Investment Fraud Lawyer Blog

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" »

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" »

MarketWatch is reporting a prediction by John Stephenson, senior vice president of First Asset Management in Toronto, that a new, Lehman-like financial crisis will occur in the next six to twelve months, this time involving the debt of government and European banks. Mr. Stephenson predicts that stocks will fall to levels that existed just after the collapse of Lehman in 2008. The decline will be “deep” and “ugly,” he told MarketWatch columnist Howard R. Gold. Mr. Gold takes him seriously. See his column entitled “Lehman Brothers II crisis is coming soon.”

Continue reading "Market Risks Continue to Grow" »

Investors withdrew net $23.5 billion from U.S. equity mutual funds as of Aug. 10, the most since October 2008, following the Lehman Brothers bankruptcy, according to a recent InvestmentNews article entitled “Equity investors exiting -- and may not be back for years.”.

Continue reading "Have the Equity Markets Become Too Risky for Most Retail Investors?" »

Lehman Brothers is filing arbitration claims to recover recruitment and retention bonuses paid to brokers based on the premise that they are loans that have to be repaid if the broker’s employment was terminated for any reason. So far, Lehman has been successful as arbitration panels have awarded Lehman clawbacks of $2.2 million against one former broker and $800,000 against another, according to Joseph Checkler’s and Suzanne Barlyn’s Wall Street Journal article entitled “Lehman Pursues Former Brokers' Bonuses.“

Continue reading "Lehman Sues Brokers to Recoup Bonuses - Confirms that Consummate Corporate Arrogance Knows No Bounds" »

The current free fall in the stock market is likely to activated the ticking time bombs that are hidden away in some investors’ portfolios. These time bombs are embedded in a type of structured product called Reverse Convertible Notes or Reverse Exchangeable Notes. The problem has to do with the way these products are structured.

Continue reading "Reverse Convertible Securities More Likely to Become Toxic as Market Swoons" »

The Financial Industry Regulatory Authority (FINRA) has issued an investor alert warning against chasing yield with structured products, junk bonds and floating-rate bank-loan funds. The alert was prompted by "significant recent inflows" into high-yield products. Investors may find enhanced yields attractive in the current market environment of low yields on conventional fixed-income investments and higher stock market volatility.

Continue reading "FINRA Warns Investors about Structured Products and Other Non-Conventional Securities" »

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" »

Best-selling “Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led To Economic Armegeddon,” by Gretchen Morgenson and Joshua Rosner, “calls out greedy guys behind mortgage mess,” according to a USA Today book review by Kathryn Caravan. See also “Home Truths,” by James Freeman of the Wall Street Journal. Both reviews provide examples of how the book peels back layer after layer of a bad onion to reveal how a nice-sounding idea (home ownership for all) turned into a house of cards that was doomed to collapse, after being propped up by private greed and public corruption.

Continue reading "The Subprime Mortgage Mess: How the American Dream Turned into a Nightmare" »

Investors in today’s markets, particularly seniors, are caught between extremely low interest rates and the risk of pursuing higher returns they want or need. Brokerage firms are capitalizing on that dilemma by selling structured products as a way to earn above-market returns purportedly without market risk. But as Robert Powel, editor of MarketWatch’s Retirement Weekly, points out in his article entitled “Investors warned about risky structured products,” structured product sellers routinely overstate the potential upside and understate the potential downside of these investments. The net result has been the rampant destruction of investors’ wealth.

Continue reading "What are Structured Products and Why are They so Dangerous?" »

In one of the largest dollar awards to date in a Lehman note case against UBS Financial Services Inc., a Financial Industry Regulatory Authority (FINRA) arbitration panel “walloped” UBS, ordering it to pay former Philadelphia 76ers President Pat Croce more than $2 million for losses in so-called “100% Principal Protected” Lehman notes that were sold to him weeks before Lehman’s September 15, 2008 bankruptcy filing. See Samuel Howard’s Law360 article entitled “UBS Told To Pay 76ers Prez $2M Over Lehman Notes.”

Continue reading "Improper Sales of '100% Principal Protected Notes' Wallop UBS Again" »

Retail investors in structured products that were sold as safe and secure investments have lost at least $113 billion, according to a report by the nonpartisan policy center Demos and The Nation Institute. "In my three decades of Wall Street experience, I have not seen any other product as absurdly destructive as retail investments linked to structured products," securities arbitration consultant Louis Straney wrote in the report.

