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FINRA Broker Charged for Churning Multiple Accounts, Even on the Day of a Customer’s Death

February 28, 2019 | Malecki Law Team

Formerly registered broker James Bradly Schwartz is facing charges in a FINRA disciplinary proceeding for allegedly churning customers’ accounts while a registered broker employed with Aegis Capital Corp between August 2014 and May 2016. In this quite brief period, Schwartz allegedly executed around 535 trades in these customer accounts, many of which were unauthorized. The FINRA complaint alleges that Schwartz violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder as well as FINRA rules 2010, 2011 and 2020. His alleged victims include a married couple, engineer, estate executer and a deceased individual. It is alleged that Schwartz even made unauthorized and excessive trades while one of the victims was dying in the hospital. Our securities law team is appalled to hear that possibly two unauthorized transactions were made in this customer’s account less than an hour after he passed away.

Churning is a fraudulent activity in which the broker makes excessive trades in light of the customer’s investment objectives. Common signs of churning in investment accounts are high broker commissions and significant investor losses. While Mr. Schwartz’s customers allegedly lost at least $660,000, Schwartz is reported as having pocketed over $194,000 sales credits and commissions, with annualized turnover rates ranged from 19.9 to 54.7 and annualized cost-to-equity ratios between 87% and 120%. These percentages are above average for their proclaimed non-speculative investment objectives. In an alleged effort to conceal his purported nefarious activities, Schwartz allegedly traded on a riskless principal basis. Trading on a reckless principal basis does not explicitly report the commission costs on customer’s account statements. Our securities attorneys believe that if such measures to hide his activity is true, Schwartz most likely acted with intent to defraud, which fulfilling the churning legal requirement of “scienter”.

This current FINRA disciplinary proceeding is not the first time that Schwartz has been accused of fraudulent activity. In his 18 years in the securities industry, Schwartz accumulated 12 disclosures on his official CRD records, publicly available on Broker Check. Each of the nine customer disputes mentioned on Schwartz’s BrokerCheck reference at least one allegation pertaining to unsuitability, unauthorized trading, or churning. Our New York securities attorneys encourage investors to think twice before working with brokers that have that many negative disclosures mentioned on their records. Even before Schwartz was a registered representative with Aegis Capital Corp for three years in June 2013, he procured a seemingly shady record that should have raised many flags. It is a matter of grave concern that Schwartz may have continued to gain new employment after so many customers made some of the same allegations.

Three Men Indicted in $364 Million Ponzi Scheme Involving Consumer Debt

September 19, 2018 | Malecki Law Team

Three men are facings charges by the SEC and federal prosecutors over allegations of running a $364 million in one of the largest Ponzi Schemes found in the Washington D.C region. A federal grand jury indicted the three alleged perpetrators, Kevin Merrill of Maryland, Jay Ledford of Texas and Cameron Jezierski of Texas in a Maryland court. The charges leading to their arrest include wire fraud, identity theft, money laundering, and conspiracy, according to the U.S attorney’s office. They falsely represented themselves as financial professionals selling credit portfolios to unsuspecting investors. Meanwhile, most of the investor money was pocketed or used to pay existing investors. The alleged victims include individuals, family offices, and investment groups across the nation. Investment fraud attorneys see parallels between this case and the textbook example of a Ponzi Scheme.

Alleged Ponzi Schemers Kevin Merrill, Jay Ledford, and Cameron Jezierski allegedly ran a multi-million-dollar scheme to defraud investors using consumer debt portfolios, according to the indictment. Consumer debt portfolios consisted of outstanding debt owed to consumer lenders like banks and student loan lenders. It is alleged that starting in January 2013, the three men collected investor money through offering investments in consumer debt portfolios. The investing victims were allegedly promised profits from successful “flips” or collections from consumer payments. The indictment further alleges that the men shielded their fraudulent activity from investors through the creation of falsified documents and companies. The investors allegedly received collection reports, consumer debt portfolio overviews and sales agreements, bank wire transfer records and bank statements containing falsified information.

According to the indictment, most of the money was not invested but used to maintain their elaborate Ponzi Scheme, unbeknownst to the victims. A Ponzi Scheme is an investment fraud that solicits people to invest in non-existent investments. New investor money ends up being used to produce “returns” to existing investors to maintain the Ponzi Scheme and fund their lavish lifestyle. The Ponzi Schemer will distribute falsified documents containing inaccurate information about their nonexistent investments. The schemes will spread as investors bring more people on board based on their positive returns in the beginning. As more investors join, Ponzi Schemers, such as the three men receive more money to fund their lavish lifestyle. Notably, according to the indictment in the Baltimore case, $73 million of investor funds went to personal expenses that included high-end cars, expensive homes, and jewelry. Additionally, the accused allegedly spent the money gambling at casinos and other luxuries to sustain their lavish lifestyles.

