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International Investing Issues and Risks

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Investing in any security requires careful consideration, and investor risk increases considerably with international investing. Special issues and risks when making investments overseas include:

Legal remedies. Where you purchase a security can impact whether you have, and where you can pursue, legal remedies against the foreign company or any other foreign-based entities involved in your transaction, such as a foreign broker. Even if you sue successfully in a U.S. court, you may not be able to collect on a U.S. judgment against a foreign company, entity or person. You may have to rely on legal remedies that are available in the home country, if any.

Working with a broker or investment adviser. If you are working with a broker, make sure the broker is registered with the SEC. It is against the law for a broker, foreign or domestic, to contact you and solicit your investment unless it is registered with the SEC. If you directly contact and work with a foreign broker not registered with the SEC, you may not have all the protections under the laws of the United States as would be the case if the broker were registered with the SEC.

Costs of international investments. International investing can be more expensive than investing in U.S. companies. In some countries there may be unexpected taxes, such as withholding taxes on dividends. In addition, transaction costs such as fees, broker’s commissions and taxes may be higher than in U.S. markets. You also should be aware of the potential effects of currency conversion costs on your investment. Mutual funds that invest abroad may have higher fees and expenses than funds that invest in U.S. securities, in part because of the extra expense of trading in foreign markets.

Fort Lauderdale Securities Litigation Attorney and FINRA Arbitrator

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.

Peregrine Financial Group Losses Draw Investor Lawsuits

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Peregrine Financial Group (“PFG” or “PFGBest”) is the subject of an increasing number of lawsuits following its bankruptcy filing last week.

The financial derivatives brokerage firm, based in Cedar Falls, Iowa with offices in Chicago, collapsed when founder Russell R. Wasendorf, Sr. was rescued during a suicide attempt. A note he left admits, “Through a scheme of using false bank statements I have been able to embezzle millions of dollars from customer accounts at Peregrine Financial Group, Inc.”

PFG was one of the largest non-clearing U.S. Futures Commission Merchants, with customers, affiliates and brokerage offices in more than 80 countries, according to the firm’s website. For 13 consecutive years, PFGBEST was ranked as one of the nation’s Top 50 Brokers in Futures magazine annual roundup.

A “Futures Commission Merchant” (“FCM”) is defined as an individual or entity that solicits or accepts orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any exchange. FMCs also accept payment from or extend credit to those whose orders are accepted.

Investors are charging that the firm violated a basic broker regulation forbidding the commingling of client funds with other firm monies.

The Commodity Futures Trading Commission, in accordance with the Commodity Exchange Act, requires that customer funds to be segregated and separately accounted for. Specific regulations include:

  • All customer funds shall be separately accounted for and segregated as belonging to commodity or option customers. Such customer funds when deposited with any bank, trust company, clearing organization or another futures commission merchant shall be deposited under an account name which clearly identifies them as such and shows that they are segregated.
  • Each futures commission merchant shall treat and deal with the customer funds of a commodity customer or of an option customer as belonging to such commodity or option customer. All customer funds shall be separately accounted for, and shall not be commingled with the money, securities or property of a futures commission merchant or of any other person, or be used to secure or guarantee the trades, contracts or commodity options, or to secure or extend the credit, of any person other than the one for whom the same are held, with some additional provisions.

The rules of the Chicago Mercantile Exchange (“CME”) similarly prohibit commingling of customer funds with other firm funds.

Approximately $200 million in client funds are allegedly missing.

Fort Lauderdale Securities Litigation Attorney and FINRA Arbitrator

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.

Investors Warned about Exchange-Traded Notes

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An Investor Alert titled Exchange-Traded Notes—Avoid Unpleasant Surprises was issued today by The Financial Industry Regulatory Authority (FINRA).

Exchange-traded notes (ETNs) are a type of debt security that trade on exchanges and promise a return linked to a market index or other benchmark. However, unlike exchange-traded funds (ETFs), ETNs do not buy or hold assets to replicate or approximate the performance of the underlying index.

Some of the indexes and investment strategies used by ETNs can be quite sophisticated and may not have much performance history. The return on an ETN generally depends on price changes if the ETN is sold prior to maturity (as with stocks or ETFs)—or on the payment, if any, of a distribution if the ETN is held to maturity (as with some other structured products).

As FINRA’s Investor Alert explains, an ETN’s closing indicative value is computed by the issuer and is distinct from an ETN’s market price, which is the price at which an ETN trades in the secondary market. Investors should understand that an ETN’s market price can deviate, sometimes significantly, from its indicative value.  If the ETN is trading at a significant premium to its closing or intraday indicative value, investors might want to consider similar products that are not trading at a premium.

