Author Archives: Jeff Pederson

Hospitality Investors Trust (HIT)

Hospitality Investors Trust (HIT) filed for bankruptcy in May 2021. This real estate investment trust was previously known American Realty Capital (ARC).

American Realty

HIT, formerly American Realty Capital, has been troubled for years.

HIT has been known to be a troubled investment for years. Securities brokers who have recommended HIT may have legal exposure. HIT paid excessively high commissions and, in turn, brokers turned a blind eye to the problems of HIT.

Securities brokers have a duty to only recommend suitable investments. This is mandated by FINRA Rule 2111. Part of this suitability requirement is to reasonably investigate all recommended investments. HIT should have only been sold to the most aggressive investors, assuming that it was suitable for any investors at all. Our experience is that HIT was inappropriately sold to many conservative to moderate investors and to investors relying on stable income from their investments to fund retirement.

The REIT, formerly headed by the famous, and somewhat infamous, Nicholas Schorsch, is no stranger to trouble.  This former ARC REIT was previously part of an accounting scandal.  In 2015, it was sued by many institutional investors under allegations that it misrepresented its business and artificially inflated prices.

If you believe you were inappropriately sold HIT please call 1-866-817-0201 for a free and confidential consultation. Jeffrey Pederson has been representing investors nationwide for over 19 years.

Broker Steven Schisler Allegations

Steven Douglas Schisler, formerly a securities broker with IFS and Sterne Agee, is the subject of investment fraud allegations.  If you are a client of Steven Schisler please call 1-866-817-0201 for a free and confidential consultation with a private attorney.

FINRA, the regulator overseeing securities brokerages, alleges that from April 2009 to October 2020, Steven D. Schisler committed nine separate violations of FINRA and NASD rules as a result of his dealings with two sets of retired customers and his member firm.

Specifically, he is alleged to have committed the following:

(1) made an unsuitable recommendation to two elderly, married customers;

(2) participated, without the approval of his firm, in a private securities transaction with those customers;

(3) willfully failed to timely amend his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose a civil complaint and arbitration filed by one of the elderly customers, as well as other reportable events;

(4) entered into a settlement agreement with the customer that contained a prohibited condition — namely, that she would support his request for expungement;

(5) lied under oath at the expungement hearing;

(6) lied during on-the-record testimony to FINRA’s Department of Enforcement;

(7) engaged in a long pattern of unethical business conduct towards another retired customer from whom Schisler solicited a personal loan that he failed to repay for over six and a half years after maturity;

(8) made a false statement on a firm compliance questionnaire; and (9) caused his fn-m to fail to preserve books and records by using outside, unmonitored email accounts to conduct securities business.

Zach Avery Fraud Recovery

You may be entitled to recovery if you were a fraud victim of Zach Avery, aka Zachary J. Horwitz.  Call 1-866-817-0201 for a free and confidential consultation.

Avery is a small-time actor and was arrested Tuesday April 6 in Los Angeles for running a massive Ponzi scheme.  This is a fraud that defrauded investors out of $227 million.  He did this by touting fictitious film licensing deals with HBO, Netflix and other platforms.

Investors may have recourse to recover Ponzi losses.

The actor sent investors bottles of Johnny Walker Blue Label whisky with the his company’s falsified financials highlighted a “library” of 52 films his company, 1inMM Capital, distributed in Africa, Australia, New Zealand and South America.

Avery ran the Ponzi through City National Bank.   We are currently investigating liability of this bank for its involvement in the laundering of the funds received by Horwitz.  Investors who themselves had accounts or other business relationships with City National Bank would have relatively stronger claims for recovery.

According to the Securities and Exchange Commission, SEC, Horwitz used money from his personal City National Bank account for lavish personal spending, including, but not limited to, extravagant trips to Las Vegas, flights on chartered jets, payments for high-end automobiles, a subscription service for luxury watches, and the previously described purchase of his multi-million-dollar home.

 

John Krohn of Principal

John Krohn of Principal Securities located in West Des Moines, Iowa is accused of illegally “selling away” investments.  If you have suffered losses with Mr. Krohn call 1-866-817-0201 for a free and confidential initial consultation.

