Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > Federal Regulation > FINRA

Las Vegas Firm Busted in Phony LGBT Resort Scam: Enforcement

Your article was successfully shared with the contacts you provided.

Antonio Katz, a defendant in ongoing SEC litigation, pled guilty to criminal charges filed by the U.S. Attorney for the District of Massachusetts. Katz was charged with one count of conspiracy and one count of securities fraud in connection with a pump-and-dump scheme that defrauded investors in Greenway Technology, a Las Vegas based company purporting to operate resorts catering to gay and lesbian travelers.

The court accepted Katz’s plea and his sentencing currently is scheduled to occur on February 16, 2018.

The SEC previously charged Katz and Jehu Hand on December 10, 2015.

According to the SEC’s complaint, the defendants and their co-schemers secretly planned and orchestrated the sale of Greenway stock to the public without proper securities registration statements and at prices artificially inflated by news releases, promotional materials, or blast e-mails containing false, exaggerated or misleading information, and by engaging in undisclosed coordinated trading of the stock.

“These efforts were designed to generate the appearance of demand for the stock and to increase its price even though Greenway had no operations or assets at the time,” the SEC says.

Between August 2012 and January 2013, after the stock price had been pumped, the participants in the scheme sold more than 12 million net shares of Greenway stock, causing losses to the investing public of more than $850,000.

The SEC’s litigation against Katz and Hand continues. The SEC’s complaint seeks disgorgement of ill-gotten gains from the scheme plus interest and penalties as well as penny stock bars and permanent injunctions against further violations of the securities laws.

New Jersey Man Pleads Guilty to Federal Charges in Investment Scam

The Honorable William J. Martini of the U.S. District Court for the District of New Jersey entered a judgment against defendant James R. Trolice that imposed permanent injunctions and an officer and director bar.

The SEC’s complaint alleged that Trolice and Lee P. Vaccaro pocketed the approximately $6 million they raised from more than 100 investors for limited liability companies they owned and controlled that purportedly held warrants to purchase the common stock of a technology startup company.

The complaint further alleged that Trolice lured investors by showcasing his apparent wealth and hosting elaborate investor parties at his multi-million-dollar home. He also touted his purported track record of bringing startup companies public and obtaining high returns for investors. Meanwhile, Trolice allegedly used investor funds to pay his mortgage along with other bills for a credit card, car lease, college tuition and landscaping.

On April 4, 2017, Trolice pled guilty to federal criminal charges for securities fraud and money laundering in a parallel criminal action before the District Court for the District of New Jersey in United States v. Trolice. Sentencing is scheduled for July 20, 2017.

Nationwide Fined $65K for Email Malfunction

Nationwide Fund Distributors LLC and Nationwide Investment Services Corporation were censured and jointly and severally fined $65,000 by FINRA for failing to properly reload two of their email servers.

Without admitting or denying the findings, the firms consented to the sanctions and to the entry of findings that two out of the firms’ 87 email servers were not properly reloaded with an email retention and supervision program after a standard server refresh.

According to FINRA, the system was not reloaded on the two servers due to human error.

Nationwide Investment Services Corporation, who maintained and administered the system, first discovered the issue as part of an internal compliance review of emails. Upon discovery, the firm identified the extent of the issue and took steps to recover emails that were potentially lost.

Despite these efforts, approximately 547,000 emails were lost due to the error over a nine-month period, and the emails of representatives from both firms were impacted. The fact that the firm self-reported to FINRA, and took steps to identify and correct technical deficiencies, was considered in determining appropriate sanctions.

FINRA Fines Pershing for Reporting Errors

Pershing LLC was censured, fined $80,000, and required to revise its Written Supervisory Procedures (WSPs), according to FINRA’s June disciplinary actions.

According to FINRA, Pershing failed to report to the OTCRF as “tape-eligible” 35,303 odd-lot transactions in OTC equity securities. The findings stated that as a result, the OTCRF received inaccurate information regarding these transactions, which impacted the quality and usability of information FINRA received and employed in its overall surveillance of market activity in OTC equity securities.

The findings also stated that the firm failed to media report 23,526 odd-lot transactions in OTC equity securities to the OTCRF.

As a result, the OTCRF received inaccurate information regarding these transactions, which impacted the quality and usability of information FINRA received and employed in its overall surveillance of market activity in OTC equity securities.

Additionally, as a result of the firm’s conduct, information regarding these 23,526 transactions was not (but should have been) made available to the public as part of FINRA’s regular dissemination of information regarding media-reported transactions.

FSC Securities Corp. Fined for Supervisory Failures

FINRA censured FSC Securities Corporation and fined the firm $200,000 for failing to establish, maintain and enforce a supervisory system that was reasonably designed to review and monitor third-party check requests from customer accounts.

According to FINRA, a registered representative associated with the firm sold memberships in an investment fund created by a former firm representative. Without the FSC Securities’ knowledge or approval, the representative sold memberships in the fund, which was not an approved product for sale, and the firm did not therefore supervise the representative’s sales.

The representative also submitted to the firm Letters of Authorization (LOA) signed by each of the 15 firm customers, which authorized in aggregate approximately $1.6 million to be transferred from their firm brokerage accounts to a bank account the fund controlled.

The fund ultimately lost millions of dollars through speculative trading and other investments, according to FINRA. To cover up the losses, the former firm representative created false account statements that fraudulently reflected fictitious assets and investment returns.

According to FINRA, the firm’s supervisory system was too limited to detect the representative’s misconduct, which involved—among other things—a pattern of checks issued from customer accounts to the same third-party payee. As a result, the firm failed to conduct reasonable supervision of third-party check requests coming from a single branch office, and approved the transmittal of approximately $1.6 million of customer funds to the fund.

FTC Returns Money to Victims of Auto Loan Scheme

The Federal Trade Commission is mailing 288 checks totaling more than $109,000 to people who paid an up-front fee to Regency Financial Services, which promised to get them better terms for their auto loans. According to the FTC, the company and its CEO, Ivan Levy, did not provide the promised services and failed to honor their “money-back guarantee.”

In July 2015, the defendants agreed to pay money to settle the lawsuit. The settlement banned them from telemarketing, and from selling debt relief products or services.

Affected consumers will receive full refunds based on information they reported to law enforcement. The average amount is $380.

— Related on ThinkAdvisor: 


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.