Author Archives: Jeff Pederson

Gregory Walter McCloskey (Meier)

The Financial Industry Regulatory Authority (FINRA) alleges that between 2008 and 2018, Respondent Gregory Walter McCloskey, also known as Gregory Meier, is alleged to have defrauded at least one and possibly more elderly investor.

While associated with FINRA member firms, including Westpark Capital and Newport Coast Securities, McCloskey participated in two undisclosed private securities transactions (“PSTs”) involving an elderly, retired widow, and then sought to conceal these transactions from his member firms and FINRA.  There are very few legitimate reasons for not disclosing such transactions and create a strong inference of fraud.

McCloskey has been alleged to have committed such actions in the past.  He previously consented to the sanctions and to the entry of findings that he participated in a series of private securities transactions without providing written notice to or receiving approval from his member firm to engage in such activity. The findings stated that specifically, McCloskey, without his firm’s approval, personally invested $50,000 in a lighting and energy networking company and introduced two of his customers to the company, and they invested a total of $50,000.   For this he received a 15-day suspension and his firms were required to give him heightened supervision.  

In October 2019, McCloskey was permitted to resign from Westpark Capital.  This was in response to allegations that he failed to abide by the heightened supervision placed upon him.

If you were sold investments suffering substantial losses or that are illiquid call 1-866-817-0201 for a free and confidential consultation.

Fraud of Keith Ashley

Parkland Securities adviser, Keith Ashley, 48, is accused of incapacitating and murdering an investor associated with Ashley’s Ponzi-type fraud.  Authorities arrested Ashley on November 4, 2020, on wire fraud charges.  These charges that stem from an FBI investigation, according to a statement by the Carrollton Police Department. Carrollton is a suburb north of Dallas.

The victim, James “Jim” Seegan, 62, an investor of Ashley’s.  He was found dead of a gunshot wound to the head by his wife when she returned to their home on the evening of Feb. 19, 2020. Next to Seegan was a typed suicide note.

Over the course of a nine-month investigation, detectives found evidence that Ashley incapacitated, then murdered his investor to gain control of Seegan’s finances.

“Ashley was a friend and financial adviser of Seegan’s who would visit the Seegan home periodically,” according to the police. “During the course of the investigation, detectives also identified several other victims of a Ponzi scheme Ashley orchestrated.”

FBI

The FBI has take Ashley into custody concerning potential wire fraud.

The fraud occurred while Ashley was a registered representative, a securities broker, of Parkland Securities.  Parkland, formerly known as Sammons Securities, terminated him on October 27, 2020.  The reason for the termination was “undisclosed outside business activity.”

Brokers are required to identify all outside business activity to their brokerage firms.  Outside business activity of a broker is an area of significant concern.  Brokers often use their status as a broker to engender trust of the investing public.  This trust leads the investors to believe the investment opportunity offered by the broker to be legitimate.

There are very few reasons for a broker to not disclose outside business activities to his brokerage.  Failing to disclose outside business activities allows a broker to perpetuate Ponzi-type frauds.  The firm is unable to conduct due diligence to prevent the sale of investments with weak financials or that have no legitimate business operations.

A brokerage firm is still required to monitor for such activities though the activities may be undisclosed.  Audits and other reasonable measures are required to identify such activities.  A firm cannot sit content with a broker’s representation of not engaging in outside business activities.

Victims of the Ashley securities fraud should call 1-866-817-0201 for a free and confidential consultation.

Suspension of Christopher Hildebrandt

If you were an investor of Christopher Hildebrandt of Principal Securities and suffered losses please call 1-866-817-0201 to discuss your rights and potential recovery.  Initial consultations are free.

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Investors have rights to recover losses from fraud or negligence.

Mr. Hildebrandt agreed to a four-month suspension and a $5000 fine for the altering of investor documents.  Between 2009 and 2017 he altered over 90 investor documents.  These documents include new account documents, documents that identify an investors risk tolerance and investment objectives, along with money transfer forms and other documents.  This was done as an accommodation to approximately 30 investors and FINRA acknowledges that many, if not all, were authorized.

The regulatory action was finalized on July 30, 2020.

This was not the first time he was warned not to alter investor documents.  Additionally, four customer complaints were filed by investors against Hildebrandt or his employer concerning the investment sales practices of Hildebrand.  This includes allegations misrepresentations as to accounts, tax ramifications and investment products such as annuities.  Additionally, he was accused multiple times of misappropriating funds.

In 2018, he ceased working with Principal and his CRD, his record maintained by the Financial Industry Regulatory Authority, does not indicate current employment with a licensed securities firm.

 

 

The Fraud of Michael Barry Carter

If you were a client of Morgan Stanley broker Michael Barry Carter, better known as Mike Carter, please call 1-866-817-0201 for a free and confidential consultation to determine whether you have been a victim of fraud.