“ETNs are complex products and can carry a raft of risks. Investors considering ETNs should only invest if they are confident the ETN can help them meet their investment objectives and they fully understand and are comfortable with the risks,” said Gerri Walsh, FINRA’s Vice President for Investor Education.

Exchange-Traded Notes describes the specific risks associates with ETNs, including:

  • Credit Risk. ETNs are unsecured debt obligations of the issuer.
  • Market Risk. As an index’s value changes with market forces, so will the value of the ETN in general, which can result in a loss of principal to investors.
  • Liquidity Risk. Although ETNs are exchange-traded, a trading market may not develop.
  • Price-Tracking Risk. Investors should be wary of buying at a price that varies significantly from closing and intraday indicative values.
  • Holding-Period Risk. Some leveraged, inverse and inverse leveraged ETNs, are designed to be short-term trading tools, and the performance of these products over long periods can differ significantly from the stated multiple of the performance (or inverse of the performance) of the underlying index or benchmark during the same period.
  • Call, Early Redemption and Acceleration Risk. Some ETNs are callable at the issuer’s discretion.
  • Conflicts of Interest. The issuer of the notes may engage in trading activities that are at odds with investors who hold the notes (shorting strategies, for instance).

FINRA’s new Investor Alert also contains a step-by-step checklist to help investors determine if an ETN is right for them. Click on the link to read the full ETN investor alert.

Fort Lauderdale Securities Litigation Attorney and FINRA Arbitrator

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.

SEC Freezes Assets of Aubrey Lee Price for Florida, Georgia Scam

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A $40 million investment fraud by Aubrey Lee Price targeting Florida and Georgia investors has resulted in a court order freezing the assets of the Georgia-based investment adviser, who has apparently gone into hiding.

The SEC alleges that Aubrey Lee Price raised money from more than 100 investors living primarily in Georgia and Florida by selling shares in an unregistered investment fund (PFG) that he managed. Price purported to invest fund assets in traditional marketable securities, but he also made illiquid investments in South America real estate and a troubled South Georgia bank.

In order to conceal mounting losses of investor funds, Price created bogus account statements with false account balances and returns that were provided to investors and bank regulators.

According to the SEC’s complaint filed in U.S. District Court for the Northern District of Georgia, Price is believed to be a resident of Lowndes County in Georgia after moving from Manatee County, Florida.

The SEC alleges that Price began his scheme in 2008. According to PFG’s private placement memorandum, the investment objective was to achieve “positive total returns with low volatility” by investing in a variety of opportunities, including equity securities traded on the U.S. markets.

A significant portion of PFG investor funds – approximately $36.9 million – was placed in a securities trading account at a broker-dealer. The trading account suffered massive trading losses and money was frequently wire-transferred to PFG’s operating bank account. Throughout the time during which PFG suffered trading losses, client account statements prepared by Price were made available to investors indicating fictitious amounts of assets and investment returns.

According to the SEC’s complaint, Price has sent a letter to some individuals dated June 2012 and titled “Confidential Confession For Regulators – PFG, LLC and PFGBI, LLC Summary.” In the 22-page letter, Price admits that he “falsified statements with false returns” in order to conceal between $20 million and $23 million in investor losses.

The SEC’s complaint charged Price and his related companies, PFG, LLC; PFGBI, LLC; Montgomery Asset Management, LLC (Florida); and Montgomery Asset Management, LLC (Georgia) with violations of Section 10(b) and of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and further charged Price and Montgomery Asset Management, LLC (Florida) with violations of Sections 206(1), (2) and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder.

The Honorable Timothy C. Batten, Sr. granted the SEC’s request for a temporary restraining order and entered an asset freeze for the benefit of investors against Price, PFG, and his affiliated entities. Judge Batten has scheduled a court hearing on July 13, 2012 for the SEC’s motion for a preliminary injunction.

Anyone with information about Price’s whereabouts should contact the Atlanta office of the Federal Bureau of Investigation at 404-679-9000 or the Lowndes County Sheriff’s Office at 229-671-2985. [SEC v. Aubrey Lee Price, et al. Case No. 1:12-CV-2296 (N.D. Ga.)] (LR-22409)

Fort Lauderdale Securities Litigation Attorney and FINRA Arbitrator

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.

