Category: Securities Fraud

Puerto Rican securities and Puerto Rico play a part in Merrill Lynch case.

Merrill Lynch Pays Fine Over Puerto Rican Securities

dkradmin

The Financial Industry Regulatory Authority (FINRA) announced that Merrill Lynch will pay more than $7 million in fines for inadequately supervising its customers’ use of leverage. The settlement includes Merrill Lynch repaying some customers for losses on Puerto Rican securities in leveraged accounts.

Merrill Lynch Pierce Fenner & Smith Inc. will pay a $6.25 million fine to settle FINRA allegations that the brokerage firm failed to ensure customers were not using funds from certain credit lines to buy securities. The firm will pay an additional $780,000 in restitution to 22 customers of its Puerto Rican branch after FINRA found it failed to supervise the suitability of their transactions, leading to losses after the customers’ funds became highly concentrated in risky Puerto Rican securities.

According to FINRA, from January 2014 through November 2014, Merrill Lynch failed to maintain adequate supervisory systems to ensure compliance with applicable law when operating a securities-based lending program called loan management accounts (LMAs).

Under that program, customers could open an LMA to borrow money from Merrill’s banking affiliate, Bank of America, using securities in their Merrill Lynch accounts as collateral. During the time in question, customers opened 121,000 LMAs and received more than $85 billion in total credit.

FINRA charged Merrill Lynch with failing to train its representatives on the different types of accounts – namely whether loan proceeds could be used to buy securities.  Merrill also was sanctioned for over-concentrating Puerto Rico customer accounts in risky securities purchased with LMAs. As a result, approximately 25 customers with modest net worth and investment objectives suffered heavy losses after investing more than 75% of their account assets in the securities despite the risks.

Call a Los Angeles Securities Fraud Attorney Today

Investing can be quite complicated, and even brokers and brokerage firms can make serious mistakes. If you invested with Merrill Lynch or in risky Puerto Rico 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.

Male broker works at his office.

Former Merrill Lynch Broker Charged in Million-Dollar Theft

dkradmin

A Chicago-based investment adviser with Merrill Lynch was charged last week with stealing more than $1 million from two of his clients by funneling the money through a local chamber of commerce before taking the money for himself. Broker theft is one of the worst types of stockbroker misconduct.

Alec Rivera is facing one count of wire fraud for allegedly transferring $1 million from two client investment accounts without their knowledge between 2010 and 2013. Prosecutors claim Rivera then sent the money to accounts belonging to the Philippine American Chamber of Commerce of Greater Chicago, where he was treasurer. He then cut himself checks from the accounts.

In order to hide his fraud from his clients, Rivera had Merrill Lynch colleagues mail his clients’ statements directly to him, then sent doctored ones to his clients that did not reflect the transfers. He also told colleagues that the clients authorized the transfers.

The Merrill Lynch broker charged is no longer a licensed broker, as the Financial Industry Regulatory Authority (FINRA) banned him in 2014 after the allegations of his theft came to light.

Call a Los Angeles Securities Fraud Attorney Today

If you had an account with Alec Rivera at Merrill Lynch, or you have suffered losses due to the fraudulent actions of your broker or brokerage firm, 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.

Theranos failed blood panel test.

Theranos Sued by Investment Fund

dkradmin

An investment fund filed suit against California-based blood-testing startup Theranos in Delaware Chancery Court Monday, seeking to rescind its stock purchase agreement and claiming damages as a result of Theranos’ allegedly fraudulent misrepresentations, omissions, and violations regarding the fund’s investment in the company.

The lawsuit, filed by Partner Investments LP, comes on the heels of Theranos’ announcement that it would shutter its clinical labs and in-store “wellness centers” following sanctions over its allegedly shoddy lab practices. Also named in the suit were Theranos founder Elizabeth Holmes and former president Ramesh Balwani.

The lawsuit is the latest in a string of issues the company is facing, including sanctions imposed by the Centers for Medicare and Medicaid Services over poor lab practices resulting in a two-year ban on lab ownership by Holmes, as well as several quality control issues at the California-based labs.

Theranos also pulled its request for FDA clearance for a Zika blood test after an inspection revealed the data collected by the company had been done without a patient-safety protocol in place.

Theranos made headlines for its proprietary blood-testing device, which claimed it could obtain the same tests from a few drops of blood, where other companies required multiple vials. Instead, an investigation by The Wall Street Journal raised serious doubts about its accuracy leading Theranos to void the results of several thousands of test results.

Several other proposed class actions are currently pending against Theranos and Walgreens, where many in-store “wellness centers” were located.

Call a Los Angeles Securities Attorney Today

If you suffered a loss after investing in Theranos, or if you visited one of their wellness centers, 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.

California Richard Weed will face the justice system in his court case.

California Lawyer Richard Weed Free During Appeal

dkradmin

California lawyer Richard Weed was found guilty of operating a pump-and-dump and unregistered securities scheme in Boston, but was allowed to remain out of jail while he appeals his conviction to the First Circuit.

