Securities Fraud Lawyer Blog

On September 8, 2015 the SEC announced it had filed fraud charges against three traders accused of repeatedly lying to customers who were relying on them for honest and accurate pricing information about residential mortgage-backed securities (RMBS).

The SEC alleges that Ross Shapiro defrauded customers to illicitly generate millions of dollars in additional revenue for Nomura Securities International. They complaint alleges that Ross Shapiro, Gramins and Peters misrepresented the bids and offers being provided to Nomura for RMBS, as well as the prices at which Nomura bought and sold the RMBS. They also trained, coached, and directed junior traders at the firm to engage in the same misconduct.

According to the SEC’s complaint filed in federal court in Manhattan, the lies and omissions to customers generated at least $7,000,000 in additional revenue for Nomura. Customers relied on market price information quoted by these traders because the market for this type of RMBS is not transparent, and accurate price information is difficult for a customer to determine. Therefore it was particularly important for the traders to provide honest and accurate information.

On September 25, 2015 the SEC filed a civil injunctive in federal court in Colorado relating to the fraudulent offer and sale of stock in GenAudio, Inc. The SEC charged GenAudio, Inc., a Colorado corporation, its corporate successor, Astound Holdings, Inc. and GenAudio’s founder and CEO, Taj Jerry Mahabub, of Broomfield, Colorado, with the fraudulent and unregistered offer and sale of  GenAudio stock.

According to the SEC’s complaint, from 2010 through 2012, GenAudio raised over $4,000,000 in two private placements based in large part on representations that Apple planned to acquire GenAudio or enter into licensing agreements to use its technology. The complaint alleges that GenAudio and Mahabub told prospective investors that Apple wanted to acquire GenAudio’s technology, and that a third party had valued GenAudio’s technology as being worth 0ver $1,000,000,000.

However, the complaint alleges that GenAudio had only demonstrated its technology and had technical discussions with mid-level Apple personnel, none of whom had indicated that Apple was interested in a transaction with GenAudio. The SEC further alleges that during the scheme, Mahabub falsified documents and pocketed more than $2,000,000 through his offer and sale of his personal stock in GenAudio.

On September 28, 2015 the SEC announced that it had filed fraud charges against Eldrick Woodley, a Houston-based investment advisor, for misappropriating close to $150,000 from customers. funds.

According to the SEC’s complaint, filed in the U.S. District Court for the Southern District of Texas, Houston Division, Eldrick Woodley, through his advisory firm Woodley & Co. Wealth Strategies, undertook a fraudulent scheme to steal money from his advisory clients.

The SEC’s complaint alleges that Eldrick Woodley submitted a series of fraudulent fee invoices to the custodian of his clients’ accounts, purportedly as compensation for services Woodley performed and investments Woodley made on his clients’ behalf. According to the SEC’s complaint, the fee invoices were fictitious, as Woodley never performed the services or made the investments on behalf of the clients.

On August 20, 2015 The SEC announced that it had obtained a preliminary injunction freezing the assets of Iftikar Ahmed, an investment professional, who they charged with running a 10 year fraud at the venture capital firm where he previously was employed, Oak Investment Partners.

The SEC filed its emergency action against Iftikar Ahmed in May and alleged that he obtained approximately $65,000,000 improperly. On May 7, 2015, the court imposed a temporary restraining order on Ahmed imposing an asset freeze on him, and on August 12, 2015, the U.S. District Court for the District of Connecticut issued an order granting the SEC’s motion for a preliminary injunction continuing the asset freeze up to approximately $118,000,000.

The SEC alleges that Iftikar Ahmed used a variety of fraudulent means to perpetrate his scheme and generate illicit profits in connection with multiple securities transactions. Among other things, Ahmed overstated the prices of investments in companies  by altering deal documents, pocketing the difference for himself.

In November, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that Aldo Comuzzi of Boca Raton, FL, and formerly associated with Dawson James Securities submitted a letter of acceptance, waiver and consent in which he was barred from association with any FINRA member in any capacity.

