of recovery and investors should contact an attorney about recovery options.

The account owners were unsophisticated. Both had a high school degree with a small amount of junior college. The husband had been unemployed as a plumber for approximately two years. The wife had only part-time employment as a bookkeeper. When they inherited the funds they advised Maughan to invest conservatively.

The annualized cost-to-equity ratio—the percentage the account had to appreciate to break even—was 21.06. Maughan’s churning and excessive trading was quantitatively unsuitable and generated commissions and costs totaling approximately $841,000 while causing the account to incur realized and unrealized losses of approximately $812,000.

During the Relevant Period, Maughan also recommended overly aggressive and unsuitable trades in the IFT Account involving: (a) options and (b) non-traditional Exchange-Traded Funds (“ETFs”) and an Exchange Traded Note (“ETN”).

By churning the IFT Account, Maughan willfully violated the Securities Exchange Act of 1934, and a multitude of FINRA Rules.

This is not the first time Maughan has been accused of fraud. In 2015, his employer paid $550,000 to settle a suit alleging that he fraudulently sold his investors options and penny stocks.

In 2009, Wedbush Morgan was sued, via arbitration, for Maughan’s recommendation of overly aggressive ETFs and aggressive stocks to an investor. This matter settled for the payment of $10,000.

Merrill Lynch, a previous employer, was sued in 2002 over allegations that Maughan churned the portfolio of an investor, along with making other investments in overly aggressive investments without authorization. Merrill Lynch settled this matter for $46,000.

In 2001, an arbitration suit was filed against Merrill Lynch. The suit alleged that Maughan made unauthorized purchases in the account of a mentally incompetent adult, and that the client could not comprehend any conversation concerning the investments in question. This matter settled for $51,321.

Merrill Lynch terminated Maughan in 2001 for this sale. Maughan has stated that he made “several errors” in the sale of the investment.

Michael Lee Origin Fund Fraud

Leave a reply

If you invested with the Origin Fund through Michael Lee or others you may be a victim of fraud. Please call 1-866-817-0201 for a free and confidential consultation with a lawyer concerning your rights.

Michael Lee is a former Kestra Investment Services broker. From December 2015 through December 2016 (the “Relevant Period”), Lee engaged in the sale of the “Origin Fund.” Lee was an employee of Kestra during this time. His office was located in Darien, CT.

The Origin Fund is a prospective ETF fund. Lee solicited potential investors and distributing written materials prepared by Lee’s business partner. The written materials distributed by Lee falsely represented that the Origin Fund was an investment advisory with $20 million in assets under management, and that Kestra’s was sponsoring and providing certain administrative services to the Origin Fund.

FINRA, the Financial Industry Regulatory Authority, suspended Lee for one year and fined him $12,500 for his actions associated with the Origin Fun. At the time of suspension, Lee was still in the industry as a representative of Altium Wealth Management.

The inappropriate investments were done under Kestra’s watch. Kestra, like all brokerages, had a duty to conduct audits and take other reasonable steps to prevent the “selling away” of its brokers.

Selling away is a common form of fraud where a broker uses his status as a broker to persuade investors into purchasing investments that have not been approved by the brokerage. These investments often pay the broker an excessive commission but the investment itself often lacks substance and is often a fraud.