Articles Posted in Fraud

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Daniel Rudden

Publicly available records published by the Securities and Exchange Commission (SEC) and accessed on July 31, 2018, as well as an Investment News report published on July 27, 2017 indicate that the SEC has filed charges against a group of companies and their principal in connection with an alleged Ponzi scheme that affected 150 investors.

According to an SEC release, the commission has alleged Daniel Rudden and a group of companies known as Financial Visions defrauded up to 150 investors whom they promised returns of or exceeding 12% on promissory notes issued to fund the company’s operations in “short-term financing for funeral services and related expenses.” The complaint states that “since 2010 or 2011, Rudden used new investor funds to pay interest and redemptions to existing investors and concealed the Financial Visions companies’ true financial performance and condition.” He also allegedly represented the company as successful to current and prospective clients even though he “knew that he was running a Ponzi scheme.”

The SEC’s charges were filed under seal in a Denver, Colorado federal court on July 20th, 2018 and unsealed on July 25th, 2018. Mr. Rudden and Vision companies have been charged with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking permanent injunctions, disgorgement, prejudgment interest, and penalties in the pending complaint. It has also named as relief defendants “three entities” which were allegedly controlled by Mr. Rudden and which allegedly received funds from the $55 million scheme.

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David White

Publicly available records published by the Financial Industry Regulatory Authority (FINRA) and accessed on May 7, 2018 indicate that Michigan-based Sigma Financial Corporation broker/adviser David White has received several customer disputes. Fitapelli Kurta is interested in hearing from investors who have complaints regarding Mr. White (CRD# 2316760).

David White has spent twenty-five years in the securities industry and has been registered with Sigma Financial Corporation in Allen Park, Michigan since 2004. Previous registrations include Intersecurities in St. Petersburg, Florida (1993-2004) and Sigma Financial Corporation in Ann Arbor, Michigan (2004). He has passed four securities industry examinations: Series 66 (Uniform Combined State Law Examination), which he obtained on August 25, 2009; Series 63 (Uniform Securities Agent State Law Examination), which he obtained on April 1, 1993; Series 7 (General Securities Representative Examination), which he obtained on June 1, 2001; and Series 6 (Investment Company Products/Variable Contracts Representative Examination), which he obtained on April 1, 1993. He is a registered broker and investment adviser with eleven states and territories: Arizona, Florida, Georgia, Michigan, Missouri, Nebraska, Ohio, South Carolina, Utah, Virginia, and Wisconsin. He is registered with two self-regulatory organizations (SROs): FINRA and the Nasdaq Stock Market.

According to his BrokerCheck report, he has received three customer complaints and three denied customer complaints.

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Sam PiehPublic records provided by the Financial Industry Regulatory Authority (FINRA) and accessed on May 7, 2018 indicate that Oregon-based American Independent Securities Group broker/adviser Sam Pieh has received several customer disputes. Fitapelli Kurta is interested in hearing from investors who have complaints regarding Mr. Pieh (CRD# 1321892).

Sam Pieh has spent 33 years in the securities industry and has been registered with American Independent Securities Group in Lake Oswego, Oregon since 2015. Previous registrations include JHD Capital Advisors in Portland, Oregon (2012-2015); Paulson Investment Company in Portland, Oregon (2002-2012); First Union Securities in St. Louis, Missouri (1998-2002); Dain Rauscher in New York, New York (1998-1998); Dain Rauscher (1995-1998); Painewebber in Weehawken, New Jersey (1990-1995); Prudential-Bache Securities in New York, New York (1988-1990); Kidder Peabody & company (1985-1988); and the Equitable Life Assurance Society of the United States (1985). He has passed four securities industry examinations: Series 65 (Uniform Investment Adviser Law Examination), which he obtained on May 24, 2000; Series 63 (Uniform Securities Agent State Law Examination), which he obtained on May 20, 1985; Series 3 (National Commodity Futures Examination), which he obtained on December 11, 1985; and Series 7 (General Securities Representative Examination), which he obtained on December 15, 1984. He is a registered broker and investment adviser with eight US states: California, Colorado, Iowa, Montana, New York, Oregon, Utah, and Washington.

According to his BrokerCheck report, he has received five customer complaints.