SEC Charges Orlando Buddy Persaud, White Elephant Trading in Ponzi Scheme

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Gurudeo “Buddy” Persaud of Orlando, Fla. lured family, friends, and others into investing in his firm, White Elephant Trading Company LLC, by falsely guaranteeing their money would be safe and yield lofty returns ranging from 6 to 18 percent, according to SEC charges.

Persaud told investors he would invest in the debt, stock, futures, and real estate markets, but did not reveal that his trading strategy was based on his belief that markets are affected by gravitational forces.

According to the SEC’s complaint filed in U.S. District Court for the Middle District of Florida, Persaud used investors’ money to make payments to other investors, the hallmark of a Ponzi scheme. Persaud also lost $400,000 of investor funds through his trading and diverted at least $415,000 to pay for his personal expenses, the SEC alleged. The same month Persaud began receiving investor money, he started using some of that money for his personal expenses. The SEC said that Persaud created phony account statements to hide his trading losses and give investors a false sense of security.

“Persaud preyed on people who trusted him by promising high and steady returns while hiding his unconventional trading strategy,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “When Persaud blatantly lied to investors and hid their losses through a Ponzi scheme, he should have known that an SEC enforcement action was in the stars.”

Persaud was a registered representative at a Florida-based broker-dealer but separately operated the now-inactive White Elephant, starting in mid-2007. In all, Persaud raised more than $1 million from at least 14 investors between July 2007 and January 2010.

The SEC alleges that in making trading decisions, Persaud chiefly relied on an Internet service that provided directional market forecasts based on lunar cycles and gravitational pull. Persaud’s strategy was premised on the idea that gravitational forces affect mass human behavior, and in turn, the stock market. For example, Persaud believed that when the moon exerts greater gravitational pull on the Earth, people feel dejected and are more inclined to sell securities.

The SEC’s complaint seeks disgorgement of ill-gotten gains, financial penalties, and injunctive relief against Persaud to enjoin him from future violations of the federal securities laws.

Fort Lauderdale Securities Litigation and FINRA Arbitration

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.

Florida Penny Stock Financiers Face SEC Charges

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Mark Lefkowitz, Compass Capital Group, Mark Lopez, Unico, Inc., Steven R. Peacock, Shane H. Traveller, and Advanced Cell Technology allegedly violated federal securities laws in connection with the unregistered distribution of billions of shares of penny stocks through the repeated misuse of the exemption from registration contained in Section 3(a)(10) of the Securities Act of 1933, according to an SEC civil injunctive action filed in the U.S. District Court for the Middle District of Florida.

Section 3(a)(10) provides an exemption from registration that permits a company to issue common stock to public investors “in exchange for one or more bona fide outstanding securities, claims or property interests” without having to file a registration statement “where the terms and conditions of such issuance and exchange are approved after a hearing upon the fairness of such terms and conditions” by any court or any governmental authority “expressly authorized by law to grant such approval.” The Complaint alleges that the Section 3(a)(10) exemption was not available for any of the stock offerings at issue because the terms and conditions of the exchanges – including the fact that the issuers were raising capital through such exchanges – were not fully disclosed to the court.

According to the Commission’s Complaint, in or about early 2006, Lefkowitz, a penny stock financier, devised a strategy for penny stock issuers to pay off past due debts while, at the same time, improperly raising additional capital in reliance upon Section 3(a)(10). According to the Complaint, Lefkowitz executed his illegal strategy with Lopez, the chief executive officer of Unico, a penny stock issuer based in California, and William Caldwell IV, the chief executive officer of Advanced Cell Technology, a penny stock issuer based in Massachusetts. The Complaint further alleges that Peacock and Traveller, two penny stock financiers who learned of the illegal strategy from Lefkowitz, executed the strategy with Unico and other penny stock issuers.

The Complaint alleges that from September 9, 2006 through January 29, 2009, in order to satisfy the fairness hearing requirement of Section 3(a)(10), more than fifty pre-settled lawsuits were filed in a Florida state court purportedly to settle past due debts owed by Unico, Advanced Cell, or other penny stock issuers (collectively, the “Penny Stock Issuers”) to Compass Capital Group and several offshore financing entities affiliated with Lefkowitz, and Sequoia International, Inc., an entity affiliated with Peacock and Traveller (collectively, the “Financiers”).