Selling away is the process of selling investments to investors outside of a broker’s employment and beyond the supervision of the brokerage firm.  While this may sound harmless, there is little reason for a broker to recommend such a sale absent an intent to deceive or defraud the investor.

The review of an investment by a brokerage includes a due diligence investigation to ensure that the investment is legitimate or that its financials are not falsified.  Ponzi schemes often start by a broker selling “away.”  The review of the broker’s brokerage also ensures that the investment is suitable for the investor and that the broker is not charging an excessive commission.

Regulators take selling away accusations seriously because of this.  Regulations not only strictly forbid the practice, but they also require firms to conduct audits and investigate brokers routinely to prevent the practice from occurring.

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Krohn is accused of “selling away” millions in investments.

Krohn was known as a top seller at Principal.  He also ran a purported investment capital firm called Spotlight Innovations and other investing companies on the side.  He generated a high volume of small investments through his firms into may small, unknown companies.  The victims are largely Iowa residents.

We are aware that Principal knew that Krohn had been selling away and failed to supervise appropriately.  Krohn was previously fined and suspended by regulators for engaging in selling away in 2018.

As of March 2021, there are currently three investor suits pending against Principal concerning Krohn.  These claims seek damages in excess of $39 million.  An SEC suit is also currently pending.

Losses with Rhett Bedwell

If you suffered losses with Rhett Bedwell you may be entitled to to compensation.  Please call 1-866-817-0201 for a free and confidential consultation.

LPL

Rhett Bedwell is alleged to have recommended investments into Ponzi investments.

Mr. Bedwell was a broker with LPL until November 2020.  He was terminated for transferring the money from an elderly client’s IRA into investments that were not properly vetted.  These investments were Ponzi-type scams.  Proper vetting, or due diligence, would have recognized the high level of risk of the investment, if not disclosed the Ponzi nature of the investment itself.

Small World Capital and the now defunct, Graysail Capital, and IRA custodian.   Small World has specifically been identified by regulators as a Ponzi-type operation.  

LPL is currently facing an arbitration lawsuit from an investor concerning such actions.  Shortly after the termination of Bedwell by LPL, FINRA, the Financial Industry Regulatory Authority, opened an investigation into Bedwell.  Bedwell refused to cooperated and was expelled from the securities industry.

Charles Bonilla Energy Investments

Charles Bonilla of David Lerner and Prudential inappropriately recommended energy sector investments.  If you were a Bonilla investor recommended energy investments please call 1-866-817-0201.  

Between December 2015 and December 2017, while associated with David Lerner Associates, Bonilla recommended investments in energy sector securities without having a reasonable basis to believe those investments were suitable.  This means that Bonilla had insufficient knowledge or that the investments had insufficient financials to be recommended to investors with even the highest risk tolerance.

While these actions occurred while Bonilla was at David Lerner, it is possible that such offending trades also were recommended while Bonilla was a representative for Prudential.

Due to Bonilla’s failure to conduct reasonable diligence in investigating the investments, there were potential risks and costs of the investments, among other things, that Bonilla did not adequately understand. Accordingly, Bonilla violated the rules of FINRA, the regulator overseeing securities brokerages.

Bonilla did not perform reasonable diligence on the fund prior to recommending it to customers. Bonilla could describe little about the fund’s holdings, beyond that some of the fund holdings were “midstream” energy companies.

Bonilla did not know how the fund paid its monthly distributions. Further, Bonilla did not know what, if any, diligence David Lerner Associates performed on the fund or its holdings prior to offering shares of the funds to customers. During the period between the fund’s initial offering in July 2014 and December 2015, the fund’s net asset value declined by more than 40%.

Bonilla also recommended illiquid investments in a limited partnership sold to customers of David Lerner Associates. Limited partnerships are known to be extremely risky investments.  The limited partners for the partnerships in question invested in common unit ownership interests in the partnership. The limited partnership was formed to acquire and develop oil and gas properties located onshore in the US. The partnership was a “blind pool”, meaning at the time of the initial offering the partnership had not identified any properties for acquisition.

