On August 10, 2016, the Securities and Exchange Commission (“SEC”) filed fraud charges against an individual, Edwin Ruh Jr., and his firm, Pan Asia China Commerce Corp. Inc. (“PAC-3”), in connection with the fraudulent offering of an investment fund called PAC-3 Film Fund LLC (“PAC-3 Film Fund”).

The SEC’s complaint alleges that Ruh established the PAC-3 Film Fund to make investments in a film financing deal between a well-known film studio (“Film Studio A”) and a film financing firm (“Financing Firm A”). Pursuant to its deal with Film Studio A, Financing Firm A agreed to provide Film Studio A with 25 percent of Film Studio A’s motion picture financing for the next five years (the “Film Deal”). As part of the fund raising effort, Financing Firm A invited PAC-3 Film Fund to assist in raising money for the deal, but subject to a number of specific limitations that Financing Firm A communicated to Ruh. Notwithstanding specific contrary instructions from Financing Firm A, beginning in approximately July 2013, either directly or through intermediaries, Ruh and PAC-3 created and caused to be distributed to potential investors various versions of an offering document titled “confidential executive summary” (collectively, the “Offering Document”). Read More

On August 8, 2016 the Securities and Exchange Commission (“SEC”) charged three individuals and the now-defunct firms Global Transition Solutions, Inc. and Global Transition Solutions, LLC (collectively “Global Transition”) with fraud for misleading their current and prospective customers about the fees they charged in connection with securities transactions.

According to the SEC’s complaint, filed in federal court in Philadelphia, Pennsylvania, John Place, Global Transition’s Chief Executive Officer, John Kirk, Global Transition’s President, and his brother, Paul Kirk, Global Transition’s General Counsel and Chief Operating Officer, operated the two Global Transition firms as a “transition management” brokerage consulting business. The complaint alleges that Global Transition assisted its customers – largely public pension funds – in handling large orders to buy and sell securities when transitioning a large portfolio from one investment manager or strategy to another, or liquidating it. Read More

On August 4, 2016, Patrick Churchville, a defendant in an ongoing SEC litigation, pled guilty to an information charging him with five counts of wire fraud and one count of tax evasion in connection with orchestrating a $21 million Ponzi scheme and additional misappropriation from funds he advised. The court accepted Churchville’s plea and scheduled sentencing for October 25, 2016 at 9:30 a.m.

The SEC previously charged Churchville, the owner and president of ClearPath Wealth Management, LLC, an investment adviser formerly located in Providence, Rhode Island, and ClearPath in a civil action filed on May 7, 2015. According to the SEC’s complaint, from at least December 2010, ClearPath and Churchville diverted deposits from investors to pay other investors, used proceeds from selling particular investments to pay unrelated investors, used investors’ funds as collateral for loans to make investments for their own benefit then used other investors’ money to repay the loans, and converted investor funds into investments for ClearPath’s own benefit. Read More

On August 10, 2016 the Securities and Exchange Commission (“SEC”) charged Merrill Robertson Jr., a former player for the Philadelphia Eagles, with defrauding investors, including former coaches he knew from his time playing football for the Fork Union Military Academy and the University of Virginia.

The SEC’s complaint, filed in federal court in Richmond, Virginia, charges Robertson, Sherman Vaughn, Jr. and the company they co-owned, Cavalier Union Investments LLC. According to the complaint, the defendants promised to invest in diversified holdings but diverted nearly $6 million of the more than $10 million they raised from investors to pay for personal expenses and used other funds to repay earlier investors.

Robertson and Vaughn, both of Chesterfield, Virginia, are alleged to have lied about the unregistered debt securities they sold, saying they would yield as much as 20 percent “while providing safety and security for our investors.” According to the complaint, the defendants claimed that Cavalier had investment funds operated by experienced investment advisers, when it did not have any funds or investment advisers and was functionally insolvent shortly after it was formed. Read More

On August 4, 2016 the Securities and Exchange Commission (“SEC”) charged a cardiologist with insider trading on confidential developments as he worked on a clinical drug trial.

