SEC CHARGED UNREGISTERED BROKER WITH STEALING INVESTOR FUNDS IN DAY TRADING INVESTOR SCHEME

FROM:   U.S. SECURITIES AND EXCHANGE COMMISSION 
11/18/2014 05:30 PM EST

The Securities and Exchange Commission today charged an unregistered broker living outside Tampa, Fla., with stealing investor funds as part of a fraudulent day trading scheme.

The SEC alleges that Albert J. Scipione and his business partner solicited investors to establish accounts at their company called Traders Café for the purposes of day trading, which entails the rapid buying and selling of stocks throughout the day in hope that the stock values continue climbing or falling for the seconds to minutes they own them so they can lock in quick profits.  Scipione touted Traders Café’s software trading platform and made a series of false misrepresentations to investors about low commissions and fees, high trading leverage, and safety of their assets.  More than $500,000 was raised from investors who were assured that funds invested with Traders Café would be segregated and used only for day trading or other specific business purposes.  However, many customers encountered technical service problems that prevented them from trading at all, and Scipione and his business partner squandered nearly all of the money in investor accounts for their personal use.  Meanwhile, Traders Café was never registered with the SEC as a broker-dealer as required under the federal securities laws.

“Scipione portrayed Traders Café as a broker-dealer for customers interested in day trading, but it became merely a depository from which he stole investor funds for himself,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.

The SEC previously charged Scipione’s business partner Matthew P. Ionno, who agreed to settle the case and has been barred from the securities industry.  Financial penalties will be decided by the court at a later date.

In a parallel action, the U.S. Attorney’s Office for the Middle District of Florida today announced that Scipione has pleaded guilty to criminal charges.  The U.S. Attorney’s Office previously brought a criminal case against Ionno.

According to the SEC’s complaint filed against Scipione in federal court in Tampa, customers across the country deposited approximately $367,000 with Traders Café from December 2012 to October 2013 with the intention of opening day trading accounts.  Traders Café also received approximately $150,000 from an investor who invested directly in Traders Café’s business. Customers encountered problems with Traders Café from the outset, and many of them cancelled their accounts and requested refunds of their remaining account balances.  Scipione and Ionno tried to cover up their fraudulent scheme by offering excuses and delays for why customers could not get refunds.  Eventually less than $1,200 remained in Traders Café’s accounts primarily due to the repeated misuse of investor funds by Scipione and Ionno.

The SEC’s complaint against Scipione alleges that he violated Section 17(a) of the Securities Act of 1933 as well as Section 15(a) and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The SEC seeks disgorgement of ill-gotten gains, financial penalties, and permanent injunctive relief to enjoin Scipione from future violations of the federal securities laws.

The SEC’s investigation was conducted by D. Corey Lawson and Tonya T. Tullis, and the SEC’s litigation is being led by Christopher E. Martin.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Middle District of Florida, the Federal Bureau of Investigation, and the Florida Office of Financial Regulation.

SEC CHARGES CANADIAN CO. IN ALLEGED PUMP-AND-DUMP SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION PUMP-AND-DUMP, SECURITIES FRAUD
Litigation Release No. 23135 / November 19, 2014

Securities and Exchange Commission v. Forum National Investments Ltd., et al., Civil Action No. 5:14-cv-02376 (C.D. Cal., filed November 18, 2014)

SEC Charges Canadian Life Settlement Company in Pump-And-Dump Scheme

On November 18, 2014, the Securities and Exchange Commission ("Commission") charged a Canadian life settlement company, its CEO, and three other individuals for engaging in a pump-and-dump scheme that misled investors and artificially inflated the price of the company's stock. According to the Commission's complaint, filed in the United States District Court for the Central District of California, Daniel Clozza, the CEO of Forum National Investments Ltd., and one of his associates, Robert Logan Dunn, hired two penny stock promoters, William Anguka and Alex Ghaznawi, to create and publish promotional materials about Forum during the summer of 2012. These materials, which Anguka and Ghaznawi posted on the internet under fake and assumed names, made false and misleading statements about Forum, fabricated quotes and "buy" recommendations from stock analysts who did not cover the company, and claimed that a fictitious entity named "Welsson Financial Media" funded the promotion. At the same time, the complaint alleges, Clozza caused Forum to issue press releases that made false and misleading statements about the company, including the launch and success of a non-existent bond offering. The defendants' scheme caused significant increases in the trading volume and price of Forum stock - from $0.36 per share on a volume of 15,000 shares to $1.90 on a volume of 254,000 shares - from which Clozza's relatives and associates, including Dunn, profited by selling more than one million shares in the public markets.

