Weekly Enforcement Action Tracker (Apr 8 – Apr 13)

Financial Enforcement Action Summary

SEC

19 Enforcement Documents

$5,145,829.66 in Fines

Penalties: $90,435.00
Respondent: Philip John James, CA and Kevin Silverwood, CA
Violation: This matter involves financial reporting fraud conducted by two former employees of Tech Data’s U.K. subsidiary. In fiscal years 2012 and 2013, Respondents Philip John James, the subsidiary’s Finance Director, and Kevin Silverwood, the subsidiary’s Financial Management Controller, fraudulently overstated Tech Data’s income by concealing uncollectible receivables that should have been written off, reversing previously-recorded expenses and foreign exchange losses, and prematurely recognizing a vendor rebate. As a result of this fraud, Tech Data overstated its consolidated pretax income by 7% in the third quarters of fiscal years 2012 and 2013 and by 5% in the fourth quarter of fiscal year 2013…. Read More

Penalties: TBD
Respondent: Longfin Corp., et al.
Violation: Shortly after Longfin began trading on NASDAQ and announced the acquisition of a purported cryptocurrency business, its stock price rose dramatically and its market capitalization exceeded $3 billion. The SEC alleges that Amro Izzelden “Andy” Altahawi, Dorababu Penumarthi, and Suresh Tammineedi then illegally sold large blocks of their restricted Longfin shares to the public while the stock price was highly elevated. Through their sales, Altahawi, Penumarthi, and Tammineedi collectively reaped more than $27 million in profits… Read More

Penalties: TBD
Respondent: Troy C. Baldridge
Violation: Baldridge pleaded guilty to one count of mail fraud in violation of 18 U.S.C. § 1341 before the United States District Court for the Eastern District of Virginia, in United States v. Troy C. Baldridge, Case No. 3:16-cr-00148-HEH. On March 13, 2017, the Court sentenced Baldridge to 41 months imprisonment followed by three years of supervised release and ordered Baldrige to pay restitution… Read More

Penalties: TBD
Respondent: Daryl G. Bank and Bobby D. Jones
Violation: Respondent engaged in securities fraud, acted as an unregistered broker or dealer, and offered and sold securities in unregistered transactions, in connection with a $12.5 million securities offering fraud orchestrated by Janus Spectrum LLC (“Janus Spectrum”) and its current and former principals, David Alcorn (“Alcorn”) and Kent Maerki (“Maerki”)… Read More

Penalties: N/A
Respondent: Benjamin Wey, et al.
Violation: The SEC’s complaint alleges violations or the aiding and abetting of violations of the antifraud provisions and the disclosure and reporting provisions of the federal securities laws… Read More

Penalties: N/A
Respondent: Guardian 8 Holdings, et al.
Violation: Failed to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder because it has not filed any periodic reports with the Commission since the period ended September 30, 2015… Read More

Penalties: TBD
Respondent: Laura Pendergest-Holt
Violation: In connection with the sale of certificates of deposit offered by SIB to the SGC customers, Holt misled investors and others who communicated directly with investors to believe that SIB’s multi-billion dollar portfolio of assets was managed by a global network of portfolio managers and monitored by a team of SFG analysts in Memphis, Tennessee, which she supervised… Read More

Penalties: TBD
Respondent: The Lifepay Group, LLC, et al.
Violation: Stanley is alleged to have used roughly $1.3 million of the Lifepay offering proceeds for personal expenses, including country club memberships, daily living expenses, travel, and entertainment expenses. In addition, Watts and Stanley allegedly engaged in shell game transactions so they could use the vast majority of SMDRE investor funds for personal expenses and keep the Lifepay Ponzi scheme afloat… Read More

Penalties: N/A
Respondent: SEC Complaint – The Lifepay Group, LLC, et al.
Violation: From 2010 to 2017, Stanley ran a Ponzi scheme through Lifepay, a retirement planning and real-estate investment company he owned and controlled. Stanley raised approximately $2.4 million by selling Lifepay promissory-note securities in unregistered transactions to at least thirty investors located in Louisiana and Texas… Read More

