SEC CHARGES FLORIDA RESIDENT FOR ROLE IN FRAUD SCHEME TARGETING COLOMBIAN-AMERICAN COMMUNITY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
SEC Charges South Florida Resident in Ponzi Scheme Targeting Colombian-American Community

The Securities and Exchange Commission today charged a South Florida resident with conducting a Ponzi scheme and affinity fraud that targeted the Colombian-American community, among others. The SEC alleges that Jenny E. Coplan raised approximately $4 million from more than 90 investors, many of whom were Colombian-Americans and Colombians, primarily living in Florida but also in California, Georgia, Texas, Canada, and Colombia. The SEC alleges that Coplan actively solicited investors through personal discussions with individuals both over the phone and in person. According to the SEC's complaint filed in the U.S. District Court for the Southern District of Florida, Coplan falsely told investors that her company Immigration General Services, LLC operated through an investment broker that would invest funds in immigration bail bonds. Further, Coplan promised investors interest payments ranging from 60 to 108 percent annually and falsely told prospective investors this was a safe investment and their money was FDIC insured. According to the complaint, Coplan never placed investors' funds with an investment broker to make a profit. Instead, the SEC alleges that Coplan, to conceal her unlawful conduct, paid purported profits to earlier investors using funds from newer investors in classic Ponzi scheme fashion and misappropriated approximately $878,000 of investors' funds for her own personal use.

In a parallel action, the U.S. Attorney's Office for the Southern District of Florida today announced criminal charges against Coplan.

According to the SEC's complaint, Coplan conducted the scheme from at least January 2009 to October 2011. Coplan, who resides in Tamarac, Florida, and her company Immigration Services have never been registered with the SEC to offer securities.

The SEC further alleges that Coplan created fictitious investor statements that were sent to investors to hide Coplan's misuse of investor money and lead investors to believe their investments were growing. The SEC's complaint charges Coplan with violating Sections 5(a), 5(c) and 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 SEC's complaint also charges Coplan with violations of Section 15(a) of the Exchange Act. The SEC's complaint seeks disgorgement of ill-gotten gains, financial penalties, and injunctive relief against Coplan to enjoin her from future violations of the federal securities laws.

The SEC's investigation was conducted in the Miami Regional Office by Senior Counsel Jorge L. Riera and Accountant Karaz S. Zaki under the supervision of Assistant Regional Director Elisha L. Frank. Amie Riggle Berlin will lead the SEC's litigation. The SEC acknowledges the assistance and cooperation of the U.S. Attorney's Office for the Southern District of Florida, and the Federal Bureau of Investigation.

COMPANY WILL PAY $275,000 TO SETTLE CHARGES OF VIOLATING MINIMUM FINANCIAL REQUIREMENT RULES

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 
FXDirectDealer, LLC Ordered to Pay $275,000 Penalty to Settle CFTC Charges of Violating Minimum Financial Requirement Rules

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges that, between November 2010 and December 2012, FXDirectDealer, LLC (FXDD), a CFTC-registered Retail Foreign Exchange Dealer (RFED) and Futures Commission Merchant (FCM) headquartered in New York, New York, failed to comply with minimum financial requirements for RFEDs and FCMs. FXDD has been registered with the CFTC as an FCM since December 10, 2009 and as an RFED since September 2, 2010.

Effective October 18, 2010, the CFTC adopted comprehensive rules to protect members of the public who buy foreign currency (forex) contracts from, or sell forex contracts to, forex firms. Under these rules, RFEDs and FCMs that offer or engage in retail forex transactions must at all times maintain adjusted net capital of $20 million, or more in certain circumstances.

According to the CFTC Order, FXDD did not maintain its required adjusted net capital during at least 18 separate months between November 2010 and December 2012, with month-end adjusted net capital computations showing that FXDD was undercapitalized by more than $7.5 million at one point. Because FXDD reported its adjusted net capital on a consolidated basis with its subsidiary, FXDD apparently did not realize that, on the required stand-alone basis, it failed to satisfy its adjusted net capital requirements throughout most of this period, the Order finds.

The Order imposes a $275,000 civil monetary penalty and a cease and desist order against FXDD for its violations. The Order notes that in settling this matter, the CFTC took into account FXDD’s cooperation and the corrective action it undertook after its deficiencies were discovered.

The CFTC thanks the National Futures Association for its assistance.

