Securities Fraud Lawyer Blog
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.
The Complaint alleges that, based on this conduct, GenAudio and Mahabub violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. The complaint alleges that as GenAudio’s successor in interest, Astound Holdings is liable for GenAudio’s fraudulent and unregistered stock offerings..
The above allegations contained in the SEC’s complaint have not been proven, and the issuance of a complaint represents the SEC’s initiation of a formal proceeding in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint.
The Law Office of David Liebrader practices exclusively in the field of investment loss recovery. For the past 23 years, we have dedicated our law practice to assisting investors who have been victims of investment fraud via fraudulent and unsuitable investment transactions. During that time we have recovered money for over one thousand individuals, pension plans, trusts and companies. The recoveries we have obtained via judgments, awards and settlements on behalf of our clients exceed $40,000,000.
When investors contact our firm they can expect prompt attention, and a detailed analysis of their issues. Typical claims that we are asked to review involve “unsuitability (where a financial advisor makes investment recommendations that are inconsistent with a customer’s investment objectives), claims for “churning” (where a broker enters into an excessive number of trades for the purpose of generating commissions), claims involving illiquid investments such as private placements (I.e., real estate investment trusts, limited partnerships, equipment leasing and oil and gas drilling programs) as well as claims for violations of state securities laws, which often provide investors remedies like attorney’s fees and interest, if they are successful on the claim.
Since a Supreme Court ruling in the 1980s, most investment related disputes between brokerage firms and their customers have been filed in an arbitration forum hosted by FINRA Dispute Resolution. FINRA, along with the SEC, serves as a securities industry “watchdog” and regulator. Most brokerage firms require their clients to sign binding arbitration agreements, mandating that any disputes between them be arbitrated at FINRA.
Investors pursuing claims at FINRA typically advance claims related to suitability. FINRA rules require that all registered representatives make suitable investment recommendations to their clients. Other claims are based on negligence or breach of fiduciary duty, while another category includes claims based on misrepresentations and fraud. Most claims filed with FINRA are resolved within 15 months, and oftentimes, the cases are resolved via settlement or mediation in under a year.
FINRA’s rules require that all investment recommendations made by licensed financial advisors be suitable in light of a customer’s needs, objectives and risk tolerance. In addition, all registered representatives are required to be properly supervised, with periodic inspections and reviews by qualified supervisors, whose job it is to vigorously investigate suspicions of wrongdoing (red flags).
If you suspect that you have been the victim of investment fraud, or had a financial advisor recommend unsuitable investments to you, call us today for a free, confidential consultation at (702) 380-3131.