Penalties: N/A
Respondent: SEC Complaint – William C. Gennity and Rocco Roveccio
Violation: Gennity and Roveccio, as registered representatives from 2012 to 2014 at Alexander Capital, L.P. (“Alexander Capital”). a New York City broker-dealer violated the antifraud provisions of the federal securities laws… Read More

Penalties: $411,107.38
Respondent: William C. Gennity and Rocco Roveccio
Violation: Gennity and Roveccio churned customer accounts, engaged in unauthorized trading, and concealed material information from their customers – namely that the transaction costs associated with their recommendations (commissions, markups, markdowns, postage, fees, and margin interest) would almost certainly outstrip any potential monetary gains in the accounts. According to the SEC’s complaint, customer losses totaled $683,038 while Gennity and Roveccio received approximately $280,000 and $206,000, respectively, in commissions and fees… Read More

Penalties: $3,841,301.92
Respondent: Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani
Violation: Operated under an alias Rashid K. Khalfani and hid his past criminal convictions, with raising nearly $2 million through his firm Capital Cove Bancorp LLC for purported investments in two private funds that invested in distressed real estate. Khalfani allegedly enticed investors by falsely boasting that REO Opportunities Fund II LLC and Rittenhouse Square Trust LLC were “vetted, qualified, and registered” with the SEC and several other government agencies. Khalfani allegedly stole investor money from both funds, and in some instances used it to purchase his own real estate… Read More

Penalties: N/A
Respondent: Iftikar Ahmed, et al.
Violation: Used fraudulent and deceptive means to divert into his personal bank accounts more than $67 million from ten different venture capital investments. In its ruling on the SEC’s summary judgment motion, the court found that, with respect to each of the ten investment deals, Ahmed violated certain anti-fraud provisions and related rules of the Investment Advisers Act of 1940, the Securities Exchange Act of 1934 and/or the Securities Act of 1933… Read More

Penalties: TBD
Respondent: Gregory M. Bercowy
Violation: Between August 4 and August 15, 2016, Bercowy, who is associated with a state-registered investment adviser, sold shares of certain Fortune 500 companies, including Abbott and Apple, in his relative’s brokerage account in order to buy over three million shares of Aureus at a total cost of more than $2.8 million… Read More

Penalties: TBD
Respondent: Wellness Center USA, Inc.
Violation: From 2013 through 2014, Wellness Center USA, Inc. (“Wellness”) issued false and misleading Forms 10-K and 10-Q concealing a scheme by Andrew Kandalepas, its President, Chief Executive Officer, Chief Financial Officer, and Chairman of the Board of Directors, to misappropriate $450,000 from the company… Read More

Penalties: N/A
Respondent: Michael S. Moses
Violation: On January 17, 2018, a final default judgment was entered against Moses, permanently enjoining him from future violations of Section 17(a)(2) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder, and Section 206(4) of the Advisers Act and Rule 206(4)-8(a)(1) thereunder, in the civil action entitled Securities and Exchange Commission v. Michael S. Moses and Moses Investment Company, Civil Action Number 1:17-CV-2296-RBJ, in the United States District Court for the District of Colorado… Read More

Penalties: $95,286.00
Respondent: Li, Company, PC, and Tony Zhicong Li, CPA
Violation: These proceedings arise out of improper professional conduct by Li & Co. and Li in connection with the audit and interim reviews of the financial statements of Wellness Center USA, Inc. (“Wellness”). Li & Co. acted as the independent public accountant with respect to the financial statements included in Wellness’ 2013 Form 10-K (“Wellness Audit”) and each of its 2013 Forms 10-Q (“Wellness Reviews”). 4 Li was the engagement partner for the Wellness Audit and Wellness Reviews… Read More

Penalties: $496,026.36
Respondent: Matthew T. Mushlin
Violation: Between 2012 and 2017, Matthew T. Mushlin solicited purchases of approximately $2,000,000 worth of stock in a microcap company named Wellness Center USA, Inc. (“Wellness”) through a series of private placement offerings. Mushlin collected $232,925 in commissions for acting as an unregistered broker in violation of the Exchange Act… Read More

Penalties: TBD
Respondent: Andrew J. Kandelapas
Violation: Kandalepas took $450,000 in unauthorized withdrawals from the company and then concealed his actions by causing Wellness to characterize his withdrawals as salary, prepayments, or loans in false and misleading Forms 10-K and 10-Q. The complaint further alleges that Kandalepas caused the company to issue false and misleading press releases touting non-existent sales of medical devices by a Wellness subsidiary… Read More

