Tag Archives: fraud

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 303-300-5022.  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.

When Stockbroker Emails are Hacked

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 303-300-5022.

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 Investors of Daniel Maughan

If you were an investor of Danial Maughan call 303-300-5022 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

If you invested with the Origin Fund through Michael Lee or others you may be a victim of fraud.  Please call 303-300-5022 for a free and confidential consultation with a lawyer concerning your rights.

Invest photo 2Michael 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.

DC Solar Ponzi – Loss Recovery

DC Solar is accused of operating a large Ponzi-type scheme concerning  a number of tax equity investment funds from 2015-2018.  The company, whose products include solar generators as well as light towers that can be used at sports events, filed for Chapter 11 bankruptcy protection in February 2019 in Reno, Nevada.  This Ponzi scheme, as with most Ponzi schemes, is about a failure of investigation as much as the underlying fraud.

In a February 8, 2019 affidavit related to those bankruptcy proceedings, an FBI agent said the manner in which the Benecia, California-based company appeared to have operated reflected “evidence of a Ponzi-type investment fraud scheme.”

The U.S. Securities and Exchange Commission accused DC Solar’s owners by name of engaging in a Ponzi scheme, according to a separate court filing.

As late as December 20, 2018, DC Solar had been seen in the business media as an “Energy Powerhouse.”  The company was well known and sponsored a NASCAR team.  Those fortunes reversed quickly.

Sufficient investigation by advisors would have revealed insufficient lease revenue and that the funds coming in to compensate the lack of lease revenue was simply investor money.  As such, payments of profits was simply earlier investors receiving the investment funds of newer investors.  Detecting such arrangements is the charge of brokers, advisors and their firms as part of their due diligence obligations.

Civil action has been commenced against the property of DC Solar, which is considered the defendant in the case. Because it is a civil action, no criminal charges need be placed against the property’s owner, according to the U.S. Department of Justice.

However, 87 defendant items are traceable to an investment fraud and money laundering scheme run by companies described in other court documents as those associated with DC Solar.

The defendant properties listed are $62,546,110.43 in multiple domestic and foreign bank accounts; $1,944,091.07 in cash seized at the Carpoffs’ Martinez home and Benicia offices; an estimated $500,000 worth of jewelry and other personal items; and a $782,949 money transfer for that luxury box at the Raiders NFL football team’s future stadium in Las Vegas, Nev.

Most of the bank accounts had been opened with China Bank and Trust, which is based in Taiwan with multiple international subsidiaries, according to its website. Other accounts were opened with E-trade, J.P. Morgan, BBVA Compass and Bank of America, the attorneys wrote.

Once of the largest victims is Berkshire Hathaway.  Warren Buffett’s Berkshire Hathaway Inc on Wednesday said a $377 million charge it incurred recently was tied to a solar generation company that U.S. authorities have linked to fraud.

 

Christopher Duke Bennett Fraud Victims

If you have suffered losses with Christopher Duke Bennett of J.J.B. Hilliard, please call 303-300-5022.   Victims may receive a free and confidential consultation with an attorney.  Bennett is accused of participating in systemic fraud of his investors.

Bennett engaged in unauthorized trading, or churning.  This is where a broker makes trades in an account to effectuate commissions for himself without regard for the investor.  Between January 2014 and December 2015, Bennett violated federal and state securities laws by exercising discretionary trading authority in the accounts of several customers without written authorization, in violation of NASD Rule 2510(b) and FINRA Rule 2010.  This was the grounds for a regulatory action filed against Bennett by the Financial Industry Regulatory Authority (FINRA).

Between January 2014 and December 2015, Bennett made unauthorized trades in the accounts of four customers, one of whom was a senior investor, by placing approximately 75 total trades in those accounts. A broker is required to speak to an investor contemporaneously to a trade, or have written authorization that the broker has authority to make a trade at the broker’s discretion.  Bennett did not obtain express authorization from those customers for those trades prior to placing them, did not have written authorization from the customers to exercise discretionary authority in those accounts, and neither sought nor obtained from Hilliard Lyons prior written acceptance of the accounts as discretionary.

To date, at least 10 of Bennett’s former clients have filed suit, via FINRA arbitration, seeking redress.

Adam Michael Lopez Loss Recovery

If you were an investor of Adam Michael Lopez, formerly of Country Capital Management, please call 303-300-5022 to discuss your options for loss recovery.

Invest photo 2Mr. Lopez has recently received a bar from the securities industry.  He refused to respond to allegations made against him by the Financial Industry Regulatory Authority (FINRA).  These allegations included claims that he stole funds  that clients had given to him for investment, namely funds for insurance policies.

