SEC Stops Penny Stock Scheme by NIT Enterprises

SEC Stops Penny Stock Scheme by NIT Enterprises

Dec 4, 2019

The Securities and Exchange Commission recently announced an emergency action to stop a South Florida-based penny stock investment fraud. This scheme affected over 100 retail investors nationwide and in Canada.  According to the recently unsealed SEC complaint Defendants NIT Enterprises, Inc., NIT’s CEO Gary R. Smith, Jason M. Ganton, and James E. Cleary, Jr., made misrepresentations in order to raise $4.9 million from investors. Many of the investment fraud victims were seniors. Defendants Ganton and Cleary were previously barred by the SEC from acting as brokers and offering penny stocks to investors. As alleged by the SEC in its complaint, NIT consists of three entities: NIT Delaware, NIT Enterprises, and NIT Florida, NIT’s principal place of business is in Palm Beach Gardens, Florida. Until March 2016, NIT Delaware was majority owned by a Florida public microcap issuer. The SEC complaint alleges that the defendants represented that NIT was raising money to fund the company’s development of radiation protection products for medical and military use, which would generate significant investment returns. Instead, according to the SEC’s complaint, Smith misappropriated $1.25 million or 25% of total investor proceeds to pay his personal expenses. The SEC also alleges that  NIT and Smith have paid 25% of the  proceeds as undisclosed commissions. The SEC’s complaint further alleges that the defendants falsely promised NIT’s future profitability and told investors that there would be a soon to come initial public offering (“IPO”). The Defendants allegedly told the investors that they  could “double or triple” their investment. Defendants Ganton and Cleary also allegedly concealed their regulatory disciplinary histories and prior SEC actions and bars, in part done through Ganton’s use of an alias name when soliciting investors. The SEC’s complaint charges all defendants with violating the anti-fraud and registration provisions of the federal securities laws and also charges the individual defendants for, either directly or indirectly, acting as unregistered broker-dealers and violating past Commission orders. According to the SEC, the term “penny stock” generally refers to a security issued by a small company that trades at less than $5 per share. Penny stocks generally are quoted over-the-counter, such as on the OTC Bulletin Board . Penny stocks may, however, also trade on securities exchanges, including foreign securities exchanges. Penny stocks may trade infrequently, which means that it may be difficult to sell penny stock shares once you own them creating a liquidity problem for investors who need access to their money. .Moreover, because it may be difficult to find price quotations for certain penny stocks, they may be difficult, or even impossible, to accurately price. For these, and other reasons, penny stocks are generally considered speculative investments. Because of their speculative nature, Congress prohibited broker-dealers from effecting transactions in penny stocks unless they comply with the requirements of Section 15(h) of the Securities Exchange Act of 1934 (“Exchange Act”) and the rules thereunder. These SEC rules provide, among other things, that a broker-dealer must (1) approve the customer for the specific penny stock transaction and receive from the customer a written agreement to the transaction; (2) furnish the customer a disclosure document describing the risks of investing in penny […]

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Securities fraud attorneys

The 5 Essential Factors to Consider When Finding a Securities Fraud Attorney

Nov 27, 2019

Choosing an attorney can be a challenging prospect.  Indeed, there are myriad factors that come into play when you begin the search for an attorney.   Whether it is a family lawyer to handle a divorce, a trusts and estates lawyer to handle drafting a will, or a criminal defense lawyer to represent you in a criminal case, there are some things that are universal to the search, and some things that are particular to that specific area of practice.   The search for a securities fraud attorney is no different.  The things that you want to see in all lawyers – integrity, experience – you will want in a securities fraud lawyer.  Yet, there are also some characteristics that you want to see specifically with regard to a securities fraud attorney. If you are currently looking for a securities fraud attorney because you were the victim of investor fraud, then this article is for you.  Here, we will discuss the things to look for in general, and specifically with regard to a securities fraud attorney.   Of course, if you have additional questions about your own circumstances after reading this article, we welcome you to contact us today on our online contact form, or by calling 888-768-2499.  1.The Basics for Any Attorney Search: Choice and Rapport Before delving into the criterion specific to securities fraud attorneys, there are just some basics that you should expect with every attorney. First, do not jump at the first attorney you meet or speak to over the phone.  While you may feel that you are comfortable with the first lawyer you encounter, try to pause and meet a few lawyers before deciding.  Remember, your lawyer will likely be working with you for a long period of time, will have access to your personal information, and will need to assist you through a difficult time.  That is a substantial responsibility, and you will want to be informed about who is out there before making a final decision on representation.   Second, keep an eye out for the rapport you have when you meet with an attorney for the first time.  While there might be many lawyers out there who are technically proficient, or have the highest honors from law school, but may not necessarily “click” with you.  Again, take the time to meet with several attorneys to see with whom you can establish the best working relationship.  2.Type of Securities Fraud Experience You will, of course, want some amount of experience with any attorney you hire.  With securities fraud, however, you will want to make sure that the attorney you choose has considerable experience in this area such as being a former Wall Street lawyer or representing Wall Street firms. Why do you want someone with that type of background?  You want that experience because lawyers who have been “on the other side of the aisle,” so to speak, are far better able to assess your case and anticipate the counterarguments that will be coming back in your direction if you pursue a securities fraud lawsuit. With someone who has such experience, that person has already spent a […]