The SEC alleges that Dr. Edward Kosinski of Weston, Connecticut, traded in advance of two negative news announcements by Regado Biosciences, which was pursuing a drug called REG-1 to regulate clotting in patients undergoing coronary angioplasty. Kosinski, who served as principal investigator of the drug trial, got advance notice that patient enrollment in the trial was being suspended because patients had experienced severe allergic reactions. He allegedly sold all 40,000 shares of his Regado stock the following day to avoid approximately $160,000 in losses when the news became public and the stock price dropped. Read More

Posted by Brenda Hamilton. On August 17, 2016, Penny Stock Fraudster, Sandy Winick, a  Canadian, was sentenced To 78 Months In prison for masterminding the international fraud scheme.  Winick was sentenced to 78 months in prison following his July 2015 guilty plea to conspiring to commit wire fraud for running an international advance fee scheme. As part of the sentence, Winick was ordered to pay   $2,431,038.32 in restitution and $5,000,000 in forfeiture.    Read More

On August 2, 2016, Leonid Momotok of Suwanee, Georgia pled guilty before United States Magistrate Judge Ramon E. Reyes, Jr. in United States District Court for the Eastern District of New York to one count of conspiracy to commit wire fraud.

The criminal charges against Momotok arose out of the same conduct alleged by the SEC in a civil securities fraud action filed in August 2015. Read More

The Securities and Exchange Commission (SEC) announced that the federal district court in Rhode Island has entered a final judgment against Kenneth Rampino, a resident of Seekonk, Massachusetts and a practicing attorney, ordering him to pay approximately $39,000 to settle allegations that he engaged in insider trading in the stock of Bancorp Rhode Island, Inc. (BankRI).

In June 2015, the SEC charged Anthony Andrade, a former member of the board of directors of BankRI, and three of his friends and close business associates, including Rampino. According to the SEC’s complaint, filed in federal court in Providence, Rhode Island, Andrade illegally tipped inside information about BankRI’s potential acquisition to the three friends and associates, each of whom traded on the inside information Andrade supplied to them, and collectively profited by over $80,000 when BankRI’s stock price significantly increased after an acquisition announcement was made public. Read More

On July 25, the Honorable Sam R. Cummings of the United States District Court for the Northern District of Texas granted summary judgment for the SEC on all claims against the father-and-son duo of Paul and Jeffry Downey, and John Leonard, all involved in oil-and-gas fraud, finding them liable on all charges.

The SEC’s action, filed in November 2014, alleges that the defendants raised nearly $5 million from 17 investors in a securities offering in the Permian Advanced Oil Recovery Investment Fund I, LP (PAOR), in which the Downeys’ company, Quest Energy Management Group, Inc. (Quest), served as PAOR’s operating general partner. The SEC’s complaint alleges that the Downeys violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and alleges that Leonard violated Section 15(a) of the Exchange Act, and seeks permanent injunctions, money penalties, and disgorgement of illicit earnings from the illegal offerings. Read More

On July 28, 2016 the Securities and Exchange Commission (“SEC”) announced an asset freeze it has obtained against three men who aren’t registered to sell investments and allegedly went on lavish shopping sprees with more than $5 million raised from investors to purportedly develop a resort.

In an emergency action filed in federal court in Atlanta, the SEC alleges that Matthew White, Rodney Zehner, and Daniel Merandi fraudulently issued $1 billion in unsecured corporate bonds out of a shell company they own and claimed the money would be used to fund the resort project. But they never came close to raising the funds necessary to start the project, and meantime they pocketed the $5.6 million they did raise and used it for personal purchases at Saks Fifth Avenue, Gucci, Louis Vuitton, Prada, and Versace.

The SEC’s complaint filed yesterday alleges that White, Zehner, Merandi, and their companies violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rule 10b-5. The SEC seeks permanent injunctions, disgorgement, and penalties against all of the defendants. The court order obtained late yesterday freezes defendants’ cash held in a brokerage account and freezes the bonds held in a separate brokerage account.

For further information about this securities law blog  post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit  www.securitieslawyer101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855

On July 26, 2016, the Honorable Charles R. Breyer of the United States District Court for the Northern District of California entered a final judgment against Luca International Group, LLC, Luca Resources Group, LLC, Luca Energy Fund, LLC and relief defendants Luca Operation, LLC, Luca Barnett Shale Joint Venture, Luca To-Kalon Energy, LLC, Luca Oil, LLC, Luca I, Limited Partnership, and Luca Oil II Joint Venture (collectively, the “Luca Entities”). The final judgment imposes on the Luca Entities a permanent injunction against future violations of certain antifraud provisions of the federal securities laws and orders that certain Luca Entities pay $68.3 million in disgorgement.

