New York Securities Fraud Lawyers Blog

Malecki Law Announces Investigation Into Credit Suisse’s TVIX Exchange Traded Notes

March 23, 2012 | Nick Curley

Malecki Law is currently investigating the potential for recovery of losses from VelocityShares Daily 2x VIX Short-Term ETNb (TVIX), an exchange-traded note issued by Credit Suisse. The product is typically utilized to hedge against market decline, or as a presumptive bet on the decline of stocks. It appear that Credit Suisse ceased creation of new units in February, 2012, until March 22nd, when the company announced a reopened limited issuance of the product. Prior to this reopening, it seems demand for the product greatly outweighed supply. Many market observers predicted that this reopening would cause the value of the notes to plummet, causing TVIX’s premium to fade. It looks as though shares of TVIX had lost as much as 50% of their value in less than two days following Suisse’s announced reopening.

While Credit Suisse cited internal limits to the size of the product as the reason for its initial closure, many have speculated that the action of short sellers also played a role, as well as something that may have changed within the company as to how Suisse markets and packages the product. “Short sellers may be accelerating bets against TVIX today on speculation Credit Suisse will permit issuance of more shares,” said WallachBeth Capital’s Chris Hempstead.

It is the right of any and all investors who believe they may have suffered losses as a result of recommendations of their financial advisor to contact our offices to explore their legal rights and options. If you or a family member invested in TVIX exchange traded notes issued by Credit Suisse, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

Malecki Law Announces an Amendment to the Civil Complaint with FINRA Against MetLife Securities, Inc. in Connection with Alleged Ponzi Schemer Robert H. Van Zandt

March 7, 2012 | Malecki Law Team

Malecki Law announces the filing of an Amended Statement of Claim against MetLife Securities in connection with the real estate investments solicited by Robert H. Van Zandt of The Van Zandt Agency in the Bronx, NY as part of an alleged Ponzi scheme currently under investigation by the New York State Attorney General’s Office.

This past December, Malecki Law announced the filing of a civil arbitration complaint with the Financial Industry Regulatory Authority against MetLife Securities for more than $4 million on behalf of twenty-four investors. The attorneys at Malecki Law continue to take calls and anticipate either adding future victims to the existing claim or commencing a second action, if necessary.

In the following months, many more investors contacted the attorneys at Malecki Law requesting to be part of that action. So, on March 5, 2012, Malecki Law amended their complaint with FINRA to add an additional nineteen investors to the action. In total, Malecki Law’s forty-three clients have suffered losses of over $9.2 million as a result of their investments through Mr. Van Zandt and the Van Zandt Agency.

Investor Complains About Behringer Harvard REIT

February 9, 2012 | Malecki Law Team

We recently posted about the Behringer Harvard family of REITs and the devastation that these funds have had on investors’ portfolios. Some investors have now begun to seek answers. Investment News reports that a 70 year old woman who has seen her share in Behringer Harvard Short-Term Opportunity Fund drop 96% has recently filed a letter with the Financial Industry Regulatory Authority (FINRA) to complain about her investment.

The shares of BH Short-Term Opportunity Fund have dropped to $.40 from $6.48 just one year ago, and from the $10 per share they were offered at just six years ago. Since the BH Short-Term Opportunity Fund had $130 million in total assets, it is clear that this investor is not alone. Many firms, such as Capital Financial Services, Inc. sold these products to senior citizens.

Since REITs can deliver regular income of up to 7-8% a year, they are attractive to seniors who live off the income generated by their investments. Since these products offer high commission, they are very attractive to the brokers who sell these products. However, all too often, the risks involved with investing in REITs are hidden from investors by their brokers, and these same seniors can see their entire life’s savings disappear in the blink of an eye. Downplaying and failing to fully disclose the risks of an investment to a client is illegal, and investors who have suffered losses as a result may have the right to recover their entire loss.

Trouble with Behringer Harvard REIT Family

January 18, 2012 | Malecki Law Team

Recently in the news have been stories about the devastation that the Behringer Harvard family of Real Estate Investments Trusts (REITs) has had on investors’ portfolios. It was reported by Investment News that the value of the popular Behringer Harvard Opportunity REIT I is down 46% from its value this time a year ago, with prices down to just over $4 per share. The value of the Behringer Harvard REIT I has also seen substantial declines as well.

Unfortunately for many investors, a quick recovery does not appear to be in store. According to Investment News, Mr. Robert Aisner (Behringer Harvard’s Chief Executive) “said in an interview … that since the REIT is shedding assets, its valuation will go down in the long run.” That is bad news for investors.

