Senior-aged investors continue to dominate securities related news coming out of the Financial Industry Regulatory Authority (FINRA). Though Avenir Financial Group, a New York-based broker-dealer, has only been a FINRA member for three years, the regulator has alleged substantial fraud claims against the firm, the firm’s Chief Executive Officer and Chief Compliance Officer Michael Clemens and several registered representatives.
In a New Release dated April 27, 2015, FINRA alleged that Avenir and registered representative Karim Ibrahim (a/k/a Chris Allen) defrauded a 92 year old customer of the firm by selling equity interests in the firm based on misleading and fraudulent terms. FINRA alleged that Mr. Ibrahim was aware that the firm was financially struggling, yet offered 5% of the company for $250,000, a valuation that was materially misleading because other investors had previously been offered lower prices and there was no basis for the change in the prices. FINRA alleged that Mr. Clemens aided and abetted the fraud by instructing Mr. Ibrahim regarding the proposed sale to the senior-aged customer.
In the related FINRA Complaint, FINRA detailed that Avenir “inexplicably” increased the equity share offerings. For example, the Complaint stated that a one percent share increased from an initial offer of $2,600 to a third offering costing $50,000. During this time, Avenir was allegedly suspended from operating a securities business when its net capital decreased below regulatory thresholds, and the firm faced an approximate $200,000 margin call that would have closed the firm had it not been for the investor who purchased the third offering.
FINRA alleged in the Complaint that Avenir, Mr. Clemens and Mr. Ibrahim violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b), as well as FINRA Rules 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices) and 2010 (Standards of Commercial Honor and Principles of Trade). Rule 10b-5 is the main tool that regulators use to prosecute securities fraud.
In a separate matter also involving defrauded investors at Avenir, FINRA detailed that broker Cesar Rodriguez consented to being barred from association with any FINRA member firm for fraudulent investments. According to the Letter of Acceptance, Waiver and Consent No. 2015044960502 (AWC), Mr. Rodriguez sold promissory notes and equity self-offerings, telling investors he would use the proceeds raised for operations at an Avenir branch office he ran in Illinois. Instead, the AWC described that he used the proceeds for personal needs. In the News Release, FINRA stated that many of the defrauded investors were senior-aged.
Malecki Law has previously investigated and successfully handled securities arbitrations concerning senior-aged and other investors who have been defrauded by brokers and broker-dealers. If you believe you have suffered losses as a result of questionable actions taken in your securities account, please contact us immediately for a confidential consultation.