CFTC Division of Enforcement staff members responsible for this case are Rachel Hayes, Thomas Simek, Charles Marvine, Rick Glaser, and Richard Wagner. Kevin Piccoli, Ronald Carletta, Robert Loeber, and Nicholas Chiacchere of the CFTC’s Division of Swap Dealer and Intermediary Oversight also assisted in this matter.

FIRMS AND OWNER AGREE TO PAY OVER $1 MILLION TO SETTLE SEC CHARGES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today sanctioned an Omaha, Neb.-based investment advisory firm and its owner for failing to seek the most beneficial terms reasonably available when investing in mutual fund shares for three funds that they managed.

An SEC investigation found that Manarin Investment Counsel Ltd. and Roland R. Manarin violated their obligation to seek what is known as “best execution” by consistently selecting higher cost mutual fund shares for the three fund clients even though cheaper shares in the same mutual funds were available.  As a result, the clients paid avoidable fees on their mutual fund holdings, which were passed through to a brokerage firm owned by Manarin in a practice inconsistent with the disclosures they made to investors.  The brokerage firm also is charged with violations.

Manarin and his firms agreed to pay more than $1 million to settle the charges.

“Investment advisers must fulfill their fiduciary duty of best execution when selecting mutual fund shares for their clients,” said Marshall S. Sprung, co-chief of the SEC Enforcement Division’s Asset Management Unit.  “Manarin and his firm breached that duty by choosing more expensive shares that would pay higher fees to an affiliate when their clients were eligible to own lower-cost shares in the very same mutual funds.”

According to the SEC’s order instituting settled administrative proceedings, Manarin Investment Counsel provides investment advice to a mutual fund called Lifetime Achievement Fund (LAF) as well as two private funds known as Pyramid I Limited Partnership and Pyramid II Limited Partnership.  As “funds-of-funds” they invest their assets principally in the shares of various mutual funds.

The SEC’s order finds that from 2000 to 2010, Manarin and his investment advisory firm caused these fund clients to invest in “Class A” mutual fund shares when they were eligible to own lower-cost “institutional” shares in the same mutual funds.  Because they owned “Class A” shares, the clients paid ongoing 12b-1 fees on their mutual fund holdings for distribution and shareholder services.  Such fees often could have been avoided had Manarin and his firm purchased institutional shares on the clients’ behalf.  Instead, the unnecessary fees were passed through to Manarin’s broker-dealer Manarin Securities Corp.  Although Manarin’s brokerage firm eventually refunded 12b-1 fees paid by LAF, it did not refund fees to the Pyramid funds.  From June 2000 to October 2010, Manarin Securities Corp. received approximately $685,000 in 12b-1 fees from mutual funds in which the Pyramid funds could have purchased institutional shares.

The SEC’s order finds that by failing to seek best execution when selecting among available mutual fund share classes, Manarin and his investment advisory firm violated their fiduciary duty as investment advisers under Section 206(2) of the Investment Advisers Act of 1940.  Because their ongoing practice was inconsistent with disclosures in LAF’s registration statement and the offering memoranda for the two Pyramid funds, the order finds that Manarin and his investment advisory firm violated Section 206(4) of the Advisers Act and Rule 206(4)-8.  The SEC’s order also finds that Manarin violated Section 34(b) of the Investment Company Act of 1940, and that he and both firms violated Section 17(a)(2) of the Securities Act of 1933.  The SEC’s order further finds that Manarin’s brokerage firm charged commissions to LAF that exceeded the usual and customary amounts charged by broker-dealers for transactions in shares of exchange-traded funds – in violation of Section 17(e)(2)(A) of the Investment Company Act.

Manarin and his brokerage firm agreed to pay disgorgement of $685,006.90 and prejudgment interest of $267,741.72.  Manarin agreed to pay a $100,000 penalty.  Without admitting or denying the SEC’s findings, Manarin and his firms also consented to censures and cease-and-desist orders.

The SEC’s investigation was conducted by Coates Lear and Kurt Gottschall of the Asset Management Unit in the Denver Regional Office.  Examinations of the firms were conducted by Susan Day, Philip Perrone, and Nicholas Madsen of the Denver office’s investment adviser/investment company and broker-dealer examination programs.

