Articles Tagged with fraud

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While marijuana-related investments grow in popularity, the SEC has reportedly received more associated complaints from investors. As a result, the Securities and Exchange Commission warns individuals to be mindful of certain risks before investing in marijuana-related companies. The SEC released an investor alert with this warning after medical marijuana company owner, Richard Greenlaw settled charges for allegedly offering and selling unregistered securities to 59 investors.  Signs of fraud reportedly include unlicensed, unregistered sellers; guaranteed returns; and unsolicited offers. Chiefly, Richard Greenlaw was not registered nor licensed to sell his marijuana-related investments with the Securities and Exchange Commission.

The SEC complaint, filed with the United States District Court of Maine charged the owner of NECS, Richard Greenlaw and his 20 cannabis-related entities for violating the registration provisions of federal securities laws. The 20 cannabis-related entities charged in the SEC complaint are NECS LLC, MaineCS LLC, VTCS LLC, MassCS LLC, NHCS LLC, RICS LLC, CTCS LLC, FLCS LLC, ILCS LLC, IACS LLC, LOUCS LLC, MICS LLC, MNCS LLC, NDCS LLC, NJCS LLC, NYCS LLC, OHCS LLC, PennCS LLC, UPCS LLC, and WICS LLC. It is alleged that Richard Greenlaw posted advertisements on Craigslist to offer and sell subscription agreements for securities in his companies. In response to these charges, Mr. Greenlaw agreed to pay $400,000 and accept permanent injunctions from further violations of  Section 5(a) and 5(c) of the Securities Act of 1933.

Federal securities laws mandate that any offer and sale of a security must be registered with the SEC. A company registers a security by filing financial statements, business descriptions and other legally required information with the SEC. Otherwise, the securities offering must be found to be subject to exemption under Securities Act 1933. Offerings of securities that can be exempt include those of limited size, intrastate, private and more. Exemption requirements may also require that securities be only sold to accredited investors. Thus, investment salespersons would be prohibited from selling exempted securities to any investors who do not meet the requirements. In this case, Mr. Greenlaw’s marijuana-related investments were not registered nor qualified for exemption.

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Patrick Churchville of Rhode Island has been accused of orchestrating a $21 million Ponzi scheme and was recently sentenced to 7 years in prison by a federal judge, according to an Investment News report. Mr. Churchville is the owner and president of ClearPath Wealth Management and according to SEC’s complaint, he allegedly diverted funds from investors to pay older investors, used their funds as collateral for loans or converted investments to benefit ClearPath Wealth Management. According to the news report, he allegedly used $2.5 million of borrowed money to buy a lavish waterfront home in Rhode Island.

Mr. Churchville started running his Ponzi scheme 2010 onwards and like in any Ponzi scheme, he added to his net worth at the cost of his victims, who lost their homes and all their savings. One of his victims was left on food stamps and needed heating assistance by the end of it, and others were forced back into the workforce in their retirement years. U.S. District Court Chief Judge William E. Smith called the whole scheme a “tragedy”. Churchville allegedly pleaded guilty to five counts of wire fraud and one of tax fraud for failing to pay more than $820,000 in taxes. He has also reportedly been ordered to pay restitution to his 114 victims although the number is unspecified.

Being victimized by financial fraud not only means lost savings but can completely wreak someone’s life and strain personal relationships. At Malecki Law, we regularly help victims of Ponzi scheme get justice and restitution. If you suspect a financial advisor or brokerage firm has been taking advantage of you or your loved ones, reach out for legal advice.

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We frequently represent individuals who have received an SEC Subpoena, and often the first question asked is, “Why did I get this subpoena? I did nothing wrong.”  The SEC investigates many kinds of misconduct, and the people they seek information and documents from (through the use of Subpoenas) very often are not “targets” of the investigation, but the SEC may believe they could be a “witness,” or may have useful information that could aid the investigation.  Understanding the common investigations the SEC may commence is a good first step to understanding what prompted the Subpoena.

According to the SEC, the most common types of investigations of potential securities violations include:

  • Misrepresentation or omission of important information about securities – when promoting the sale of securities, brokers, broker-dealers and other securities professionals should ensure that promotional materials accurately reflect the characteristics and risks of the securities.
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  • Salesperson seems to openly live a lavish lifestyle: The most famous Ponzi schemers have been infamous for their extravagant lifestyles. Scott Rothstein, the mastermind in a $1.2million Ponzi scheme said, “We were living like rock stars; private jets, massive amounts of money. There were lots of things that kept fueling that,” in his 2011 deposition testimony (reported in Forbes 2014). Be cautious if you are approached by a broker or advisor who fits the bill. As an extra precautionary measure, check your broker out on FINRA’s BrokerCheck.
  • Their marketing/ sales documents look like they could have come out of a printer in their home! Robert Van Zandt, known as the Bernie Madoff of Bronx, who was criminally prosecuted for running a Ponzi scheme, distributed homespun brochures that said “Learn to Earn 9% On Your Investment.” The quality of their marketing materials could be a good indication of the credibility of the investment.
  • “Guarantees” with high returns: If it sounds too good to be true, it probably is. Look out for buzzwords like “High Return” or “Risk-Free” Investments. But in reality no investment is risk-free. In fact, higher probability of return is usually associated with higher risks, according to the risk-reward tradeoff principle. So if you are offered a guaranteed high return investment with no risks, the chances are that you are dealing with a financial scam.
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Wells Fargo financial advisors, David Jeremy Welty and Ane Plate have been barred from the securities industry by FINRA and the SEC, respectively, per AdvisorHUB. Both advisors were accused of stealing customer funds.