Just as with the funds, Bonilla did not perform reasonable diligence on the limited partnerships prior to recommending to his investors. Finra regulators stated, “Bonilla did not know how the partnership generated funds to pay investors monthly distributions. Bonilla did not know how the price of the common units reflected on customer account statements were calculated. Bonilla did not read the full prospectus nor did he review the partnership’s financial statements.”

These offenses constitute suitability fraud.  These high risk investments carry higher commissions with their higher risks.

 

Gary Hammond of MML

Gary Wayne Hammond, a Charlotte, NC advisor with MML Investor Services has been barred by regulators.  Please call 1-866-817-0201 to speak to a private attorney for a free and confidential initial consultation about loss recovery.

The Financial Industry Regulatory Authority (FINRA) is a regulator under the oversight of the Securities and Exchange Commission.  FINRA alleged that Hammond referred investors to businesses of his half-brother in exchange for a commission.  The businesses of his half-brother were Ponzi-type schemes.

Hammond’s activity is referred to as “selling away.”  When a broker recommends an investment not offered or vetted by his employer to obtain a heightened commission or to share in the fraudulent proceeds of that investment.  The lack of vetting allows  a company to run as a fraud since there is no review by a brokerage firm as to financials and operations.  Such due diligence by a brokerage is essential to verify that the representations of the company are correct.

MML, like all brokerage firms, have duties to prevent its advisors from selling away.  Audits and other mechanisms are required to be conducted on the operations of advisors by their brokerage.  This is to verify that the advisors, such as Hammond, are not participating in outside business activity or recommending private offerings.  Situations like the one Hammond put his investors rarely happen when such supervisory procedures are met.

Jeffrey Pederson has handled numerous such cases involving selling away.  Call for a consultation.

Ryan Raskin Churning Losses

If you suffered losses due to account churning by Merrill Lynch broker Ryan Raskin, please call 1-866-817-0201.  Initial consultations are free and all consultations are private.

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Merrill broker accused of churning.

On March 26, 2020, Merrill Lynch discontinued its relationship with Raskin.  Raskin worked in the Beverly Hill, California office of Merrill.  In the termination form submitted to securities regulators, Merrill stated the termination was for “conduct involving business practices inconsistent with firm standards [...]”

On August 31, 2020, FINRA, the federal regulator overseeing securities brokers under the oversight of the SEC, sent Raskin a request for documents and information.  Raskin never responded.

The result of the regulatory action, which Raskin did not fight, was Raskin’s bar from the financial industry.

Merrill Lynch employed Raskin from May of 2016 to March of 2020.  Previously, he worked for Morgan Stanley in its Woodland Hills, California office.

Churning is the excessive trading of an account that has the result of generating commissions at the expense of the investor.

In September 2020, Merrill received a customer complaint demanding payment for churning and excessive trading  by Raskin.

Jeffrey Pederson PC works with investors across the country in the recovery of losses due to fraud, such as churning.

Worden Capital Lack of Supervision

If you have suffered as the result of the lack of supervision at Worden Capital – commonly in the form of either excessive broker trading or failing to transfer your funds – call 1-866-817-0201.  Jeffrey Pederson is an attorney who represents investors.  Initial consultation is free and confidential.

On December 31, 2020, FINRA, the Financial Industry Regulatory Authority, ordered Worden to pay restitution of over $1 million to investors.  The order stems from systemic problems in supervision of Worden brokers.

FINRA found that from January 2015 to October 2019, Worden and the firm’s owner and CEO, Jamie Worden, failed to establish and enforce a supervisory system to achieve compliance with regulatory rules relating to excessive trading, also known as “churning.” As a result, Worden’s brokers and advisors made more than $1.2 million in excessive commissions. In one instance, a Worden investor paid $205,557 in commissions in the course of one year. Worden did not take action to investigate or stop the trading in this investor’s account and others like it.

The Head of FINRA’s Department of Enforcement said, “FINRA has an unwavering commitment to protect investors from excessive and unsuitable trading. Firms must ensure they establish systems and procedures reasonably designed to supervise representatives’ recommendations to their customers, and firms’ supervisory personnel must have in place the necessary tools and training to address red flags.”

FINRA also found that Worden and its CEO interfered with customers’ requests to transfer their accounts to another brokerage.

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.