On August 4, 2016, Patrick Churchville, a defendant in an ongoing SEC litigation, pled guilty to an information charging him with five counts of wire fraud and one count of tax evasion in connection with orchestrating a $21 million Ponzi scheme and additional misappropriation from funds he advised. The court accepted Churchville’s plea and scheduled sentencing for October 25, 2016 at 9:30 a.m.
The SEC previously charged Churchville, the owner and president of ClearPath Wealth Management, LLC, an investment adviser formerly located in Providence, Rhode Island, and ClearPath in a civil action filed on May 7, 2015. According to the SEC’s complaint, from at least December 2010, ClearPath and Churchville diverted deposits from investors to pay other investors, used proceeds from selling particular investments to pay unrelated investors, used investors’ funds as collateral for loans to make investments for their own benefit then used other investors’ money to repay the loans, and converted investor funds into investments for ClearPath’s own benefit. Read More
On August 10, 2016 the Securities and Exchange Commission (“SEC”) charged Merrill Robertson Jr., a former player for the Philadelphia Eagles, with defrauding investors, including former coaches he knew from his time playing football for the Fork Union Military Academy and the University of Virginia.
The SEC’s complaint, filed in federal court in Richmond, Virginia, charges Robertson, Sherman Vaughn, Jr. and the company they co-owned, Cavalier Union Investments LLC. According to the complaint, the defendants promised to invest in diversified holdings but diverted nearly $6 million of the more than $10 million they raised from investors to pay for personal expenses and used other funds to repay earlier investors.
Robertson and Vaughn, both of Chesterfield, Virginia, are alleged to have lied about the unregistered debt securities they sold, saying they would yield as much as 20 percent “while providing safety and security for our investors.” According to the complaint, the defendants claimed that Cavalier had investment funds operated by experienced investment advisers, when it did not have any funds or investment advisers and was functionally insolvent shortly after it was formed. Read More
The SEC alleges that Dr. Edward Kosinski of Weston, Connecticut, traded in advance of two negative news announcements by Regado Biosciences, which was pursuing a drug called REG-1 to regulate clotting in patients undergoing coronary angioplasty. Kosinski, who served as principal investigator of the drug trial, got advance notice that patient enrollment in the trial was being suspended because patients had experienced severe allergic reactions. He allegedly sold all 40,000 shares of his Regado stock the following day to avoid approximately $160,000 in losses when the news became public and the stock price dropped. Read More
Posted by Brenda Hamilton. On August 17, 2016, Penny Stock Fraudster, Sandy Winick, a Canadian, was sentenced To 78 Months In prison for masterminding the international fraud scheme. Winick was sentenced to 78 months in prison following his July 2015 guilty plea to conspiring to commit wire fraud for running an international advance fee scheme. As part of the sentence, Winick was ordered to pay $2,431,038.32 in restitution and $5,000,000 in forfeiture. Read More
On August 2, 2016, Leonid Momotok of Suwanee, Georgia pled guilty before United States Magistrate Judge Ramon E. Reyes, Jr. in United States District Court for the Eastern District of New York to one count of conspiracy to commit wire fraud.
The criminal charges against Momotok arose out of the same conduct alleged by the SEC in a civil securities fraud action filed in August 2015. Read More
The Securities and Exchange Commission (SEC) announced that the federal district court in Rhode Island has entered a final judgment against Kenneth Rampino, a resident of Seekonk, Massachusetts and a practicing attorney, ordering him to pay approximately $39,000 to settle allegations that he engaged in insider trading in the stock of Bancorp Rhode Island, Inc. (BankRI).
In June 2015, the SEC charged Anthony Andrade, a former member of the board of directors of BankRI, and three of his friends and close business associates, including Rampino. According to the SEC’s complaint, filed in federal court in Providence, Rhode Island, Andrade illegally tipped inside information about BankRI’s potential acquisition to the three friends and associates, each of whom traded on the inside information Andrade supplied to them, and collectively profited by over $80,000 when BankRI’s stock price significantly increased after an acquisition announcement was made public. Read More
On July 25, the Honorable Sam R. Cummings of the United States District Court for the Northern District of Texas granted summary judgment for the SEC on all claims against the father-and-son duo of Paul and Jeffry Downey, and John Leonard, all involved in oil-and-gas fraud, finding them liable on all charges.