Penalties: $211,673.00
Respondent: William Betta, Jr., Travis A. Branch, James J. Caprio, Troy L. Gagliardi, Russell M. Kautz, Barry M. Kornfeld, Shane A. McCann, Clifford A. Popper, Alfred B. Rubin, and Steven I. Shrago
Violation: Committed fraud related to their sale of Collateralized Mortgage Obligations (“CMOs”), which are created from mortgage-backed securities. The SEC’s complaint alleged that the brokers misrepresented the CMOs to their customers as safe, secure, liquid investments that guaranteed by the United States government and suitable for retirees, retirement accounts, and investors with conservative investment goals. In fact, according to the complaint, many of the CMOs purchased for Brookstreet customer accounts carried no government backing, were largely illiquid, and were only suitable for sophisticated investors with a high-risk investment profile… Read More

FINRA

20 Enforcement Documents

$2,250,000.00 in Fines

Penalties: $5,000.00
Respondent: Philip M. Winstead
Violation: Winstead acted as an agent under a written power of attorney for Firm customer SW and received monthly compensation from SW for his services averaging between $4000 and $8000. Winstead failed to provide written notice to Cambridge of his outside business activities involving SW. As a result, Winstead violated FINRA Rules 3270 and 2010 and NASD Rules 3030 and 2110…Read More

Penalties: $20,000.00
Respondent: Brent Lott
Violation: Knowingly and substantially aided and abetted another individual, Steven Heinz, in engaging in the recommendation and sale of securities at a time when (i) Heinz was not registered with FINRA and not associated with any FINRA member firm, and (ii) Heinz was not registered with the state of Utah where both Heinz and the customers resided… Read More

Penalties: N/A
Respondent: Domingo Gonzalez
Violation: Gonzalez was given a check from a Firm customer in the approximate amount of $2,629, which the customer asked Gonzalez to deposit into her Firm account. However, Gonzalez endorsed the check to himself and deposited it into his personal bank account, and then used the funds to pay for his personal expenses without the customer’s knowledge or consent. Thus, Gonzalez misused and converted customer funds in violation of FINRA Rules 2150(a) and 2010… Read More

Penalties: N/A
Respondent: Scott W. Palmer
Violation: Palmer acknowledges that he received FINRA’s request and will not appear for on-the-record testimony at any time. By refusing to appear for on-the-record testimony as requested pursuant to FINRA Rule 8210, Palmer violated FINRA Rules 8210 and 2010… Read More

Penalties: $200,000.00
Respondent: Simmons First Investment Group Inc
Violation: The Firm failed to establish and implement an anti-money laundering (“AML”) program that could reasonably be expected to detect and cause the reporting of suspicious transactions occurring in three accounts connected to one of the Firm’s customers that represented the vast majority of the Firm’s money movement activities (the “John Doe accounts”)… Read More

Penalties: $5,000.00
Respondent: Wolf A. Popper
Violation: Popper made and sent to prospective customers numerous retail communications concerning an investment strategy that he had developed involving the purchase of variable annuities… Read More

Penalties: $10,000.00
Respondent: David W. Ingle
Violation: In June and November 2015, Ingle created and distributed two proof of funds letters that contained misleading statements. Ingle’s actions violated FINRA Rule 2010… Read More

Penalties: $45,000.00
Respondent: Paul Frank Mauceli Jr. and Reef Securities, Inc.
Violation: Reef distributed four communications related to Offering M to investors that failed to provide a balanced presentation or a sound basis for evaluating the investments being promoted, contained misleading and unwarranted claims, and, in addition, made prohibited investor profit projections. As a result, Reef violated FINRA Rules 2210(d)(1)(A), 2210(d)(1)(B), 2210(d)(1)(F), and 2010… Read More

Penalties: N/A
Respondent: Kevin J. Lee
Violation: During the course of an ongoing examination, Respondent failed to fully respond to FINRA Rule 8210 requests for information and documents, thereby violating FINRA Rules 8210 and 2010… Read More

