Investment Fraud Lawyer Blog

Sixty-five years ago, the Justice Department filed an antitrust suit against 17 investment banks seeking to break them up for creating “an integrated, overall conspiracy and combination … to eliminate competition and monopolize” the investment banking business. It failed. Today, the investment banking business is much larger and more profitable, and much more concentrated than it was back then. Only 6 Wall Street firms monopolize the even richer investment banking business today, according to William D. Cohan’s Bloomberg article (“Cohan: How Wall Street Turned a Crisis Into a Cartel”).

Continue reading "Is Wall Street Evolving into an Illegal Monopoly?" »

Criminal acts did not play an important role in causing the mortgage crisis, according to an opinion piece in the Wall Street Journal written by Gordon Crovitz, a former publisher of the Journal. In Crovitz’s view, critically flawed policies and rules in the U.S. and abroad did so, and set the stage for the global shocks we see today. Crovitz did not say that crimes did or did not occur; he said that bad regulations were “worse than a crime.” (“Financial Regulation: Worse Than a Crime,” Wall Street Journal, Opinion). Other informed observers believe the subject of Wall Street crime is a very serious matter.

There is no doubt that, as Crovitz says, policies that subsidized bad mortgages in the U.S. and shaky European sovereign debt, and the “Basel rules” that called for big banks to place significant amounts of capital in investments like mortgages and mortgage-backed securities, were based on unwarranted assumptions that those investments were low-risk. When they imploded, many banks that held the same undiversified bad investments went down too. Crovitz concludes: “The reason prosecutors can't prove criminal intent is that in many cases the bankers were simply trading in compliance with the regulations governing them.”

Continue reading "Ignoring Financial Crimes Makes Next Financial Crisis Inevitable" »

Fitch Ratings issued a report on November 16 on the U.S. banking sector saying that “the risks of a negative shock are rising” if the effects of European debt crisis keep spreading. (“Fitch’s Warning Spooks Investors, “ Wall Street Journal).

Continue reading "Concerns Rise Regarding Wall Street Banks" »

Morgan Stanley’s motion to dismiss a class action involving “built to fail” structured products has been denied as to the fraud claims against it, and the case will go forward. The plaintiffs – a group of Singapore retail investors – allege that Morgan Stanley committed fraud in selling them sold them $154.7 million of Pinnacle Notes. The notes, which lost almost 100 per cent of their value during the financial crisis, were linked to synthetic (i.e., derivatives-linked) collateralized debt obligations (CDOs) in 2006 and 2007.

Continue reading "Morgan Stanley Bitten by 'Built to Fail' Structured Products" »

JP Morgan Chase and Goldman Sachs have sold credit default swaps that put them on the hook for $5 trillion of debt – but they won’t say whose debt they are on the hook for. That leaves investors worried that it may be debt issued by Greece, Italy, Ireland, Portugal and/or Spain. Greece and Italy are insolvent, and the others are not very creditworthy, according to experts.

Continue reading "Wall Street Firms Refuse to Disclose Exposure to European Debt" »

The Securities and Exchange Commission says it has stepped up its enforcement activities during the 2011 fiscal year ended September 30, filing a record 735 enforcement actions resulting in disgorgements and penalties totaling $2.806 billion, according to InvestmentNews (“SEC sets record in crackdown on advisers, B-Ds”). It reportedly filed 146 enforcement actions against investment advisers and investment companies in 2011, a 30% increase over last year and 200% more than 2002 when the SEC filed 52 cases. With regard to broker-dealers, the SEC says it filed 112 enforcement actions, a 60% increase over 2010.

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Unfortunately, many investors are experiencing first hand the truism that hedge fund managers rarely outperform the market on consistent basis.

John Paulson, the hedge fund manager who made a killing when Goldman Sachs let him select bad CDO assets, which he turned around and bet against, is having a tough time in 2011. His hedge fund has declined nearly 50% this year as a result of a massive positions in Bank of America, which had lost half of its value by October, Rupert Murdoch’s scandal-plagued News Corp., which owns Fox News, and Sino-Forest Corp., which imploded after an accounting scandal.

Continue reading "Hedge Fund Heroes Getting Battered" »

U.S. District Court Judge Jed S. Rakoff has been asked by the SEC and Citigroup to approve a settlement of charges that Citigroup misled investors in a $1 billion dollar CDO deal called Class Funding III that was tied to residential mortgage-backed securities. Citigroup would pay a $95 million penalty and not admit fault. The Judge has some tough questions that he wants answered at a hearing before him in his courtroom on November 9.

Continue reading "Judge Challenges 'Cozy' Deal Between the SEC and Citigroup" »

Occupy Wall Street has swept the globe and is generating enormous sympathy and interest in Asia as well as Europe. The spread of Occupy Wall Street to Asia – especially Japan – is further evidence that it is a mistake to dismiss a global groundswell of anger over the flow of money from banks to governments that concentrates wealth in the hands of the 1 percent.

In Japan, the protesters gathered at the swanky Roppongi Hills complex where Goldman Sachs maintains offices. Bloomberg News columnist William Pesek was there, reporting signs saying “No Greed,” “Taxiderm the Rich” and “Stop Vampire Squids,” a reference to Goldman Sachs, which Rolling Stone colorfully characterized as a “great vampire squid wrapped around the face of humanity” (See “The 1 percent meets 2 billion in search of answers,” Daily Report).

