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Portfolio > Alternative Investments > Real Estate

Mass. Advisor Charged in 26-Year Real Estate Scheme: Enforcement

By Emily Zulz

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Commonwealth Secretary William F. Galvin charged a Massachusetts investment advisor agent with orchestrating a complex real estate scheme that defrauded investors and other clients out of at least $1 million over the past 26 years.

The administrative complaint filed by Galvin’s Securities Division states that Thomas Riquier solicited money from clients and others, a majority of whom are elderly residents of the North Shore, used to purchase property in Rowley, Massachusetts, which investors were told would then be sold for a profit.

In reality, the complaint states, the investments were used to purchase property already owned by Riquier. To date, the property has not been sold or improved and has not provided any returns on the money invested, according to the complaint.

“This scheme has been going on for so long that many of the original investors and clients have died while the remaining elderly Massachusetts investors have not seen a penny returned on their 26-year-old investment,” the complaint states.

The complaint further alleges that Riquier solicited more than $800,000 in private loans from his clients, again mainly residents of the North Shore, in violation of state and federal law.

Also named in the complaint is United Planners Financial Services of America, which employed Riquier as an investment advisor agent throughout the 26 years the alleged scheme took place. According to the complaint, the firm, which employed Riquier’s own son-in-law to supervise him, failed to appropriately monitor their agent’s actions.

The complaint seeks a cease-and-desist order, censure and administrative fine, and the revocation of Riquier’s registrations as an investment advisor agent and broker-dealer in Massachusetts.

Galvin’s office is also seeking an order requiring Riquier to pay restitution to compensate investors for their losses under the scheme.

SEC Suspends Trading in 3 Firms Claiming Blockchain Involvement

The SEC suspended trading in three companies amid questions surrounding similar statements they made about the acquisition of cryptocurrency and blockchain technology-related assets.

The SEC’s trading suspension orders state that recent press releases issued by Cherubim Interests Inc. (CHIT), PDX Partners Inc. (PDXP) and Victura Construction Group Inc. (VICT) claimed that the firms acquired AAA-rated assets from a subsidiary of a private equity investor in cryptocurrency and blockchain technology among other things. According to the SEC order regarding CHIT, it also announced the execution of a financing commitment to launch an initial coin offering.

According to the SEC’s orders, there are questions regarding the nature of the companies’ business operations and the value of their assets, including in press releases issued beginning in early January 2018. The SEC also suspended trading in the securities of CHIT because of its delinquency in filing annual and quarterly reports.

Under the federal securities laws, the SEC can suspend trading in a stock for 10 days and generally prohibit a broker-dealer from soliciting investors to buy or sell the stock again until certain reporting requirements are met. The stocks of CHIT, PDXP and VICT are all quoted on OTC Link operated by OTC Markets Group.

Deutsche Bank to Repay Misled Customers

Deutsche Bank Securities Inc. agreed to repay more than $3.7 million to customers, which includes $1.48 million that was ordered as disgorgement, according to the Securities and Exchange Commission.

The SEC’s investigation found that traders and salespeople made false and misleading statements while negotiating sales of commercial mortgage-backed securities (CMBS). According to the SEC’s order, customers overpaid for CMBS because they were misled about the prices at which Deutsche Bank had originally purchased them. 

According to the SEC, Deutsche Bank failed to have compliance and surveillance procedures in place that were reasonably designed to prevent and detect the misconduct that consequently increased the firm’s profits on CMBS transactions to the detriment of its customers.

The SEC’s order finds supervisory failures by the former head trader of Deutsche Bank’s CMBS trading desk, Benjamin Solomon, who did not take appropriate action after becoming aware of false statements made to customers by traders under his supervision, including specific misrepresentations about the prices that Deutsche Bank paid for the CMBS.

To settle the charges, Deutsche Bank agreed to reimburse customers the full amount of firm profits earned on any CMBS trades in which a misrepresentation was made. According to a payment schedule in the order, Deutsche Bank will distribute more than $3.7 million. Deutsche Bank also agreed to pay a $750,000 penalty. Solomon agreed to pay a $165,000 penalty and serve a 12-month suspension from the securities industry.  