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The LJM Preservation and Growth Fund, which trades under the symbols LJMIX, LJMAX, LJMCX, lost approximately $700 million, or approximately 80% of its value in the first week of February, 2018 leaving investors to wonder how a fund that calls itself “preservation and growth” could lose so much money so quickly.  In this article, we will explore how this happened, what LJMIX may have done wrong and what legal recourse investors may have against the fund.

False and Misleading Statements by LJM Preservation and Growth Fund

Before we discuss how the LJM Preservation and Growth Fund (LJMIX) lost 80% of its value in a week, it is important to understand how the fund marketed itself.  The prospectus for the LJM Preservation and Growth Fund represented the following to investors, “the LJM Preservation and Growth Fund seeks capital appreciation and capital preservation with low correlation to the broader U.S. equity market…[t]he Fund aims to preserve capital, particularly in down markets (including major market drawdowns), through using put option spreads as a form of mitigation risk.”  We believe that these statements may have been materially false and/or intentionally misleading.

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Navellier & AssociatesAccording to a press release published by the Securities and Exchange Commission (SEC) on August 31, 2017, the SEC has issued fraud charges against Nevada-based investment advisory firm Navellier & Associates, as well as its founder and chief investment officer, Louis Navellier. Fitapelli Kurta is interested in hearing from investors who have complaints regarding Navellier & Associates.

The SEC’s complaint, according to the press release, alleges that “from 2010 to 2013, Mr. Navellier and his firm defrauded their clients and prospective clients, misleading them about the performance track record of the “Vireo AlphaSector” investment strategies that the firm offered under the “Vireo” brand name.” The release continues: “First, Mr. Navellier and his firm allegedly breached their fiduciary duty to clients and prospective clients by ignoring and concealing red flags that should have alerted them that the investment strategies had not performed as advertised. Second, Navellier & Associates allegedly distributed materially false advertisements and client communications about the performance track record of the investment strategies. Third, as Mr. Navellier and his firm realized their misrepresentations could get them in legal trouble, they allegedly sold the Vireo line of business in August 2013 for $14 million, rather than correcting their prior misrepresentations to their clients or informing their clients about their conflicts of interest in selling the Vireo business.”

The SC notes additionally that whereas the firm had claimed its customer assets were invested in the strategies from April 2001 through September 2008, and further that they had “significantly outperformed the S&P 500 Index” in that period, in reality no assets had tracked the strategy, and “even as a back-test the claimed performance was substantially overstated.” The charges, filed in a federal court in Boston, Massachusetts, remain pending.

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Patrick HowardPublic records published by the Securities and Exchange Commission (SEC) on March 2, 2017 indicate that Dallas-based businessman Patrick Howard has been charged by the SEC with fraud. Fitapelli Kurta is interested in hearing from investors who have complaints regarding Mr. Howard.

According to an SEC press release dated February 16, 2017, “since February 2015, Patrick O. Howard and two Dallas-based companies he controls – Optimal Economics Capital Partners, LLC and Howard Capital Holdings, LLC – have raised approximately $13 million from 119 investors through the fraudulent offer and sale of interests in three private funds.” Mr. O’Howard and his companies allegedly told investors that their investments would yield returns between 12% and 20% “with minimal risk exposure,” and allegedly represented that “nearly all investor funds would be used to acquire the interests in the portfolio companies’ revenue streams, and that the promised returns were backed by insurance.” According to the SEC’s complaint, “these representations were false.” Mr. Howard and his companies allegedly “only used $7.5 million of the $13 million in investor funds to acquire revenue streams from portfolio companies and spent most of the rest on Howard’s personal expenses and on unrelated business expenses.” He also allegedly sent customers false account balances, encouraging them to reinvest funds, to “cover up” for the companies’ revenue’s insufficiency to support guaranteed minimum returns. “Additionally, Optimal Economics allegedly used new investor funds to make Ponzi-like payments to earlier investors,” the release states.

Finally, Mr. Howard allegedly also falsely represented to investors that he was a registered investment adviser, which he was not. After the SEC filed its complaint in a Dallas federal court, the court “issued a temporary restraining order halting the offering, as well as orders appointing a receiver over, and freezing, the defendants’ assets.” The SEC is seeking disgorgement of ill-gotten gains, preliminary and permanent injunctions, prejudgment interest and civil penalties in the pending complaint.