COURT ORDERS DEFENDANTS TO PAY OVER $18 MILLION DISGORGEMENT, PENALTIES FOR MISCONDUCT IN SECURITIES MARKET

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Court Enters Final Judgment by Consent Against SEC Defendants Philip A. Falcone, Harbinger Capital Partners Offshore Manager, L.L.C., Harbinger Capital Partners Special Situations GP, L.L.C., and Harbinger Capital Partners LLC

The Securities and Exchange Commission announced that, on September 16, 2013, the Honorable Paul A. Crotty, United States District Court Judge for the Southern District of New York, entered a final judgment by consent against Defendants Philip A. Falcone, Harbinger Capital Partners Offshore Manager, L.L.C., Harbinger Capital Partners Special Situations GP, L.L.C., and Harbinger Capital Partners LLC in two related actions. No judgment was entered against Defendant Peter A. Jenson. The final judgment bars Falcone from the securities industry for at least five years. In addition, Falcone and his advisory firm Harbinger Capital Partners agreed to a settlement in which they must pay more than $18 million in disgorgement and penalties and admit wrongdoing.

The SEC filed enforcement actions in June 2012 alleging that Falcone improperly used $113 million in fund assets to pay his personal taxes, secretly favored certain customer redemption requests at the expense of other investors, and conducted an improper "short squeeze" in bonds issued by a Canadian manufacturing company. In the settlement papers filed with the court, Falcone and Harbinger admit to multiple acts of misconduct that harmed investors and interfered with the normal functioning of the securities markets.

On August 19, 2013, Falcone agreed to a settlement which requires him to pay $6,507,574 in disgorgement, $1,013,140 in prejudgment interest, and a $4 million penalty. The Harbinger entities are required to pay a $6.5 million penalty. Falcone also consented to the entry of a judgment barring him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization with a right to reapply after five years. The bar will allow him to assist with the liquidation of his hedge funds under the supervision of an independent monitor.

Among the set of facts that Falcone and Harbinger admitted to in settlement papers filed with the court:

Falcone improperly borrowed $113.2 million from the Harbinger Capital Partners Special Situations Fund (SSF) at an interest rate less than SSF was paying to borrow money, to pay his personal tax obligation, at a time when Falcone had barred other SSF investors from making redemptions, and did not disclose the loan to investors for approximately five months.

Falcone and Harbinger granted favorable redemption and liquidity terms to certain large investors in HCP Fund I, and did not disclose certain of these arrangements to the fund's board of directors and the other fund investors.

During the summer of 2006, Falcone heard rumors that a Financial Services Firm was shorting the bonds of the Canadian manufacturer, and encouraging its customers to do the same.

In September and October 2006, Falcone retaliated against the Financial Services Firm for shorting the bonds by causing the Harbinger funds to purchase all of the remaining outstanding bonds in the open market.

Falcone and the other Defendants then demanded that the Financial Services Firm settle its outstanding transactions in the bonds and deliver the bonds that it owed. Defendants did not disclose at the time that it would be virtually impossible for the Financial Services Firm to acquire any bonds to deliver, as nearly the entire supply was locked up in the Harbinger funds' custodial account and the Harbinger funds were not offering them for sale.

Due to Falcone's and the other Defendants' improper interference with the normal interplay of supply and demand in the bonds, the bonds more than doubled in price during this period.

SEC ANNOUNCES FRAUD CHARGES AGAINST COUPLE FOR "PATH TO RESIDENCY" INVESTOR FRAUD

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today announced fraud charges against a husband and wife in Texas for stealing funds from foreign investors under the guise of an investment opportunity to create U.S. jobs and a path to U.S. residency.

The SEC alleges that Marco and Bebe Ramirez and three companies they own have fraudulently raised at least $5 million from investors by falsely promising that their money would be invested as part of the EB-5 Immigrant Investor Pilot Program.  Through the program, foreign investors can earn conditional visas and eventually green cards by making investments in U.S. economic development projects that will create or preserve a minimum number of jobs for U.S. workers.  Instead of investing the money as promised, the Ramirezes routinely diverted investor funds to other undisclosed businesses and for their personal use.  In at least one instance, they used new investor funds to make Ponzi-like payments to an existing investor.

According to the SEC’s complaint unsealed today in U.S. District Court for the Southern District of Texas, the Ramirezes initially targeted investors in Mexico, but more recently have solicited investors in Egypt and Nigeria.  The court has granted the SEC’s request to freeze the assets and accounts of the Ramirezes and their three companies: USA Now LLC, USA Now Energy Capital Group LP, and Now Co. Loan Services.  This effectively halts their ability to raise further money from investors or spend any remaining funds in the scheme.

