Category: Securities Fraud

Bank paper listing wire transfers.

South Florida Essex Holdings Exec Admits Fraud

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A South Florida executive of Essex Holdings Inc. pled guilty in federal court to two counts of wire fraud in connection with a $29 million Ponzi scheme and another scam intended to illegally obtain economic development funds from South Carolina.

Navin Shankar Subramaniam Xavier, from Miramar, will be facing up to 20 years in prison and faces a $250,000 fine for each count when sentenced. Prosecutors agreed to drop an additional 13 counts of wire fraud against Xavier as part of his plea deal.

Xavier ran his schemes through Essex Holdings Inc. in Miami Gardens. His company purported to place investor funds in sugar shipping and iron ore mining in Chile. Xavier allegedly promised rates of return ranging from 8 to nearly 25 percent in the first nine months to convince nearly 100 investors to entrust him with nearly $29 million.

Instead, most of the money taken in the scam was spent on personal items, including a luxury SUV, several watches, diamonds, and even property in South Carolina. Later investors’ money was used to pay returns to earlier investors – a classic signature of a Ponzi scheme.

Xavier also received payments and property from the South Carolina Coordinating Council for Economic Development by providing falsified financial documents for Essex Holdings, claiming millions in assets that did not exist. The money and property were supposed to go toward revitalizing an industrial property into a diaper plant and rice packaging center. The revitalization did not happen.

Call a Securities Fraud Attorney Today

If you invested with Navin Xavier, Essex Holdings Inc., or believe you have been the victim of a similar Ponzi scheme, you may have certain legal rights that require your immediate attention.

The attorneys at Dimond Kaplan & Rothstein, P.A. have recovered over $100 million from banks and brokerage firms for their wrongful actions. Contact us to schedule a consultation today.

Hunter green oil pump in a field.

Poseidon Concepts Executive Charged in Securities Fraud Scam

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A former oil company executive has been charged in federal court for allegedly scheming to inflate his company’s reported revenue by $100 million, according to the Department of Justice.

Joseph Kostelecky, of Poseidon Concepts Corporation, is facing five counts of wire fraud and one count of securities fraud for his role in a scheme that caused the company to falsely report in 2012 that it has more than $100 million in contracts with various oil and gas entities when in fact it did not.

As a result of his misrepresentation, Poseidon Concepts collapsed and thousands of investors lost money. Poseidon filed for bankruptcy protection in 2013 and sold its operations in the U.S. within a few months.

In 2015, Kostelecky entered into a settlement with the SEC regarding his role in artificially inflating the value of Poseidon Concepts, agreeing to pay a $75,000 fine and agreeing to a ban from serving as an officer or director of any U.S. publicly-traded company.

Kostelecky’s admission caused the value of the stock to tumble and shares lost nearly $1 billion in value. According to allegations from the SEC, his actions caused between a 64 to 72 percent disparity between the actual company income and its reported value.

The scheme unraveled when an operations controller for the company directly contacted the companies that Poseidon Concepts was supposed to be dealing with. Upon discovering the truth, the employee notified the company’s board of directors.

After Poseidon Concepts disclosed the fraud, the stock lost almost 99 percent of its value in only three months.

Call a Los Angeles Securities Fraud Lawyer Today

If you invested with Joseph Kostelecky or Poseidon Concepts Corporation, or suffered a loss and suspect your broker of securities 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.

Stock trading screen ticker.

Former Jeffries Trader Facing Retrial for Securities Fraud

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Federal prosecutors are attempting to convict former Jeffries trader Jesse Litvak for the second time with securities fraud charges after his original 2014 conviction was overturned on appeal to the Second Circuit.

Litvak was convicted for letting bond buyers and sellers think his firm was making less than it actually was on certain transactions, which led to a $2 million profit for the firm. His conviction was overturned in December, as the court tossed charges that he defrauded the Treasury Department’s Troubled Asset Relief Program (TARP), setting up the current retrial on charges that he broke criminal securities laws when dealing with asset managers.

Litvak’s trades involved the now-infamous residential mortgage-backed securities – home loans that were bundled together and sold to investors. According to the U.S. Attorney’s Office, only broker-dealers knew the true prices of the residential mortgage-backed securities bonds, while buyers and sellers relied on what their broker-dealers told them.

