Investment Fraud Lawyer Blog

As reported in recent articles in Investment News, after the SEC filed fraud charges against Medical Capital Holdings Inc, the Financial Regulatory Authority indicated that it has “a number of investigations under way involving the allegations of wrongdoing arising from the sale of these ‘Reg D’ private placements.” Regulation D refers to the securities regulation that governs the sale of private-placement investments that don’t have to be registered with regulators.

Continue reading "Medical Capital Debacle Puts Private (Reg D) Offerings under the Microscope" »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 10,520 and, on Monday, the market rose 27 points.

• On Tuesday, the Dow Jones Industrial Average dropped 2 points.

• On Wednesday, the Dow Jones Industrial Average gained 3 points.

• On Thursday, the Dow Jones Industrial Average fell 120 points and closed the year at 10,428.

• On Friday, the markets were closed for New Years Day.

Continue reading "Page Perry's Market Monitor - January 1, 2010" »

It’s not just the SEC that is feeling the sting of public criticism for lax enforcement. The U.S. Department of Justice, responsible for prosecuting federal crimes (including financial crimes), filed markedly fewer cases during the years leading up to one of the worst economic meltdowns in U.S. history, according to a recent USA Today article by Brad Heath (“Crisis loomed as fraud cases fell,” Dec. 16, 2009). An examination of Justice Department records by USA Today revealed that the drop in enforcement actions involved everything from stock-trading schemes and corporate wrongdoing to fraud aimed at individual consumers.

Continue reading "The Lack of Government Enforcement Actions Facilitated the Recent Epidemic of Investment Fraud" »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 10,471 and, on Monday, the market rose 30 points.

• On Tuesday, the Dow Jones Industrial Average fell 49 points.

• On Wednesday, the Dow Jones Industrial Average sunk 11 points.

• On Thursday, the Dow Jones Industrial Average dropped 133 points.

• On Friday, the Dow Jones Industrial Average rose 21 points and closed the week at 10,329.

Continue reading "Page Perry's Market Monitor - December 18, 2009" »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 10,389 and, on Monday, the market rose 1 point.

• On Tuesday, the Dow Jones Industrial Average fell 104 points.

• On Wednesday, the Dow Jones Industrial Average rebounded up 51 points.

• On Thursday, the Dow Jones Industrial Average jumped 69 points.

• On Friday, the Dow Jones Industrial Average rose 66 points and closed the week at 10,472.

Continue reading "Page Perry's Market Monitor - December 11, 2009" »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 10,310 and, on Monday, the market jumped 35 points.

• On Tuesday, the Dow Jones Industrial Average surged 127 points.

• On Wednesday, the Dow Jones Industrial Average dropped 19 points.

• On Thursday, the Dow Jones Industrial Average tumbled 87 points.

• On Friday, the Dow Jones Industrial Average rose 23 points and closed the week at 10,389.

Continue reading "Page Perry's Market Monitor - December 3, 2009" »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 10,023 and, on Monday, the market soared 204 points.

• On Tuesday, the Dow Jones Industrial Average rose 20 points.

• On Wednesday, the Dow Jones Industrial Average climbed 44 more points.

• On Thursday, the Dow Jones Industrial Average fell 94 points.

• On Friday, the Dow Jones Industrial Average rebounded 73 points and closed the week at 10,270.

Continue reading "Page Perry's Market Monitor - November 13, 2009" »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 9972 and, on Monday, the market fell 104 points.

• On Tuesday, the Dow Jones Industrial Average rebounded 14 points.

• On Wednesday, the Dow Jones Industrial Average dropped 119 points.

• On Thursday, the Dow Jones Industrial Average surged 200 points.

• On Friday, the Dow Jones Industrial Average tumbled 250 points and closed the week at 9713.

Continue reading "Page Perry's Market Monitor - October 30, 2009" »

A Special Review Committee (the “Special Committee”) appointed by the Board of Governors of the Financial Industry Regulatory Authority (“FINRA”) issued a report finding that FINRA missed opportunities to detect the Ponzi Schemes perpetrated by Bernard Madoff and Allen Stanford, according to an October 2 article in InvesmentNews by Sue Asci. The fraudulent schemes perpetrated by Stanford and Madoff are striking due to their size and duration. The Madoff scheme spanned decades, defrauded thousands of investors, and caused an estimated $64 billion in investor losses. According to the SEC, Stanford sold numerous investors approximately $7.2 billion of fraudulent products, purported to be certificates of deposit (“CDs”), over at least a decade. Despite conducting examinations of the Madoff and Stanford firms, FINRA did not uncover these frauds.