Investors who bought into this fund , believing it to be a safe investment, are now seeing substantial portions of their savings disappear. Too often, investors in REITs do not fully understand the risks of investing in these illiquid and oftentimes speculative products. These products often require investors to “lock in” their money for a set time period and are difficult if not impossible to sell in the interim, even amid sharp declines in value. For more information on the risks of REITs and other investments, click here.

FINRA Files Wells Fargo for Unsuitable Sales to Elderly Customers

December 23, 2011 | Malecki Law Team

In a follow up to Malecki Law’s recent announcement of our investigation into reverse convertible securities comes news that the Financial Industry Regulatory Authority (FINRA) has fined Wells Fargo Investments, LLC $2 million for the selling of unsuitable reverse convertibles securities, as well as failing to grant sales charge discounts to certain customers on Unit Investment Trust (UIT) transactions. A UIT can be defined as ownership of a fixed portfolio of securities within a finite timespan. FINRA’s press release regarding the matter defines reverse convertibles as “interest-bearing notes in which repayment of principal is tied to the performance of an underlying asset, such as a stock or basket of stocks.” Customers of such reverse convertibles risk sustaining losses if the value of the underlying asset falls to a certain level at certain points of maturity during the contracted term.

A separate complaint was filed by FINRA against Alfred Chi Chen, the former Wells Fargo registered representative who approved and sold the reverse convertibles. Chen recommended hundreds of unsuitable investments to twenty-one clients, most of whom were elderly investment novices with low capacities for risk. Fifteen of those twenty-one clients were over the age of eighty. Chen also made unauthorized trades in several accounts, including those of deceased customers.

FINRA specified that Wells Fargo failed between January 2006 and July 2008 to give qualified customers breakpoint and rollover/exchange discounts to which they were entitled upon purchasing UITs. This has been attributed to insufficient internal monitoring of sales and discount eligibility.

In Light of MF Global: Knowing the Risks of European Investment

December 20, 2011 | Malecki Law Team

It has been difficult to not hear about the recent events surrounding MF Global Holdings Ltd and former Senator and New Jersey Governor, John Corzine. However, many investors do not really understand what happened or why. A recent article in Forbes Online titled “MF Global: Were the Risks Clear?” helps to break down just how these events transpired. The article details how overexposure to European sovereign debt (government bonds) leveraged by using borrowed money (called “margin”) coupled with declines in the value of those bonds caused the downfall of the fund.

The almost overnight collapse of such a prominent and public investment fund as MF Global has brought many issues to light, and the Forbes article characterizes this “as the latest reminder to investors that it’s important – and sometimes very difficult – to understand the entire spectrum of risk they’re exposed to.” These events also raise many questions that should be asked by investors, such as “Do I really understand how my advisor is managing my savings?” and “Have the risks in my portfolio been adequately explained to me?”.

Many investors in MF Global have said that they did not understand what their money was being invested into, but rather trusted that the firm would do the right thing by them. One investor cited by the article said on his blog that “I am supposed to know the difference between an ethical operator and one that is not. The truth is that it often is very difficult to tell them apart.” This has unfortunately come to be a fairly common sentiment by many individual investors, in reference to their personal broker and the funds they invested in.

Malecki Law Announces Filing of a Civil Complaint with FINRA Against MetLife Securities, Inc. in Connection with Alleged Ponzi Schemer Robert H. Van Zandt

December 6, 2011 | Jenice L. Malecki, Esq.

Malecki Law announces the filing of a civil arbitration complaint in excess of $4 million, plus punitive damages, against MetLife Securities, Inc. The case is being filed with the Financial Industry Regulatory Authority (“FINRA”) today for alleged improper supervision and selling away, relating to an alleged Ponzi scheme that devastated a Bronx community. The complaint alleges that the firm failed to properly supervise and maintain the compliance of one of their registered representatives, Mr. Robert H. Van Zandt, in violation of federal and state securities laws, as well as financial industry rules and regulations. Robert H. Van Zandt is apparently already under investigation by the New York State Attorney General’s Office. “I believe there are a lot of victims out there who don’t know what is going on, nor their rights under the rules and regulations of the securities industry,” securities fraud attorney Jenice Malecki indicates.