The Securities and Exchange Commission on Monday, July 20, 2020, charged a former Morgan Stanley representative with stealing approximately $6 million from brokerage customers and an elderly investment advisory client.

Investors have recourse when investment professionals turn bad.

Investors have recourse when investment professionals turn bad.

Mike Carter was a financial advisor in the McLean, Virginia office of a Morgan Stanley.  He falsified internal documents in order to effect dozens of unauthorized wire transfers, totaling millions of dollars, from the accounts of brokerage customers to his own personal bank accounts.  

“As a financial advisor, Carter was entrusted with millions of dollars belonging to his brokerage customers, his advisory clients, and their families,”  stated SEC’s New York regional office director in a press release. “As alleged in our complaint, Carter instead took advantage of that trust for his personal gain.”

Morgan Stanley also failed to adequately monitor money transfers to accounts of its brokers.  Adequate supervision would have stopped most, if not all of these transfers.

Carter attempted to hide his fraud with the circulation of false account statements to his investors.  He then used the stolen funds to pay his credit cards and his mortgage.

Carter has been charged by federal authorities with wire fraud and other criminal counts.

Len Marzocco Churning Fraud

If you were an investor of Len Marzocco please call 1-866-817-0201 to discuss whether you have been a victim of churning.  Churning is a type of fraud and investors who are victims of churning are entitled to recovery.

Churning is the action of a securities broker making excessive trades in an account that benefit the broker more than benefiting the investor.  Regulators require that trades be quantitatively and qualitatively suitable.  When a broker makes excessive trades, such trades are quantitatively unsuitable.

Regulators stated that Marzocco engaged in quantitatively was-unable trading in the accounts of multiple customers.

One way of determining the existence of churning is by analyzing the “turnover” in the account.  Turnover rate represents the number of times that a portfolio of securities is exchanged for another portfolio of securities. The cost-to-equity ratio measures the amount an account has to appreciate just to cover commissions and other expenses. In other words. it is the break-even point where a customer may begin to see a return. A turnover rate of six or a cost-to-equity ratio above 20 percent generally indicates that excessive trading has occurred.

Regulators found violations in at least three accounts:

• The first account exhibited an annualized cost-to-equity ratio of 179.29%. JMS’s accouim incurred losses of 5135.;: OD and paid 553,232 in commissions and 11et.s ($36,824 was charged at First Standard and $16,408 was charged at Spartan).’

• The second account exhibited an annualized turnover rate of 39.30 and an annualized cost-to-equity ratio of 76.86%. CR’s account incurred losses of 524.542 and paid $9,647 in commissions and fees.

• The third account exhibited a turnover rate of 37.88 and a cost-to-equity ratio of 54.44%. DG’s account incurred losses of 535.989 and paid 518,644 in commissions and fees.

Marzocco has a history of investor lawsuits, regulatory actions, felony criminal actions, and job terminations for fraud.  His employers had a duty to provide heightened supervision if they were to hire him at all.

Call for a free and confidential consultation.  Most representations handled on a contingency basis.

 

Misdeeds by Charles Euler

If your were an investor of Charles J. Euler, Jr. with Janney Montgomery Scott of Radnor, PA please call 1-866-817-0201.  Charles Euler has a long history of being a broker but he also has a long history of lawsuits concerning alleged fraud in the form of selling unsuitable investments.

On March 27, 2020, Mr. Euler surrendered his license rather than defend a regulatory investigation.   The investigation was initiated by the Financial Industry Regulatory Authority (“FINRA”).  This is the self-regulatory organization that is empowered by the Securities and Exchange Commission to oversee securities brokers in the United States.  The agreement was that Mr. Euler consents to “A bar from associating with any FINRA member firm in any capacity.”

The investigation followed the filing of Janney that Mr. Euler was permitted to resign in April 2018.

The history of suits against Mr. Euler for similar actions is long.  In all, there are seven suits.  All the suits alleged that Mr. Euler allege that he made unsuitable recommendations.

Regulations, state and federal laws all prohibit the sale of unsuitable securities.  Unsuitable securities or investment plans are recommendations by a broker that are higher risk or inconsistent with an investors investment objectives.  This can be the result of high risk investments being placed in the portfolio of someone looking for moderate risk.  It can also occur when a broker recommends too high a concentration of a particular stock, industry, or too high a concentration in stocks compared to bonds, cash and CDs.

There are various reasons for the sale of unsuitable securities.  Many times high risk investments pay a higher commission than suitable investments.  Unsuitable recommendations can also be the result of negligence on the part of the broker.

FINRA requires brokerages to give a broker heightened supervision if the brokerage employs a broker with a customer complaint history.  The general number of suits or complaints triggering such supervision is four.    That means heightened supervision was required and the employer of Euler, Janney, is largely to blame for the actions of Euler.

