Investment Fraud Lawyer Blog

Affinity fraud is a big problem and it is growing. The affinity aspect of it refers generally to the fraudster’s standing as an insider among a group of people who share a common interest. This standing as a member of the group, so to speak, makes the fraudster presumptively trustworthy. Unfortunately, affinity settings are breeding grounds for investment fraud.

Continue reading "Affinity Fraud Hits Close to Home" »

In connection with the Medical Capital receivership, the SEC Receiver recently filed its “Proposed Plan for Distribution” (the “Plan”). Unfortunately, the Plan contains some disturbing news for those investors who were pro-active and obtained recoveries against third-parties through litigation (including class actions) or arbitration.

Continue reading "SEC Receiver Seeks to Deny Recovery to Many Medical Capital Investors" »

The Houston Athletics Foundation, which funds athletic scholarships for the University of Houston, is apparently the victim of a major ponzi scheme perpetrated by David Salinas, a Houston-based money manager. Approximately, $2.2 million (over 40 percent) of the Foundation’s assets are unaccounted for, having been supposedly invested in bonds that never existed. The ponzi scheme involved $39 million raised from more than 100 investors, including numerous high-profile college coaches.

Continue reading "Ponzi Scheme Victimizes Texas University" »

In the Medical Capital Receiver case, the SEC Receiver recently filed the “Receiver’s Proposed Plan for Distribution” (the “Plan”) which contains some disturbing news for those investors who were pro-active and obtained recoveries against third-parties through litigation (including class actions) or arbitration. As proposed in the Plan (set forth on Page 14 section 4) the Receiver would deduct any funds that an investor received from third-parties in arbitration or litigation dollar for dollar against any sums that would be due from the Receiver.

Continue reading "SEC Receiver's Plan is Unfair to Proactive Medical Capital Noteholders" »

Broker-dealers that sold billions of dollars in fraudulent private placements, such as Medical Capital and Provident Royalties notes, “failed massively in their due diligence responsibilities to investors” according to Gordon Yale, a CPA and expert witness in securities fraud cases. (See “Private-placement due diligence ‘sloppy,’” Investment News). They grossly misrepresented investigations into the investments and issuers they claimed to have performed, and, in fact, merely relied on self-serving representations made by management that were false and fraudulent.

Continue reading "Expert Contends that Brokerage Firms are Failing to Satisfy their Due Diligence Obligations." »

Investors should use extreme caution before investing in alternative investments. Alternative investments have become the popular “investment du jour" but these investments are fraught with risks. Simply stated, alternative investments are not the panacea that so-called experts represent them to be. For the reasons discussed below, investors need to be very skeptical of any recommendation encouraging them to invest in alternative investments.

Continue reading "Most Alternative Investments Carry Huge Risks" »

Brokers often pitch alternative investments when the stock market is declining and returns on traditionally safe investments are too low. A few alternative investments may have some merit. Many more are flawed, bad and ugly in that they provide investors little more than uncompensated high risk. Then there are those that cross the line into the realm of the outright fraudulent. Unless the brokerage firm is itself a criminal enterprise, brokers often try sell fraudulent investments away from the firm to avoid detection by the firm. The practice is known as “selling away.”

Continue reading "'Selling Away' Abuses Are Costing Investors Millions" »

Investment fraud accounts for $40 billion in investor losses per year, according to the association of state securities regulators called the North American Securities Administrators Association (NASAA). Con artists take advantage of fear as well as greed, and fear of running out of money is prevalent these days.

Continue reading "Protect Yourself Against Investment Scams" »

The time is ripe for financial scammers who seek to take advantage of senior investors. Recently a 76-year-old Texas insurance agent was sentenced to up to 15 years for selling fake annuities to other elderly investors. The scammer in this case just happened to be the same age as many of his elderly victims. Mr. Langford apparently stole close to $7 million from dozens of clients through the sale of phony “private annuities” and promissory notes that promised interest rates as high as 9%.

Continue reading "Seniors Are Increasingly Targeted in Financial Scams" »

The association of state securities regulators known as NASAA has released its top 10 investment traps. NASAA finds that scam artists are peddling various get-rich-quick schemes to take advantage of the economic uncertainty. According to NASAA, investments that investors should be particularly wary of include distressed real estate schemes, energy investments, gold and precious metal investments, promissory notes, and securitized life settlement contracts. Tactics used to peddle such investments often involve affinity fraud, bogus or exaggerated credentials, mirror trading, private placements, and securities and investment advice offered by unlicensed agents.