The SEC Has Brought Charges Against Two Executives for Accounting Fraud in Nicholas Schorch’s flagship REIT Company

September 15, 2016 | Malecki Law Team

According to published materials, two years ago the SEC started investigating, American Realty Capital Properties Inc (ARCP) and its executives, for allegedly overstating financial results and deliberate concealment of financial mistakes, which rattled the REIT brokerage empire built by Nicholas Schorsch. After investigations, the SEC reported that it recently brought charges against Brian S. Block and Lisa P. McAlister, the former chief financial and chief accounting officers of American Realty Capital Properties Inc.

The FBI announced Block’s arrest at his home in Pennsylvania on charges of securities fraud and conspiracy. In June, McAlister reportedly pled guilty to four securities fraud and false filing counts. According to the charges brought by the SEC, they are alleged to have intentionally inflated a key metric to make sure that the REIT met analysts’ estimates for the first two quarters of 2014. As per AdvisorHub, Block’s attorney was quoted saying “[t]here is little precedent for the notion that criminal charges are appropriate when accountants make decisions involving these sorts of accounting principles [non-GAAP principles applicable only to REITs].”

After ARCP, with apparent market capitalization of $11.5 billion, publicly disclosed its intentional errors and result inflation in 2014, Schorsch controlled REITs and holding companies lost billions of dollars and ten broker dealers filed for Chapter 11 bankruptcy.

FINRA Files Complaint Against Broker Craig Dima for Unauthorized Trades in a Senior Citizen’s Securities Account

August 22, 2016 | Malecki Law Team

It was reported by Reuters on August 20, 2016 that the Financial Industry Regulatory Authority (FINRA) filed a complaint against a broker alleging that they broker engaged in unauthorized trading in the account of a senior aged investor.

According to the Reuters Article, the investor was a 72 years old retiree, and the broker, Craig Dima allegedly charged $376,000 in fees and commissions after making repeated unauthorized trades of the investor’s blue-chip Colgate-Palmolive Co. stock. The Reuters article further detailed that the inappropriate trading costed the client a further $127,000 in lost dividend payments, as well as a further $72,000 in losses when the broker sold the stock and then purchased it back later at a higher price. According to the Reuter’s article, the trading in the client’s account made up about 80% of Mr. Dima’s annual commissions.

Mr. Dima is currently employed and registered with the brokerage firm K.C. Ward Financial, out of Ronkonkoma, New York, and has been registered there since September 2009, according to his publicly available BrokerCheck report. Prior to working at K.C. Ward Financial, he was registered with American Capital Partners, LLC from November 2008 to December 2009, Andrew Garrett, Inc. from November 2004 to November 2008 and L.H. Ross & Company, Inc. from May 2003 to December 2004, according to Mr. Dima’s BrokerCheck records.

FINRA Announces $950,000 Fine to Prudential Annuities Distributors, Inc. for Supervisory Failures

July 20, 2016 | Malecki Law Team

The Financial Industry Regulatory Authority (FINRA) announced on July 19, 2016 in a News Release that it had fined Prudential Annuities Distributors, Inc. $950,000 for “failing to detect and prevent a scheme that resulted in the theft of approximately $1.3 million from an 89-year-old customer’s variable annuity account. Prudential Annuities Distributors acts as a principal underwriter and distributing broker-dealer for life and annuity products issued by its affiliates.

According to the News Release, a former registered Sales Assistant named Travis Wetzel, who worked at LPL Financial, stole money from the elderly customer’s account by submitting to Prudential Annuities Distributors 14 forged annuity withdrawal requests. The News Release detailed that each month, from July 2010 to September 2012, Mr. Wetzel submitted 4 to 5 withdrawal requests totaling approximately $50,000. The News Alert detailed that all withdrawn funds were deposited into an account in Mr. Wetzel’s wife’s maiden name that was controlled by Mr. Wetzel.

Prudential Annuities Distributors consented to the fine by submitting a Letter of Acceptance, Waiver and Consent No. 2012034423502 (AWC). According to the AWC, each transaction submitted by Mr. Wetzel triggered an alert, or a “red flag,” putting Prudential Annuities Distributors on notice that his requests may be fraudulent. Each alert required that a person manually review and confirm each transaction, and for each transaction, personnel determined the activity appeared legitimate, according to the AWC. The AWC also noted that for 44 transfers, Prudential Annuities Distributors also determined that the withdrawn funds were paid to the customer, when they were not actually sent to the customer.

BROKER REPORT: Financial Advisor Brandon Gioffre Barred from Conducting Securities Business

June 29, 2016 | Malecki Law Team

The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Brandon Gioffre. Mr. Gioffre was employed and registered from July 2014 to August 2015 with Constellation Wealth Advisors LLC, a New York broker-dealer, according to his publicly available BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA). According to BrokerCheck records, Mr. Gioffre voluntarily resigned from Constellation amid allegations that he was involved in “soliciting a private placement” to three individuals.

Per his BrokerCheck report, prior to his employment and subsequent resignation from Constellation, Mr. Gioffre was employed by Morgan Stanley Smith Barney from June 2009 to June 2014 and was discharged from this firm amid allegations of “fee reversals in [his] personal Morgan Stanley account, continuing to maintain a pre-existing outside investment that never received written approval from the firm, and fund transfers between [his] personal Morgan Stanley account and the accounts of family members.”

