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Category Archives: Ponzi Schemes

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Broker Custody and Financial Responsibility Rules Implemented

Posted in Books and Records, Broker-Dealer Regulation, Ponzi Schemes, SEC Compliance

A divided Securities and Exchange Commission adopted new rules to strengthen oversight of broker-dealers’ custody of customer assets. The regulations amend the SEC’s broker-dealer reporting rule Securities and Exchange Act of 1934 Rule 17a-5, requiring firms to file new quarterly reports — Form Custody — containing information as to if and how they maintain custody… Continue Reading

What Does FINRA Rule 3270 Mean To You

Posted in Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA Enforcement, Money Laundering, Ponzi Schemes, Registered Representatives, Social Media

The outside business activities of registered persons have the potential for causing your firm significant liability, especially where those activities are unknown to the firm, involve firm customers and constitute a fraud.  FINRA 3270 only requires the registered person to provide notice to the firm before engaging in the activity, but should the firm do more…. Continue Reading

Law Firms Cannot Ignore Clients Who May Be Engaged in Ponzi Schemes

Posted in Federal and State Criminal Activities, Law Firms and Lawyers, Ponzi Schemes, SEC Enforcement

Regulators seem to believe that lawyers and their law firms act like ostriches when it comes to their clients and Ponzi schemes.  For example, a law firm paid $25 million to settle malpractice claims over legal services rendered to certain hedge funds and related entities controlled by a Ponzi Scheme artist, Arthur Nadel.  See SEC v…. Continue Reading

Receiver is Unlucky with Clawback Attempt From Charity

Posted in Ponzi Schemes, Securities Litigation

The receiver for a convicted fraudster and his entities will not be able to recover a $2 million donation the fraudster made to a small Minnesota college.  See Kelley v. College of St. Benedict, D. Minn., Civ.;’ No. 12-822 (RHK/LIB), 10/26/12, and http://docs.justia.com/cases/federal/district-courts/minnesota/mndce/0:2012cv00822/125281/34/. The federal district court found that the receiver lacked the ability to bring this action, and… Continue Reading

What You Should Know Before You Start a Ponzi Scheme?

Posted in Federal and State Criminal Activities, Ponzi Schemes

Okay, no one is suggesting that you start a Ponzi scheme!!!  However, now, that we have your attention, you should be aware of the United States Court of Appeals for the Second Circuit’s decision affirming a 25-year prison sentence for Ponzi scheme operator, Nicholas Cosmo.  See United States v. Cosmo, 2d Cir., No. 11-4506, 9/20/12, and http://federal-circuits.vlex.com/vid/united-states-v-cosmo-399026010. This… Continue Reading

Stanford Investors May Have a Second Life

Posted in Ponzi Schemes, SIPC

The SEC has decided to appeal a district court decision denying the SEC’s application to force SIPC to pay Staford investors.  See SEC v. SIPC, D.D.C., No. 1:11-mc-00678-RLW, 8/31/12, and http://www.scribd.com/doc/81297680/Judge-Wilkins-Opinion-re-SEC-SIPC-Case. The SEC believes that these investors should be protected by SIPC insurance.  However, the court’s decision held that the investors did not invest through… Continue Reading

The Supremes Hand the SEC Big Win Against Hedge Fund Scammer

Posted in Ponzi Schemes, SEC Enforcement

The United States Supreme Court refused to review a federal appeals court ruling approving a $62 million award against a former hedge fund manager, who defrauded hedge fund investors over several years.  See Lauer v. SEC., U.S., No. 12-260, 10/29/12, and http://www.supremecourt.gov/orders/courtorders/102912zor_3f14.pdf. This was an appeal from the United States Court of Appeals for the Eleventh Circuit… Continue Reading