Category: Investment Fraud

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Los Angeles Investment Banker Pleads Guilty to Stock Scam

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An investment banker, along with his father and two brothers, were accused of reaping illegal profits by manipulating a reinsurer’s stock price.

Jason Galanis, once known as “Porn’s New King,” admitted to creating a stock scam, committing securities fraud, investment adviser fraud and two charges of conspiracy. As a result of his plea, Galanis agreed to forfeit nearly $38 million plus two properties he owns.

Galanis and his family were alleged to have orchestrated a $60 million bond scheme that targeted South Dakota’s Oglala Sioux Nation, using the proceeds towards other investments and personal luxury items.

Gerova Financial Group Ltd. was the reinsurer used for Galanis’ scheme. With the assistance of Gerova’s chairman, Gary Hirst, Galanis was able to amass more than 5 million shares and had his ownership interest hidden by a shell company. Galanis then allegedly bribed investment advisers to have their clients purchase Gerova shares.

As a result of the stock scam, Galanis netted himself approximately $20 million between 2007 and 2011. Along with Galanis, a broker named Gavin Hamels also pled guilty, while the alleged straw holder, Ymer Shahini, remains at large.

Galanis gained fame over a decade ago after purchasing the nation’s largest credit card payment processor for Internet pornography.

Call a Los Angeles Stock Fraud Attorney Today

If you invested in Gerova or with Galanis, Gavin Hamels, or members of Galanis’ family, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles stock fraud attorney today for a consultation to discuss your rights and options.

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EB-5 Fraud Victims Sue California Bank Holding Their Investments

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Several foreign investors sued Los Angeles-based attorney and money manager, Justin Moongyu Lee, after finding out their money was not being used to secure entry to the United States through the government’s EB-5 visa program. Now, investors also are suing the bank where Mr. Lee kept investors’ funds for related to the EB-5 Fraud.

Several Korean nationals are suing Wilshire Bank for fraud, negligence, and breach of contract, claiming that the bank should have recognized Mr. Lee’s fraudulent activities and stopped him from furthering his scheme.

According to investors, Wilshire Bank had a long relationship with Lee, including employing a relative – information that was never disclosed. Investors are also alleging that because of Lee’s close ties to the bank, he was able to improperly transfer money out of investors’ escrow accounts.

As far back as 2006, Lee told his investors that their money would be used to build biofuel plants in Kansas and Texas. When the market tanked and clients did not receive their green cards, the lawsuits began piling up starting in 2010.

The California Bar Association instituted disciplinary proceedings against Lee in 2013, and he was sued by both the SEC and Justice Department in 2014. According to the Justice Department, Lee used some of the money he received to pay back earlier investors from another failed venture instead of putting it into biofuel plants.

Investors believe the bank should have prevented this misappropriation of funds by safeguarding their escrow accounts. Instead, their money was transferred out of escrow in random sums while the investors awaited their preliminary check with the U.S. Customs and Immigrations Services.

Call a Los Angeles Securities Fraud Attorney Today

If you invested with Mr. Lee or Wilshire Bank and are a victim of EB-5 Fraud you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles securities fraud attorney today for a consultation to discuss your rights and options.

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Ameriprise Fined Over Short-Term Trades of Closed-End Funds

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Ameriprise Financial Services Inc. has agreed to pay a $100,000 fine to the Financial Industry Regulatory Authority (FINRA) after allegations that the company failed to supervise closed-end fund sales resulting in unsuitable short-term trading, according to the settlement agreement.

The fine stemmed from an employee who wrongfully recommended short-term trading of closed-end funds (CEFs) after they were bought at the IPO. According to FINRA, Ameriprise did not have a system in place to prevent the employee’s actions from taking place. The employee has been fired.

FINRA claimed that Ameriprise knew that CEFs purchased at an IPO were more suitable for long-term investment and that the sales charges applied to the short-term trading were unsuitable. Despite that, Ameriprise did not have a procedure in place to prevent the trades from going through. Ameriprise’s lack of oversight violated NASD Rule 3010.

CEFs are a type of pooled investment that offer a fixed number of shares in an IPO and then are traded on an exchange. Ameriprise began selling CEFs in 2010. The firm had guidelines in place regarding short-term trading, but it failed to have a system to prevent these types of transactions. In fact, on at least two occasions supervisors flagged customer accounts with short-term CEF trading but no action ever was taken.

The $100,000 fine came after FINRA determined that Ameriprise identified the short-term trading, investigated the trades, and then fired the individual who was recommending the short-term CEF trades.

Call a Los Angeles Securities Fraud Attorney Today

If your Ameriprise broker made short-term trades with your closed-end funds, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles securities fraud lawyer today for a consultation to discuss your rights and options.

Industry Groups Sue Over New DOL Fiduciary Rule

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Several industry and trade groups have filed suit in Texas federal court challenging the Department of Labor’s new fiduciary rule that would require financial professionals who advise retirement accounts to act in their “client’s best interest” when recommending investment products. We question why anyone would oppose such an obvious, common sense obligation.