In its complaint filed in July 2015, the SEC alleged that the Luca Entities, their CEO Bingqing Yang and her chief fundraiser Lily Lei orchestrated a fraudulent Eb-5 scheme targeting the Chinese American community as well as investors in Asia to invest in unregistered offerings of securities. According to the complaint, Yang and Lei represented to investors that their money would be invested in oil and gas drilling operations, that they could expect annual rates of return of 20-30 percent, and that their investments were risk free. In reality, as the complaint alleges, Yang, the Luca Entities and Lei deceived investors by misrepresenting that their operations as successful and projecting outsized investment returns, all while knowing the operations were losing millions of dollars and the enterprise was sinking under a mountain of debt. Read More

On July 27, 2016, Rosalind Herman, a relief defendant in an ongoing SEC fraud action, was sentenced to seven years in federal prison and ordered to pay $1,819,391 in restitution in a parallel criminal case.

Herman and her business partner, Gregg Caplitz, were indicted in March 2012 and additional charges were added against both of them by a superseding indictment returned in March 2013. The superseding indictment alleged that Herman and Caplitz fraudulently induced clients to entrust their savings and other funds to them by falsely representing that the funds would be invested and managed for the clients’ benefit when, in truth, the funds were used to pay the personal expenses for Herman, her family, and Caplitz. On April 3, 2014, Caplitz pled guilty to conspiracy, investment adviser fraud, making a false filing with the SEC, and wire fraud. On April 5, 2016, a federal jury in Massachusetts convicted Herman of conspiracy, investment adviser fraud, wire fraud and a tax-related charge. Read More

On July 26, 2016 the Securities and Exchange Commission (“SEC”) announced that it obtained an asset freeze against the operator of an international Ponzi scheme that raised more than $207 million from investors worldwide, primarily in the U.S., India, and Russia.

In a complaint filed in federal court in Salt Lake City on July 26, the SEC alleges that Traffic Monsoon LLC and Charles Scoville, the company’s only member operated an Internet-based Ponzi scheme that they falsely represented to investors was an advertising company. According to the SEC complaint, Scoville began operating Traffic Monsoon in October 2014 as a combination Internet traffic exchange and pay-per-click program and recruited more than 162,000 investors around the world. Read More

The Securities and Exchange Commission (“SEC”) announced that it has charged Odessa, Texas-based JNL Oilfield Instruments, LLC and its founder Jeffery McCollum with operating a multi-year Ponzi scheme.

According to the SEC’s complaint filed in the U.S. District Court for the Western District of Texas, defendants raised more than $12 million from approximately 30 investors by offering investment contracts for the purchase and resale of oilfield services equipment. The complaint alleges that McCollum told investors that their money would be used to invest in used equipment that JNL would purchase and resell for large profits. In reality, as the complaint alleges, defendants were not purchasing the equipment and were instead using investor funds to pay off earlier investors and to pay McCollum’s personal expenses. The complaint further alleges that when investors requested details about equipment transactions, McCollum made up stories about fictitious pieces of equipment and phantom buyers, sent photographs of unrelated equipment, and sent investors fake equipment invoices that he had created.

Without admitting or denying the SEC’s allegations, McCollum and JNL agreed to a settlement that permanently enjoins both McCollum and JNL from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, requires them to pay a $160,000 penalty, and requires them to pay disgorgement and prejudgment interest in amounts to be determined at a later date. The settlement is subject to court approval.

For further information about this securities law blog  post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit  www.securitieslawyer101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855

On July 22, 2016, Judge Cynthia M. Rufe of the U.S. District Court for the Eastern District of Pennsylvania sentenced former attorney Herbert Sudfeld, Jr. to six months imprisonment followed by three years of supervised release and 150 hours of community service.

The criminal charges against Sudfeld arose out of the same conduct alleged by the SEC in a civil securities fraud action filed on July 16, 2015. The SEC’s complaint alleged that he illegally traded in advance of the 2011 announcement of a $760 million merger of Harleysville Group, Inc. and Nationwide Mutual Insurance Company. At the time, according to the complaint, Sudfeld was a real estate partner at a Philadelphia-area law firm that advised Harleysville on the merger. Read More

The Securities and Exchange Commission (“SEC”) announced that on July 20, 2016, the Honorable Charles Pannell of the United States District Court for the Northern District of Georgia entered a final judgment against Michael Sean Cain. In its complaint, the SEC alleged that Cain, a registered representative, received confidential information from his friend and accountant Thomas Melvin. Specifically, the SEC alleged that Melvin Read More

On July 9, the Securities & Exchange Commission (“SEC”) settled with Alexander Hawatmeh and Christopher Mrowca who allegedly received more than $2.5 million by manipulating penny stock  pot stocks.  According to the proposed judgments filed in the US District Court for the Western District of Washington, Alexander Hawatmeh and Christopher Mrowca each consented to an SEC permanent bar from participating in penny stock offerings and to a permanent restraint from further violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Section 9(a)(1) of the Exchange Act and Section 17(a) of the Securities Act. Read More

