Among recent enforcement actions, the SEC charged a Swiss-based company and several individuals connected with it for doing investors out of millions.
Meanwhile, anti-money laundering played a big role in FINRA actions, as the agency went after COR Clearing for a broad range of regulatory failures, including AML, and fined and censured Argentus Securities over AML failures as well as others.
Malom Group ‘Made A Lot Of Money’ for Its Perpetrators, Not Investors
A Swiss-based company whose name was an acronym for “Make A Lot Of Money” was certainly doing that for itself, but not for its investors, as the SEC charged it and several individuals connected with bilking investors out of $11 million.
According to the SEC, Malom Group AG and several individuals conducted a pair of advance fee schemes guaranteeing astronomical returns to investors in purported prime bank transactions and overseas debt instruments, from Las Vegas and Zurich. Between lies and forged documents, Malom and six individuals parted investors from substantial sums through the scams.
According to the agency, Malom charged fees to investors for nonexistent services, and the individuals running the scam kept the money for personal use. Then they lied to investors who asked about the progress of the transactions, and came up with excuses about the lack of investment returns or refunds.
The six individuals charged along with Malom Group were also charged by the U.S. Department of Justice in a parallel criminal action. They are:
Anthony Brandel of Las Vegas, who served as Malom Group’s main point of contact with U.S. investors. He “explained” the investments, collected the money and soothed worried investors. His Las Vegas company M.Y. Consultants also is charged in the SEC’s complaint.
Sean Finn of Whitefish, Mont., who recruited U.S. investors through his Wyoming-based company M. Dwyer LLC, which also is charged in the SEC’s complaint.
Hans-Jürg Lips of Switzerland, who has been described as the Malom Group’s president or chairman of the board of directors.
Joseph Micelli of Las Vegas, who has been described as Malom Group’s compliance officer.
Martin Schläpfer of Switzerland, who has been described as Malom Group’s chief executive officer, managing director and legal counsel.
James Warras of Waterford, Wis., who has been described as Malom Group’s executive vice president.
The agency said that the schemes ran from 2009 to 2011, but the perpetrators continued to stall investors into 2013. None of the transactions in securities offered or sold were registered with the SEC or eligible for an exemption.
In the first scheme, they offered “joint venture” agreements that supposedly allowed investors to “use” Malom Group’s financial resources in exchange for an upfront fee. Investors had to propose investment transactions for Malom Group to enter into with third parties in order to generate returns for the company and the investor. Malom Group provided investors with forged bank statements and “proof of funds” letters to make investors believe the money was there to carry out those transactions.
Before investors paid the upfront fees, the Malom Group executives and promoters usually knew at least the basic details of the proposed trading programs, in some cases actually providing the trading program for investors to propose. But once they got their hands on the fees, Malom Group proceeded to reject every proposed transaction, while keeping the fees to keep the scheme going and to enrich themselves.
The second scheme promised investors that Malom Group would generate funding by creating structured notes that would be listed on “Western European” exchanges. Investors were hit up for “underwriting fees” and also had to make personal and corporate guarantees of repayment, after which Malom Group reneged on the guarantees of repayment and failed to issue any structured notes. In this instance, too, the perpetrators kept the money for themselves.
The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.
FINRA Fines Deutsche Bank Securities for Deficiencies in Lending Program
FINRA fined Deutsche Bank Securities, Inc. (DBSI) $6.5 million and censured the firm for “serious” financial and operational deficiencies primarily related to its enhanced lending program. The violations, which were originally identified during a 2009 examination, included lack of transparency in the firm’s financial records and inaccurate calculations resulting in overstated capitalization and inadequate customer reserves.