Continue reading "FINRA "Missed Opportunities" to Stop Madoff and Stanford Ponzi Schemes" »

Two victims of Bernard Madoff’s Ponzi scheme have sued the Securities and Exchange Commission, alleging that the agency was negligent in performing its duties to protect investors. The plaintiffs argue that the SEC should have “done its job” and uncovered the scheme. They claim that the SEC’s failure to detect the fraud led directly to losses by the plaintiffs, Phyllis Molchtasky and Stephen Schneider. Ms. Molchtasky had previously filed an administrative claim against the SEC in December of 2008. The Commission refused to negotiate a settlement, which resulted in the present suit. Ms. Molchtasky and Dr. Schneider lost a combined $2.45 million in the scheme.

Continue reading "Investors Sue the SEC" »

When SEC officials appeared before Congress last January and February to answer questions about their handling of the Madoff Ponzi scheme, they rebuffed many questions posed by lawmakers on the ground that there was a pending investigation of the SEC by its inspector general. Now that Inspector General David Kotz has completed his investigation and issued a report on the matter, the SEC is full of regret, reports Paul Wiseman of USA Today in his September 3 article entitled “Inspector general’s report blasts SEC over Madoff.”

Continue reading "Inspector General Continues to Blast SEC" »

The North American Securities Administrators Association (NASAA), the organization of state securities regulators, has published its annual list of top 10 investor traps to avoid. NASAA identified Leveraged Exchange-Traded Funds (ETFs), real estate investment schemes, private placement offerings, natural resources investments, and Ponzi schemes as the greatest potential threats to investor safety. Regarding leveraged ETFs, NASAA warns: “Given their volatility, these funds typically are not suitable for most retail investors.” NASAA also warns investors to be wary of pitches for investments in gold bullion and currency scams, life settlements, entertainment investments, short-term commercial promissory notes, and speculative inventions and new products.

Continue reading "Regulators Issue Warnings about Leveraged Exchange-Traded Funds (ETFs) and Other Toxic Investments" »

The Securities and Exchange Commission is outmanned and outgunned by the folks it is trying to police, according to an August 20 article in the Wall Street Journal by Tom McGinty and Kara Scannell. The SEC turned over daily surveillance of the markets to the markets’ own self-regulatory organizations (“SROs”) long ago. Now, under pressure from Congress and investors to prove it is up to the job, after its glaring failures in the Madoff Ponzi scheme and other scandals, Chairman Mary Shapiro’s SEC is trying desperately to catch up. But surveillance of complex modern markets requires “the quantitative, analytical capacity that the agency has never had,” observes Jonathan Katz, who left the SEC in 2006 after 20 years as secretary.

Continue reading "The SEC Simply Does Not Have Sufficient Resources To Do Its Job" »

The Financial Industry Regulatory Authority (“FINRA”), the regulator of broker-dealers and protector of investors, allegedly failed to investigate the sworn testimony of a former Stanford broker, in 2003, that the Stanford Financial Group, a FINRA broker-dealer, was “engaged in a Ponzi scheme to defraud its clients,” according to recent articles by Reuters, published by the New York Times, and Scott Cohn, posted on CNBC.com. Had FINRA investigated back in 2003, the financial disaster inflicted on Stanford investors might have been avoided.

Continue reading "Securities Regulators Questioned about Dropping the Ball" »

Recent news that the SEC has charged Medical Capital Holdings Inc. and Provident Asset Management, LLC with fraud related to large private-securities deals could mean serious problems for broker-dealers who sold the products to investors.