Litvak is accused of padding his costs, keeping investors clueless. Litvak’s attorney stated that he had no obligation to act in the best interests of the companies he sold distressed residential mortgage-backed securities to, likening his statements to what a salesman might say on a used car lot.

His attorney also argued that the asset managers on the other side of the trades were sophisticated investors who have access to proprietary computer programs and teams of researchers to help them make trading decisions.

In at least one instance, a former client found out about the alleged secret profit margins “padded” by Litvak upon receiving an accidental email containing an internal spreadsheet.

Call a Los Angeles Securities Fraud Attorney Today

If you invested through Jeffries trader Jesse Litvak, or have suffered a loss after purchasing residential mortgage-backed securities, 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.

Close up of United States Visa.

California Couple Faces Contempt Over EB-5 Securities Fraud Claims

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A couple involved in securities fraud relating to an EB-5 immigrant investor program for a cancer treatment center was ordered by a California federal judge to explain why they hadn’t followed the court’s order to repay nearly $27 million to investors or face contempt charges.

In September 2016, the U.S. Securities & Exchange Commission (SEC) won its bid to get husband and wife Charles Liu and Xin Wang to turn over money raised from at least 50 investors despite their claims that they could not come up with the money. Liu and Wang raised the money from proposed investors to construct a cancer treatment center in 2014 – 18 months later no construction had taken place at the designated site.

The couple was ordered to show cause as to why they shouldn’t be held in civil contempt after failing to comply with orders to answer questions regarding their finances and failing to respond to the SEC’s interrogatories. Instead of using investors’ money for its stated purpose, Liu was accused of transferring $11 million to three marketing firms in China, including one where he is the CEO and chairman. An additional $7 million went into his and Wang’s personal accounts. According to the SEC, Liu also told Chinese press that he’d pocketed some of the money.

Liu and Wang solicited investments through the government’s EB-5 program, in which investors invest at least $500,000 in a commercial enterprise. As part of the program, investors become eligible for a two-year work and residency visa and the potential for permanent residency in the United States. We reported about this EB-5 Securities Fraud earlier here.

The couple’s funds were frozen by the court in June, along with those of three corporate defendants, all of whom were a part of the failed cancer treatment project: Beverly Proton Center LLC, Pacific Proton Therapy Regional Center LLC and the Pacific Proton EB 5 Fund LLC. The SEC is seeking to hold these companies in contempt for failing to allow access to their corporate books.

Call a Los Angeles Securities Fraud Attorney Today

If you invested with Charles Liu or Xin Wang or think you may be involved with a case of EB-5 Securities Fraud, believing that your investment would help secure you a visa to the U.S., 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.

Credit Suisse Credit Suisse logo on a white wall of building.

Settlement for Credit Suisse Mortgage-Backed Securities

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In what could be the last major settlement with the Department of Justice over the 2008 financial crisis, Credit Suisse Group AG agreed to pay $5.28 billion to settle charges related to sales of Credit Suisse mortgage-backed securities. The settlement brings a long-standing investigation into the marketing and packaging of Credit Suisse mortgage-backed securities to a close.

In a statement from Credit Suisse, $2.48 billion of the settlement is a civil money penalty while $2.8 billion has been set aside for consumer relief over the next five years after the settlement is finalized. Relief includes loan modifications and other measures intended to help borrowers remain in their homes.

The announcement came hours after Deutsche Bank agreed to pay a combined $7.2 billion in penalties and consumer relief in a similar settlement with the DOJ. Barclays was sued over problematic mortgage bonds as well. The settlements with Credit Suisse and Deutsche Bank are expected to be the last major ones resulting from the financial crisis. In 2012, President Obama created a task force to uncover lending and banking fraud, which has resulted in billions of dollars in settlements with the Justice Department.

Other major players have paid billions to settle claims, including JPMorgan Chase, Citigroup Inc., Bank of America, and Morgan Stanley, among others – each paying between $2.6 and $17 billion over the past several years as a result of their actions with respect to mortgage-backed securities.

Call a Los Angeles Securities Fraud Attorney Today

Big banks and lenders are not above the law. If you invested in Credit Suisse mortgage-backed securities, 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.