FINRA is a self-regulatory organization that polices securities brokerages under the oversight of the SEC.  This entity is charged with policing securities brokers in their interactions with investors both with their firm and away from their investment firm.

The State of Illinois is also investigating since Mr. Lopez operated out of the Springfield area.  The allegations consist of theft of funds given to Lopez for the placement in certain insurance policies and securities.

Country Capital Management had a duty to oversee the activities of Lopez.  A securities broker-dealer has obligations to oversee outside business activities of its representatives.  Consequently, civil liability may exist on the part of Country Capital to compensate the clients of Lopez.

If you have suffered such losses, Jeffrey Pederson may be able to assist you.  Jeffrey Pederson handles FINRA arbitration cases across the country and is licensed with the United States District Court for the Central District of Illinois.

Douglas Simanski Fraud

Investors of Douglas Simanski should call 303-300-5022 for a free and confidential consultation with a private attorney.

FBIFederal regulators allege that Douglas Simanski raised more than $3.9 million from approximately 27 of his brokerage customers and investment advisory clients by telling them that he would invest their money in either a “tax-free” fixed rate investment, a rental car company, or one of two coal mining companies in which Simanski claimed to have an ownership interest.

The investors were largely in the Altoona, PA area.  Most of the investors were elderly.

The Securities and Exchange Commission (SEC) filed a civil action in the United States District Court for Western Pennsylvania on November 2, 2018.  The complaint describes the fraudulent scheme of Simanski and seeks civil penalties and disgorgement.

As stated in the SEC  complaint, “Simanski convinced some of his most trusting and vulnerable clients, many of them retired or elderly, to invest their money while knowing the investments were not legitimate, that he would make virtually no securities investments on their behalf, and would instead use their money for personal expenses or to repay other investors.”

Simanski placed investor funds in brokerage and bank accounts that Simanski opened in his wife’s name.  He would then use the life savings of his investors for his own personal needs.

The record of Simanski shows that his employers ultimately discovered the wrongdoing after investors brought the matter to the attention of regulators.

Attention Investors of John Maccoll

John C. Maccoll, who was a registered representative of UBS Financial Services and an investment advisor, is charged both criminally and civilly with defrauding at least 15 of his brokerage clients, most of them elderly and retired, in a scheme that lasted for at least a decade.  If you were an investor with Maccoll please call 1-866-817-0201 for a free and confidential consultation.  Representation will be on a contingency fee basis.

Maccoll’s career goes back 40 years.  Prior to being with UBS he spent years working as a brokerguy in handcuffs for Morgan Stanley.  We believe that he used his scheme not only at UBS but also at Morgan Stanley.

According to the SEC, he used high-pressure sales tactics to convince his brokerage customers to invest in what he described as a “highly sought after” private fund investment. The victims were convinced to sell their retirement accounts or borrow against them and make out checks to Maccoll.

The actions of Macoll are commonly referred to as “selling away.”  This is common.  A broker will either try to sell an investment of a confidant who will pay him a premium, or sometimes make up the investment completely.  Brokerage firms are required to have mechanisms in place to detect and stop such trading practices.

One customer’ defrauded invested her life savings and money from her deceased husband’s life insurance payout, which she intended to use to pay for college expenses for her three children, adding that Maccoll knew that the funds invested in his customers’ accounts were for retirement or college expenses.

Attention Investors of Mark Solomon

If you were one of the investors of Mark Solomon please call 1-866-817-0201 for a free and confidential consultation.   We believe that Mr. Solomon, whose office is in Wynnewood, Pennsylvania, inappropriately sold real estate investments and that his employer, M Holdings, inappropriately supervised Solomon and allowed the sales to occur.

Invest photo 2From December 16, 2014 through December 29, 2014, on behalf of a commercial real estate limited partnership, Solomon solicited and sold limited partnership interests (the “offering”) to seven investors for a total of $1,400,000.  However, before soliciting and selling interests in the offering on behalf of the commercial real estate limited partnership, Solomon did not provide to M Holdings the notice required. Solomon first provided written notice of his sales activity to M Holdings on August 31, 2015 after responding to inquiries made by a regulator during an examination of M Holdings.

The financial industry regulator, FINRA, brought an action against Solomon for the sales of the investments.  Solomon entered into a settlement where he agreed to a one year suspension from the securities industry.

M Holdings ultimately is responsible for the sale of the investments.  Brokerage firms are responsible for the supervision of the private securities sales of their brokers even when the sales are away from the firm.  FINRA brought action for the inadequate supervision of Solomon by M Holdings.    M Holdings was censured and agreed to pay a $135,000 fine.