Georgia Man Charged With Bilking Submarine Investors to Pay Sudent Loans

The SEC filed an enforcement action against an Atlanta-area resident who allegedly misused more than $1.2 million in investments intended to support national security-related businesses and the development of a high-performance submarine vessel.

The SEC’s complaint alleges that Timothy Batchelor misspent approximately half of the $2.4 million he raised from a handful of investors through an investment fund called Specter Ventures Fund II. According to the SEC, Batchelor allegedly used nearly a quarter-million dollars in investor funds to purchase new vehicles and approximately $225,000 to pay student loans. Batchelor also allegedly transferred thousands of dollars in investor funds to other family members.

According to the SEC’s complaint, Batchelor later tried to cover his tracks by belatedly fabricating a document in November 2015 describing the unauthorized expenditures as a “loan” taken in February 2015.

The SEC’s complaint also alleges that Batchelor was not registered with the SEC in any capacity at the time he raised funds through Specter.

The complaint seeks disgorgement plus interest and penalties as well as permanent injunctions against Batchelor.

Advisor Barred and Firm’s Registration Revoked For Hiding Losses From Investors

A hedge fund manager in Baton Rouge, Louisiana has agreed to be barred from associating with any investment advisor and the firm he founded has consented to the revocation of its registration with the Securities and Exchange Commission for their participation in an alleged financial crisis-era scheme.

On Feb. 15, the federal court in Louisiana entered a final judgment against Walter Morales and Commonwealth Advisors Inc. (The now-defunct firm is not affiliated with the broker-dealer Commonwealth Financial Network.)

The final judgment orders Morales to pay a $130,000 penalty.

Morales and Commonwealth also agreed to the entry of an SEC order that revokes Commonwealth’s registration as an investment advisor and bars Morales from associating with an investment adviser with the right to apply for reentry after five years.

Morales and Commonwealth agreed to the settlement without admitting or denying the allegations in the SEC’s complaint or the findings in the SEC order.

In November 2012, the SEC charged Morales and Commonwealth with allegedly defrauding investors by hiding losses from investments tied to residential mortgage-backed securities.

Hedge Fund Manager, Firms Ordered to Pay Nearly $13 Million for Diverting Investor Money

The SEC obtained final judgments against a hedge fund manager and his investment advisory businesses.

The federal court in Connecticut ordered Stephen Hicks, a Ridgefield, Connecticut-based hedge fund manager, and his investment advisory businesses to pay nearly $13 million in disgorgement and penalties after the court had previously determined that the defendants had illegally diverted investor money for use by other hedge funds that were illiquid and in need of cash.

The court earlier found Stephen Hicks, a Ridgefield, Connecticut-based hedge fund manager, and his businesses liable on the SEC’s claim that they misappropriated investor funds.

The SEC alleged that investors were defrauded because they were not told about the transfers of hedge fund assets while they were taking place. According to the SEC’s complaint, Hicks sent a letter to investors admitting that legal and administrative expenses had been improperly allocated between funds, but rather than repaying the money, he transferred illiquid securities to the funds.

Portfolio to Repay $1.95M for Matched Trades Scheme

The SEC obtained a final judgment against a Massachusetts-based portfolio manager at a major asset management firm charged with diverting at least $1.95 million to his personal brokerage account from a fund over which he had trading authority.

In its complaint, the SEC alleged that Kevin Amell carried out a fraudulent matched-trades scheme in which he prearranged the purchase or sale of call options between his own account and the brokerage accounts of the fund at prices that were disadvantageous to the fund and advantageous to him.

The final judgment orders Amell liable for disgorgement of $1.95 million, the payment of which is deemed satisfied by the forfeiture ordered in a parallel criminal case. Amell, who pled guilty in that case, is serving an 18-month sentence of imprisonment.

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