INVESTMENT ADVISER BUSINESS AND OWNER ACCUSED OF TAKING CLIENTS FUNDS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
June 11, 2012
SEC Charges Atlanta Investment Advisor and its Owner for Misappropriating Client Funds
On Saturday, June 9, 2012, The Securities and Exchange Commission filed a civil action in the United States District Court for the Northern District of Georgia against Benjamin Daniel DeHaan and Lighthouse Financial Partners, LLC. Lighthouse, an investment advisor located in Atlanta and registered with the State of Georgia, has been owned and operated by DeHaan since 2007.

The Commission’s complaint alleges that from approximately January 2011 through early May 2012, DeHaan moved approximately $1.2 million in funds belonging to his clients from their accounts at a custodial broker-dealer into a bank account in Lighthouse’s name that he controlled, thus gaining custody and control of these client assets. DeHaan and Lighthouse told the clients that these funds would be used to open new accounts at another broker-dealer. Once in this account, at least some of these funds were moved to a personal account belong to DeHaan and to accounts used by Lighthouse for business expenses. At least $600,000 in client funds remains unaccounted for. DeHaan is also alleged to have provided false documents to the Commission’s staff and to an examiner for the State of Georgia.

Without admitting or denying the allegations in the Commission’s complaint, DeHaan and Lighthouse have offered to consent to interim relief in the form of an order providing for a preliminary injunction against violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, allowing for expedited discovery, freezing their assets, preventing the destruction or concealment of documents and requiring an accounting. The Commission may seek additional relief, such as a permanent injunction, disgorgement of any ill-gotten gains with prejudgment interest and civil penalties, at a later time.
The Commission acknowledges the assistance and cooperation of the Securities Division of the Georgia Secretary of State’s Office in investigating this matter.

14 SALES AGENTS CHARGED IN $415 MILLION PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., June 12, 2012 — The Securities and Exchange Commission today charged 14 sales agents who misled investors and illegally sold securities for a Long Island-based investment firm at the center of a $415 million Ponzi scheme.

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.

The SEC thanks the U.S. Attorney’s Office of the Eastern District of New York and the Federal Bureau of Investigation for its assistance in this matter. Anthony Ciccone, Kaylor, Jason Keryc, and Massaro have previously been arrested on a criminal complaint charging each of them with conspiracy to commit mail fraud based on their conduct as Agape sales agents. The SEC also acknowledges the assistance of the U.S. Postal Inspection Service and the Commodity Futures Trading Commission.

The SEC’s investigation was conducted by Celeste Chase, Philip Moustakis, and Yvette Panetta in the New York Regional Office. The SEC’s related examination that led to the enforcement case was conducted by Richard A. Heaphy, Yvette Q. Panetta, Dawn M. Sacco, Joseph P. DiMaria, James E. Anastasia, Marianne Cala, and Steven Gilchrist. The SEC’s litigation will be led by Paul G. Gizzi and Mr. Moustakis.

COMMISSIONER AGUILAR'S REMARKS ON THE NEW INVESTOR ADVISORY COMMITTEE

FROM:  U.S. SECURITEIS AND EXCHANGE COMMMISSION
Public Statement by Commissioner:
Investor Voices Renewed: The New Investor Advisory Committee
by
Commissioner Luis A. Aguilar
Investor Advisory Committee
U.S. Securities and Exchange Commission
June 12, 2012
It is a pleasure to be here with you for the first meeting of the new Investor Advisory Committee. Before I begin, let me issue the standard disclaimer that the views I express today are my own, and do not necessarily reflect the views of the Securities and Exchange Commission, my fellow Commissioners, or members of the staff.

This important Committee was established by Congress to advise and consult with the Commission on a broad range of issues, initiatives and priorities affecting the public interest. I was honored to be the sponsor of the SEC’s first Investor Advisory Committee, which was formed in June 2009 to give investors a greater voice in the Commission’s work. That committee was terminated in November 2010, with the expectation that the Investor Advisory Committee provided for in the Dodd-Frank Act would soon be constituted. Although the ensuing delay was longer than expected, I am delighted that this Committee is now a reality.

Thank you for agreeing to serve on this new Investor Advisory Committee. I know that you all have other jobs and other responsibilities, and I appreciate your willingness to devote the time and effort required for this important task. I commend you for your public service.

The Committee’s statutory role calls for your input on regulatory priorities, on disclosure and other regulatory issues, on initiatives to protect investor interest, and on initiatives to promote investor confidence and the integrity of the securities marketplace.1 This work will be vital to the SEC and the American public.