The Financial Industry Regulatory Authority  has adopted amendments to its rules related to the operation of the Regulation NMS Plan to Address Extraordinary Volatility following a trading pause or regulatory halt.  FINRA Rule 6121.01 (Resumption of Trading in Securities Subject to the Regulation NMS Plan to Address Extraordinary Market Volatility) provides, among other things, that no trades in an NMS stock are permitted to occur during a trading pause. The rule also addresses the resumption of trading otherwise than on an exchange in an NMS stock following a trading pause. Read More

On July 22, 2016, the Honorable Travis R. McDonough of the Eastern District of Tennessee entered a court-ordered asset freeze to halt an ongoing fraud by two former brokers with disciplinary histories who allegedly raised more than $5 million from investors without using the money as promised.

In an emergency action filed in federal court on July 20, 2016, the SEC alleged that James Hugh Brennan III and Douglas Albert Dyer sold purported shares in eight similarly named companies to more than 240 investors since 2008 without ever registering the stock as they promised. Instead, according to the SEC’s complaint, Brennan and Dyer transferred investor funds into their personal accounts or those belonging to their wives. Read More

On July 20, 2016, the SEC charged Jeffrey Wilson, the former CEO of Imperial Petroleum, Inc., and a defendant in a SEC civil enforcement action, with 19 counts of securities fraud and other violations of federal law on July 20 by a jury in a federal criminal trial in Indianapolis, Indiana. The criminal charges stemmed from Wilson’s role in a fraudulent scheme in which Imperial Petroleum’s largest subsidiary, E-biofuels LLC, was falsely portrayed as a legitimate biodiesel production company in order to illegally take advantage of valuable government incentives. Read More

On July 18, 2016, the U.S. District Court for the District of Utah entered final judgments against Tyson Williams and Stanley Parrish, both of whom were charged by the SEC in 2014 in connection with the sale of securities by ST Ventures, LLC. Among other remedies, the final judgments ordered the two defendants to pay over $4 million in monetary sanctions.

According to the SEC’s complaint, Williams and Parrish raised over $7 million from approximately 50 investors through the fraudulent and unregistered sale of securities in ST Ventures, LLC. The complaint alleged Williams and Parrish told investors that ST Ventures would purchase collateralized mortgage obligations (CMOs) and then leverage the CMOs to produce a large return for the investor within 30 to 90 days. The complaint further alleged that Williams and Parrish made material misrepresentations and omissions regarding the investment including, among other things, the risk of the investment and the use of investor funds. Read More

On Friday, July 15, 2016, the Securities and Exchange Commission (“SEC”) charged Thomas Conrad, Jr. and his son, Stuart Conrad, and their two unregistered advisory firms, Financial Management Corporation (“FMC”) and Financial Management Corporation, S.R.L. (“FMC Uruguay”), with defrauding investors in a $10.7 million hedge fund primarily managed by Thomas Conrad.

According to the SEC’s complaint, between 2010 and late 2014, Thomas Conrad directed preferential redemptions and other disbursements out of the hedge fund and its feeder funds to himself, his son Stuart Conrad, their extended family, and certain favored investors, while representing to other investors that redemptions were suspended.

The complaint also claims that Thomas Conrad arranged to increase his compensation from the hedge fund by appointing himself to be a sub-manager, for a fee, and that this additional fee and the related conflict of interest was not disclosed to investors. Read More

Vineet Kalucha was sentenced to fifteen months in prison in a parallel criminal case after pleading guilty to charges that he obstructed justice in an investigation conducted by the SEC. Vineet Kalucha, whose sentence was handed down on July 14, will also be placed on supervisory release for 24 months upon completing his prison term. On May 5, 2014, the SEC filed fraud charges in federal district court against Kalucha, Aphelion Fund Management LLC (“Aphelion”), an unregistered investment advisor Kalucha controlled, and Aphelion’s chief financial officer. The SEC’s complaint alleged that Kalucha fraudulently altered an outside audit firm’s report reviewing the performance of an investment account that Kalucha managed, essentially changing an investment loss into a major investment gain in the account. The complaint further alleged that investors were separately provided false information about Aphelion’s assets under management and Kalucha’s litigation history, and that Kalucha allegedly siphoned investor funds for his luxury car payments and settlements of legal actions against him personally that are unrelated to Aphelion.