Welty was alleged to have converted $8,700 for personal expenses from an account that was originally set up as a “memorial fund,” according to reports. Prior to his termination in December 2016, Welty worked in the Wells Fargo branch in Norristown, PA, beginning in March 2012, according to records. He reportedly consented to the bar without admitting nor denying the allegations.

Plate was accused of stealing $176,000 that was raised through the sale of securities from elderly clients’ account without authorization. According to the AdvisorHUB report, the pilfered money was allegedly used to pay Plate’s mortgage and upgrade her home. Records indicate that Plate worked at the Wells Fargo office in Deltona, FL from 2005 through 2014. Earlier this month, she was reportedly sentenced to 27 months in federal prison.

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Alliance for Investor Education and the PIABA Foundation is Hosting an Educational Conference about Securing Investors’ Financial Futures


The National Investor Town Hall Meeting is a day-long series of presentations, free to the public, aimed at educating investors about the risks and rewards of financial investing. It will be held on October 29, 2016 at the Rancho Bernado Inn in San Diego, California. Many respected industry professionals, including Ms. Malecki and federal and state regulators will participate in four sessions to help attendees understand risk tolerance, choose financial advisors and avoid becoming victims of financial fraud.

“Financial fraud costs Americans approximately $50 billion each year. It has been my mission for over a decade to educate and empower investors, lending them a voice and holding big entities accountable for violating their fiduciary and ethical duties,” said Jenice Malecki, the founder of Malecki Law. She further adds, “I am excited to be part of this much needed grass-root investor education drive.”

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Generally speaking, it’s usually not a good thing when when a company is fined for similar conduct multiple times.

Just this month, UBS Financial Services, Inc. submitted a Letter of Acceptance, Waiver and Consent No. 2013038351701 (AWC) that detailed a $250,000 fine for failures in supervision regarding sales of mutual fund shares to investors.  According to the AWC, for a four year period, from approximately 2009 to 2013, UBS failed to provide sales charge waivers to customers entitled to waivers through rights of reimbursement.  The AWC detailed that this conduct created a violation of FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade).

Mutual fund class A shares generally require the investor to pay an upfront sales charge, except where the mutual fund waives the charge, such as when the mutual fund is purchased with a right of reimbursement.  The AWC detailed that investors sometimes purchase class A shares with right of reimbursement when they reinvest proceeds from earlier redemptions of Class A shares in the same fund or fund family within a specific time period.

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The investment and securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints regarding Alexander Capital LP financial advisor Rocco Guidicipietro.

According to his BrokerCheck report maintained by the Financial Industry Regulatory Authority (“FINRA”), Mr. Guidicipietro was most recently with Legend Securities and JP Turner prior to that.

Mr. Guidicipietro has at least four reportable disclosures on his FINRA record, including three customer disputes and a regulatory event.

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The Financial Industry Regulatory Authority (FINRA) announced on July 19, 2016 in a News Release that it had fined Prudential Annuities Distributors, Inc. $950,000 for “failing to detect and prevent a scheme that resulted in the theft of approximately $1.3 million from an 89-year-old customer’s variable annuity account.  Prudential Annuities Distributors acts as a principal underwriter and distributing broker-dealer for life and annuity products issued by its affiliates.

According to the News Release, a former registered Sales Assistant named Travis Wetzel, who worked at LPL Financial, stole money from the elderly customer’s account by submitting to Prudential Annuities Distributors 14 forged annuity withdrawal requests.  The News Release detailed that each month, from July 2010 to September 2012, Mr. Wetzel submitted 4 to 5 withdrawal requests totaling approximately $50,000.  The News Alert detailed that all withdrawn funds were deposited into an account in Mr. Wetzel’s wife’s maiden name that was controlled by Mr. Wetzel.

Prudential Annuities Distributors consented to the fine by submitting a Letter of Acceptance, Waiver and Consent No. 2012034423502 (AWC).  According to the AWC, each transaction submitted by Mr. Wetzel triggered an alert, or a “red flag,” putting Prudential Annuities Distributors on notice that his requests may be fraudulent.  Each alert required that a person manually review and confirm each transaction, and for each transaction, personnel determined the activity appeared legitimate, according to the AWC.  The AWC also noted that for 44 transfers, Prudential Annuities Distributors also determined that the withdrawn funds were paid to the customer, when they were not actually sent to the customer.

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The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Walter Marino.  Mr. Marino is currently employed and registered with Lincoln Investment, a broker-dealer, working out of the Dix Hills, New York office, according to his publicly available BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA).

Per his BrokerCheck report, Mr. Marino was previously employed by Legend Securities from 2002 to August 2015, when he was discharged after the “Firm discovered what [Mr. Marino] represented as a non-replacement [variable annuity] sale was in fact a replacement.”  Prior to his employment and subsequent termination from Legend Securities, Mr. Marino left Brill Securities in 2001 by “voluntary resignation” amid allegations of unauthorized trading activity and disregarding a customer’s investments, according to BrokerCheck.

Currently, according to BrokerCheck records, it appears Mr. Marino is a registered broker in Connecticut, New Jersey, New York and South Carolina.

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