Continue reading "SEC Charges Medical Capital Holdings and Provident Asset Management with Fraud" »

"What's up, Doc?" It may not sound like the start of a very effective sales pitch, but when Radical Bunny LLC (no relation to Bugs) talked, people listened, according to a recent article by John Emswhiller in the Wall Street Journal entitled "SEC Sues Four Over Real-Estate Deal." At least 900 investors placed over $197 million with Radical Bunny in connection with a purported Phoenix commercial real estate venture. The Securities and Exchange Commission (SEC) says the money was funneled to Mortgages, Ltd., which made short-term, high-interest loans to real estate developers that were building malls, office parks, condominiums, and other projects. When the commercial real estate bubble burst, and the borrowers defaulted, Mortgages, Ltd, Radical Bunny, its principals and investors were left holding a big, empty bag. Bankrutptcy filings ensued, as did enforcement actions by the SEC against Radical Bunny and its principals. Mortgages, Ltd.'s chief executive committed suicide.

Continue reading "SEC Cracks Down on Phoenix Investment Fraud" »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 8438 and, on Monday, jumped 91 points.

• On Tuesday, the Dow Jones Industrial Average fell 82 points.

• On Wednesday, the Dow Jones Industrial Average rose 57 points.

• On Thursday, the Dow Jones Industrial Average plunged 214 points and closed the week at 8290.

• On Friday, the markets were closed in celebration of the July 4th holiday.

Continue reading "Page Perry's Market Monitor - July 3, 2009" »

Pro-business advocates continue to lobby for establishing the United States as a “free fraud zone” where “anything goes” conduct is acceptable. A recent advertisement by the Washington Legal Foundation, a self-described “advocate for freedom and justice” which campaigns for pro-business legal reform, claims that securities fraud lawsuits “are lawful Ponzi schemes,” and that “the lawyers who enrich themselves at the expense of their clients are no different from the high-living CEOs who do the same to their shareholders and employees.” In its ad titled “Bull Market for Plaintiff’s Lawyers,” the Foundation tries to deflect attention from the abuses of Wall Street by complaining that, “amid all the discussion about increasing business regulation, no one has considered protecting consumers from the unaccountable litigation industry’s excesses.” The Washington Legal Foundation conveniently ignores that what it describes as the “unaccountable litigation industry’s excesses” are, in fact, lawsuits spawned by true Ponzi schemes, massive frauds in the sales of securities and excessive risk taking by so-called investment professionals in an effort to pad their own pockets without regard for the consequences to others.

Continue reading "Wall Street Firms Try to Make Others the Scapegoat for Problems of their Own Making" »

There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:

• The Dow Jones Industrial Average opened the week at 8131 and, on Monday, plunged 290 points.

• On Tuesday, the Dow Jones Industrial Average bounced back 128 points.

• On Wednesday, the Dow Jones Industrial Average fell 83 points.

• On Thursday, the Dow Jones Industrial Average rose 70 points.

• On Friday, the Dow Jones Industrial Average jumped 119 points and closed the week at 8076.

Continue reading "Page Perry's Market Monitor - April 24, 2009" »

The liability exposure of registered investment advisors for imprudent recommendations of hedge funds and other managed investments is increasing. On April 22, 2009, the U.S. Securities and Exchange Commission (“SEC”) censured Hennessee Group LLC and Charles J. Gradante and ordered them to pay, jointly and severally, over $800,000 for violating Section 206(2) of the Investment Advisors Act of 1940 (the “Act”) and their fiduciary duties owed to clients who relied on their services and recommendations in investing in a group of fraudulent hedge fund known as Bayou Superfund, LLC; Bayou Accredited Fund, LLC; Bayou Affiliates Fund, LLC; and Bayou No Leverage Fund, LLC; all successors to Bayou Fund LLC (“Bayou”).

Hennessee, a “hedge fund consultant” and registered investment advisor subject to the Act, and its chief executive and investment officer, Gradante, operated in New York City. In 2005, Hennessey had approximately 100 clients and $1.35 billion in client assets under management. The SEC found that Hennessee held itself out as “pioneers in Hedge Fund Consulting” with years of experience in helping clients achieve “higher investment returns with lower risk” by recommending “a customized portfolio of hedge funds, properly diversified and managed. Hennessee routinely represented to clients and prospects that it would not recommend investments in hedge funds that did not satisfy all phases of its due diligence.

Continue reading "Registered Investment Advisors Have Liability Exposure for Imprudent Recommendations of Asset Managers" »