Posts Tagged ‘Securities Fraud’

High Frequency Trading Securities Fraud Class Action Filed Against “Flash Boys” Exchanges and Major Brokerages

May 22nd, 2014
English: A view from the Member's Gallery insi...

English: A view from the Member’s Gallery inside the NYSE (Photo credit: Wikipedia)

Many large brokerages, high speed trading firms, and U.S. stock exchanges were named as defendants in a securities fraud class action lawsuit filed by Providence, Rhode Island on April 18, 2014.  The Defendants in the high frequency trading securities fraud class action are accused of various types of conduct, including insider trading and manipulating trading within the U.S. securities markets.  The manipulation is alleged to have been achieved via high frequency trading based upon access to market information not available to the general investing public and other illegal conduct.

A few of the defendants targeted in the lawsuit include NASDAQ Stock Market, LLC, New York Stock Exchange LLC, Chicago Board Options Exchange Inc., BATS Global Markets, Inc. stock exchanges, a number of large brokerage firms, including Citigroup, Inc., Goldman Sachs Group, Inc., Morgan Stanley & Co. LLC and a number of high speed trading firms or “Flash Trading” firms.

Investors who purchased stock in the United States are being represented in a securities fraud class action.  The transactions at issue in the class complaint occurred from April of 2009 forward.  The complaint alleges the Defendants’ actions resulted in billions of dollars in damages to the investor class.  The securities fraud misconduct alleged against the class defendants includes:  contemporaneous trading, front-running, spoofing, and rebate arbitrage.  The lawsuit further explains that using certain devices and manipulations, the defendants were able to pursue false schemes and fraudulent courses of business that were intended to defraud investors who were trading securities.

Securities regulators, including the S.E.C., Justice Department and Commodities Exchange Commission are reviewing the high frequency trading industry independently of the Providence Class action filing last month.

The Providence high frequency trading class action and the ongoing regulator investigations into the high frequency trading industries potential for fraud and market manipulation will hopefully further uncover and bring to light trading and market practices by large market players that at best involve questionable conduct.  Securities regulators should act quickly to investigate and protect the general investing public from any questionable or illegal conduct by the trading and investment industry.

With billions of dollars in losses alleged and allegations of billions of dollars in gains by the Defendants, can a Hollywood movie be far off?   Stay tuned.

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Will the SEC File Investment Fraud Charges Against Credit-Rating Companies?

July 5th, 2011
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According to the Wall Street Journal, in May 2011 the Securities and Exchange Commission (SEC) acknowledged that credit-rating agencies, desirous of pleasing the companies they rate, are sometimes less than objective in their evaluations. To mitigate this problem, the SEC has proposed that credit-rating firms operate under stricter guidelines.
This month, the Journal reports that the SEC is currently contemplating civil fraud charges against some of these credit-reporting firms for their part in the development of mortgage-bond deals that precipitated the recent financial crisis.
During its investigation, the SEC is examining the research done by Standard & Poor, Moody’s Investors Services, and other ratings agencies into the subprime mortgages (and additional loans) that underpinned recent ill-fated mortgage-bond deals. Was the research adequate? Or was it so slipshod as to constitute negligence or fraud?
Although a Standard & Poor spokesperson declined knowledge of any SEC investigation, she maintained that the ratings firm would cooperate with any request made by the SEC.
The SEC’s inquiry into ratings firms is part of its larger investigation into Wall Street’s culpability in the recent financial crisis. The investigation may or may not result in investment fraud charges being brought against the companies under scrutiny.

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Posted in Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Loss | Comments (0)

Ambac & Others Agree to Pay $33M to Settle Fraud Allegations Surrounding Bond/Insurance Litigation

June 20th, 2011

Ambac Financial Group Inc., as well as several of its banking underwriters and insurers, has agreed to pay a total of $33M in order to settle claims of investment fraud. According to investors who experienced significant financial loss, the parties involved hid risks from investors about the mortgage debt it guaranteed.

The primary claimants in the case are the Arkansas Teachers Retirement System, the Public Employees’ Retirement System of Mississippi and the Public School Teachers’ Pension and Retirement Fund of Chicago. These claimants allege securities fraud in regard to Ambac bonds and stocks purchased from October 25, 2006 to April 22, 2008.

According to the suit, Ambac gave out misleading information regarding the safety of the bonds it insured in order to inflate the value of the securities. Claimants further allege that Ambac, which insured instruments related to high-risk mortgages, hid its involvement in the subprime loan disaster, an involvement that became clear when the housing market collapsed in 2008. According to the suit, Ambac falsely claimed that it insured the “safest” transactions, when in reality it guaranteed billions of high-risk residential mortgage debt and collateralized debt obligations that were high risk in pursuit of big profit.

Once a federal court has approved the settlement proposal, Ambac will pay claimants 2.5M. Citigroup, Goldman Sachs, Merrill Lynch, HSBC Holding and Wachovia (now a part of Wells Fargo) will pay a combined total of $5.9 million. The four insurance companies involved will pay a total of $24.5M.

If you believe that you’ve been a victim of securities fraud, contact an investment recovery lawyer. Like the claimants in the Ambac case, you could recoup some or all of your financial loss through securities arbitration or litigation. Contact Carlson Law today at 619-544-9300 for a free consultation.