In November of this year FINRA and the U.S. Securities and Exchange Commission jointly released Regulatory Notice 11-54 stressing the importance of supervision over registered representatives. Shortly before the release of Regulatory Notice 11-54, FINRA filed a regulatory action against Merrill Lynch and fined the firm $1 million for failing to properly supervise a registered representative and catch a Ponzi scheme that he was running out of a San Antonio, Texas branch office that victimized clients and non-clients of Merrill Lynch, all to which Merrill Lynch was responsible for its failure to supervise.

The complaint filed by Malecki Law relates to the alleged conduct of Robert H. Van Zandt of the Van Zandt Agency, who is believed to have sold unregistered securities in the form of promissory notes that were represented to prospective investors as part of a secured real estate investment, which appears improperly set up and not secured at all. It is alleged that these notes were part of yet another “Ponzi” scheme in what Ms. Malecki opines to be “an era filled with ponzi schemes for which the industry should closely monitor to avoid harm to unwitting victims,” this alleged ponzi scheme one run through a series of shell companies including Burke and Grace Avenue Corp.

Watching the Watchers: Charting the SEC’s Increased Pursuit of Negligent Execs

November 4, 2011 | Nick Curley

The Securities and Exchange Commission (SEC) has in recent weeks seemingly broadened its pursuit of wrongdoers by filing cases against defendants on the charge of negligence alone. Negligence can be defined as a situation in which one should have known that information given to investors was inadequate. In recent years, negligence fines have been what accused bigwigs would accept and pay to avoid more severe charges of fraud, which carry heavy costs and the potential to be banned from the finance industry. Such admissions were usually made out of court and out the public eye. Readers looking to learn more about the role of negligence in securities law proceedings can visit our firm’s informational Practice Areas and Investors sections.

As of today, these ramped-up regulations have been sparsely utilized, though the Wall Street Journal speculates that more actions against negligence are forthcoming. It’s the SEC’s recently united “Structured and New-Products Enforcement” unit that’s claiming to be newly insistent about information being more fairly provided to investors.

Criticism of the SEC’s post-2008 methods has come in part because they have seemingly failed to catch many financial criminals in the act. Detractors believe that in many cases, outright fraud or recklessness is the issue: branding such failures as negligence would then only diminish or downplay their severity. The penalties for fraud are far more severe, but are in turn more challenging to obtain, as they require proof of intentional malfeasance. The charge of “Recklessness” falls between fraud and negligence in severity, and can be defined as one turning a blind eye to potentially harmful activity.

Malecki Law Announces Investigation into Leveraged and Inverse ETFs

November 2, 2011 | Malecki Law Team

Malecki Law is currently investigating Financial Industry Regulatory Authority (FINRA) brokerage firms who have advised customers to purchase leveraged and inverse ETFs (Exchange Traded Funds), including those issued by Direxion, ProFunds (ProShares) and Rydex. Some of these ETFs trade under the symbols FAS, FAZ, UPRO, SDOW, SPXU, UDOW, RSU and RSU, among many others.

From 2007 through 2010, the market for inverse and leveraged ETFs such as these has grown from $1 billion to $30 billion, in large part due to these products being solicited in the accounts of normal, unsophisticated investors.

These products are highly complex, using various trading strategies in an attempt to deliver their promised returns, and are oftentimes not suitable for the investment portfolio of a conservative or retired investor.

Malecki Law Announces Investigation of Citigroup’s FALCON and ASTA-MAT Hedge Funds

November 2, 2011 | Nick Curley

Malecki Law takes a proactive and informed approach to the financial news of today: actively engaging in fact-finding analysis on prospective cases from around the world. Our thorough knowledge of securities law’s history and fine points makes us ideal consultants for investors who have suffered losses due to misadvice from their broker or other financial counsel. Information on a selection of funds and companies currently under investigation by Malecki Law can be found below. Our pursuit of excellence is constant, but our opportunities to make lasting positive change to the securities industry begin and end with determined clients who seek justice.

Malecki Law is currently investigating the potential for recovery of losses from Citigroup’s FALCON and ASTA-MAT hedge funds, as sold by its broker-dealer Smith Barney in the years spanning from 2005 to 2008. It is alleged that Citigroup presented the funds as affordable options, with fair-to-little risk and low volatility.

If the group failed to disclose crucial information about dangerous aspects of the funds and potential for severe losses, a claim may be warranted. Both funds were increasingly and excessively invested in real estate, leading to both funds reporting upward of 80% losses in 2008. Investors’ legal claims against Citigroup have included but are not limited to Fraud, Failure to Supervise, Unsuitability, Misrepresentations & Omissions, Breach of Contract, and Breach of Fiduciary Duty.