Posts

Florida Court Enters Final Judgment against James Clements & Zeina Smidi

/in /by

A Ponzi scheme that offered investors guaranteed monthly returns ended in a court judgment. Defendants Clements and Smidi first told investors they would use investor proceeds to trade in foreign currencies and later stated they would use proceeds to invest in Swiss high-yield, fixed-rate savings accounts. In reality, however, Clements and Smidi siphoned approximately $3 million of investors’ money to their personal bank accounts, and paid out approximately $3 million for travel, expenses, and luxury items. [SEC v. Clements, Civil Action No. 11-60673-CIV- Dimitrouleas/Snow (S.D. Fla.)]

The Commission announced that on May 21, 2012, a District Judge in the Southern District of Florida entered Final Judgments Ordering Disgorgement, Prejudgment Interest and a Civil Penalty against Defendants James Clements and Zeina Smidi. Pursuant to Section 20(d) of the Securities Act of 1933 (Securities Act) and Section 21(d) of the Securities Exchange Act of 1934 (Exchange Act), District Court Judge William P. Dimitrouleas ordered Defendant Clements to pay disgorgement of $339,451, prejudgment interest of $88,975.66, and a civil penalty of $339,451, and ordered Defendant Smidi to pay disgorgement of $2,492,000, prejudgment interest of $611,837.60, and a civil penalty of $2,492,000.

The District Court previously entered by consent permanent injunctions against Clements and Smidi on February 6 and 17, 2012. The permanent injunctions enjoined Clements from future violations of Securities Act Sections 5(a), 5(c), and 17(a), and Exchange Act Sections 10(b), 15(a), and Exchange Act Rule 10b-5, and enjoined Smidi from future violations of Exchange Act Section 10(b), and Exchange Act Rule 10b-5. Clements and Smidi neither admitted nor denied the allegations of the complaint in their consents.

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.

SEC Charges Anthony Massaro of Boynton Beach in Agape Ponzi Scheme

/in /by

A $415 million Ponzi scheme by Agape World Inc. of Long Island in New York is the basis for SEC charges against 14 sales agents, including one in South Florida, who misled investors and illegally sold securities to 5,000 investors nationwide.

The SEC alleges that the sales agents – which include four sets of siblings – falsely promised investor returns as high as 12 to 14 percent in several weeks when they sold investments offered by Agape World Inc. They also misled investors to believe that only 1 percent of their principal was at risk.

The Agape securities they peddled were actually non-existent, and investors were merely lured into a Ponzi scheme where earlier investors were paid with new investor funds. The sales agents turned a blind eye to red flags of fraud and sold the investments without hesitation, receiving more than $52 million in commissions and payments out of investor funds. None of these sales agents were registered with the SEC to sell securities, nor were they associated with a registered broker or dealer. Agape also was not registered with the SEC.

“This Ponzi scheme spread like wildfire through Long Island’s middle-class communities because this small group of individuals blindly promoted the offerings as particularly safe and profitable,” said Andrew M. Calamari, Acting Regional Director for the SEC’s New York Regional Office. “These sales agents raked in commissions without regard for investors or any apparent concern for Agape’s financial distress and inability to meet investor redemptions.”

According to the SEC’s complaint filed in the U.S. District Court for the Eastern District of New York, more than 5,000 investors nationwide were impacted by the scheme that lasted from 2005 to January 2009, when Agape’s president and organizer of the scheme Nicholas J. Cosmo was arrested. He was later sentenced to 300 months in prison and ordered to pay more than $179 million in restitution.

The SEC alleges that the sales agents misrepresented to investors that their money would be used to make high-interest bridge loans to commercial borrowers or businesses that accepted credit cards. Little, if any, investor money actually went toward this purpose. Investor funds were instead used for Ponzi scheme payments and the agents’ sales commissions, and Cosmo lost $80 million while trading futures in personal accounts.

Meanwhile, the sales agents assuredly offered and sold Agape securities to investors despite numerous red flags of fraud including Cosmo’s prior conviction for fraud, the too-good-to-be-true returns, and the incredible safety of principal promised to investors. The sales agents also ignored Agape’s relatively small and unknown status as a private issuer of securities, Agape’s series of extensions and defaults, and other dire warnings about Agape’s financial condition. None of the Agape securities offerings were registered with the SEC.