The Complaint further alleges that in each case, one of the Penny Stock Issuers entered into a written settlement agreement with one or more of the Financiers whereby the Penny Stock Issuer agreed to issue unrestricted common stock to the Financiers at a substantial discount to the prevailing market price, purportedly to retire the past due debt. The settlement shares allegedly were worth multiple times more than the debt that was to be extinguished and the Financiers agreed to remit monies to the Penny Stock Issuer following the sale of the settlement shares to the public on the open market.

According to the Complaint, none of the settlement agreements submitted to the court for approval, disclosed, nor did the parties ever apprise the presiding judges of, the existence of the side agreements, that the market value of the shares to be issued greatly exceeded the debts that were to be extinguished, or that significant sums of monies would be remitted to the Penny Stock Issuers as a result of the Section 3(a)(10) settlements.

According to the Complaint, at the conclusion of each of the hearings, the Florida state court granted a Section 3(a)(10) exemption from registration and, thereafter, unrestricted shares were issued to the Financiers, who quickly sold the shares on the open market to public investors unaware of the dilutive effects of the new stock issuances. Also according to the Complaint, the Financiers subsequently remitted millions of dollars to the Penny Stock Issuers, either directly or through an intermediary, as financing, making it an improper capital raising transaction for the Penny Stock Issuers.

The Complaint alleges that Unico extinguished approximately $4.0 million in past due debts but separately raised more than $9.2 million as a result of monies later remitted to it by the Financiers. Advanced Cell allegedly extinguished $1.1 million in debts while separately raising more than $3.5 million through monies later remitted by or on behalf of the Financiers. The Other Penny Stock Issuers allegedly collectively extinguished approximately $1 million in debts while separately raising more than $1.2 million. The Complaint also alleges that Lefkowitz and his affiliated entities profited by at least $1.7 million from these transactions and that Peacock and Traveller profited by at least $455,000.

The Complaint alleges that Unico filed false and misleading disclosures with the Commission concerning the monies it received from the Financiers and that Unico and Advanced Cell failed to timely disclose the settlement agreements and issuance of over 9 billion and 260 million unregistered shares of their respective common stocks in connection with the Section 3(a)(10) settlements. In addition, the complaint further alleges that Peacock, aided and abetted by Traveller, failed to report his beneficial ownership of more than five percent of the outstanding shares of Unico common stock in December 2006.

The Complaint charges all of the defendants with violations of the securities offering registration provisions, Unico and Advanced Cell with periodic reporting violations, Lopez for aiding and abetting Unico’s periodic reporting violations, Peacock with beneficial ownership reporting violations, and Traveller for aiding and abetting Peacock’s ownership reporting violations.

The Commission seeks permanent injunctions, disgorgement of illegal profits with prejudgment interest, and civil penalties as to Unico, Advanced Cell, Peacock, and Traveller; a permanent injunction and a civil penalty as to Lopez; disgorgement of illegal profits with prejudgment interest and civil penalties as to Lefkowitz and Compass Capital; and an order barring Lefkowitz, Compass Capital, Lopez, Peacock, and Traveller from participating in any future offerings of penny stock.

Lefkowitz, Compass Capital, and Traveller previously have been enjoined from violating various provisions of the federal securities laws, including the antifraud provisions, in connection with unrelated conduct that also involved the misuse of an exemption from registration of securities offerings. [SEC v. Mark A. Lefkowitz, Compass Capital Group, Inc., Mark A. Lopez, Unico, Inc., Steven R. Peacock, Shane H. Traveller, and Advanced Cell Technology, Inc., United States District Court for the Middle District of Florida, Civil Action No. 8:12-CV-1210T35MAP] (LR-22381)

Miami Hedge Fund Adviser Charged with Misleading Investors

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Quantek Asset Management LLC deceived investors about fund managers having personal investments in the $1 billion Quantek Opportunity Fund, a Latin America-focused hedge fund, according to an SEC investigation.

The Securities and Exchange Commission found that Quantek’s executives never invested their own money in the fund. The SEC’s investigation also found that Quantek misled investors about the investment process of the funds it managed as well as certain related-party transactions involving its lead executive Javier Guerra and its former parent company Bulltick Capital Markets Holdings LP.

Bulltick, Guerra, and former Quantek operations director Ralph Patino are charged along with Quantek in the SEC’s enforcement action. They agreed to pay more than $3.1 million in total disgorgement and penalties to settle the charges, and Guerra and Patino agreed to securities industry bars.

“When making an investment decision, private fund investors are entitled to the unvarnished truth about material information such as management’s skin in the game or the adviser’s handling of related-party transactions,” said Bruce Karpati, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Quantek’s investors deserved better than the misleading information they received in marketing materials, side letters, and other fund documents.”