Without admitting or denying the findings, Aldo Comuzzi consented to the sanction and to the entry of findings that he refused to provide a response to a FINRA request for documents and information during an investigation into whether he had engaged in excessive trading and whether he had improperly utilized discretion without written approval in certain of his broker dealer’s customer accounts.

Aldo Comuzzi’s registration and disciplinary history

In November, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that Ryan Bowers of San Diego, California submitted a letter of acceptance, waiver and consent in which he was assessed a deferred fine of $25,000 and suspended from association with any FINRA member in any capacity for five months.

Without admitting or denying the findings, Ryan Bowers consented to the sanctions and to the entry of findings that he was aware of, but failed to provide updated valuation information regarding private equity funds to the firm that was the custodian of investors’ holdings. The findings stated that as a result, the custodian produced account statements falsely representing that investors’ positions were unchanged, when in fact their positions had declined.

Ryan Bowers was the chief executive officer (CEO) of a registered investment adviser that served as the investment advisor for the private equity funds, and was responsible for management of these funds. The funds raised approximately $22 million in cash and securities from investors. The investment adviser reported periodic account values to investors in the funds through quarterly reports generated by a third-party company that served as the custodian of the funds’ investments, and through monthly reports generated by a third-party company that served as the custodian of the investors’ investments.

In November, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that Jim Belenis of Davis, California submitted a letter of acceptance, waiver and consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 20 business days.

Without admitting or denying the findings, Jim Belenis consented to the sanctions and to the entry of findings that he engaged in a private securities transaction by investing in a limited liability company that held a gold mining operation, without prior written notice to his member firm. The findings stated that Belenis assisted in raising capital for the limited liability company, yet inaccurately answered “no” on a firm questionnaire asking whether he had assisted in raising capital.

The suspension was in effect from October 5, 2015, through October 30, 2015..

In November, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that Wiley Bros. Aintree Capital, LLC of Nashville Tennessee submitted a letter of acceptance, waiver and consent in which the firm was censured and fined $35,000. Without admitting or denying the findings, Wiley Bros. Aintree Capital consented to the sanctions and to the entry of findings that it failed to establish, maintain, and enforce a supervisory system and adequate written supervisory control procedures reasonably designed to review and monitor the movement of funds from customer accounts to firm employees.

The findings stated that a registered sales assistant converted approximately $147,400 from a customer by using blank, pre-signed letters of authorization to request and obtain checks payable to herself. The sales assistant also requested checks payable to the customer, claiming that she would hand-deliver the checks to him, but thereafter forged the endorsements on the checks to herself and converted the funds.

The findings also stated that the firm’s supervisory control system in this area failed to include a policy or procedure requiring a review to detect or prevent transmittals of funds from customers to firm employees. The firm failed to enforce its own written supervisory procedures related to hand-delivery of checks. As a result of the firm’s failure to establish, maintain, and enforce a supervisory system and adequate written supervisory control procedures, the registered sales assistant was able to convert the funds.

In November, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that Sterne Agee Financial Services, Inc. of Birmingham, Alabama) submitted a letter of Acceptance, Waiver and Consent in which the firm was censured and fined $25,000.

Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that Sterne Agee failed to enforce its written supervisory procedures prohibiting solicitation of inverse or leveraged exchange-traded funds (ETFs). The findings stated that the firm maintained written supervisory procedures that prohibited its registered representatives from soliciting transactions in inverse or leveraged ETFs. A registered representative solicited transactions in leveraged and inverse ETFs in contravention of the firm’s WSPs and mismarked all of the order tickets as “unsolicited” when, in fact, he had solicited each order.

Despite the occurrence of almost one thousand transactions in a concentrated number of inverse and leveraged exchange traded funds, Sterne Agee failed to investigate whether the transactions were, in fact, unsolicited. As a result of the incorrectly marked order tickets, the firm’s books and records were inaccurate.