“Through their investment scheme, the Ramirezes abused a program intended to attract foreign capital to create U.S. jobs,” said David R. Woodcock, Director of the SEC’s Fort Worth Regional Office.  “The Ramirezes misappropriated investor funds for their own purposes without any regard for the harm they caused investors who were seeking an avenue to U.S. residency.”

The SEC and U.S. Citizenship and Immigration Services (USCIS) today issued a joint investor alert that provides additional information about the EB-5 program and cautions investors about fraudulent EB-5 schemes.  USCIS offered substantial assistance in the SEC’s investigation of the Ramirezes.  The EB-5 program is administered by USCIS and enables foreign investors to make their investments either directly in a business or through EB-5 “regional centers” that are private entities organized to promote economic development in specific geographic areas and industries.

According to the SEC’ s complaint, beginning in 2010, the Ramirezes sought approval from USCIS to register USA Now as an EB-5 regional center that would accept and direct investments from foreign investors into investment opportunities that would purportedly satisfy the EB-5 visa requirements.  But even before USCIS decided, the Ramirezes and other USA Now employees already had started soliciting investors with false promises about how their money would be invested.

The SEC alleges that the Ramirezes told investors that USA Now would hold their investments in escrow until they received USCIS approval.  And once the funds were released from escrow, they would be used for specific business purposes.  However, the Ramriezes failed to hold the funds in escrow as required, and instead routinely diverted the funds for other uses not described in offering materials, often on the same day the funds were received.  Among their misappropriations, the Ramirezes appear to have opened a Cajun-themed restaurant with investor funds and settled an unrelated lawsuit.  Meanwhile, none of the at least 10 investors identified by the SEC as victims of the scheme have received visas from USCIS, and none of their funds seem to remain in escrow.

“Even though investors provided the Ramirezes with at least $5 million, none of them have ever received conditional visas let alone green cards,” said David Peavler, Associate Director of the SEC’s Fort Worth Regional Office.  “Instead, the Ramirezes opened a restaurant and purchased other assets for themselves and their employees.”

The SEC’s complaint alleges that the Ramirezes and their companies violated and aided and abetted violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.  The complaint seeks various relief including preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

The SEC’s investigation has been conducted by Timothy Evans, Kimberly Cain, Ty Martinez, and Jonathan Scott of the Fort Worth Regional Office.  The SEC’s litigation will be led by Mr. Evans and David Reece.  The SEC appreciates the assistance of the Federal Bureau of Investigation and U.S. Attorney’s Office for the Southern District of Texas.

CFTC FILES ENFORCEMENT ACTION IN REGARDS TO A COMMODITY POOL FRAUD SCHEME

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Charges TOTE Fund LLC, MJS Capital Management LLC and their Principal, Michael J. Siegel with Commodity Pool Fraud

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced that it filed a civil enforcement action in the U.S. District Court for the District of New Jersey, charging two California firms, TOTE Fund LLC (TOTE) and MJS Capital Management LLC (MJS), and their principal, Michael J. Siegel of Northfield, New Jersey, with misappropriating funds in connection with two commodity pools.

The CFTC’s Complaint, filed on September 27, 2013, alleges that, from August 2007 through at least October 2010, TOTE, MJS, and Siegel, operated two commodity pools, the Monarch Futures Fund LLC (Monarch) and the QEP Futures Fund LLC (QEP). Pool participants placed approximately $1.375 million in the QEP and Monarch pools.

The Complaint further alleges that, from at least January 2008 through at least October 2010, the Defendants misappropriated funds totaling approximately $191,689 from Monarch and QEP pool participants by withdrawing money from the pools for non-pool expenses and taking fees to which they were not entitled. As alleged in the Complaint, despite earning incentive, management, and administrative fees of approximately $319,909 based on his trading for Monarch and QEP, Siegel transferred approximately $511,598 from bank accounts in the names of Monarch, QEP, and TOTE to his personal bank accounts, to a credit card account, and to at least one individual. Siegel used some of these funds to pay personal expenses, according to the Complaint, and MJS and Siegel also misappropriated funds by failing to return funds to at least two pool participants who sought to withdraw their funds from QEP.

As further alleged, TOTE, acting through Siegel, also failed to provide Monarch pool participants with copies of monthly statements received by TOTE from Futures Commission Merchants, as required by CFTC Regulation.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act.

CFTC Division of Enforcement staff members responsible for this case are Kara Mucha, James Garcia, Michael Solinsky, Gretchen L. Lowe, and Vincent A. McGonagle.