Continue reading "Occupy Wall Street As A Global Phenomenon" »

USA Today reports that Occupy Wall Street is a middle class revolt (“Protests spotlight a stressed middle class”). Long term unemployment, slumping pay, rising health care costs are behind it. “These people are not just protesting for the hell of it,” Allen Sinai, chief economist at Decision Economics in New York, which consults for banks and hedge funds, was quoted as saying, adding: “A lot of people don’t have purple hair, but underneath, they feel what these people are saying. The middle class is under tremendous pressure.”

Continue reading "Middle Class Values Behind Occupy Wall Street" »

Many investors have reason to support the Occupy Wall Street movement that objects to Wall Street greed. These investors have seen their hard-earned money dissipate in the hands of their “trusted financial professionals.”

Continue reading "Investors Should Be Leading The 'Occupy Wall Street' Charge" »

The securities industry in New York City has lost 22,000 jobs since January 2008, and will lose another 10,000 by the end of next year, according to a report by New York City’s Comptroller Thomas P. DiNapoli. If his predictions are correct, Wall Street will have lost 17% of its jobs. Wall Street has shed 4,100 jobs since April. Bonuses and other compensation are declining as well. (See “Wall Street Shrinkage,” by Andrew Grossman, Wall Street Journal).

Continue reading "Wall Street: Under Siege and Contracting" »

Jobs at Wall Street banks are being eliminated at an increasingly rapid pace and this bodes ill for many employed in the financial services sector.

Bloomberg’s recent article “UBS Bankers Face Dwindling Options for Jobs” underscores this situation. Those pushed out at UBS will doubtless find few opportunities on Wall Street. The bigger story, however, is that what is happening at UBS is just a small part of the overall “brain drain” occurring all across Wall Street these days, as the larger global banks are cutting jobs at the fastest rate since 2008.

Continue reading "Job Cuts at UBS - A Microcosm of What's Happening on Wall Street" »

What in the world is going on with corporations today? How does one draw the line between capitalism and greed? Whatever happened to the theory that when employee hard work contributes in a positive way to the corporate bottom-line, everyone prospers? These are some issues addressed by Sally Kohn writing for The Guardian, a British national daily newspaper.

Continue reading "Wall Street Versus Main Street: Greed Versus Common Sense" »

Many investors, both individuals and corporations, were misled by their brokers and harmed during the credit crisis. For various reasons, however, many such investors have not yet taken action to recover their losses. Some have delayed taking action in order to see whether the misconduct warranted legal action while others just put it off until a later time. Investors need to appreciate that time is running out on their claims, and they should act now or forever hold their peace.

Continue reading "Time Is Running Out On Credit Crisis Legal Claims" »

The SEC is expanding its investigation into Wall Street’s sales practices involving toxic collateralized debt obligations that were linked to subprime mortgages as more and more evidence comes out that the Wall Street banks deliberately defrauded some of their customers.

Continue reading "SEC Expands Investigations into Toxic CDO Deals as the Awful Truth Begins to Come Out" »

The National Credit Union Administration (“NCUA”), acting as liquidating agent for failed corporate credit unions, has filed suit in a federal court in Los Angeles against Goldman Sachs. The complaint involves the sale of $1.2 billion of mortgage-backed securities that were "destined to perform poorly."

Continue reading "Credit Unions Sue Goldman Sachs for Misrepresenting Mortgage-Backed Securities" »

Large Wall Street banks like Goldman Sachs, Morgan Stanley and others, are cutting compensation for big producers, not just laying off lower producers and back-office employees, and are requiring even the biggest producers to bring in more business for the same amount of compensation, according to a CNBC article entitled “Wall Street Slashing Pay—Even for Best Performers.”

Continue reading "Wall Street Pressures Brokers to Generate More Commissions" »

SEC Enforcement Chief Robert Khuzami recently stated that the SEC’s decision not to charge top executives of Wall Street banks with wrongdoing in cases involving structured products was appropriate, according to Suzanne Barlyn’s Wall Street Journal article entitled “SEC: Structured-Product Cases Haven’t Reached Top Bank Officers.” According to Mr. Khuzami, top executives were not involved in, and did not know about, the key decisions relating to structured product problems.

Continue reading "SEC Refuses to Take Action Against Senior Executives in Structured Product Cases" »

The jobs crisis is starting to hit Wall Street banks and brokerage firms, according to a series of Wall Street Journal articles (“Wall Street Wielding the Ax,” by Aaron Lucchetti and Liz Rappaport; “Credit Suisse Set to Ax 600 Jobs,” by Katharina Bart; and “Here’s Why Wall Street Is Cutting Jobs”). A regulatory crackdown on high-risk proprietary trading is reportedly to blame. As the Wall Street Journal put it, “[a] longtime secret sauce on Wall Street – derivatives trading – is drying up.” In addition, less trading by retail and hedge fund clients means less fees and commissions are coming in.

Continue reading "Securities Industry Employment Disputes on the Increase as Wall Street Cuts Jobs" »