The current standard only requires professionals to promote products that are “suitable” for the investor, rather than in the client’s best interest. Opponents of the new rule argue that the heightened standard would impose unjustifiable costs on small businesses and professionals who must implement it, claiming it is arbitrary and capricious, and contrary to the law. Of course, one could argue that if a company cannot afford to act in its client’s best interest, then that company should not be in business.

According to opponents, the requirements for the new DOL fiduciary rule  would violate the First Amendment by restricting advisers’ ability to advise clients and by barring firms from including class action waivers. Opponents also claim that the new rule would subject investment advisors to potentially costly litigation in the future. We believe that investment advisors should be exposed to litigation if they fail to act in their clients’ best interests.

Proponents of the new rule argue that the heightened standard would help protect investors’ retirement accounts by making sure that brokers adhere to products that are in clients’ best interest.

Under the DOL fiduciary rule, brokers would be exempted and may continue to earn commissions from sales of investment products, provided they pledge to act in their client’s best interests going forward. The rules also exempt a broader class of retirement plan sponsors from owing a fiduciary duty to investors.

Call a Los Angeles Stock Fraud Attorney Today

If you suspect your broker has recommended unsuitable investments in your retirement account and you have suffered investment losses as a result, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles stock fraud attorney today for a consultation to discuss your rights and options.

Los Angeles Securities Lawyer: When is the Right Time to Exercise Employee Stock Options?

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An employee stock option gives an employee the right to buy their employer’s stock at a pre-set price within a certain period of time. The holder of the option can choose not to exercise their right, which is why the holder has the “option” to buy the stock.

Employees of a company may be given “options” to purchase company stock at a price and time specified by the employer. Employee stock options generally are provided as a hiring incentive or as part of an employee’s compensation. An employer can allow options to vest all at once or over a period of time – this is known as the vesting period.

When or Whether to Exercise Your Stock Options According to a Los Angeles Securities Lawyer

Knowing when (and whether) to exercise your stock options can be complicated. If the exercise price of the stock option is below the stock’s current market value, then the stock options are said to be “in the money” and would produce an immediate profit when the options are exercised. Of course, after purchasing the shares the company could go out business or the stock’s price could decline for other reasons. As a result, many employees choose to exercise their stock options and immediately sell the shares to realize a profit and to eliminate the risks of owning the stock. Employers may pressure employees not to sell shares that they have purchased. Continuing to hold a large stock position, which can comprise a significant portion of an employee’s savings, can expose the employee to significant risk of loss. If an employee chooses to continue to hold a large number of shares of his employer’s stock there are investment strategies that can be employed in an effort to protect a large stock position.

Make sure you are fully aware of both your rights and the risks involved when deciding whether to exercise your employee stock options. There are tax consequences to consider and investment diversification and risk protection strategies for which employees should seek guidance when contemplating what to do with their employee stock options.

Call a Los Angeles Securities Lawyer Today

If you suffered significant losses relating to your employee stock options or stocks purchased after exercising your stock options you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles securities lawyer today for a consultation to discuss your rights and options.

Los Angeles Securities Attorney: Are Mutual Funds Right For Me?

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Before you invest, it is important that you know what you are investing in. Any good stockbroker should be able to explain not only what you are investing in, but also the positives and potential negatives of any investment. In fact, brokers are obligated to provide you with a balanced presentation regarding recommended investments.

In a nutshell, a mutual fund is an investment vehicle that invests in and holds a basket of securities, such as stocks and bonds. Generally speaking, shareholders contribute the money used for investment, and the fund is professionally managed. The various securities that make up the mutual fund are known as “the portfolio,” and investors can buy or sell shares in the portfolio.

The Advantages of Investing in a Mutual Fund from a Los Angeles Securities Attorney

Mutual funds are popular among investors because of they typically offer a diversified portfolio of securities. One positive aspect of diversification is that if one of the stocks or bonds drops in value, the fund shares often maintain some price stability because the fund is comprised of many securities. Another advantage is that many mutual funds offer low minimum investments, making a mutual fund an attractive investment for someone looking to invest without large amounts of capital. In addition, mutual funds generally can be sold without much difficulty.

The Disadvantages of Investing in a Mutual Fund from a Los Angeles Securities Attorney

Investments carry risk. Even if your fund is diversified to mitigate risk, you could lose some or all of your money if the securities held in the fund drop in value. Market conditions also can play a factor. Importantly, just because a fund did well in the past does not guarantee its future performance. You also should be aware of the securities that comprise the fund: the more volatile they are, the greater the investment risk is.

Call a Los Angeles Securities Attorney Today

If you invested in a mutual fund and suffered significant losses or were not made aware of the risks of investing, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles securities attorney today for a consultation to discuss your rights and options.