Even before Euler reached the threshold of four complaints, Janney had a duty to supervise.  Each trade by a broker is to be reviewed by the employing brokerage for suitability.

Investors should speak to a lawyer familiar with FINRA regulations to determine if they are entitled to compensation.

 

Direxion ETF Loss

If you have suffered losses in Direxion ETFs, please call 1-866-817-0201 to discuss the potential for loss recovery.

After days of volatility, Direxion stated that it was closing the following funds “due to their inability to attract investor assets“:

Direxion Daily Russia Bear 3X Shares RUSS
Direxion Daily Natural Gas Related Bull 3X Shares GASL
Direxion Daily Natural Gas Related Bear 3X Shares GASX
Direxion Daily MSCI Developed Markets Bear 3X Share DPK
Direxion Daily Mid Cap Bear 3X Shares MIDZ
Direxion Daily Regional Banks Bear 3X Shares WDRW
Direxion Daily MSCI European Financials Bull 2X Shares EUFL
Direxion Daily Total Bond Market Bear 1X Shares SAGG

These investments are investments that should have only been sold to highly sophisticated investors looking to take great amounts of risk.

In 2009,  FINRA, the regulator that oversees the actions of brokers,  stated that leveraged and inverse ETF investments are toxic for average investors.  These investments reset every day.  As a result, the investments compound in their losses and the nature of them can change drastically over the course of a few days.

Daily re-leveraging combined with high volatility, such as the volatility seen in March 2020, creates compounding issues.  When the underlying index of the ETF if volatile as opposed to being stable, either up or down, the re-leveraging of the ETF each day is mathematically destructive.

Gerald Dewes Loss Recovery

If you were an investor of Gerald Dewes, call 1-866-817-0201 to discuss your legal rights as to loss recovery.  All initial consultations are with an attorney and are free and confidential.

Gerald Dewes’ employer, Cadaret,Grant & Co., terminated his employment in November 2019.  Termination was for selling investors shares of his own company, Elite Roasters.  In March 2020, FINRA, the Financial Industry Regulatory Authority, expelled Dewes from the securities industry.  Dewes had failed to cooperate with FINRA’s investigation of him and he failed to refute the charges against him.

The issue with selling Elite Roasters is that the investment was not approved by those supervising Dewes, his employing brokerage firm.  Approval is needed so that the requisite due diligence investigation can be given the investment to assure that representations are correct concerning the investments’ assets, financing and other important factors.  Brokers commonly sell unapproved investments so that the investment appears to have the backing of the brokerage firm but either is not a legitimate investment or would not withstand the scrutiny of a due diligence investigation by the brokerage.  Such action is termed “selling away” and is a form of fraud.

Many Ponzi schemes start as simple selling away violations.  A broker either wishes to promote  the broker’s own business or is paid a heightened commission to sell investments in a friend’s business.  These businesses do not have the due diligence review to assure that representations are accurate or that the venture is even solvent.  When the business cannot meet expectations payments are made if the funds of new investors.

As a result, FINRA instituted a number of rules, including Rule 3270.  This rule requires a broker to notify his employer of all outside business activity.  The employer, in turn, is required to audit the broker and verify that all outside business activity is disclosed.  The employer has a duty to supervise all investment sales even if the sales are of unapproved investments and outside the broker’s employment.

The employers of Dewes had other reasons to give heightened supervision.  Dewes has had a variety of investor suits of which he has been the subject, and he has also been the subject of multiple tax liens.  These past incidents of improper financial dealings should have served as a red flag.

We have handled a large number of selling away cases nationwide.  Please call for an evaluation.

 

SSL Loss Recovery

If you suffered losses in SSL, Sasol Spon ADR, and were not a speculative investor you may be entitled to loss recovery.  Please call the Law Offices of Jeffrey Pederson at 1-866-817-0201 for a free and confidential consultation.

From its high in April 2019 of over $34 per share, SSL has lost over 90% of its value as of March 11, 2020.  This is an investment that was not only highly speculative, but was known to be highly speculative.  As a speculative investment, advisors and brokers cannot recommend or purchase such an investment for conservative, moderate or growth investors since such a purchase would be unsuitable.

Investment professionals have a duty to purchase only suitable investments.  This obligations for brokers stems from FINRA, the Financial Industry Regulatory Authority, rules.  For advisors, the act of purchasing unsuitable investments runs contrary to the fiduciary obligations of care and prudent investing.

SSL is an emerging markets investment.  This, in and of itself, is a high-risk field.  SSL has even higher risk than other emerging market investments.  The investment holds some of the riskiest investments in the MSCI Emerging Markets Index.

While many firms may be looking to recover by means of a class action route, recovery from class actions may be small.  We believe greater liability leading to greater recovery exists with those brokerage and advisory firms that allowed this speculative investment be sold to retail investors.