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Investment Fraud Attorneys

SEC Freezes Palm Financial and Shore Financial In Ponzi Scheme

Nov 20, 2019

Yesterday, the Securities and Exchange Commission (“SEC”) announced its filing of an emergency action for a temporary restraining order and asset freeze against Neil Burkholz of Boca Raton, Florida, and Frank Bianco, of Pembroke Pines, Florida, and their companies Palm Financial Management LLC and Shore Management Systems LLC, for an alleged $6 million Ponzi  scheme. Many of the investor victims are senior citizens between the ages of 65 and 100, including several Florida small-business owners. At least some have liquidated their retirement savings and other assets to invest with Defendants. According to the SEC’s complaint, the defendants falsely touted their proprietary options trading strategies as highly profitable. In reality, as alleged in the complaint, Defendants did not properly invest victim assets, nor where the invested assets profitable. Instead, Bianco and Burkholz knowingly channeled new money obtained from the investor victims in three ways: to pay other investors purported profits or redemptions, to pay themselves, and to invest the money in a calamitous trading strategy that has incurred years of material, undisclosed losses. Much of the money was not in fact invested and, as alleged in the Complaint,  the defendants misappropriated the remaining cash which was not invested by using it to repay other investors (a classic Ponzi scheme hallmark) and by transferring approximately $880,000 of investor funds to themselves and their spouses for personal use. According to the SEC’s complaint, the Defendants sent false reports to investors to conceal their fraudulent conduct and give the investors the false impression they were generating positive returns. As stated in the Complaint, to perpetuate their scheme, Defendants employed a variety of methods to discourage withdrawals. These tactics included providing redemption payments funded from other investors’ money and sending false investment reports intended to reassure investors that their assets continued to grow. The SEC’s complaint, filed in federal court in Miami on Nov. 14 and unsealed Monday, Nov. 18, charges the defendants with securities fraud and seeks certain emergency relief as well as permanent injunctions, return of allegedly ill-gotten gains with prejudgment interest, and civil penalties. The complaint also names Burkholz’s wife, Rhoda Burkholz, and Bianco’s wife, Suzanne Bianco, as relief defendants. Former Wall Street Attorney Melanie S. Cherdack represents investors in the United States and the Caribbean in claims against brokers and brokerage firms for wrongdoing. If you believe you are the victim of a Ponzi scheme or other financial fraud you may have a claim for damages. For a free consultation, contact us by filling out our online contact form, or calling 305-349-2336.

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Investment Fraud Attorneys

How Do You Select the Right Investment Fraud Attorney?

Nov 13, 2019

You have been the victim of investment fraud.  What do you do now?   Without question, your first order of business is to retain the services of an experienced, qualified attorney to handle your investment fraud matter.  Yet, having suffered loss at the hands of an investment “professional,” it is perfectly understandable that you may be a little reluctant to start wading through an endless choice of lawyers to prosecute an investment fraud case.  Indeed, it can be difficult to know who might be the best investment fraud lawyer for you under the circumstances. In this blog, we hope to assuage some of those fears. While selecting any type of attorney is always a subjective process that relies on your own judgment and preferences, we will discuss a few important tips to help you be better prepared to select the investment fraud attorney who is right for you. Tip #1 – Do Your Research, Avoid Snap Decisions There is a phrase that goes back to the children’s stories we all remember:  “Slow and steady wins the race.” Yes, to garner a little wisdom from the old Tortoise and the Hare story, faster is not always better.  More to the point, do not jump at the first attorney you meet. Take your time – slow and steady – to speak with several attorneys before making a decision. While that advice is good for the selection of an attorney in any field, it is vital when you are pursuing a case against a person who purported to be a “financial professional.”  That is because you need to find an attorney who is both seasoned in dealing with the complexity of investment fraud cases and is someone with whom you feel comfortable.   Accordingly, in the research phase, you want to start by getting some personal referrals.  Ask friends, colleagues, and neighbors for recommendations. You may be surprised that you will get the names of a few attorneys right away.    Then, check with state bar associations and, of course, do your online research to find the investment fraud attorneys in your area.   Once you have compiled a list of attorneys who you think would be able to help you, then move into the evaluation phase.  That is what the next series of tips is all about. Tip #2 – Experience, Experience, Experience The number one consideration in selecting an investment fraud attorney is – you guessed it – experience.  There are attorneys and firms that focus on a number of legal fields, and there are others that specialize in only one. It is very possible that a law firm with a more diverse practice could still effectively help you when acting as your investment fraud attorney.  Yet, all things being equal, you might be better off with an attorney who focuses solely on investment fraud matters. Why is that?  That is because a person laser-focused on investment fraud cases will have seen every possible fact pattern that could come up in an investment fraud case.  Thus, an attorney who has, so to speak, “seen it all,” will be that much better at knowing how […]

