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Archive for April, 2015

SEC Halts Fraudulent Farm Loan Scheme by Indianapolis Investment Adviser

The Securities and Exchange Commission today announced charges against an Indianapolis investment adviser, its president, two associates and several affiliated companies for engaging in two fraudulent farm loan offerings, in which they made ponzi scheme payments to investors in other offerings and paid themselves hundreds of thousands of dollars in undisclosed fees. The SEC obtained a temporary restraining order and emergency asset freeze to halt the scheme.

According to the SEC’s complaint, filed in the U.S. District Court for the Southern District of Indiana, in 2013 and 2014, Veros Partners, Inc., its president, Matthew D. Haab, and two associates, attorney Jeffrey B. Risinger and Tobin J. Senefeld, fraudulently raised at least $15 million from at least 80 investors, most of whom were Veros advisory clients. The investors were informed that their funds would be used to make short-term operating loans to farmers, but instead, significant portions of the loans were to cover the farmers’ unpaid debt on loans from prior offerings. According to the SEC’s complaint, Haab, Risinger and Senefeld used money from the two offerings to pay millions of dollars to investors in prior farm loan offerings and to pay themselves over $800,000 in undisclosed “success” and “interest rate spread” fees.

In addition to Veros, Haab, Risinger, and Senefeld, the SEC charged Veros Farm Loan Holding LLC and FarmGrowCap LLC, the issuers of the offerings, and PinCap LLC. The SEC also charged registered broker-dealer Pin Financial LLC as a relief defendant.

The Honorable Jane Magnus-Stinson of the U.S. District Court for the Southern District of Indiana issued an asset freeze order against the defendants as well as a temporary restraining order prohibiting them from soliciting, accepting or depositing any monies from any actual or prospective investors, and in the case of Veros, any investors in private securities offerings. Judge Magnus-Stinson also ordered that a receiver be appointed. A preliminary injunction hearing has been scheduled for May 1, 2015.

The SEC’s complaint charges the defendants with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and also charges Veros and Haab with violating Sections 206(1), 206(2) of the Investment Advisers Act, and Veros with violating Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-2. The SEC’s complaint seeks permanent injunctions and disgorgement against all defendants and a financial penalty. The SEC’s complaint names Pin Financial for the purposes of recovering proceeds it received from the fraud.

FINRA Files Cease and Desist Order Against Avenir Financial Group, CEO Michael Clements, and Registered Representative Karim Ibrahim for Fraud Against Elderly Investors

Registered Representative Cesar Rodriguez Barred for Fraud and Improper Use of Customer Funds

WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that Avenir Financial Group, its CEO Michael Clements, and registered representative Karim Ibrahim aka Chris Allen consented to an order halting further fraudulent sales of equity interests in the firm and promissory notes pending a hearing on fraud charges relating to the same offerings. The sales, which occurred from October 2013 to the present, were often to elderly customers of the firm, and the respondents’ capital-raising practices were continuing. FINRA obtained the order based on its concern regarding ongoing customer harm and depletion of investor assets prior to the completion of a formal disciplinary proceeding against the firm and these individuals. FINRA also permanently barred registered representative Cesar Rodriguez from the securities industry for fraud and for improperly using $77,000 of investor funds for personal expenses in a related offering.

Avenir is a New York, NY-based full-service broker-dealer. During its three-year operation as a FINRA member firm, Avenir and its branch offices have raised over $730,000 in 16 issuances of equity or promissory notes. Most of these sales of equity and promissory notes were to elderly customers of the firm.

In its related underlying complaint, FINRA charges that Avenir, Clements and Ibrahim committed fraud in the sale of equity or promissory notes of the firm, and that Clements aided and abetted the fraud. FINRA specifically alleges that in November 2013, Avenir and Ibrahim defrauded a 92-year-old investor by failing to disclose that Avenir was in dire financial condition at the time they sold a 5 percent equity interest in the firm to him for $250,000. FINRA alleges Ibrahim was aware of the firm’s financial difficulties because his unfunded margin trading on behalf of another customer led to a $196,000 margin call and a request by Clements for all Avenir representatives to raise money. FINRA further charges that Clements aided and abetted that fraud by instructing Ibrahim regarding the sale price and also on how he should characterize the offering. In the complaint, FINRA charges that in connection with that same sale, Avenir and Clements defrauded the same elderly investor by providing him with a misleading purchase agreement offering a 5 percent interest in the firm for $250,000. FINRA alleges that the document was misleading because it omitted material information that a few weeks earlier, Avenir offered ownership to other investors at materially different terms; other investors paid significantly lower prices for their ownership interest and there was no basis for the changes in price. Avenir continues to face financial challenges and continues to attempt to raise revenue through equity offerings.

In addition, FINRA alleges that Avenir, through Rodriguez, defrauded six investors, many of whom are elderly, in an Avenir branch office Rodriguez owned. In its complaint, FINRA charges that Avenir, through Rodriguez, misrepresented that $173,800 in proceeds from purchases of equity or promissory notes would be used for general operating expenses and instead, Rodriguez improperly used $77,000 of the proceeds for personal expenses, including jewelry, shoes and toys. FINRA alleges that Clements aided and abetted this fraud because he advised Rodriguez that personal use of investor funds was acceptable.

In settling this matter, Rodriguez neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

Under FINRA rules, the individuals and firms named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible sanctions include a fine, an order to pay restitution, censure, suspension or bar from the securities industry. The issuance of a disciplinary complaint represents the initiation of a formal proceeding by FINRA, 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.

SEC charges New York financial advisor with stealing $20 million from customers

The Securities and Exchange Commission today announced fraud charges against a New York City-based financial advisor accused of stealing at least $20 million from customers to fund his own brokerage accounts and then squandering the bulk of the money in highly unprofitable options trading.

The SEC alleges that Michael J. Oppenheim abused his position as a private client advisor at a global bank and persuaded some customers to withdraw millions of dollars out of their accounts by promising he would purchase safe and secure municipal bonds on their behalf. Instead, Oppenheim bought himself cashier’s checks and deposited them into his own brokerage account or his wife’s account that he controlled. Almost immediately after each theft and deposit, Oppenheim allegedly embarked on sizeable trading of stocks and options including Tesla, Apple, Google, and Netflix. Oppenheim typically lost the entire amount of each deposit, and his brokerage accounts currently show minimal cash balances. On occasions when his accounts did have positive cash balances, he allegedly wired money to bank accounts in his or his wife’s name. At least one outgoing wire was used to pay off a portion of his mortgage.

“We allege that Oppenheim promised his customers that he would invest their money in safe and secure investments, but he seized their funds and aggressively played the stock market in his own accounts,” said Amelia A. Cottrell, Associate Director of the SEC’s New York Regional Office.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Oppenheim.

According to the SEC’s complaint filed in federal court in Manhattan, Oppenheim took illicit steps to conceal his fraud. For instance, Oppenheim created false account statements when a customer asked for a statement reflecting his municipal bond holdings. Oppenheim simply pasted the customer’s name onto an account statement reflecting the holdings of another customer, and provided the fabricated statement to convince the customer that he had purchased the municipal bonds for his account as promised. In another instance, Oppenheim transferred money from one customer to another to replenish the amounts he had stolen earlier.

The SEC’s complaint charges Oppenheim, who lives in Livingston, N.J., with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC’s complaint seeks disgorgement of ill-gotten gains plus prejudgment interest and financial penalties as well as permanent injunctions barring future violations. The SEC’s complaint against Oppenheim names his wife Alexandra Oppenheim as a relief defendant for the purpose of recovering any customer funds transferred to her.

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