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 > SEC

SEC Charges Ex-Wells Fargo Broker With Defrauding Seniors: Enforcement

Your article was successfully shared with the contacts you provided.

The Securities and Exchange Commission charged a former registered representative in Dayton, Ohio, with defrauding his retail brokerage customers out of more than $1 million in a long-running scheme.

According to the SEC’s complaint, John Greg Schmidt, who was associated with an SEC-registered broker-dealer, sold securities of at least seven of his customers and secretly transferred more than $1 million in proceeds to 10 other customers to cover shortfalls in their accounts.

“From at least 2003 through 2017, Schmidt betrayed his customers’ trust by perpetrating a classic fraudulent scheme: He robbed Peter to pay Paul,” the complaint states.

Schmidt worked at Wells Fargo for 10 years until he was discharged from the firm in late October 2017, according to BrokerCheck. In addition, the Financial Industry Regulatory Authority barred Schmidt from association with any FINRA member in any capacity as of March 2018. Prior to Wells Fargo, Schmidt worked at Stifel, Nicolaus & Co.

As alleged in the SEC’s complaint, Schmidt accomplished his scheme by making unauthorized sales and withdrawals from variable annuities held by the customers, secretly transferring funds using fraudulent letters of authorization, and issuing fake account statements.

Most of the injured customers were elderly with little to no financial expertise and were particularly vulnerable.

Schmidt received more than $230,000 in brokerage commissions from these customers.

The SEC is seeking a judgment ordering Schmidt to disgorge his ill-gotten gains with prejudgment interest, and to pay civil penalties.

SEC And CFTC File Charges Against Bitcoin-Funded Securities Dealer and CEO

The SEC filed charges against an international securities dealer and its Austria-based CEO for allegedly violating the federal securities laws in connection with security-based swaps funded with Bitcoins.

According to the SEC’s complaint, 1pool Ltd., aka 1Broker, and its CEO, Patrick Brunner, solicited investors from the United States and around the world to buy and sell security-based swaps. Investors could open accounts by simply providing an email address and a user name — no additional information was required — and could only fund their account using Bitcoins.

The SEC alleges that a special agent with the FBI, acting in an undercover capacity, successfully purchased several security-based swaps on 1Broker’s platform from the U.S. despite not meeting the discretionary investment thresholds required by the federal securities laws.

The SEC also alleges that Brunner and 1Broker failed to transact the security-based swaps on a registered national exchange, and failed to properly register as a security-based swaps dealer.

“The SEC protects U.S. investors across a variety of platforms, regardless of the type of currency used in their transactions,” said Shamoil Shipchandler, director of the SEC’s Fort Worth Regional Office, in a statement. “International companies that transact with U.S. investors cannot circumvent compliance with the federal securities laws by using cryptocurrency.”

The SEC’s complaint, filed in U.S. District Court for the District of Columbia, seeks permanent injunctions, disgorgement plus interest, and penalties.

In a parallel action, the Commodity Futures Trading Commission announced charges against 1Broker arising from similar conduct.

The CFTC’s complaint charges the 1Pool and Brunner with engaging in unlawful retail commodity transactions, failing to register as a futures commission merchant, and supervisory violations for failing to implement procedures to prevent money laundering as required under federal laws and regulations.

The CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC regulations as charged.

SEC Charges Real Estate Crowdfunding Portal Founders With Fraud

The SEC charged the co-founders of a New York-based crowdfunding portal with misappropriating more than $1 million from investors.

According to the SEC’s complaint, William Skelley and Sohin Shah, the co-founders and senior executives of iFunding LLC, raised more than $3 million from 42 investors in 17 states, with fraudulent claims about iFunding’s plans to use the funds to build an online real estate equity crowdfunding portal.

The complaint alleges that Skelley and Shah in fact diverted more than $1 million of investor funds for their personal use. The complaint also alleges that Skelley made materially false and misleading oral statements to investors and, in a later period, iFunding LLC and Skelley solicited investors with two private placement memoranda that contained false statements about the use of funds and misrepresented the number of real estate projects that iFunding had financed, and the amount of funds that had been raised on iFunding’s portal.

The SEC’s complaint seeks injunctions, the return of allegedly ill-gotten gains plus interest and civil monetary penalties against both defendants.

SEC Awards Almost $4 Million to Overseas Whistleblower

The SEC announced that it awarded nearly $4 million to an overseas whistleblower whose tip led it to open an investigation and whose extensive assistance helped it bring a successful enforcement action.

The SEC has now awarded over $326 million to 59 individuals since issuing its first award in 2012. In that time, more than $1.7 billion in monetary sanctions have been ordered against wrongdoers based on actionable information received by whistleblowers.

Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely and credible information that leads to a successful enforcement action.  Whistleblower awards can range from 10% to 30% of the money collected when the monetary sanctions exceed $1 million.

Petrobras to Pay Almost $1.8B for Misleading U.S. Investors

The SEC charged Brazilian oil-and-gas company Petróleo Brasileiro S.A. with misleading U.S. investors by filing false financial statements that concealed a massive bribery and bid-rigging scheme at the company.  The U.S. Department of Justice also announced today a non-prosecution agreement with Petrobras.

The SEC’s order finds that senior Petrobras executives worked with Petrobras’ largest contractors and suppliers to inflate the cost of Petrobras’ infrastructure projects by billions of dollars.

The companies executing those projects paid billions in kickbacks to the Petrobras executives, who shared the illegal payments with Brazilian politicians who helped them obtain their high-level positions at Petrobras. Petrobras erroneously recorded these payments as money spent to acquire and improve assets, resulting in an estimated $2.5 billion overstatement of assets.

The SEC’s order finds that Petrobras’ false and misleading filings included materially false and misleading statements to U.S. investors in a $10 billion stock offering completed in 2010. The filings misrepresented Petrobras’ assets, infrastructure projects, the integrity of its management and the nature of its relationships with its majority shareholder, the Brazilian government.

In connection with the settlement of the SEC’s charges and the non-prosecution agreement with the Department of Justice, Petrobras has agreed to pay a total of $933 million in disgorgement and prejudgment interest and an $853 million penalty.

These payments are subject to offsets for, respectively, certain payments it makes to investors in a related class-action settlement and penalties paid to law enforcement authorities in Brazil.  The SEC’s order also establishes a Fair Fund to distribute the penalty received by the SEC to harmed investors.

CFTC Charges Unregistered Commodity Trading Advisor With Binary Options Fraud

The CFTC filed a civil enforcement action, charging Yehuda Belsky of Brooklyn, New York, and his firm Y Trading LLC with solicitation fraud in connection with binary options trading.

According to the complaint, Belsky solicited at least $1.25 million from at least 14 customers to purportedly trade binary options on their behalf.

The CFTC’s complaint alleges that from at least June 22, 2015, through the present, Belsky — individually and on behalf of Y Trading — fraudulently solicited customers by making materially false statements, including that he was an expert binary options trader with a record of profitable binary options trading on behalf of multiple customers.

At the same time, Belsky allegedly failed to disclose that he was misappropriating customer funds, had no binary options trading account in the name of Y Trading or in his own name from which to trade, and had been the subject of a 2008 CFTC order.

Belsky, as alleged, also deceived some customers by providing a false binary options trading account statement and by using the fictitious name of “Jay Bell” to conceal his identity.

The CFTC seeks full restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws, as charged.


© 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.