Weed plans to claim that under federal law, the securities he was selling did not need to be registered at all, which he advised in opinion letters at the time. He is also claiming that because the majority of his trial focused on the sale of unregistered securities, his “pump and dump” conviction should also be overturned because his whole case was infected.

A “pump and dump” scheme involves artificially inflating the price of a stock through the release of false positive statements to drive prices up, then allowing the shareholders who were in on the scheme to flood the market with their shares, turning a large profit while driving the price back down for unwitting investors and causing significant losses.

The district judge did not find much merit in Weed’s arguments, but allowed him to remain free given the “novel” nature of his arguments before the court. Weed is claiming that an exemption to registering securities exchanged “by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange” applies in this case.

California lawyer Richard Weed was convicted in May of securities fraud and wire fraud that allowed his co-conspirators to sell off shares of ticket broker CitySide Tickets, Inc. and other companies that were essentially worthless. He will remain free pending his appeal to the First Circuit.

Call a Los Angeles Securities Fraud Attorney Today

If you invested in CitySide Tickets, Inc. or with California lawyer Richard Weed, or believe you may have been the victim of a pump and dump scheme, 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.

 

Columns from court house with shadows.

Avalanche Biotechnologies Seeks to Avoid IPO Suit

dkradmin

California Drug Maker Avalanche Biotechnologies Inc. is in court after shareholders brought a proposed class action IPO suit regarding clinical trials aimed at combating vision loss.

The plaintiffs allege that Avalanche knew that its vision loss gene therapy was ineffective before its initial public offering (IPO). Avalanche initially claimed tentative positive safety trial results, and that the drug was “well tolerated” in ongoing clinical trials.

Avalanche seeks a dismissal of the IPO suit, stating that the shareholders’ assertions relied on a logical leap without the facts to back it up. In particular, the plaintiffs take issue with the safety of the drug, stating that just because the drug is not having harmful effects does not mean that it is working.

According to the shareholders, some of the safety data available to the company was not revealed to its investors – information that the market would have wanted to know.

Also at issue was how to interpret the meaning of “well tolerated” – either within the framework of the Food and Drug Administration safety frameworks or with respect to the gene therapy’s success.

If Avalanche’s motion to dismiss is denied, the case will continue moving forward. We will keep you updated with news as the case progresses.

Call a Los Angeles Stock Fraud Attorney Today

If you invested in Avalanche, 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.

Financial documents, pen, calculator on a desk against a blurry office backdrop.

What is a Shareholder Derivative Lawsuit?

dkradmin

As a shareholder, you own a “share”, or a percentage of ownership, in the company in which you have invested. The officers and directors of the company are obligated to act in the best interests of the company at all times. If they fail to act in the company’s best interest by wasting corporate assets, profiting personally at the company’s expense, or failing to keep shareholders informed of material information, you have certain options to protect the corporation from the officers and directors who are supposed to act on behalf of the corporation.

One of these options comes in the form of a shareholder derivative lawsuit, or a stockholder suit. This type of litigation is brought by one or more shareholders to remedy or prevent a wrong to the corporation. In a derivative suit, the plaintiff shareholders file suit in a representative capacity on a cause of action that belongs to the corporation but that the corporation is unwilling to pursue.

The principal reason that derivative suits are permitted is that they provide a means for shareholders to enforce claims of the corporation against officers and directors of the corporation. Officers and directors in control of the corporation are unlikely to authorize the corporation to bring suit that only arose because of the directors’ and officers’ own wrongdoing. So a derivative suit permits a shareholder to prosecute these claims in the name of the corporation.

If more than one shareholder brings the same type of lawsuit, the court might consolidate claims into one case, or even allow for the creation of a class, a group of people who are similarly affected, and might be able to raise the same claims in their own lawsuit.

Call a Los Angeles Securities Fraud Attorney Today

If you are a shareholder in a company whose corporate officers or directors are not acting in the best interest of the company, 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.

Hand of two stockbrokers looking at financial documents with disagreement.

SEC Announces $1.5M Settlement with LA’s Wealthpire

dkradmin

The Securities & Exchange Commission (SEC) recently announced that a Los Angeles-based, self-styled “whiz kid” and his company Wealthpire have agreed to pay $1.5 million to settle a complaint alleging violations of Rule 10b-5, that he and his company defrauded subscribers through false statements and misrepresentations.

According to the complaint, Manuel Jesus and his newsletter company Wealthpire, Inc. used advertising materials and websites proclaiming him the “untutored prodigy of stock investing,” going by the alias Manny Backus. Wealthpire materials claimed that Backus made millions before “deciding to help other investors” by starting an alert service to let subscribers copy his trades.

Between January 2012 and September 2014, Backus was apparently not trading in the same stocks recommended by his services as he claimed. He was also not the one making all of the recommendations, either – a man named Robert Joiner was paid by Wealthpire to make all of the stock picks for one service without any input from Backus, and posed as Backus during certain chat room sessions online with investors.