Dealing with Stockbroker Misrepresentation in the Stock Market

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Investors generally want their investments to grow. In order to make sure they you are picking the right investment vehicle or product, investors often rely on the advice of professional stockbrokers or brokerage firms.

Your broker has an obligation to provide full and fair disclosure of all material information when recommending and selling a security to you. This means you should be made aware of the potential risks and rewards, and make sure the investment fits within your investment profile and risk tolerance.

A broker or brokerage firm making a securities recommendation has an obligation to be honest and fully forthcoming, even if some of the information isn’t favorable. Brokers and brokerage firms must disclose all material information about the company, its principals, and the nature of the investment that any reasonable person would want to know in order to make an informed investment decision.

How to Recognize Stockbroker Misrepresentation

If a broker or brokerage firm tells you about the positives but fails to disclose negatives, this is an omission. If a broker or the firm misleads you about the nature or risks about a security, then this is a misrepresentation. Omissions and misrepresentations violate securities industry rules and are in violation of brokers’ and brokerage firms’ legal obligations owed to investors.

Call a Los Angeles Stockbroker Misrepresentation Attorney Today

If you lost money after your broker or brokerage firm misrepresented an investment or failed to disclose material information about an investment, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles stock attorney today for a consultation to discuss your rights and options.

Director & Officer Liability for Corporate Malfeasance

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Officers and directors of companies often are targets of lawsuits by those who claim they have been harmed by corporate malfeasance. This is often the case because officers and directors are responsible for running a company properly: both legally and in the company’s best interests.

Sometimes a company will have a bad quarter, bad year or even fail, but this does not mean that those in charge made bad decisions. External influences can play a role, such as a market downturn, shortage of supplies or changing rules and regulations. Sometimes, however, the improper conduct of officers or directors causes financial harm to a company.

What does Corporate Malfeasance mean?

Corporate malfeasance is a term used to describe wrongdoing that may be committed by the officers or directors of a company. Some examples of corporate malfeasance can include, but are not limited to:

  • Defrauding investors by issuing false financial reports
  • Corporate espionage
  • Securities Fraud
  • Negligence
  • Embezzlement 

In a nutshell, any activity that is illegal or committed to the company’s detriment may be an example of corporate malfeasance, which would render the company’s officers and directors liable.

Have You Suffered Losses Due to Corporate Malfeasance? 

If you are a shareholder in a private or public company and believe that the officers or directors of the company have acted illegally or in bad faith, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles stock attorney today for a consultation to discuss your rights and options.

Identifying Employee Benefits Violations Under ERISA

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What is ERISA?

If you work for a company that offers benefits as part of your compensation package, the Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that governs such matters. ERISA sets minimum standards for most voluntarily established pension plans in private industry to provide protection for individuals in these plans. Many business owners or managers are not properly qualified to evaluate pension plans, profit-sharing plans, or 401(k) plans, so they rely on investment professionals to do so. Investment professionals who oversee 401(k) plans assume the legal duty to investigate and evaluate investments in the plan and how to handle the investments in a prudent manner.

What Actions Can Be Considered Violations of ERISA?

Violations in a 401(k), pension, or profit-sharing plan include:

  • Failing to operate the plan prudently for the benefit of the participants
  • Failing to use the most cost-effective funds within a plan
  • Using plan assets to benefit only certain members of the plan
  • Failing to follow the plan terms 

Did You Experience Violations of ERISA?

When your pension, profit-sharing plan, or 401(k) is mismanaged or fails to use the most cost-effective funds, the plan can lose value and your broker or your employer may be liable for those damages. You may have certain legal rights under ERISA as an employee. Contact an experienced Los Angeles securities attorney today to discuss these rights.

SEC Advises Fund Directors to Remain Vigilant

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The U.S. Securities & Exchange Commission (SEC) continues to emphasize the role of mutual fund directors in managing liquidity and other risks. SEC Chair, Mary Jo White, told directors to make sure their funds address liquidity and other operational risks, while reassuring concerned parties that the proposed new rules would not force fund directors into daily management of funds or unduly penalize directors.

According to White, two major events in 2015 raised questions prompting the SEC to focus on rules to avoid future problems. First, a program developed by a systems software vendor developed a glitch affecting calculations of net asset values for mutual fund and ETF customers of BNY Mellon, forcing BNY Mellon to manually calculate the NAV resulting in potential errors. The second issue occurred in December, when Third Avenue Management’s $790 million junk bond Focused Credit Fund froze redemptions.

The SEC voted in favor of proposed liquidity requirements in September, which would require funds to create a liquidity plan and make sure a minimum amount of fund assets could be converted to cash in three days or less, in addition to adding liquidity disclosure requirements.

Although some have claimed that the SEC has acted “aggressively” in pursuing sanctions in recent matters, the SEC maintains that directors who act with “diligence and skill…should not fear enforcement.”

Did the SEC Step in Too Late for You?

If you lost money in a mutual fund, contact an experienced Los Angeles securities attorney as soon as possible to discuss your rights.