As you undertake your work, I particularly urge you to focus on the needs of retail investors. These are the investors who, directly or indirectly, provide the bulk of all capital invested in securities. Numerous reports suggest many individual investors feel like they are under siege.2 According to a recent survey, only 15% of Americans trust the stock market.3 Investors continued to withdraw cash from U.S. equity funds in 2011, continuing a trend that has seen a total outflow of a half a trillion dollars from domestic equity funds since 2006.4 Some of this shift may be a natural result of the aging population of baby boomers.5 But research suggests there may also be a decline in the willingness of even younger investors to invest in the stock market.6 The reasons are many, but may include concerns such as those sparked by the May 2010 “Flash Crash,” the recent debacles of the BATS IPO and the Facebook IPO – and a market structure that is increasingly complex and opaque. All these factors contribute to a sense that Wall Street is rigged against the individual investor, damaging confidence and impeding capital formation.7

It is no wonder a recent survey found many Americans planning for retirement believe that keeping their money under the mattress is the most viable option.8

The participation of retail investors in our capital markets is crucial to our country's economic success. Yet – in contrast to many other groups that interact with the Commission – most individual investors lack the time and resources to mobilize in support of policy positions, participate in meetings with Commissioners and SEC staff, and make their needs known. Accordingly, I urge the IAC to put individual retail investors foremost in its considerations.

There are other issues that I am hopeful the Committee will tackle. These include: what the SEC can do to address the growing pressure on our nation's growing senior population and the increasing incidence of financial abuse to which they are subject;9 the disparate and confusing standards of conduct between broker-dealers and investment advisers; the desire of shareholders for input regarding the use of corporate resources; and investor demands for disclosure on diversity in corporate board rooms and leadership ranks.10

On these and other issues, investors and the American public are counting on your leadership.
I look forward to hearing your recommendations.
Thank you.

FUTURES COMMISSION MERCHANT ORDERED TO PAY $250,000

FROM:  COMMODITY FUTURES TRADING COMMISSION

CFTC Orders Futures Commission Merchant Open E Cry, LLC to Pay $250,000 to Settle Failure to Supervise Charges

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing and simultaneous settlement of charges against Open E Cry, LLC (OEC), a registered futures commission merchant (FCM), for failing to diligently supervise the handling of its customer accounts.  OEC has offices in Powell, Ohio, and Chicago, Ill.

The CFTC order requires OEC to pay a $250,000 civil monetary penalty and to cease and desist from further violations of CFTC regulation 166.3, which requires diligent supervision of customer accounts. 

The CFTC order finds that for a period of months prior to June 2010, OEC failed to detect and correct a flaw in software it offered its customers for trading futures contracts that miscalculated the customers’ intraday profits and losses from trading the Russian ruble futures contract.  As a result of the flaw, the order finds that the software that OEC offered its customers calculated profits and losses resulting from trades in the ruble contract at only 10 percent of actual amounts.  OEC was unaware of the flaw, according to the order.

Also, according to the order, over a period of several hours in June 2010, a Russian national, Marat Yunusov,exploited the ruble calculation error and OEC’s supervision failures.  Yunusov engaged in a fraudulent prearranged trading scheme using his OEC account in which he traded more than 20,000 ruble contracts through 372 individual trades, as well as an additional 70,000 E-micro British pound futures contracts with an account that he controlled at another FCM, the order finds.  Yunusov’s ruble trading generated an actual loss of approximately $9 million in his OEC account, which roughly matched the ruble profits in the account he controlled at the other FCM, the order finds.  As a result of the flaw, however, OEC’s systems inaccurately reflected a ruble loss of only $900,000 rather than $9 million. 

The order also finds that as part of the scheme, Yunusov engaged in prearranged trading in British pound futures, which resulted in a gain to Yunusov in his OEC account of more than $900,000.  As a result of the flaw, it appeared to OEC that Yunusov’s net ruble/pound trading at OEC was slightly profitable, when in fact Yunusov’s true net results for his ruble and pound trading that day showed a significant loss, according to the order. 

OEC also failed to implement adequate alert systems to detect suspicious trading activity, such as the trading of extremely large quantities of futures contracts, and thus failed to detect and stop Yunusov’s trading, according to the order.

The CFTC thanks the CME Group for its assistance.  

CFTC CHARGES FLORIDA FIRM AND OWNER WITH FRAUD RELATING TO COMMODITY POOL

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Charges Jose S. Rubio and his Florida firm, Rubio Wealth Management, LLC, with Commodity Pool Fraud
Defendants also charged with misappropriation, false statements, commingling investor funds, and failure to register
Defendants allegedly fraudulently solicited over $1.8 million from at least 21 individuals
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a civil enforcement action against Jose S. Rubio (Rubio) and Rubio Wealth Management, LLC (RWM) of Surfside and Coral Gables, Fla., respectively. The CFTC complaint charges Rubio and RWM with defrauding investors in connection with operating a commodity pool to trade commodity futures and off-exchange foreign currency (forex) contracts. The CFTC complaint also charges Rubio with making false statements to pool participants, misappropriating pool funds, commingling investor funds with those of RWM, failing to register as a commodity pool operator, and failing to produce documents to the CFTC.

The CFTC complaint, filed June 7, 2012, in the U.S. District Court for the Southern District of Florida, alleges that from at least January 2008 through the present, Rubio and RWM solicited and accepted at least $1.8 million from at least 21 individuals in connection with their commodity pool. According to the complaint, Rubio and RWM lost in excess of $900,000 through trading and misappropriated at least $820,000 of participants’ funds.