Backus was also accused of making misrepresentations to Wealthpire subscribers, including false claims about one particular stock alert that allegedly made recommendations resulting in returns of over 1400% in the past.

The SEC issued a warning about the use of such “newsletter” services as being used for fraud. Backus and Wealthpire agreed to pay disgorgement of nearly $1.14 million plus interest of nearly $113,000. Backus also agreed to a $235,000 penalty.

Call a Los Angeles Stock Fraud Attorney Today

If you subscribed to Wealthpire, or have questions about a newsletter service you subscribed to offering stock tips, 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.

Rolled up dollar bill in a cage meant to conceptualize enticing money in illegal situations.

California Pair Tied to $900M Ponzi Scheme Sent to Prison

dkradmin

A stepmother and stepson who helped run a penny auction company tied to a massive $900 million Ponzi scheme were sentenced to a combined nine years in prison for their roles in the scheme.

Dawn Olivares, once the COO of ZeekRewards, was sentenced to 7.5 years in prison for her role in persuading investors to fund an alleged retail profit-sharing business that was mostly paid out with other investors’ money. Her stepson, Daniel Olivares, was sentenced to two years in prison for his role as a senior technology officer.

Each pled guilty to one count of investment fraud conspiracy, and Dawn Olivares also pled guilty to one count of tax fraud conspiracy in February 2014. An estimated 900,000 investors lost money in the Olivares’ scam.

They, along with Paul Burks, ran Zeekler, an internet-based penny auction company. They convinced investors that their company was generating significant retail profits from its penny auctions, and that investors could share in the profits through investment.

Instead of actual profit sharing, the money was used to pay older investors, while Burks took home $10.1 million and the Olivareses received $14.6 million.

Call a Los Angeles Stock Fraud Attorney Today

If you invested with Zeekler, ZeekRewards, Dawn Olivares or Daniel Olivares, 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.

 

Image showcasing a house made from dollars, metaphor for a ponzi scheme.

How to Avoid Ponzi Schemes and Scams

dkradmin

When you invest your money, the goal generally is for your investments to provide you a “positive return” – in other words, a profit on your investment. It stands to reason, therefore, that the more money you can make on an investment can make an investment more attractive.

This is precisely what many Ponzi (or “pyramid”) schemers rely upon: investors’ desire for investment returns that are significantly greater  than those provided by traditional investments vehicles.

Generally speaking, ponzi schemes and scams invest little to none of your money in the purported investment. Instead, your money is used to pay the promised exorbitant “investment returns” to earlier investors. These payments fool early investors into believing the false promises of high returns with little risk. Investors then pump even more money into the scam after receiving these so-called investment returns. They also often convince others to invest in the scam. This may continue as long as people continue investing in the operation – years, or even decades, in some cases – which provides a continuing flow of new investor money that the fraudsters can use to pay “investment returns” to earlier investors.

If you are approached with an investment opportunity that seems too good to be true, it probably is. Be on the lookout for the following before investing: extremely high rates of return promised, especially from unregistered investments or unlicensed brokers; very complicated investment strategies, failure to provide the proper paperwork; and last but not least – difficulty receiving payments when asked.

Call a Los Angeles Ponzi Attorney Today

If you believe you have the victim of a Ponzi scheme, you are certainly not alone, and 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.

Image of oil drill in field in California.

$7.6M Oil Settlement for Pacific Coast Oil Trust

dkradmin

A California judge said he was ready to approve a $7.6 million settlement between Pacific Coast Oil Trust and several bank underwriters after a lawsuit was filed by investors claiming they were misled by the company.

The judge for the case determined the settlement was “fair and reasonable.” The deal allowed defendants to withdraw from the settlement if an undisclosed number of class members opted out, known as a “blow provision.”

The settlement will resolve claims brought by investor Thomas Welch in July 2014. Welch claimed that before the company’s initial and secondary public offerings, the trust and two of its top officials had understated the risks that would impact their ability to issue stable or increasing profit payouts.

In addition to the trust, the suit named former CEO Halbert Washburn and Randall Breitenbach and several banks as defendants, including Barclays Capital, Citigroup, JP Morgan, UBS, and several more.

The proposed class consisted of investors who purchased Pacific Coast Oil Trust “units” during the May 2012 IPO and the Sept. 2013 secondary offering. According to the plaintiffs, because the trust only made information regarding fluctuating oil prices public after the IPO, prices declined substantially.

Generally speaking, oil and gas trusts like the one at issue here are a type of commodity investment in which an investor purchases a trust unit for the right to future net profits from a set of wells.

These trusts, on the other hand, have an incentive to maintain monthly profit distributions at least at a stable rate to satisfy the unitholders. Because the trust failed to disclose the risks and uncertainties known to them at the time, the investors brought suit.

Call a Los Angeles Securities Attorney Today

If you invested with Pacific Coast Oil Trust or have questions about an investment that you think you were misled by, you may have certain legal rights which require your immediate attention.

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