Trading screen as used by Charles Dushek for securities fraud.

Advisor Charles Dushek Accused of Securities Fraud

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Chicago-based investment adviser Charles Dushek was charged by federal prosecutors with fraud after allocating winning and losing trades among his family and client investors, netting himself over $1 million along the way. Capital Management Associates Inc.’s Charles Dushek held $25 million for clients, according to the indictment filed against Dushek. He and an unnamed co-conspirator allegedly put the profits from good trades into CMA’s own accounts but would put losses from bad trades on the ledgers of its customer accounts.

According to the indictment, Dushek falsely represented that their policy was to allocate investment opportunities on a fair and equitable basis, all the while knowing that he and a “co-
schemer” intended to defraud clients by unfairly allocating profitable trades away from clients and into their own accounts. Dushek was accused of keeping a “winners” and “losers” spreadsheet, waiting days after trades were made to apportion funds among accounts.

Charles Dushek faced similar charges from the Securities & Exchange Commission (SEC) in 2012. In that matter, Dushek was accused of selling 500 shares of Pepsi stock, putting the proceeds of the sale into his own personal account. He did the same with shares of Johnson & Johnson and other major companies. The SEC barred Charles Dushek from serving as a broker or being associated with any broker.

Call a Los Angeles Securities Fraud Attorney Today

If you invested with Charles Dushek or Capital Management Associates, or suffered a loss and suspect your broker of securities 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.

Wine bottles on the shelf at Premier Cru

Premier Cru Owner John Fox Sentenced in Ponzi Scheme

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A California federal judge sentenced the owner of a bankrupt wine store to 6 ½ years in prison for operating a Ponzi-like scheme in which he pretended to sell wine in advance of its arrival from Europe. The owner was keeping the money instead.

The owner of the store, John Fox, pled guilty to allegations that he sold wine through his company, Premier Cru, but failed to purchase the wine and instead spent the money on cars, golf club memberships, and more.

Between 2010 and 2015, Premier Cru owner John Fox sold or attempted to sell nearly $20 million in wine that he never actually purchased before adding the items to his inventory. Fox would often falsify purchase orders, then use those orders to sell to customers, promising that they would receive their wine between 6 months and 2 years from the purchase date.

Premier Cru owner John Fox was accused of embezzling directly from his business by charging the company’s accounts to pay for personal expenses and making transfers to other personal accounts, sometimes using fake names to do so.

When Premier Cru owner John Fox did contract to buy European wine, he promised to pay suppliers within 30 days but admitted it was a lie, since he spent money from new customers on himself and to pay previous customers for wine that never got delivered.

Premier Cru owner John Fox filed for Chapter 7 bankruptcy protection in January. At the time of the filing, customers had paid about $45 million for wine that hadn’t been delivered.

Call a Los Angeles Ponzi Scheme Attorney Today

If you are a victim of Premier Cru owner John Fox or have lost money through a similar Ponzi Scheme, contact an experienced Los Angeles securities attorney today for a consultation to discuss your rights and options.

Male oil executive looks out at oil plant.

Sethi Petroleum Executive Liable for Securities Fraud

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The head of a petroleum company was found guilty of selling securities in violation of federal law after a Texas court ruled that the executive lied to investors about the company’s relationship with major oil producers.

The Securities & Exchange Commission (SEC) was awarded summary judgment on its claims of securities fraud against Sameer Sethi after the agency provided enough evidence to establish that 1.) the investment at issue here was a security investment; and, 2.) the company mischaracterized its relationships with major oil and gas companies in order to lure investors to the project.

Through sales calls, Sethi advertised that Sethi Petroleum worked with a number of major players in the petroleum industry, and made similar statements in the press and on social media.

As a result, the court found that “each of these statements would lead a reasonable investor to believe that Sethi Petroleum had present relationships with major gas and oil companies at the time that the statements were made…(but) only had interests with Irish Oil & Gas, Inc., a small, private oil company.”

Sethi was unable to dispute that his claims had some basis in fact, and that they did not create a danger of misleading investors as a result. Sethi raised more than $4 million from investors to fund a program that promised 20 oil and gas wells, but channeled that money to paying himself and his employees.