The SEC’s complaint charges the following sales agents:

  • Brothers Bryan Arias and Hugo A. Arias of Maspeth, N.Y., who offered and sold Agape securities to at least 195 and 1,419 investors respectively. They received more than $9.5 million combined in commissions and payments.
  • Brothers Anthony C. Ciccone of Locust Valley, N.Y. and Salvatore Ciccone of Maspeth, N.Y., who offered and sold Agape securities to at least 535 and 348 investors respectively. They received more than $17 million combined in commissions and payments.
  • Brothers Jason A. Keryc of Wantagh, N.Y. and Michael D. Keryc of Baldwin, N.Y. Jason Keryc offered and sold Agape securities to at least 1,617 investors and received at least $16 million in commissions and payments. He also paid sub-brokers, including his brother, at least $7.4 million to sell Agape securities for him. Michael Keryc offered and sold Agape securities to at least 177 investors and received more than $1 million in commissions and payments.
  • Siblings Martin C. Hartmann III of Massapequa, N.Y. and Laura Ann Tordy of Wantagh, N.Y. Hartmann enlisted his sister in his sales effort while he worked as a sub-broker for Jason Keryc. Hartmann and Tordy offered and sold Agape securities to at least 441 investors and received more than $3.5 million in commissions and payments.
  • Christopher E. Curran of Amityville, N.Y., who worked as a sub-broker for Keryc. Curran offered and sold Agape securities to at least 132 investors and received at least $531,890 in commissions and payments.
  • Ryan K. Dunaske of Ronkonkoma, N.Y., who worked as a sub-broker for Keryc. Dunaske offered and sold Agape securities to at least 70 investors and received more than $700,000 in commissions and payments.
  • Michael P. Dunne of Massapequa, N.Y., who worked as a sub-broker for Keryc. Dunne offered and sold Agape securities to at least 99 investors and received more than $1.5 million in commissions and payments.
  • Diane Kaylor of Bethpage, N.Y., who offered and sold Agape securities to at least 249 investors and received at least $3.7 million in commissions and payments.
  • Anthony Massaro of Boynton Beach, Fla., who offered and sold Agape securities to at least 826 investors and received more than $5.9 million in commissions and payments.
  • Ronald R. Roaldsen, Jr. of Wantagh, N.Y., who worked as a sub-broker for Keryc. Roaldsen offered and sold Agape securities to at least 159 investors and received more than $600,000 in commissions and payments.

The SEC’s complaint charges Bryan and Hugo Arias, Anthony and Salvatore Ciccone, Jason and Michael Keryc, Dunne, Hartmann, Kaylor, Massaro, and Tordy with violations of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint charges all 14 defendants with violations of Section 15(a) of the Exchange Act, and Sections 5(a) and 5(c) of the Securities Act.

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.

OppenheimerFunds to Pay $35 Million to Settle SEC Charges

/in /by

Oppenheimer used derivative instruments known as total return swaps (TRS contracts) to add substantial commercial mortgage-backed securities (CMBS) exposure in a high-yield bond fund called the Oppenheimer Champion Income Fund and an intermediate-term, investment-grade fund known as the Oppenheimer Core Bond Fund, according to an SEC investigation.

The 2008 prospectus for the Champion fund didn’t adequately disclose the fund’s practice of assuming substantial leverage in using derivative instruments. When declines in the CMBS market triggered large cash liabilities on the TRS contracts in both funds and forced Oppenheimer to reduce CMBS exposure, Oppenheimer disseminated misleading statements about the funds’ losses and their recovery prospects.

Oppenheimer agreed to pay more than $35 million to settle the SEC’s charges.

“Mutual fund providers have an obligation to clearly and accurately convey the strategies and risks of the products they sell,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Candor, not wishful thinking, should drive communications with investors, particularly during times of market stress.”

Julie Lutz, Associate Director of the SEC’s Denver Regional Office, added, “These Oppenheimer funds had to sell bonds at the worst possible time to raise cash for TRS contract payments and cut their CMBS exposure to limit future losses. Yet, the message that Oppenheimer conveyed to investors was that the funds were maintaining their positions and the losses were recoverable.”

According to the SEC’s order instituting settled administrative proceedings against OppenheimerFunds and OppenheimerFunds Distributor Inc., the TRS contracts allowed the two funds to gain substantial exposure to commercial mortgages without purchasing actual bonds. But they also created large amounts of leverage in the funds. Beginning in mid-September 2008, steep CMBS market declines drove down the net asset values (NAVs) of both funds. These losses forced Oppenheimer to raise cash for month-end TRS contract payments by selling securities into an increasingly illiquid market.

According to the SEC’s order, the funds’ portfolio managers under instruction from senior management began executing a plan in mid-November to reduce CMBS exposure. Just as they began to do so, however, the CMBS market collapse accelerated, creating staggering cash liabilities for the funds and driving their NAVs even lower.