The Commission's complaint alleges that Forum, Clozza, Dunn, Anguka, and Ghaznawi violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, that Anguka and Ghaznawi violated Section 17(b) of the Securities Act of 1933 and that Dunn aided and abetted those violations, and that Forum violated Section 13(a) of the Securities Act and Rule 13a-1 thereunder. The complaint seeks permanent injunctions and financial penalties against each defendant, disgorgement with prejudgment interest and penny stock bars against the individual defendants, and an officer-and-director bar against Clozza.

Also on November 18, the Commission also instituted public administrative proceedings against Forum pursuant to Section 12(j) of the Exchange Act in order to determine whether to suspend or revoke the registration of the company's securities as a result of its failure to comply with the reporting provisions of the Exchange Act.

SEC SUSPENDS TRADING IN EBOLA RELATED COMPANIES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
11/20/2014 10:30 AM EST

The Securities and Exchange Commission suspended trading in four companies that claim to be developing products or services in response to the Ebola outbreak, citing a lack of publicly available information about the companies’ operations.

The SEC simultaneously issued an investor alert warning about the potential for fraud in microcap companies purportedly involved in Ebola prevention, testing, or treatment, noting that scam artists often exploit the latest crisis in the news cycle to lure investors into supposedly promising investment opportunities.

The SEC Enforcement Division and its Microcap Fraud Task Force work to proactively identify microcap companies that are publicly disseminating information that appears inadequate or potentially inaccurate.  The SEC has authority to issue trading suspensions against such companies.  The companies whose trading was suspended today are Patchogue, N.Y.-based Bravo Enterprises Ltd., Monrovia, Calif.-based Immunotech Laboratories Inc., Toronto-based Myriad Interactive Media Inc., and Anaheim, Calif.-based Wholehealth Products Inc.

“We move quickly to protect investors when we see thinly-traded stocks being promoted with questionable information that make them ripe for pump-and-dump schemes,” said Elisha Frank, Co-Chair of the SEC Enforcement Division’s Microcap Fraud Task Force.  “Fraudsters are constantly exploiting issues of public concern to tout a penny stock company supposedly in the business of addressing the latest crisis.”

Under the federal securities laws, the SEC can suspend trading in a stock for 10 days and generally prohibit a broker-dealer from soliciting investors to buy or sell the stock again until certain reporting requirements are met.  More information about the trading suspension process is available in an SEC investor bulletin on the topic.

According to the SEC’s investor alert, similar to how natural disasters such as Hurricane Katrina and Hurricane Sandy have given rise to investment schemes for companies purportedly involved in cleanup efforts, con artists may perpetrate investment scams related to Ebola prevention or treatment efforts.  The alert suggests that investors be wary about promises or guarantees of high investment returns with little or no risk, avoid solicitations with pressure to “buy RIGHT NOW,” and beware of unsolicited investment offers through social media.

CFTC DMO RULE ENFORCEMENT REVIEWS ISSUED FOR CBOT, COMEX, CME, NYME

FROM:  U.S.COMMODITY FUTURES TRADING COMMISSION 
November 24, 2014

CFTC DMO Issues Rule Enforcement Reviews of the Chicago Board of Trade, Chicago Mercantile Exchange, Commodity Exchange, Inc. and New York Mercantile Exchange, Inc.

Washington, DC — The U.S. Commodity Futures Trading Commission’s Division of Market Oversight (Division) today issued three separate rule enforcement reviews of certain Designated Contract Markets (DCMs).

The Division’s reviews assessed compliance with Commodity Exchange Act Core Principles for DCMs and related regulations with respect to: (1) the Chicago Board of Trade (CBOT) and Chicago Mercantile Exchange (CME) audit trail program; (2) the New York Mercantile Exchange (NYMEX) and Commodity Exchange (COMEX) trade practice surveillance program; and (3) the CBOT, CME, COMEX, and NYMEX (collectively, the Exchanges) disciplinary program.