Rubio allegedly made misrepresentations when soliciting and accepting pool participants’ funds. Rubio and RWM allegedly misappropriated some of those funds and used some investor funds to repay other investors, in the manner of a Ponzi scheme. The complaint also alleges that Rubio commingled investor funds with those of RWM, failed to register with the CFTC, and failed to produce documents to the CFTC.

The complaint alleges that, to conceal and perpetuate the fraud, Rubio failed to provide annual financial statements to pool participants and provided at least one pool participant with false investment performance documents that failed to disclose trading losses and misappropriation.

In its continuing litigation, the CFTC seeks civil monetary penalties, restitution, trading and registration bans, and preliminary and permanent injunctions against further violations of the federal commodities laws, as charged.

The CFTC appreciates the assistance of the Florida Office of Financial Regulation and the Financial Industry Regulatory Authority.

CFTC Division of Enforcement staff members responsible for this case are Christopher Giglio, David Oakland, Nathan Ploener, Manal Sultan, Lenel Hickson, Steve Obie, and Vincent McGonagle.

SEC ALLEGES THREE INDIVIDUALS MANIPULATED MARKET OF A STOCK

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
June 1, 2012
SEC Files Action Against Three Penny-Stock Fraudsters
The Securities and Exchange Commission ("SEC") today charged three individuals for their roles in a $3.9 million scheme to manipulate the market and to profit from the issuance and sale of Grifco International, Inc. (“Grifco”) stock. The SEC's complaint alleges that the stock manipulation scheme was orchestrated and devised by James Roland Dial, Grifco’s former president, chief executive officer, and sole director, Evan Nicolas Jarvis, a stock promoter and de facto Grifco officer, and Alex W. Ellerman, another stock promoter.

The complaint alleges that between December 2004 through November 2006, Dial and Jarvis caused Grifco, a publicly-traded corporation that claimed to be an international provider of oil and gas services equipment, to issue over 13 million purportedly unrestricted Grifco securities to Ellerman, themselves or their nominees. The complaint alleges that Dial, Jarvis and Ellerman sold the Grifco securities to the investing public shortly after receiving their shares, often times selling those shares into a rising, artificial market they created by disseminating false and material misleading information about Grifco to prospective investors and shareholders. None of the securities transactions were registered with the SEC and the transactions did not satisfy any exemption from registration according to the complaint. The SEC alleges that, as a result of this conduct, Dial, Jarvis, and Ellerman collectively received nearly $3.3 million in ill-gotten gains from the sale of newly-issued Grifco stock. The complaint also alleges that Dial misappropriated at least $600,000 by looting Grifco’s cash account from September 2005 through December 2006.

The SEC’s complaint also alleges that Dial, Jarvis, and Ellerman engaged in a pump-and-dump scheme designed to defraud and deceive existing and potential investors into purchasing Grifco shares while they sold Grifco shares at inflated prices into an artificially active market that they created. The complaint alleges that Dial made false and misleading information about Grifco through press releases, investor conference calls, and other statements to Grifco shareholders that Jarvis and Ellerman, at times, disseminated. Dial, Jarvis, and Ellerman sold many of their own Grifco shares at or near the release of this information, even though they knew that the press releases and other statements contained false and misleading information regarding Grifco’s financial position and projected sales, its products and product development, and the company’s total outstanding shares.

The complaint charges that Dial, Ellerman, and Jarvis violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, officer and director bars, and penny stock bars against each.

Dial, Jarvis, and Ellerman have consented to the entry of a final judgment that: (i) enjoins them from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; (ii) and bars them from serving as an officer or director of a public company or participating in an offering of any penny stock. Dial, Jarvis, and Ellerman also consented to entry of a final judgment that orders them to pay disgorgement and prejudgment interest in the amount of $1,600,628, $2,095,524, and $939,650, respectively, which will be deemed satisfied upon entry of a restitution order in an equal or greater amount in a related enforcement action brought by the United States Attorney’s Office for the Southern District of Texas (Houston); United States v. Alex Ellerman et al., Cr. NO. H-10-56-S (S.D. Tex.) (U.S. v. Ellerman).

On May 22, 2012, the Honorable David Hittner, United States District Court Judge for the Southern District of Texas, sentenced Dial to a five-year prison sentence for conspiring to commit wire fraud. Today, Judge Hittner also sentenced Jarvis to a five-year term of imprisonment for conspiring to commit wire fraud while Ellerman received a reduced prison sentence of 40 months because he cooperated with the prosecution and provided evidence against his co-defendants. The sentencings followed March 2011 pleas of guilty by Dial, Jarvis and Ellerman for conspiracy to commit wire fraud.

The SEC acknowledges the assistance of the United States Attorney's Office for the Southern District of Texas, the Federal Bureau of Investigation, and the Harris County (Houston, Texas) District Attorney's Office.