The SEC’s action, filed in November 2014, alleges that the defendants raised nearly $5 million from 17 investors in a securities offering in the Permian Advanced Oil Recovery Investment Fund I, LP (PAOR), in which the Downeys’ company, Quest Energy Management Group, Inc. (Quest), served as PAOR’s operating general partner. The SEC’s complaint alleges that the Downeys violated 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, and alleges that Leonard violated Section 15(a) of the Exchange Act, and seeks permanent injunctions, money penalties, and disgorgement of illicit earnings from the illegal offerings. Read More
On July 28, 2016 the Securities and Exchange Commission (“SEC”) announced an asset freeze it has obtained against three men who aren’t registered to sell investments and allegedly went on lavish shopping sprees with more than $5 million raised from investors to purportedly develop a resort.
In an emergency action filed in federal court in Atlanta, the SEC alleges that Matthew White, Rodney Zehner, and Daniel Merandi fraudulently issued $1 billion in unsecured corporate bonds out of a shell company they own and claimed the money would be used to fund the resort project. But they never came close to raising the funds necessary to start the project, and meantime they pocketed the $5.6 million they did raise and used it for personal purchases at Saks Fifth Avenue, Gucci, Louis Vuitton, Prada, and Versace.
The SEC’s complaint filed yesterday alleges that White, Zehner, Merandi, and their companies violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rule 10b-5. The SEC seeks permanent injunctions, disgorgement, and penalties against all of the defendants. The court order obtained late yesterday freezes defendants’ cash held in a brokerage account and freezes the bonds held in a separate brokerage account.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at firstname.lastname@example.org or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
On July 26, 2016, the Honorable Charles R. Breyer of the United States District Court for the Northern District of California entered a final judgment against Luca International Group, LLC, Luca Resources Group, LLC, Luca Energy Fund, LLC and relief defendants Luca Operation, LLC, Luca Barnett Shale Joint Venture, Luca To-Kalon Energy, LLC, Luca Oil, LLC, Luca I, Limited Partnership, and Luca Oil II Joint Venture (collectively, the “Luca Entities”). The final judgment imposes on the Luca Entities a permanent injunction against future violations of certain antifraud provisions of the federal securities laws and orders that certain Luca Entities pay $68.3 million in disgorgement.
In its complaint filed in July 2015, the SEC alleged that the Luca Entities, their CEO Bingqing Yang and her chief fundraiser Lily Lei orchestrated a fraudulent Eb-5 scheme targeting the Chinese American community as well as investors in Asia to invest in unregistered offerings of securities. According to the complaint, Yang and Lei represented to investors that their money would be invested in oil and gas drilling operations, that they could expect annual rates of return of 20-30 percent, and that their investments were risk free. In reality, as the complaint alleges, Yang, the Luca Entities and Lei deceived investors by misrepresenting that their operations as successful and projecting outsized investment returns, all while knowing the operations were losing millions of dollars and the enterprise was sinking under a mountain of debt. Read More
On July 27, 2016, Rosalind Herman, a relief defendant in an ongoing SEC fraud action, was sentenced to seven years in federal prison and ordered to pay $1,819,391 in restitution in a parallel criminal case.
Herman and her business partner, Gregg Caplitz, were indicted in March 2012 and additional charges were added against both of them by a superseding indictment returned in March 2013. The superseding indictment alleged that Herman and Caplitz fraudulently induced clients to entrust their savings and other funds to them by falsely representing that the funds would be invested and managed for the clients’ benefit when, in truth, the funds were used to pay the personal expenses for Herman, her family, and Caplitz. On April 3, 2014, Caplitz pled guilty to conspiracy, investment adviser fraud, making a false filing with the SEC, and wire fraud. On April 5, 2016, a federal jury in Massachusetts convicted Herman of conspiracy, investment adviser fraud, wire fraud and a tax-related charge. Read More