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SEC Charges Operators of Boiler Room Scheme Targeting Seniors: Enforcement

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The Securities and Exchange Commission brought additional charges against a Long Island, New York-based boiler room previously sued for defrauding elderly and unsophisticated investors.

The latest charges allege that First Choice Healthcare Solutions Inc. CEO Christian Romandetti, the boiler room, and four others, manipulated the company’s shares generating more than $3.3 million of illegal profits and more than $560,000 in kickbacks for Romandetti.

The SEC’s complaint alleges that Romandetti and the other defendants duped more than 100 victims in a scheme that inflated First Choice’s stock price from less than $1 per share to $3.40 per share.

According to the complaint, from at least September 2013 until about June 2016, the defendants used multiple accounts in an attempt to disguise their trading, engaged in manipulative trading practices, and hired Elite Stock Research, a boiler room run by defendant Anthony Vassallo, to promote First Choice to vulnerable investors, some of who invested retirement savings.

“Microcap fraud continues to be a pervasive source of harm to retail investors,” Carolyn Welshhans, associate director of the division of enforcement, said in a statement. “Investors should be on the lookout for individuals employing methods like the ones we allege in our complaint—such as using unsolicited calls and high-pressure sales tactics.”

In a related action in July 2017, the SEC originally charged boiler room Elite Stock Research, as well as another Long Island boiler room and 13 individuals, with bilking victims out of more than $10 million through high-pressure sales tactics and lies about penny stocks. Seven of those individuals have pleaded guilty to parallel criminal charges brought by the U.S. Attorney’s Office for the Eastern District of New York. The SEC’s litigation against the 13 individuals is continuing.

This recent SEC action charges Romandetti, Vassallo, Mark Burnett, Jeffrey Miller, Frank Sarro and Elite Stock Research with fraud and Burnett, Miller, Sarro, and Vassallo with market manipulation. The SEC is seeking permanent injunctions, return of allegedly ill-gotten gains with interest, civil penalties, penny stock bars, and officer-and-director bars against Romandetti and Burnett.

Wife of ‘Hamilton’ Ticket Ponzi Schemer Ordered to Pay Up

A federal court ordered the wife of an accused Ponzi schemer to disgorge more than $4 million in investor funds.

The SEC charged Joseph Meli in January 2017 with fraud for running a Ponzi scheme. The SEC alleged that Joseph Meli raised money from investors to fund businesses purportedly created to purchase and resell tickets to such high-demand shows as Adele concerts and the Broadway musical “Hamilton”. Joseph Meli was criminally charged in a parallel case in which he pled guilty and was sentenced to a 78-month prison sentence. He also was ordered in the parallel criminal case to forfeit more than $104 million, including a house in East Hampton, New York, and to pay more than $56 million in restitution.

The SEC named Jessica Ingber Meli, the wife of Joseph Meli, as a relief defendant for the purpose of recovering investor funds allegedly in her possession, including $3 million which was used to purchase the house in East Hampton in her name. She agreed to settle with the SEC, consenting to disgorgement and prejudgment interest of approximately $4 million.

Because the house in East Hampton is subject to the forfeiture order entered against Joseph Meli in the parallel criminal case, approximately $3.2 million of the judgment will be deemed satisfied and Jessica Ingber Meli will be obligated to pay approximately $840,000.

Businessman Who Ran Multimillion Dollar Ponzi Scheme Sentenced

The principal of a Mississippi company charged by the SEC with fraud for allegedly bilking at least 150 investors in a multimillion dollar Ponzi scheme was sentenced in a parallel criminal action to 19.5 years imprisonment.

The parallel criminal action arose from the same facts and circumstances alleged by the SEC. According to the SEC, Arthur Lamar Adams lied to investors by telling them that their money would be used by his company, Madison Timber Properties, to secure and harvest timber from various land owners located in Alabama, Florida and Mississippi. The SEC said he also promised annual returns of 12-15%.

However, Madison Timber never obtained any harvesting rights. Instead, Adams allegedly forged deeds and cutting agreements as well as documents purportedly reflecting the value of the timber on the land. Adams also allegedly paid early investors with later investors’ funds and convinced investors to roll over their investments.

According to the complaint, Adams also used investors’ money for personal expenses and to develop an unrelated real estate project.

Court Orders Hedge Fund and Its Principals to Pay Back Cash

A federal court ordered New York hedge fund Algointeractive Inc and co-founders Matthew James Zecchini and Kevin Whylie to pay more than $1 million in civil monetary penalties and restitution, which resolve the Commodity Futures Trading Commission’s enforcement action that charged them with fraudulent solicitation and misappropriation of funds.

According to the CFTC, Zecchini, Whylie and Algointeractive made material misrepresentations and omissions in solicitations to pool participants and prospective pool participants and misrepresented that all or substantially all of the participants’ funds would be pooled and invested in, among other things, futures contracts, for the participants’ benefit. The CFTC said that these material misrepresentations and omissions included misrepresenting or omitting material information about their own experience, track record, and amount of assets under management

According to the CFTC, only a fraction of the funds solicited were ever deposited into a futures trading account held by Algointeractive, and only $59,450 has been returned to pool participants (including through Ponzi-style payments to participants from other participants’ funds).

Zecchini and Whylie misappropriated most of the funds for their own benefit, including by using participants’ funds to pay unauthorized personal or business expenses, including food, transportation, and entertainment, the CFTC said.

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