Penalties: $5,000.00
Respondent: Mason W. Gann
Violation: Between January 1, 2014, and June 30, 2015, Gann exercised discretion in six customers’ accounts without obtaining prior written authorization from the customers or prior written approval from Berthel Fisher. Through this conduct, Gann violated NASD Conduct Rule 2510(b) and FINRA Rule 2010… Read More

Penalties: $300,000.00
Respondent: Park Avenue Securities LLC
Violation: From January 1, 2013, through March 3, 2015 (the “Relevant Period”), Park Avenue failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to ensure that representatives’ recommendations concerning multi-share class variable annuities complied with applicable securities law, regulations and rules… Read More

Penalties: $25,000.00
Respondent: J.H. Darbie & Co. Inc.
Violation: JH Darbie failed to supervise the variable annuity recommendations and related retail communications of one of its registered representatives, WP, who sent communications to prospective customers that failed to comply with the content standards of FINRA’s advertising rules… Read More

Penalties: $1,575,000.00
Respondent: Instinet, LLC
Violation: INCA failed to establish, document, and maintain a system of risk management controls and supervisory procedures, including written supervisory procedures (“WSPs”) and an adequate system of follow-up and review, reasonably designed to manage the financial, regulatory, and other risks of its market access business… Read More

Penalties: $5,000.00
Respondent: Julie R. Steinbauer
Violation: On September 25, 2017, while associated with AXA, Steinbauer possessed a prohibited device while taking the Series 7 examination, in violation of FINRA Rule 2010… Read More

Penalties: $40,000.00
Respondent: Wedbush Securities Inc.
Violation: Respondent violated SEC Rules 611(a) and 17a-3(a)(6), FINRA Rule 6380A(a)(5)(1), FINRA Rule 4511, FINRA Rule 2010, and NASD Rule 3010 and FINRA Rule 3110. Wedbush effected 2,165 trade-throughs from January 1, 2014, through September 3, 2015, and reported them to the tape with the print protection modifier, an exception to Rule 611, when it had actually relied on the stopped order exception in Rule 611(b)(9), and it failed to document the terms of the stopped orders… Read More

Penalties: N/A
Respondent: Tyler Harris
Violation: Harris acknowledges that he received FINRA’s 8210 requests for information and documents and will not produce the information or documents requested. By failing to produce information and documents as requested pursuant to FINRA Rule 8210, Harris violated FINRA Rules 8210 and 2010… Read More

Penalties: TBD
Respondent: David JC Bolton
Violation: Bolton violated FINRA Rules 2111 and 2010 by engaging in unsuitable trading in the accounts of his two largest customers, one of whom was 101 years old. Specifically, Bolton recommended short-term trading in Class A shares of mutual funds, which generally are longer-term investments to account for upfront sales charges. Bolton also recommended that one customer split his investment into 42 mutual funds across 11 fund families, which disadvantaged the customer by failing to take advantage of certain breakpoints which would have reduced the customer’s up-front sales charges. The customers incurred at least $24,747 in unnecessary sales charges based on Bolton’s unsuitable recommendations… Read More

Penalties: $10,000.00
Respondent: Jonathan R. Belden
Violation: Belden effected approximately 200 securities transactions in seven customers’ accounts without written discretionary authority from the customers and without his employer firm’s, Merrill Lynch Pierce Fenner & Smith, Inc.’s (“Merrill Lynch’s,” or the “Firm’s”), acceptance of the accounts as discretionary. By virtue of this conduct, Belden violated NASD Rule 2510(b) and FINRA Rule 2010. In addition, on four occasions between April 21 and 26, 2017, Belden mismarked order tickets for trades as unsolicited when, in fact, he solicited the trades, in violation of F1NRA Rules 4511 and 2010… Read More

Penalties: $5,000.00
Respondent: Mina A. Mishrikey
Violation: From September 2016 through July 2017, Mishrikey, while registered with FINRA through Deutsche Bank, engaged in an outside business activity even though Deutsche Bank denied his request to do so, in violation of FINRA Rules 3270 and 2010… Read More

Penalties: $5,000.00
Respondent: Peter A. Svigel Jr.
Violation: On December 28, 2017, while associated with AXA Advisors, Svigel possessed prohibited material while taking the Series 7 examination, in violation of FINRA Rule 2010… Read More

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