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On Friday, July 15, 2016, the Securities and Exchange Commission (“SEC”) charged two residents of Alpharetta, Georgia, Thomas Conrad, Jr. and his son, Stuart Conrad, and their two unregistered advisory firms, Financial Management Corporation (“FMC”) and Financial Management Corporation, S.R.L. (“FMC Uruguay”), with defrauding investors in a $10.7 million hedge fund primarily managed by Thomas Conrad. According to the SEC’s complaint, between 2010 and late 2014, Thomas Conrad directed preferential redemptions and other disbursements out of the hedge fund and its feeder funds to himself, Stuart Conrad, their extended family, and certain favored investors, while representing to other investors that redemptions were suspended. Read More

On July 18, 2016, the U.S. District Court for the District of Utah entered final judgments against Tyson D. Williams and Stanley D. Parrish, both of whom were charged by the SEC in 2014 with fraud in connection with the sale of securities by ST Ventures, LLC. Among other remedies, the final judgments ordered the two defendants to pay over $4 million in monetary sanctions. According to the SEC’s complaint, Williams and Parrish raised over $7 million from approximately 50 investors through the fraudulent and unregistered sale of securities in ST Ventures, LLC. The complaint alleged Williams and Parrish told investors that ST Ventures would purchase collateralized mortgage obligations (CMOs) and then leverage the CMOs to produce a large return for the investor within 30 to 90 days. Read More

On July 22, 2016, Jeffrey Wilson, the former CEO of Indiana-based Imperial Petroleum, Inc., and a defendant in a SEC civil enforcement action, was found guilty of 19 counts of securities fraud and other violations of federal law on July 20 by a jury in a federal criminal trial in Indianapolis, Indiana. The criminal charges stemmed from Wilson’s role in a fraudulent scheme in which Imperial Petroleum’s largest subsidiary, E-biofuels LLC, was falsely portrayed as a legitimate biodiesel production company in order to illegally take advantage of valuable government incentives.

Wilson was found guilty of two counts of securities fraud, seven counts of making false statements in required filings with the SEC, five counts of wrongful certification as a corporate officer of annual or quarterly reports filed with the SEC, three counts of making false statements or omitting to state material information to Imperial Petroleum’s auditors, and one count of making false statements to government officials. Read More

On May 5, 2016, Judge Alvin W. Thompson of the U.S. District Court for the District of Connecticut granted the SEC’s motion for an officer and director bar against Joseph F. Apuzzo, former Chief Financial Officer of Terex Corporation. The ruling follows an evidentiary hearing on the Commission’s motion and resolves the case against Joseph Apuzzo in its entirety.

Joseph Apuzzo had previously consented, without admitting or denying the allegations in the Commission’s complaint, to be permanently enjoined from violations of Sections 10(b) and 13(b)(5) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting violation of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rule 13a-1 thereunder, and to pay a penalty of $100,000. Read More

On May 3, 2016, the SEC announced  securities fraud charges against 10 individuals involved in cash bribes and other kickbacks to registered representatives and unregistered brokers who solicited investors to buy stock in ForceField Energy Inc. The SEC alleges that investors were unaware those soliciting them were being paid by a ringleader – ForceField’s then-chairman of the board Richard St. Julien – to steer them to the stock, and that some of the perpetrators attempted to evade law enforcement by going so far as to communicate with prepaid disposable “burner” phones and encrypted, content-expiring text messages.

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We last wrote about the complex litigation involving Calissio Resources Group (CRGP) in February. It arose out of a controversy surrounding the company’s payment of a special dividend of $0.011 a share in August 2015. At the time of declaration, Calissio estimated that the dividend would cost about $1.3 million. During the same period, it announced that it would launch a stock buyback program.

We last wrote about the complex litigation involving Calissio Resources Group (CRGP) in February.  It arose out of a controversy surrounding the company’s payment of a special dividend of $0.011 a share in August 2015.  At the time of declaration, Calissio estimated that the dividend would cost about $1.3 million.  During the same period, it announced that it would launch a stock buyback program.

The dividend was declared on 16 June.  The company set a record date of 30 June and a pay date of 17 August.  When FINRA processed the relative corporate action request, it named 19 June as the ex dividend date.  The ex date is the first day on which a stock will trade without a dividend attached.  The dividend will be paid on all stock of the class specified that is issued and outstanding as of the record date.  If a shareholder sells his stock between the record and ex dates—that is, during the interim period—he will be selling his right to the dividend with it.  A due bill will be attached, and the dividend will be paid to the person holding the stock as of the ex date.  To sum up:  the record date establishes what stock is eligible for the dividend; the ex date establishes what shareholders will receive it. Read More