Continue reading "Securities Cops Issue Warnings about Current Investment Scams" »

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" »

The drum beat goes on for broker-dealer closings, as MCL Financial Group Inc. of Santa Ana, California, another small broker-dealer that sold a lot of illiquid alternative investments, has gone the way of QA3 Financial Corp., Jesup & Lamont Securities Corp., GunnAllen Financial Inc., Securities Network LLC, Omni Brokerage Inc., and WFP Securities, according to the latest in Bruce Kelly’s series on the subject for InvestmentNews, “MCL Financial: Another big seller of alternative investments goes under.” These firms folded under the legal costs of their failure to perform proper due diligence on the private placements.

Continue reading "Private Offerings Scuttle Another Brokerage Firm" »

The dust recently settled on another Ponzi scheme. This time the damage was done in Florida, and involved a man who lied to investors about his so-called grocery business. Neil Shapiro was sentenced to twenty years in prison after pleading guilty to securities fraud and money laundering; he was also ordered to pay $82 million in restitution to defrauded investors but they are unlikely to ever see that money. Shapiro raised $930 million through his company, Capitol Investments USA Inc. Shapiro used approximately $770 million to pay back to investors but blew the rest.

Continue reading "Florida Man Guilty of Running a Ponzi Scheme" »

The list of independent broker-dealers that sold private offerings and are now out of business, is impressive. The private offerings include Provident Royalties LLC, Medical Holdings Inc., and DBSI Inc. So far, the list of B-Ds that have closed since 2010 includes, but is not limited to, QA3 Financial Corp., Jesup & Lamont Securities Corp., GunnAllen Financial Inc., Securities Network LLC, Omni Brokerage Inc., and most recently, WFP Securities. See series of InvestmentNews articles by Bruce Kelly entitled “Securities Network latest B-D to close its doors,” “Omni present no longer: Brokerage latest B-D to close,” and “WFP Securities bites the dust.”

Continue reading "Reg D and Other Private Offerings are Dangerous for Brokerage Firms as well as their Clients" »

Richard Ketchum, chairman and chief executive of the Financial Industry Regulatory Authority (FINRA) admonished broker-dealers that sell risky private placements under the Regulation D exemption to conduct more vigorous due diligence, following up on red flags and “pushing and pulling” for information about the products, according to Bruce Kelly’s InvestmentNews article entitled “Finra’s Ketchum: B-Ds must ‘push and pull’ for Reg D details.”

Continue reading "Reg D and Other Private Placement Offerings are Often Plagued by a Lack of Due Diligence" »

Fraudulent acts make headlines nearly every day. But when fraud occurs amongst friends and family, the violation really “hits home” – perhaps even in the most literal sense. Unfortunately, it is surprising how callous or devious some people can be, even the people trusted the most.

Continue reading "Affinity Fraud Generally Occurs When People Least Expect It" »

Securities regulators all agree that exploitation of retirees is a significant and growing problem. According to the U.S. Securities and Exchange Commission, 40 million Americans are age 65 or older, and that number will be 89 million in 2050. Seniors make up 15% of the U.S. population but 30% of fraud victims.

Continue reading "Financial Exploitation of Senior Citizens Continues to Increase" »

Securities America is on the shopping block, according to an InvestmentNews article by Bruce Kelly entitled “Ameriprise shopping Securities America.” The firm was sued along with Ameriprise Financial by a class of people who purchased hundreds of millions of fraudulent securities issued by Medical Capital and Provident Royalties. Ameriprise Financial is the corporate parent of Securities America.

Continue reading "Troubled Securities America is "For Sale"" »

The Securities and Exchange Commission has filed a civil action against Nicholas D. Skaltsounis, AIC, Inc., Community Bankers Securities, LLC (“CB Securities”), John B. Guyette, and John R. Graves, all of Virgina (the “Defendants”), for the fraudulent sale of more than $7.7 million in AIC promissory notes and stock.

Continue reading "SEC Files Suit Regarding Virginia Ponzi Scheme" »

InvestmentNews has reported that FINRA has issued the first in an anticipated series of sanctions against broker-dealers and executives of firms who sold private placements in two alleged Ponzi schemes. The actions were taken against Workman Securities Corp and Askar Corp for deficient investigation and due diligence associated with the sale of high risk investments.. The investments involved were Medical Capital Holdings Inc and Provident Royalties LLC who were charged with fraud by the SEC in 2009.

Continue reading "Regulators Issue Sanctions Against Brokers for Misconduct in Private Offerings (Reg D Offerings)" »