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September 28, 2018 at 10:23 AM
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.