The SEC’s order found that continued CMBS declines forced the funds to sell more portfolio securities in order to raise cash for anticipated TRS contract payments. This task became increasingly difficult for the Champion fund, ultimately prompting Oppenheimer to make a $150 million cash infusion into the fund on November 21. Over the next two weeks, the funds continued to reduce their CMBS exposure to avoid further losses.

According to the SEC’s order, Oppenheimer advanced several misleading messages when responding to questions in the midst of these events. For instance, Oppenheimer communicated to financial advisers (whose clients were invested in the funds) and fund shareholders directly that the funds had only suffered paper losses and their holdings and strategies remained intact. Oppenheimer also stressed that absent actual defaults, the funds would continue collecting payments on the funds’ bonds as they waited for markets to recover.

These communications were materially misleading because the funds were committed to substantially reducing their CMBS exposure, which dampened their prospects for recovering CMBS-induced losses. Moreover, the funds had been forced to sell significant portions of their bond holdings to raise cash for anticipated TRS contract payments, resulting in realized investment losses and lost future income from the bonds.

The SEC’s investigation found that the Champion fund’s 2008 prospectus was materially misleading in describing the fund’s “main” investments in high-yield bonds without adequately disclosing the fund’s practice of assuming substantial leverage on top of those investments. While the prospectus disclosed that the fund “invested” in “swaps” and other derivatives “to try to enhance income or to try to manage investment risk,” it did not adequately disclose that the fund could use derivatives to such an extent that the fund’s total investment exposure could far exceed the value of its portfolio securities and, therefore, that its investment returns could depend primarily upon the performance of bonds that it did not own.

The SEC’s order finds that OppenheimerFunds violated Section 34(b) of the Investment Company Act of 1940, Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (Securities Act), and Section 206(4) of the Investment Advisers Act of 1940 and Rule 205(4)-8 promulgated thereunder. The order finds that OppenheimerFunds Distributor violated Sections 17(a)(2) and 17(a)(3) of the Securities Act.

Without admitting or denying the SEC’s findings, OppenheimerFunds agreed to pay a penalty of $24 million, disgorgement of $9,879,706, and prejudgment interest of $1,487,190. This money will be deposited into a fund for the benefit of investors. OppenheimerFunds and OppenheimerFunds Distributor also agreed to provisions in the order censuring them and directing them to cease and desist from committing or causing any violations or future violations of these statutes and rules.

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.

Florida Penny Stock Financiers Face SEC Charges

/in /by

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)

SEC Charges Two Feeders in Rothstein Ponzi Schemes

/in /by

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.

Nasdaq Glitches with Facebook IPO Result in Bad Trades

/in /by

Nasdaq OMX Group Inc. (NDAQ) is under fire from brokers and traders who lost money on Friday’s initial public offering of Facebook Inc.

Technical issues at the exchange caused orders placed between 11:11 a.m. and 11:30 a.m. on May 18th to go into a “black hole,” according to the Wall Street Journal. Other investors experienced difficulties when they tried to cancel IPO orders. Nasdaq indicates that it may earmark at least $13 million to resolve bad trades.

The Financial Industry Regulatory Authority, or Finra, is expected to oversee the process of arbitrating and distributing the money to investors. The U.S. Securities and Exchange Commission (SEC) is also expected to review the Facebook IPO trading activity.

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 Suspends Trading in 379 Microcap Shell Companies

/in /by

Hijacking by securities fraudsters who scam investors through reverse mergers or pump-and-dump schemes was the reason given by the Securities and Exchange Commission (SEC) in an unusual one-day move to suspend tradingin the securities of 379 dormant companies.

The trading suspension marks the most companies ever suspended in a single day by the agency as it ramps up its crackdown against fraud involving microcap shell companies that are dormant and delinquent in their public disclosures.

Microcap companies typically have limited assets and low-priced stock that trades in low volumes. An initiative tabbed Operation Shell-Expel by the SEC’s Microcap Fraud Working Group utilized various agency resources including the enhanced intelligence technology of the Enforcement Division’s Office of Market Intelligence to scrutinize microcap stocks in the markets nationwide and identify clearly dormant shell companies in 32 states and six foreign countries that were ripe for potential fraud.

“Empty shell companies are to stock manipulators and pump-and-dump schemers what guns are to bank robbers — the tools by which they ply their illegal trade,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This massive trading suspension unmasks these empty shell companies and deprives unscrupulous scam artists of the opportunity to profit at the expense of unsuspecting retail investors.”

