Securities Fraud Lawyer Blog

Kenneth Graves, a former investment adviser representative in Corpus Christi whose license to sell securities was revoked last year by the Texas Securities Commissioner, was arrested June 15 after having been indicted in Nueces County on fraud and other charges. The indictment alleges that Kenneth Graves defrauded six clients of his firm, Warren Financial Services LLC, through the sale of $420,720 in investment contracts based on his firm’s gross income. In a separate scheme, Graves allegedly misapplied $128,918 in unreasonable fees he charged clients of his firm. The Securities Commissioner’s order revoking the registrations of Kenneth Graves and Warren Financial found that Graves made unauthorized withdrawal of client funds, recommended unsuitable investments, and failed to pay clients their promised return on investment.

Kenneth Graves’ registration and disciplinary history

Kenneth Graves was registered with the following firms

Tracy Spaeth, a former investment adviser representative in Lubbock, pleaded no contest to the sale of unregistered securities on Dec. 4, 2014, in Lubbock County State District Court. Spaeth’s sentence was suspended and he was placed on eight years of community supervision. The Texas Securities Commissioner entered a Disciplinary Order in 2013 that suspended Tracy Spaeth for two years and ordered him to complete restitution payments to clients.

Tracy Spaeth’s registration and disciplinary history

Tracy Spaeth was registered with the following firms

On July 17, 2015 the California Department of Business Oversight obtained a desist and refrain order against the Citivest Residential Income and Total Return Fund.

The Order found that beginning on or about May 31, 2013, Citivest Residential Income and Total Return Fund, LLC offered and sold securities in the form of membership shares without obtaining a permit or other form of qualification authorizing any person to offer the securities in California. Additionally, the Fund failed to file the Form D exemption notice, consent to service of process, and filing fee with the California Securities Commissioner pursuant to Corporations Code section 25102.1, subdivision (d). Nor did the Fund file a Form D exemption notice with the Securities and Exchange Commission with respect to its various securities offerings as required by federal law (17 C.F.R. §230.503 (2014)).

Based upon its findings, the California Commissioner of Business Oversight concluded that the membership interests offered and sold by Citivest Residential Income and Total Return Fund, LLC were securities subject to the requirements of Corporations Code section 25102.1, subdivision (d), of the Corporate Securities Law of 1968 (Corporations Code section 25000 et seq.).

On July 14, 2015 the Wisconsin Department of Financial Institutions issued an Order to Cease and Desist and to Deny Agent and Investment Adviser Registration to Robert Herget and Herget Group LLC.

Robert Herget’s application was denied based on findings that Herget violated Wis. Stat. § 551.501 (as well as the failure to disclose the investigation of this misconduct in Herget’s application for registration), pursuant to Wis. Stats. §§ 551.604 and 551.412.

The Dept. of Financial Institutions ordered Herget to cease and desist from further offers of unregistered securities in Wisconsin and also denied Herget’s application for registration as a securities agent and investment adviser representative.

On August 26, 2015 the Arizona Corporations Commission issued a temporary restraining order based on allegations that Robert Kerrigan, USA Barcelona Realty Advisors, LLC, and USA Barcelona Hotel Land Company I, LLC had engaged in, acts and practices that constitute violations of A.R.S. Q 44-1801, et seq., the Arizona Securities Act, and that the public welfare required immediate action.

The Commission alleged that from at least October 26, 2012 until at least November 25, 2013, Barcelona Advisors offered and sold promissory notes issued by Barcelona Advisors and investment contracts in the form of membership interests in Barcelona Advisors within and from Arizona, and that since at least October 2, 2013, Kerrigan offered or sold the October, 2012 Offering within or from Arizona.

Robert Kerrigan’s registration and disciplinary history

On June 16, 2015 The Arizona Corporation Commission revoked the securities registration of Michael Blake of Paradise Valley and denied his securities salesman and investment adviser representative license applications based upon his one-year disciplinary suspension by FINRA.

As a result of an administrative hearing, the Commission found that Michael Blake’s securities registration was suspended for more than six months by FINRA for conduct known as “selling away,” a practice of selling investments that are not authorized by a registered securities dealer in violation of industry conduct rules. In Michael Blake’s FINRA order accepting the offer of settlement, he neither admitted nor denied that he participated in private securities transactions totaling more than $3.2 million with approximately 28 investors in three investment contracts involving commercial real estate. Additionally, Blake neither admitted nor denied that he misled his employing member firms regarding his involvement in the private securities transactions and that he failed to disclose a separate, related outside business activity.

Michael Blake’s registration and disciplinary history

Craig Josephberg (CRD #2709288, New York, New York) submitted an AWC in which hewas barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Josephberg consented to the sanction and to the entry of findings that he willfully violated Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c), when he, his member firm, two principals of the firm, and others engaged in a fraudulent scheme to conceal a kickback of a portion of a private placement fee by pretending to act as a placement agent, accepting fees for services the firm did not perform, and agreeing to “purchase” illusory consulting services from an institutional investor’s affiliate. The findings stated that Craig Josephberg introduced his firm and the principals to the institutional investor to be the placement agent for the institutional investor’s investment in a company. The parties entered into a fraudulent scheme with the private investor to secretly kick back nearly 5 percent of the investor’s investment in a company and misrepresent to investors the actual price the institutional investor paid for the shares. The findings also stated that Craig Josephberg willfully violated Section 10(b) of the Exchange Act and Rule 10b-5(b) when he made unauthorized transactions in customers’ accounts without disclosing that one of his firm’s principals had loaned money to the issuer, purchased the issuer’s stock at a deep discount and was selling the issuer’s discounted stock. The findings also included that Josephberg falsified the firm’s books and records by submitting documents that concealed his sales of securities in states where he was not registered. FINRA found that Josephberg willfully violated Rule 10b-5 of the Exchange Act when he, with the assistance of principals and agents of his firm, engaged in excessive trading in two customers’ accounts.

Craig Josephberg also made unauthorized trades of stock in five customers’ accounts. (FINRA

Case #2012033877801)

Jeff Daggett of Temecula, California submitted an AWC in which he was assessed a deferred fine of $20,000 and suspended from association with any FINRA member in any capacity for four months. Without admitting or denying the findings, Jeff Daggett consented to the sanctions and to the entry of findings that he recommended unsuitable transactions in an exchange-traded note (ETN), and leveraged and inverseleveraged ETFs (non-traditional ETFs) in the accounts of his customer. The findings stated that Jeff Daggett recommended the ETN and non-traditional ETFs without having reasonable grounds for believing that the securities were suitable for the customer in view of the customer’s financial situation, investment objectives and needs. The customer’s realized and unrealized losses from investing in the ETN and non-traditional leveraged ETFs were approximately $88,099.75.

The suspension is in effect from July 6, 2015, through November 5, 2015. (FINRA Case

#2012035383801)