According to the SEC’s order instituting settled administrative proceedings, fund investors frequently inquire about the extent of the manager’s personal investment during their due diligence process, and many require it in fund selection. Quantek, particularly Patino, misrepresented to investors from 2006 to 2008 that management had skin in the game. These misstatements were made when responding to specific questions posed in due diligence questionnaires that were used to market the funds to new investors. Quantek made similar misrepresentations in side letter agreements executed by Guerra with two sought-after institutional investors.

The SEC’s order also found that Quantek misled investors about certain related-party loans made by the fund to affiliates of Guerra and Bulltick. Because the fund permitted related-party transactions with Bulltick and other Quantek affiliates, investors were wary of deals that were not properly disclosed.

In 2006 and 2007, Quantek caused the fund to make related-party loans to affiliates of Guerra and Bulltick that were not properly documented or secured at the outset. Quantek and Bulltick employees later re-created the missing related-party loan documents, but misstated key terms of the loans and backdated the materials to give the appearance that the loans had been sufficiently documented and secured at all times. Quantek and Guerra provided this misleading loan information to the fund’s investors.

“The related-party transactions were problematic to begin with, and the false deal documents left investors in the dark about the adviser’s conflicts of interest,” said Scott Weisman, Assistant Director in the SEC Enforcement Division’s Asset Management Unit.

According to the SEC’s order, Quantek also repeatedly failed to follow the robust investment approval process it had described to investors in the fund. Quantek concealed this deficiency by providing investors with backdated and misleading investment approval memoranda signed by Guerra and other Quantek principals.

Quantek, Guerra, Bulltick, and Patino settled the charges without admitting or denying the findings. Quantek and Guerra agreed jointly to pay more than $2.2 million in disgorgement and pre-judgment interest, and to pay financial penalties of $375,000 and $150,000 respectively. Bulltick agreed to pay a penalty of $300,000, and Patino agreed to a penalty of $50,000.

Guerra consented to a five-year securities industry bar, and Patino consented to a securities industry bar of one year. Quantek and Bulltick agreed to censures. They all consented to orders that they cease and desist from committing or causing violations of certain antifraud, compliance, and recordkeeping provisions of the Investment Advisers Act of 1940 and the Securities Act of 1933.

Florida Securities Litigation and FINRA Arbitration

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.

SEC Charges Two Feeders in Rothstein Ponzi Schemes

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George Levin and Frank Preve, who live in the Fort Lauderdale area, allegedly raised more than $157 million from 173 investors in less than two years by issuing promissory notes from Levin’s company and interests in a private investment fund they operated, according to SEC charges.

They used investor funds to purchase discounted legal settlements from former Florida attorney Scott Rothstein through his prominent law firm Rothstein Rosenfeldt and Adler PA. However, the settlements Rothstein sold were not real and the supposed plaintiffs and defendants did not exist.

Rothstein simply used the funds in classic Ponzi scheme fashion to make payments due other investors and support his lavish lifestyle. Rothstein’s Ponzi scheme collapsed in October 2009, and he is currently serving a 50-year prison sentence.

The SEC alleges that Levin and Preve misrepresented to investors that they had procedural safeguards in place to protect investor money when in fact they often purchased settlements without first seeing any legal documents or doing anything to verify that the settlement proceeds were actually in Rothstein’s bank accounts.

Moreover, as the Ponzi scheme was collapsing and Rothstein stopped making payments on prior investments, Levin and Preve sought new investor money while falsely touting the continued success of their investment strategy. With their fate tied to Rothstein, Levin and Preve’s settlement purchasing business collapsed along with the Ponzi scheme.

“Levin and Preve fueled Rothstein’s Ponzi scheme with the false sense of security they gave investors,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “They promised to safeguard investors’ assets, but gave Rothstein money with nothing to show for it.”

According to the SEC’s complaint filed in federal court in Miami, Levin and Preve began raising money to purchase Rothstein settlements in 2007 by offering investors short-term promissory notes issued by Levin’s company – Banyon 1030-32 LLC. In 2009, seeking additional funds from investors, they formed a private investment fund called Banyon Income Fund LP that invested exclusively in Rothstein’s settlements. Banyon 1030-32 served as the general partner of the fund, and its profit was generated from the amount by which the settlement discounts obtained from Rothstein exceeded the rate of return promised to investors.