Thomas Sporkin, Director of the SEC’s Office of Market Intelligence, added, “It’s critical to assess risks to investors in the capital markets and, through strategic planning, develop ways to neutralize them. We were able to conduct a detailed review of the microcap issuers quoted in the over-the-counter market and cull out these high-risk shell companies.”

The SEC’s previously largest trading suspension was an order in September 2005 that involved 39 companies. The federal securities laws allow the SEC to suspend trading in any stock for up to 10 business days. Subject to certain exceptions and exemptions, once a company is suspended from trading, it cannot be quoted again until it provides updated information including accurate financial statements.

Pump-and-dump schemes are among the most common types of fraud involving microcap companies. Perpetrators will tout a thinly-traded microcap stock through false and misleading statements about the company to the marketplace. After purchasing low and pumping the stock price higher by creating the appearance of market activity, they dump the stock to make huge profits by selling it into the market at the higher price.

The existence of empty shell companies can be a financial boon to stock manipulators who will pay as much as $750,000 to assume control of the company in order to pump and dump the stock for illegal proceeds to the detriment of investors. But with this trading suspension’s obligation to provide updated financial information, these shell companies have been rendered essentially worthless and useless to scam artists.

Click on the link for the full list of 379 dormant microcap shell stocks subject to the SEC’s trading suspension.

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 to Review J.P. Morgan Chase $2 Billion Trading Loss

/in /by

SEC officials are looking at accounting and disclosure issues related to the trading loss, according to The Wall Street Journal. Early Wall Street Journal reports in early April noted that a trader at J.P. Morgan known in the market as the “London Whale” made large bets on credit derivatives, supposedly to “hedge structural risks.”

Formal news of the loss came in the form of a disclosure in J.P. Morgan’s first quarter 10Q filed with the SEC on May 10, 2012. The following excerpt is taken from page 9:

“In Corporate, within the Corporate/Private Equity segment, net income (excluding Private Equity results and litigation expense) for the second quarter is currently estimated to be a loss of approximately $800 million. (Prior guidance for Corporate quarterly net income (excluding Private Equity results, litigation expense and nonrecurring significant items) was approximately $200 million.) Actual second quarter results could be substantially different from the current estimate and will depend on market levels and portfolio actions related to investments held by the Chief Investment Office (CIO), as well as other activities in Corporate during the remainder of the quarter.

Since March 31, 2012, CIO has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the Firm previously believed.

The losses in CIO’s synthetic credit portfolio have been partially offset by realized gains from sales, predominantly of credit-related positions, in CIO’s AFS securities portfolio. As of March 31, 2012, the value of CIO’s total AFS securities portfolio exceeded its cost by approximately $8 billion. Since then, this portfolio (inclusive of the realized gains in the second quarter to date) has appreciated in value.

The Firm is currently repositioning CIO’s synthetic credit portfolio, which it is doing in conjunction with its assessment of the Firm’s overall credit exposure. As this repositioning is being effected in a manner designed to maximize economic value, CIO may hold certain of its current synthetic credit positions for the longer term.

Accordingly, net income in Corporate likely will be more volatile in future periods than it has been in the past.”

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

/in /by

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.

SEC Suspends Trading in HydroGenetics of Fort Lauderdale

/in /by

HydroGenetics, Inc. of Fort Lauderdale, FL is subject to an SEC Order charging that the firm violated Sections 5(a) and 5(c) of the Securities Act of 1933 by issuing shares of its stock without a registration statement being in effect, or without an applicable exemption from registration.

The Securities and Exchange Commission 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 HydroGenetics, Inc. (HydroGenetics), of Fort Lauderdale, Florida at 9:30 a.m. EDT on May 2, 2012, and terminating at 11:59 p.m. EDT on May 15, 2012.

The Commission temporarily suspended trading in the securities of HydroGenetics because of questions that have been raised about the accuracy and adequacy of publicly available information about HydroGenetics because it has not filed a periodic report since its Form 10 registration statement became effective in January 2005.

According to the firm’s website, President and CEO, Charles Hansen III is responsible for day-to-day operations and leading the strategic direction of HydroGenetics, Inc.

Furthermore, the HydroGenetics website reports that the firm “recently changed its business focus from acquiring emerging alternative energy companies and incubate into revenue producing, profitable businesses… to the research and development of a high quality on demand hydrogen assist fuel cell system for internal combustion gas engines that will significantly reduce the consumption of fossil fuel through a hydrogen on demand fuel cell and for the betterment of the environment. HydroGenetics, Inc also owns HydroAxis Technologies, Inc.”

The Commission 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.