Continue reading "Experts Conclude that Structured Products are 'Absurdly Destructive'" »

Immediately before its bankruptcy in 2008, Lehman Brothers conjured up a way to pick up extra cash that apparently not even the experts at JPMorgan figured out until it was too late. Bob Ivry alerted the public to the scam in an article in Bloomberg Markets magazine after an extensive investigation by Bloomberg News uncovered the following details of exactly what happened.

Continue reading "Even the Most Sophisticated Investors can be Defrauded" »

The Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) continue to warn that the so-called “principal protection” feature of structured notes is misleading, according to an InvestmentNews article by Liz Skinner entitled “Principal-protected notes don’t always protect principal, regulators warn.”

Continue reading "When 'Principal Protected' Doesn't Really Mean an Investor's Principal is Protected" »

Simply stated, senior investors (in fact, all investors) should be very leery of high-risk structured products. Author John Wasik, in conjunction with Demos and The Nation Institute, has published a white paper entitled “How Safe Are Your Savings? How Complex Derivative Products Imperil Seniors’ Retirement Security.” The paper’s focus is on structured products and how they are mis-marketed to seniors, the group most in need of safe and secure income. The paper is reportedly the result of more than a year of research involving interviews with investors, state securities regulators, investors’ attorneys and officials with the Securities and Exchange Commission (SEC).

Continue reading "Study: Structured Products Pose Huge Risks to Investors' Portfolios" »

FINRA CEO Richard Ketchum recently stated that structured products are “areas of concern” for the Financial Industry Regulatory Authority (“FINRA”), according to a Bloomberg article by Jesse Hamilton and Alexis Leondis entitled “Finra’s Ketchum Says Structured Products Are ‘Areas of Concern.’” If FINRA is concerned, it better act fast. “Sales of structured products rose 46 percent last year to a record $49.5 billion,” according to the article, citing data compiled by Bloomberg.

Continue reading "Attention Investors - Beware of Structured Products" »

On Monday, April 11, 2011, the Financial Industry Regulatory Authority (FINRA) announced that UBS had accepted and consented to a settlement deal in which UBS would pay a fine of $2.5 million and restitution in the amount of $8.25 million to certain investors for its misconduct regarding Lehman Brothers 100% Principal-Protection Notes sold by UBS. Notwithstanding these sanctions, many investor attorneys believe it falls short of dealing with the real problems.

Continue reading "Was FINRA's Recent Settlement with UBS Concerning Lehman 100% Principal Protected Notes a "Whitewash?"" »

The Financial Industry Regulatory Authority (FINRA) announced that it has fined UBS Financial Services, Inc., $2.5 million, and required UBS to pay $8.25 million in restitution to certain investors for its misconduct regarding Lehman Brothers 100% Principal-Protection Notes (PPNs) sold by UBS. UBS’s misconduct includes misleading investors about: (1) the principal protection feature, (2) the risk that they could lose their entire investment, (3) the worsening credit risk of Lehman, (4) inadequate supervisory procedures, and (5) failure to educate its sales force about the risks and how the PPNs work.

Continue reading "Regulators Sanction UBS for Improper Sales of Lehman Principal Protected Notes (a/k/a Structured Notes)" »

Structured products are little more than IOUs from issuers and brokers who have come up with complex ways to take investors’ money. They are marketed as “low risk and high yield” – an oxymoron when dealing with stocks and the market. But to many older, fixed income investors and those tired of low interest money market or CD offerings, the pitch sounds enticing. The promise of double-digit returns in one to three years has actually COST investors over $164 billion over the last two years! John F. Wasik in an article for AARP Magazine took a good hard look at structured products and how they rarely deliver on the hype.

Continue reading "Structured Products Aren't What You Think They Are" »

The Lehman Brothers Holdings bankruptcy trustee has sued Citibank to recover more than $1.3 billion, according to Dena Aubin’s March 18, 2011 article in Reuters. The $1.3 billion includes a $1 billion deposit demanded by Citibank to continue providing foreign exchange settlement services to Lehman’s broker subsidiary (LBI) after the bankruptcy filing. Citigroup also froze more than $300 million in additional deposits, and could face up to $3 billion in claims from Lehman's bankruptcy proceedings, according to the article.

Continue reading "Lehman Bankruptcy Trustee Sues Citibank to Recover $1.3 Billion" »