The SEC alleges that the offering materials for the promissory notes and the private fund contained material misrepresentations and omissions. They misrepresented to investors that prior to any settlement purchase, Banyon 1030-32 would obtain certain documentation about the settlements to ensure the safety of the investments. Levin and Preve, however, knew or were reckless in not knowing that Banyon 1030-32 often purchased settlements from Rothstein without obtaining any documentation whatsoever.

Furthermore, the SEC alleges that Banyon Income Fund’s private placement memorandum misrepresented that the fund would be a continuation of a successful business strategy pursued by Banyon 1030-32 during the prior two-and-a-half years. Levin and Preve failed to disclose that by the time the Banyon Income Fund offering began in May 2009, Rothstein had already ceased making payments on a majority of the prior settlements Levin and his entities had purchased.

They also failed to inform investors that Levin’s ability to recover his prior investments from Rothstein was contingent on his ability to raise at least $100 million of additional funding to purchase more settlements from Rothstein.

The SEC’s complaint seeks disgorgement of ill gotten gains, financial penalties, and permanent injunctive relief against Levin and Preve to enjoin them from future violations of the federal securities laws.

Florida Securities Litigation and FINRA Arbitration

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.

Investor Alert: Nutraceutical Stock Scams

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Nutraceutical Stock Scams—Don’t Supplement Your Portfolio With These Companies is the title of a new alert issued by the Financial Industry Regulatory Authority (FINRA) to warn investors about stock scams related to companies selling everything from fortified foods and energy drinks to “natural” medicines.

Like many investment scams, pitches for nutraceutical stocks may arrive in a variety of ways—from cold calls to email, tweets, blogs or message board posts.

Nutraceuticals are products that claim to help people to lose weight, get an energy boost, live longer or fight the common cold, and can include dietary supplements and food and drink products that contain additives purporting to provide health benefits. While some nutraceutical companies are legitimate, others could be bogus operations with the potential to harm unsuspecting investors.

The con artists behind nutraceutical stock scams may try to lure in investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly-traded companies that often have little or no history of financial success. The con artists behind these “pump and dump” scams can then sell off their shares, leaving investors with worthless stock.

One company claimed to have acquired rights to “all-natural” medicines that treat maladies ranging from the common cold to kidney disease. The company claimed it had “the potential to capture 3 percent of the US market within a 3 year period” and “potentially generate “$100,000,000 in revenues.” Investors who took a look at the company’s unaudited financials would have found a firm with almost no cash on hand and no track record of sales.

“While nutraceuticals claim to help people become healthy, investing in some of the companies associated with these products can make investors’ portfolios sick,” said Gerri Walsh, FINRA’s Vice President for Investor Education. “The best way investors can inoculate themselves against investment scams is to ask and check. Find out whether the promoter is licensed using FINRA BrokerCheck, and check out the investment using the Securities and Exchange Commission’s EDGAR database of company filings.”

The Alert warns investors to ignore unsolicited investment recommendations and to question the source of investment information. Investors should also be wary of investments that promise fantastic growth and check out the person promoting the stock or investment. Nutraceutical Stock Scams also includes detailed information to help investors spot potential scams and distinguish frauds from legitimate investment opportunities.

Florida Securities Litigation and FINRA Arbitration

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.

Recycle Tech (RCYT) of Miami Trading Suspended by SEC

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Securities trading is suspended in Recycle Tech, a Miami container home manufacturer.

The U.S. Securities and Exchange Commission (SEC) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the Exchange Act), of trading in the securities of Recycle Tech, Inc. (Recycle Tech), a Colorado corporation headquartered in Miami, Florida, at 9:30 a.m. EDT on May 2, 2012, and terminating at 11:59 p.m. EDT on May 15, 2012.

The SEC temporarily suspended trading in the securities of Recycle Tech because of questions that have been raised about the lack of current and accurate information concerning the securities of Recycle Tech because it has not filed a periodic report since its Form 10-Q for the quarterly period ending November 30, 2009, filed on January 13, 2010.

According to the firm’s website, “RCYT manufactures and delivers premium eco-friendly Container Homes, as well as LEED Certified Green Homes, Communities, Buildings, and City Structures across the world. These structures and developments, combined with a very affordable pricing structure, will decrease pollution, reduce waste materials, and increase the overall quality of life for millions of homeless and/or those in a low-income housing bracket. Green Building and Engineering Contractors (RCYT) is the only builder of container homes in South Florida.”

The SEC cautions brokers, dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company.

Further, brokers and dealers should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until they have strictly complied with all of the provisions of the rule.

Florida Securities Litigation and FINRA Arbitration

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.