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April 16, 2014 at 09:48 AM
Life Partners Holdings (LPHI) said Wednesday that it has filed suit in Illinois against optionsXpress, the company’s ex-chief financial officer, and one of its top customers for issuing and selling counterfeit shares of Life Partners Holdings’ stock.
The Chicago-based options brokerage firm is now owned by Charles Schwab (SCHW), which says it “did not own optionsXpress at the time of the trading at issue and was not named in the complaint.”
Life Partners based its case on last year’s SEC proceedings, which concluded that optionsXpress, then-CFO Thomas E. Stern and client Jonathan I. Feldman “committed securities fraud by engaging in the sales of hundreds of millions of dollars in counterfeit-phantom stock passed off as the genuine stock of 25 public companies, including almost $5.5 million of counterfeit-phantom stock of Life Partners Holdings Inc.,” the life-settlements group says in a press release.
The SEC’s case involved five customers, including Feldman, who used this strategy, known as naked short selling, from late 2008 to early 2010 on about 25 stocks, including Sears (SHLD) and AIG (AIG), according to regulators.
In 2009, for instance, they bought about $5.7 billion of securities and sold about $4 billion of options. Feldman’s trades involved some $2.9 billion of purchases and $1.7 billion of options; they took place between July 2009 and March 2010.
The judge in the 2013 case ordered optionsXpress to pay some $3.6 million and Feldman to pay nearly $4.7 million. Stern, who was fired in 2012, was asked to pay $75,000; he was banned from the securities industry.
