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December 07, 2017 at 11:45 AM
The Securities and Exchange Commission continued its crackdown on brokers who defraud customers, charging two New York-based brokers with making unsuitable trades that were costly for customers and lucrative for the brokers.
The case follows similar charges of excessive trading by brokers brought in January, April and September.
The SEC’s complaint alleges that Zachary Berkey of Centerreach, New York, and Daniel Fischer of Greenwich, Connecticut, conducted in-and-out trading that was almost certain to lose money for customers while yielding commissions for themselves.
According to the complaint, 10 customers of Four Points Capital Partners LLC – where Berkey and Fischer previously worked – lost a total of $573,867. Meanwhile, Berkey and Fischer received approximately $106,000 and $175,000, respectively, in commissions.
“We’re intensifying our focus on unscrupulous brokers and their harmful practices,” said Sanjay Wadhwa, senior associate director of the SEC’s New York Regional Office, in a statement. “As alleged in our complaint, Berkey and Fischer did grave harm to their customers by providing unsuitable recommendations and siphoning money in the form of high commissions and costs.”
According to the SEC’s complaint, since the customers incurred significant costs with every transaction and the securities were held briefly, the price of the securities had to rise significantly for customers to realize even a minimal profit. The complaint also alleges that Berkey and Fischer churned customer accounts and concealed material information from their customers, namely that the costs associated with their recommendations, including commissions and fees, would almost certainly exceed any potential gains on the trades.
The complaint further alleges that Fischer engaged in unauthorized trading.
Without admitting or denying the SEC’s allegations, Fischer consented to a final judgment that permanently enjoins him from similar violations in the future and orders him to return his allegedly ill-gotten gains with interest and pay a $160,000 penalty. The settlement is subject to court approval. Fischer separately agreed to an SEC order barring him from the securities industry and penny stock trading. The SEC’s litigation against Berkey will proceed in federal district court in Manhattan.
SEC Halts a Fast-Moving Initial Coin Offering Scam
The SEC obtained an emergency asset freeze to halt a fast-moving initial coin offering (ICO) fraud that raised up to $15 million from thousands of investors since August by falsely promising a 13-fold profit in less than a month.
The SEC filed charges against a recidivist Quebec securities law violator, Dominic Lacroix, and his company, PlexCorps. The complaint alleges that Lacroix and PlexCorps marketed and sold securities called PlexCoin on the internet to investors in the U.S. and elsewhere, claiming that investments in PlexCoin would yield a 1,354% profit in less than 29 days.
The SEC also charged Lacroix’s partner, Sabrina Paradis-Royer, in connection with the scheme.
The SEC obtained an emergency court order to freeze the assets of PlexCorps, Lacroix and Paradis-Royer.
The SEC’s complaint charges Lacroix, Paradis-Royer and PlexCorps with violating the antifraud provisions, and Lacroix and PlexCorps with violating the registration provision, of the federal securities laws. The complaint seeks permanent injunctions, disgorgement plus interest and penalties. For Lacroix, the SEC also seeks an officer-and-director bar and a bar from offering digital securities against Lacroix and Paradis-Royer.
These charges are the first filed by the SEC’s new Cyber Unit, which was created in September to focus the Enforcement Division’s cyber-related expertise on misconduct involving distributed ledger technology and initial coin offerings, the spread of false information through electronic and social media, hacking and threats to trading platforms.
Digital Display Ad Firm & Execs Bilk $2 Million From Investors to Pay Rent on Mansion
The SEC charged a Seattle-area outdoor digital signage advertising company and two of its senior executives with stealing more than $2 million from retail investors.
According to the SEC’s complaint, Digi Outdoor Media Inc.’s former CEO Donald MacCord Jr. and chief financial officer Shannon Doyle raised nearly $4.5 million in promissory notes by claiming they would use investor money to construct and install digital signs for commercial advertising around Washington, D.C.