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Retired NFL Players are Victims in Alleged Investments Fraud by Cambridge

Sep 2, 2019

The Securities and Exchange Commission (“SEC”) recently charged a Florida-based investment adviser firm and its principals with defrauding investors who

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SEC Freezes Assets in Digital Securities Scam

Aug 14, 2019

Today the Securities and Exchange Commission (“SEC”) announced fraud charges against Reginald “Reggie” Middleton, a self-described

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Charles Kenahan Churning Case settled by Merrill Lynch for 40 million

Jul 30, 2019

Charles Kenahan was fired by Merrill Lynch in July 2019. Kenahan, who previously worked in the Boston, Massachusetts office, was terminated regarding allegations that he churned his customers’ accounts as well as making unsuitable investments for his customers. Merrill recently settled his claims for 40 million.  According to FINRA broker check, Kenahan has been the subject of 4 customer complaints, all of which were filed within the last two years. FINRA Rule 2111 and its predecessor, NASD Rule 2310, require brokerage firms and their brokers to have a reasonable basis to believe that a recommended securities transaction is suitable in light of the customer’s investment profile. Recommended securities transactions may be unsuitable if, when taken together, they are excessive, the level of trading is inconsistent with the customer’s investment profile, and the registered representative exercises control over the customer’s account. No single test defines when trading is excessive, but factors such as the turnover rate and the cost-to-equity ratio are considered in determining whether a member firm or associated person has violated FINRA’s suitability rule. If you believe your brokerage account has been excessively traded or that unsuitable investments have been sold to you, you may have a claim for damages. Call us today for a free consultation. Former Wall Street Attorney Melanie S. Cherdack represents investors in the United States and the Caribbean in claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-768-2499 or complete our contact form for a free consultation.  

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Boca Raton Based Summit Brokerage Services Fined For Broker’s Excessive Trading

Jul 5, 2019

Boca Raton Based Summit Brokerage Services Fined For Broker’s Excessive TradingFINRA announced this week that it fined Summit Brokerage Services, Inc. approximately $880,000 for supervisory failures, including about $558,000 in restitution to customers whose accounts were excessively traded by a former broker of the firm barred by FINRA. FINRA Press Release FINRA found that between January 2012 through March 2017, Summit, which had over 700 brokers, failed to review certain automated trade alerts used to identify excessive trading. One representative identified as “CJ,” was singled out by FINRA for excessively trading securities in the accounts of 14 customers. Most egregiously, FINRA found that CJ placed 533 trades for a retiree over a three-year period, causing her to pay more than $171,000 in commissions. FINRA also fined Summit for inadequate supervision of its brokers. Although CJ’s trading for 14 customers generated more than 150 alerts for potentially excessive trading,  FINRA found that Summit did not review them. Summit agreed to pay restitution to affected customers in the amount of the commissions they were charged as a result of the excessive trading in their accounts. FINRA previously barred CJ in a separate disciplinary action. In the  FINRA AWC   FINRA found that from June 2015 through March 2018, Summit failed to reasonably supervise its representatives’ use of “consolidated reports,” documents provided to customers summarizing the customer’s financial holdings, including assets held away from the firm. FINRA found that one such report sent by a registered representative of the firm to a customer materially misstated the value of the customer’s investment. FINRA Rule 2111 and its predecessor, NASD Rule 2310, require brokerage firms and their brokers to have a reasonable basis to believe that a recommended securities transaction is suitable in light of the customer’s investment profile. Recommended securities transactions may be unsuitable if, when taken together, they are excessive, the level of trading is inconsistent with the customer’s investment profile, and the registered representative exercises control over the customer’s account. No single test defines when trading is excessive, but factors such as the turnover rate and the cost-to-equity ratio are considered in determining whether a member firm or associated person has violated FINRA’s suitability rule. If you believe your brokerage account has been excessively traded or that unsuitable investments have been sold to you or a loved one, you may have a claim for damages. Please call us at 888-768-2499 or complete our contact form for a free consultation. Former Wall Street Attorney Melanie S. Cherdack represents investors in the United States and the Caribbean in claims against brokers and brokerage firms for wrongdoing.  

