FINRA barred John Douglas Wade, who was previously a registered broker and investment advisor and at the time worked for U.S. Bancorp Investments, for taking money from two elderly clients and using that money for personal expenses.
Without admitting or denying the findings, Wade consented to the sanction and to the entry of findings that he converted funds totaling $105,712 from his member firm’s elderly customers without authorization.
According to FINRA, Wade electronically transferred, without authorization, $47,570 from one of the elderly customers’ checking accounts (at a bank affiliated with the firm) to Wade’s own mortgage account.
Wade similarly used funds from another elderly customer to pay his own mortgage. Wade had this customer withdraw funds from his firm account via third-party checks, in amounts totaling $51,141, and write a check in the amount of $7,000 from his checking account (at a bank affiliated with the firm), ostensibly to invest in real estate investment trusts.
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SEC Charges Failing Real Estate Investment Companies With Operating a $135 Million Fraud Scheme
The Securities and Exchange Commission filed an emergency action against Jerome Cohen and Shaun Cohen and their companies, Equitybuild Inc. and Equitybuild Finance LLC, charging them with operating a $135 million offering fraud involving real estate located primarily on Chicago’s South Side.
The SEC’s complaint alleges that since 2010, the defendants have sold promissory notes to at least 900 investors throughout the country.
The defendants raised these funds by falsely promising safe investments fully secured by income-producing real estate that generated returns of 12% to 20%.
According to the SEC’s complaint, the defendants hid from investors that they skimmed 15% to 30% off each investment by taking undisclosed fees. They did this by hiding the fees by reporting inflated acquisition costs.
The complaint also alleges that, contrary to defendants’ representations, the real estate did not earn enough to pay the double-digit returns promised to investors. As a result, the defendants could only pay earlier investors by raising funds from unwitting new investors.
According to the SEC’s complaint, the defendants recently admitted in a video recording to earlier investors that the companies are in financial distress, can no longer afford to make payments to investors, and are cutting staff to a “skeleton crew.” Despite these disclosures, the defendants have continued to solicit new investors for various real estate funds, again offering double-digit returns but failing to disclose the companies’ dire financial condition.
The SEC’s complaint seeks injunctions against future securities laws violations, disgorgement of the defendants’ ill-gotten gains, and civil penalties.
The SEC recently obtained a temporary restraining order which, among other things, enjoins the defendants from raising any additional funds from investors. The SEC also obtained an order appointing a receiver to secure the real estate and other assets obtained with investor proceeds for the benefit of the defrauded investors.
FINRA Bars CEO for Unregistered Reg D Offerings
Harold Lee Connell was barred from association with any FINRA member in all capacities for participating in the sale of three unregistered Regulation D offerings through misrepresentations and omissions.
Connell was the CEO, president, principal supervisor and owner of the now-expelled firm, CP Capital Securities.
The findings stated that Connell and others at his member firm raised more than $4.5 million from individual investors in connection with the sale of the three unregistered Regulation D offerings, under the assumption that investors’ funds would be used to make investments in a variety of companies.
However, 85% of the first offering was invested in one penny stock company. The other two offerings were primarily undisclosed self-offerings. Investors’ funds were transferred to the firm’s holding company, and from there, to the firm.
The third offering also did not disclose that the companies that received their funds, the firm and its holding company, were deeply in debt, or that investor funds would be used to pay non-firm expenses and money owed to investors in prior offerings.
The findings also stated that Connell sold the offerings without a reasonable basis to believe that they were suitable for any investor. The first offering was not suitable because appropriate due diligence was not performed on the product. The second and third offerings were not suitable because they raised money for the firm’s holding company and the firm.
Also, contrary to the representations in the second and third offerings’ PPMs, the offerings’ funds were not invested in a diverse basket of investments.
According to FINRA, Connell, as the CEO, president, principal supervisor and owner of the firm should not have permitted the marketing or sale of these products.
None of the investors recouped any of their principal investments.
SEC Announces Settlement With 2 Traders Linked to NY Congressman’s Insider Trading Case
The Securities and Exchange Commission announced the entry of final judgments against two traders who received material, nonpublic information about negative drug trial results for Innate Immunotherapeutics.