Subsequent to his resignation, Mr. Gioffre was barred from association with any FINRA member broker-dealer on June 22, 2016 by FINRA, after submitting a Letter of Acceptance, Waiver and Consent No. 2015046448701 (AWC). According to the AWC, Mr. Gioffre violated FINRA Rule 3040 by recommending to several people an investment in a private placement that was not offered through his firm. The AWC further stated that Mr. Gioffre “created the false impression that [the firm] sanctioned the private placement” by using the firm’s offices for meetings and his business email account to communicate with the investors.

BROKER REPORT: Joseph A. Miles Is the Subject of Third Customer Complaint

September 4, 2015 | Malecki Law Team

The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Joseph A. Miles. Mr. Miles is believed to be currently employed and registered with St. Bernard Financial Services, Inc. based in Russellville, Arkansas. He was also previously registered with Clearing Services of America, Inc., American Capital Equities, Inc., Dominick & Dominick, Inc. and David Lerner Associates, Inc., according to industry records.

According to his BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA), Mr. Miles has been the subject of three recent customer complaints, including one complaint seeking $169,865.70 alleging that Mr. Miles sold bonds that declined in value, with damages granted of $100,000. The second most recent customer complaint alleged securities fraud, breach of fiduciary duty, common law fraud, and breach of contract related to South African Bonds which was settled for $75,000, according to FINRA records. The third complaint involved allegations of fraud, breach of contract and negligence and was settled after the death of the customer, per BrokerCheck records.

If you or a family member lost money that was invested with Joseph A. Miles, you are encouraged to contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

Top Broker Thomas Buck: First Fired, Now Barred

July 29, 2015 | Malecki Law Team

According to a Letter of Acceptance Waiver and Consent filed with the Financial Industry Regulatory Authority (“FINRA”), Thomas Buck has been barred by FINRA from working with any FINRA member firms. Mr. Buck was a former top broker at Bank of America Merrill Lynch and was at the time a broker at RBC Wealth Management.

Mr. Buck was a registered broker at Merrill Lynch’s Carmel, Indiana office, which was part of the firm’s Indiana complex. While at Merrill Lynch, Mr. Buck, who reportedly oversaw $1.3 billion in assets, was accused of failing to discuss pricing alternatives with customers, among other allegations. In addition, Mr. Buck was accused of unauthorized trading and using discretion in customer accounts improperly and in violation of FINRA Rules.

Buck was reportedly fired from Merrill Lynch in March. Just four months after, he was reported as being barred from working at any FINRA-associated broker-dealer. According to FINRA, Mr. Buck used commission-based accounts even though fee-based accounts would have been less expensive for clients. In some cases, clients were allegedly charged significantly more in commissions by virtue of the fact that they were not placed in fee-based accounts.

Jenice Malecki Appears on NBC’s TODAY SHOW on March 14, 2013

March 13, 2013 | Malecki Law Team

Jenice Malecki appeared on NBC’s Today Show tomorrow morning, March 14, 2013, to discuss the injunctive action filed by Spanx against Yummie Tummie. The video of Ms. Malecki is can be found here.

Yummie Tummie holds three design patents for its camisole products and at the end of 2012 informed Spanx that it was infringing upon those patent. Correspondence and negotiations ensued, resulting in Spanx filing an injunctive action in its home court in Georgia to preemptively stop Yummie Tummie from enforcing its patents. Yummie Tummie brought a prior infringement action against Maidenform in the United Stated Federal Court for the Southern District of New York, which case has been settled.

The issue will likely surround whether the patents are valid or invalid and whether the camisole passes the obviousness test. There are two fundamental tests: (1) the invention must be novel, not just a variation, and (2) it must be unobvious, something that someone with ordinary skills, would not have imagined. This will surely be a very fact intensive battle and this preemptive strike by Spanx is an aggressive move by a larger player exerting their financial muscles in order to attempt to control the course of the litigation against Yummie Tummie.

Give My Receipts to Broadway: NY Musical Producer Accused of Fraud and Breach and Contract

November 12, 2012 | Nick Curley

Despite theater’s common expression that “the show must go on”, a large-scale musical planned to hit Broadway this month has been postponed following accusations of fraud and breach of contract levied against its stockbroker. For further definitions of fraud and “BoC”, visit the Investors page of our firm’s website.

Long Island-based broker Mark Hotton, 46, of West Islip, NY, is alleged to have deceived producers of Rebecca: The Musical via two counts of wire fraud – for which he faces up to 20 years in prison on each count – and the supposed fabrication of four fake investors in the show, who Hotton claimed were prepared to invest $4.5 million. The show’s producers have since filed suit for a sum exceeding $100 million against Hotton and his wife and business partner, Sherri Hotton.

Hotton’s story itself is said to be one of grandstanding theatrics in its own right. When producers attempted to secure funds from allegedly falsified investor “Paul Abrams”, Hotton is said to have told them that the man had recently died on an African safari after contracting malaria. Hotton also created false e-mail accounts and United Kingdom based mailing addresses for his invented investors, even corresponding with Rebecca‘s producers under these false identities.