Overall, the Division found the Exchanges’ respective programs to be generally in compliance with the assessed DCM core principles and Commission regulations. However, the Division’s reviews identified certain deficiencies – areas where an exchange is not in compliance with a Commission regulation and must take corrective action, and recommendations – areas where an exchange should improve its compliance program. The deficiencies and recommendations identified in the reviews are summarized below.

CBOT and CME Audit Trail Program

Deficiencies:

• As required by Commission regulation § 38.553(a)(1), CBOT and CME must ensure that their program for reviewing front-end audit trail data is effective and the reviews are conducted in a timely manner.

• As required by Commission regulation § 38.553(a)(1), CBOT and CME must develop a program to at least annually review and enforce the assignment process of user IDs to automated trading models, algorithms, programs, and system in order to enforce the CBOT and CME’s user ID (Tag 50) policy.

• As required by Commission regulation § 38.553(b), CBOT and CME must ensure that the minimum summary fine amount for electronic trading audit trail deficiencies on each exchange is “meaningful” and “sufficient to deter recidivist behavior.” This minimum summary fine amount should be published in the Exchanges’ rules.

NYMEX and COMEX Trade Practice Surveillance Program

Deficiency:

• As required by Commission regulation § 38.158(b), NYMEX and COMEX must complete investigations in one year or less, absent mitigating circumstances.

Recommendations:

• NYMEX and COMEX should implement a system which would enable Market Regulation staff to efficiently track connections between related trade practice matters (complaints, research files, and cases) and thereby identify the source of time delays.

• NYMEX and COMEX should continue to develop strategies to detect spoofing.

• NYMEX and COMEX should reduce the time they take to complete pre-investigative trade practice matters (research files and complaints).

CBOT, CME, COMEX, and NYMEX Disciplinary Program

Deficiency:

• As required by Commission regulation § 38.701, the Exchanges must maintain sufficient enforcement staff to promptly prosecute possible rule violations.

Recommendation:

• The Exchanges should take appropriate measures to ensure that internal deliberations do not interfere with the prompt resolution of disciplinary matters.

Copies of the reports are available from the Commission’s Office of Public Affairs, Three Lafayette Centre, 1155 21st Street N.W., Washington, DC 20581, 202-418-5080, or by accessing the Commission’s website at www.cftc.gov.

Last Updated: November 24, 2014

SEC CHARGED PENNY STOCK CO. CEO IN ALLEGED PUMP-AND-DUMP SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Litigation Release No. 23134 / November 17, 2014
Securities and Exchange Commission v. Joseph A. Noel, Civil Action No. 3:14-CV-5054
SEC Charges San Francisco-Based Penny Stock Company CEO for Defrauding Investors in Pump-And-Dump Scheme

The Securities and Exchange Commission today charged a San Francisco-based penny stock company CEO with defrauding investors by issuing false and misleading press releases portraying his purported marketing and infomercial company as a successful venture in order to drive the stock price up while he covertly sold millions of shares into the public market for more than $300,000 in illicit profits.

According to the SEC's complaint filed against Joseph A. Noel in federal district court in San Francisco, the deceptive press releases about his company YesDTC Holdings touted exclusive distribution rights, licensing agreements, and certain products purportedly certified by the government. Noel's promotional campaigns based on such false information caused a spike in YesDTC's thinly-traded stock and enabled him to dump millions of his own shares for a profit. To conceal his sales, Noel sold the shares through a company he created in his teenage daughter's name without disclosing as required that he was actually selling the shares.

The SEC also suspended trading in YesDTC stock today, and instituted an administrative proceeding to revoke its registration.

The SEC's complaint charges Noel with violating antifraud and registration provisions of the federal securities laws. The SEC seeks disgorgement of ill-gotten gains plus prejudgment interest and a financial penalty as well as a permanent injunction. The SEC also is seeking an officer-and-director bar and a penny stock bar against Noel.

The SEC's investigation was conducted by Heather E. Marlow and David Berman of the San Francisco Regional Office, and the case is supervised by Tracy Davis. The SEC's litigation will be led by Aaron Arnzen and Ms. Marlow. The SEC appreciates the assistance of the U.S. Attorney's Office for the Northern District of California and the Federal Bureau of Investigation.

Statement at Open Meeting on Regulation Systems Compliance and Integrity

Statement at Open Meeting on Regulation Systems Compliance and Integrity