He also lied about progress of wells under construction as well as his history of criminal and regulatory violations. 90 investors were promised a 62.5% net working interest on the wells and were told that company-owned wells were producing 1 million barrels of oil per month. In fact, Sethi Petroleum wells were only producing between 9,000 and 14,000 barrels per month, while investors retained only .15 to 2.5% ownership of said wells.

Of the $4 million raised, less than $1 million was invested in the wells, while Sethi and his father pocketed $577,000, other employees received $1.1 million and sales employees another $1.04 million. Sethi also failed to disclose to investors that the company was facing litigation to rescind the purchase of wells it already owned.

Call a Los Angeles Securities Fraud Attorney Today

If you invested with Sethi Petroleum or suffered a loss after finding out you were misled, 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.

Solar panels from SunPower Corporation against a blue sky

SunPower Corporation Accused of Insider Trading

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A solar panel maker found itself facing a lawsuit after being accused by investors of insider trading and making misleading statements to shareholders, causing its stock price to drop dramatically.

SunPower Corporation and two of its executives face charges stating that for nearly six months the company misled investors about its faltering financial outlook until it was forced to adjust downward, causing stock prices to fall 30 percent in one day.
Trustees of the police and fire retirement system of Warren, Michigan, brought the investor suit, claiming that the company’s misleading statements caused share prices to drop from $14.78 to $10.31, and accused the two executives of dumping $1.2 million in stock in advance of the company’s negative announcement.

According to the lawsuit, executives of SunPower Corporation knew or disregarded the negative factors impacting the company’s business prospects as early as the beginning of 2016, breaching their fiduciary duty to their shareholders by continuing to cast a positive light on their performance for several months.

On August 9, the company filed statements claiming that several “near-term challenges” were expected to impact their business and financial performance. Further bolstering the plaintiffs’ argument was a statement made by CEO Tom Werner, claiming they knew of the problems as early as May 2016. Company CFO Charles Boynton made statements as late as May, highlighting SunPower’s expectation of exceeding its financial forecast.

SunPower Corporation shareholders argue that despite executives’ rosy outlook, demand decreased while project completion timelines increased, and the company was preparing to downsize. More importantly, the projections are alleged to have kept stock prices artificially high, only dropping once the truth came out.

The suit seeks monetary damages and fees and for SunPower Corporation to reform its business structure. A separate class action was filed in August, which contains similar securities-related charges.

Call a Los Angeles Securities Fraud Attorney Today

If you invested in SunPower Corporation, or believe you have suffered a loss as a result of misstatements or omissions of fact made by a company that you own stock in, 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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Court Rules in Salman Insider Trading Case

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In the first hearing on an insider trading case in nearly 20 years, the United States Supreme Court unanimously upheld a conviction for insider trading from tips received from the accused’s brother-in-law. The court ruled that traders can be held liable even if the insider didn’t receive a financial benefit for passing along the tip as long as the trader and the insider are friends or relatives.

The court rejected Bassam Salman’s argument that he couldn’t be convicted for passing along tips given by his future brother-in-law Maher Kara because he never received any benefit – a ruling that partially overturns the 2nd Circuit Newman decision, helping to settle a rift with the 9th Circuit. In the 9th Circuit, justices previously had ruled that prosecutors do not need to prove that a tipster received concrete benefits for passing along information as long as it can be proved that the beneficiary and the tipster were friends or related to each other.

Although the decision in the Salman insider trading case resolves the split between the 2nd and 9th Federal Circuits, the Court preserved the 2nd Circuit’s holding that traders must know that their information came from an insider. The ruling upholds the 1983 Dirks v. SEC decision that gifts of confidential information from business executives to relatives violate securities laws.

The court noted that there might still be circumstances where assessing liability for gifting information could be difficult (given the nature of the relationship in question), but declined to address “those difficult cases” in this ruling.

Call a Los Angeles Securities Attorney Today

Trading on insider information is a punishable offense, and both tipster and recipient alike can be prosecuted.

Contact an experienced Los Angeles securities attorney today for a consultation to discuss your rights and options if you have concerns trading based on information you may have received or are worried you may have disclosed to someone else.