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SEC Charges Ponzi Scheme Run out of Frat House

Jun 10, 2019

Former College Student Charged with Running Ponzi Scheme out of Frat House On June 3, 2019, the Securities and Exchange Commission announced an emergency action charging a recent college graduate with orchestrating a Ponzi scheme that targeted college students and their families.The SEC’s complaint https://www.sec.gov/litigation/complaints/2019/comp-pr2019-84.pdf alleges that Syed Arham Arbab, 22, ran his scheme out of a fraternity house near the University of Georgia campus. According to the SEC’s complaint, Arbab allegedly offered  hedge fund investments in “Artis Proficio Capital,” which he claimed had generated past annual returns of as much as 56% and for which the investments were guaranteed up to $15,000 in principal. Arbab also allegedly sold guaranteed “bond agreements” with a fixed rate of return. The SEC alleges that at least eight college students, recent graduates, or their family members invested more than $269,000 in these investments. The SEC’s complaint charges Arbab, Artis Proficio Capital Investments LLC, and Artis Proficio Capital Management LLC, with violating the antifraud provisions of the federal securities laws. According to the SEC’s complaint, there was no hedge fund at all, and Arbab created fake performance returns which he used to sell the fund to investors. Instead of investing the money in the hedge fund , Arbab allegedly invested the funds in his personal bank and brokerage accounts, which he used for his own benefit for shopping, entertainment and  travel to Las Vegas. As is the case with most Ponzi schemes, Arbab also allegedly used portions of new investor money to pay earlier investors who had asked for their money back. The SEC alleges that Arbab even instructed some new investors to send their money – unknowingly – to earlier investors through payment apps such as Venmo, Zelle, and Cash App, by representing that these payees were either a “partner” or “manager” in the fund. According to Richard R. Best of the Atlanta office of the SEC “[w]e allege that Mr. Arbab used his college affiliations to operate a Ponzi scheme that drained valuable resources from current and former students. This is a reminder that investors of all ages and experience levels—whether long-time investors or recent graduates investing funds from their first few paychecks—should carefully research investment opportunities and the people offering them.” Investors of all ages can fall victim to a Ponzi scheme, especially in situations where they know the perpetrator through a club or other social group, such as the fraternity in this case. If you or someone you know is a victim of a Ponzi scheme or other investment scam, call us today for a free consultation. Former Wall Street Attorney Melanie S. Cherdack represents investors in the United States and the Caribbean in claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-768-2499 or complete our contact form for a free consultation.

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Oasis International and others charged in $75 Million FOREX scheme

Apr 23, 2019

The Commodities Futures Trading Commission announced yesterday that it has filed a civil enforcement action in federal court in Florida against Sarasota area defendants Oasis International Group, Limited, Oasis Management, LLC, Satellite Holdings Company, Michael J. DaCorta, Joseph S. Anile, II, Raymond P. Montie, III, Francisco “Frank” L. Duran , and John J. Haas . The Complaint alleges that the defendants received approximately $75 million from pool participants for investment in two commodity pools—Oasis Global FX, Limited and Oasis Global FX, SA (collectively, the “Oasis Pools”)—that would purportedly trade in foreign currency exchange (“forex”). The defendants falsely represented that, among other things participants would receive a minimum 12% guaranteed annual return; the Oasis Pools had never had a losing month; there was no risk of loss with the Oasis Pools; and forex trading returns for the Oasis Pools were 22% in 2017 and 21% in 2018.  The defendants misappropriated the majority of pool funds and lost the remainder trading forex. As further alleged, of the approximately $75 million the defendants received from pool participants between mid-April 2014 and the present, the defendants deposited only $21 million into Oasis Pools’ forex trading accounts and lost all of those funds trading.  The defendants used over $28 million to make Ponzi-like payments to other pool participants, as well as spending over $18 million for unauthorized personal or business expenses such as real estate purchases in Florida, exotic vacations, sports tickets, pet supplies, loans to family members, and college and study abroad tuition.  The defendants also allegedly created and issued false account statements to conceal their trading losses and misappropriation from pool participants by inflating and misrepresenting the value of the pool participants’ investments in the Oasis Pools and the Oasis Pools’ trading returns. See the full CFTC press release https://www.cftc.gov/PressRoom/PressReleases/7915-19 If you believe that you are the victim or a Ponzi scheme or other investment scam, call us today for a free consultation.Former Wall Street Attorney Melanie S. Cherdack represents investors in the United States and the Caribbean in claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-768-2499 or complete our contact form for a free consultation.  

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