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Posted in Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Fraud, Securities Law, Securities Litigation | Comments (1)

Halliburton Class Action for Securities Fraud, Case Reinstated – a Victory for Claimants

June 9th, 2011
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According to a June 6, 2011 article by James Vicini for Reuters (“Halliburton securities fraud lawsuit reinstated”) the U.S. Supreme Court has reinstated a securities fraud class-action lawsuit filed against Halliburton in 2001 by pension and mutual fund investors on behalf of all buyers of Halliburton stock between June 1999 and December 2001.
Claimants in the case charge that Halliburton fraudulently overstated its engineering and construction revenues as well as the positive impact its merger with Dresser Industries would have on the company. At the same time, claimants allege, Halliburton misled investors regarding the company’s liabilities due to asbestos.
Because of these misrepresentations, claimants argue, Halliburton stock was artificially inflated and, when the company revealed the true state of its affairs, its stock fell dramatically, causing financial loss to investors.
The lawsuit had formerly been thrown out of court by a Texas federal judge who ruled that evidence of loss causation, a link between the claimants’ losses and the company’s actions, was insufficient. And an appeals court upheld that decision.
Their rulings created confusion among appeals courts regarding the necessity of claimants to prove loss causation early in the litigation process.
The Supreme Court disagreed with the judge and the appeals court, ruling that stock fraud plaintiffs do not have to prove loss causation simply in order to pursue a class-action lawsuit. That’s good news not only for claimants in the Erica P. John Fund v. Halliburton case, but also for injured investors throughout the nation who’ve had their suits quickly dismissed due to insufficient initial proof of loss causation.

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Posted in Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Fraud, Securities Law, Securities Litigation, Stock Loss | Comments (1)

Did Wall Street Bankers Commit CDO Fraud?

May 25th, 2011
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In 2009, the Securities and Exchange Commission (SEC) began a civil fraud investigation of over a dozen banking firms that traded and sold mortgage-backed collateralized debt obligations (CDOs). This investigation has engendered subsequent probes into the behavior of Wall Street firms.

Did Wall Street bankers defraud investors by selling them CDOs in order to make a profit for themselves—and a few special clients—when the mortgage market collapsed? Federal prosecutors believe so. In fact, in the spring of 2010, they launched a criminal investigation into the matter, and it’s still ongoing.

Investigators allege that a number of major Wall Street banks (including Citigroup, Deutsche Bank, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley and UBS) created CDOs in order to sell and then bet against (short) them in the event of a crash. These CDOs include Baldwin 2006-I and AB Spoke, which Morgan Stanley sold investors, and Carina, Cetus and Virgo, which Citigroup, Deutsche and UBS may have sold for fraudulent purposes.

New York’s Attorney General Andrew Cuomo has also begun an investigation into the behavior of Wall Street banks regarding CDOs. Investigators allege that Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs, Merrill Lynch, Morgan Stanley and UBS gave credit rating agencies misleading data in order to inflate CDO ratings. These agencies in turn have been harshly criticized and even sued for assigning high scores to numerous toxic CDOs.

Furthermore, the U.S. Attorney’s Office of Manhattan and the SEC are collaborating to determine if Wall Street banks misrepresented CDOs to their clients, failing to disclose pertinent facts when trading, marketing and selling them to clients.

Since hearings in Congress revealed that fraudulent conduct on Wall Street precipitated the nation into financial crisis, prosecutors have taken legal action against two traders for Bear Stearns without success. However, legislators are calling for more prosecutions, and criminal probes into Wall Street’s activities widening.

The SEC has subpoenaed Citigroup, Deutsche Bank, J.P. Morgan Chase and UBS, asking that they turn over a wide range of paperwork, including prospectuses and offering documents (final copies as well as drafts) and lists of investors associated with mortgage-related transactions. The SEC has also filed an action in federal court against Goldman Sachs, claiming that a trader on behalf of the company created an investment product designed to fail so that one of the company’s pet hedge-fund clients could bet against it and profit at the expense of less favored Goldman investors. Goldman is purportedly seeking to settle the case out of court.

From 2005 to 2007, diverse Wall Street banks issued CDOs totaling $1.08 trillion. The research firm Thomson Reuters reports that Citigroup, Deutsche Banks and Merrill Lynch issued the greatest dollar amount. J.P. Morgan, Morgan Stanley, UBS and Goldman were numbers five, seven, ten and 14 on the list, respectively.

If you believe that you’ve suffered financial loss due to CDO fraud, contact Carlson Law at 619-544-9300 for a free consultation today. The investment recovery litigators at Carlson Law are dedicated to getting justice for securities fraud victims.

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Posted in Broker Fraud, Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Fraud, Stock Loss | Comments (1)

Variable Annuity Exchanges & Replacements: Annuity Loss – Annuity Fraud – Did You Get Shafted by Your Broker?

May 11th, 2011

There is a continuing problem for investors relating to the improper sale or switching by investment advisors of variable annuities that can be annuity fraud and result is annuity losses. Many older investors have been counseled by their brokers to replace their old variable annuity contracts with new ones. In many cases it may be unsuitable and result in the creation of fees and commissions for the advisor, surrender charges for the investor and new long term non-liquid investment. Furthermore, adding insult to injury, in some cases advisors have neglected to exercise due diligence by assuring that the exchange of those annuities was tax free under Internal Revenue Code (Section 1035).

If done properly, exchanging variable annuities should be tax free.
In a tax-free 1035 exchange, the owner of a variable annuity replaces the current contract with a new contract. No tax is paid on the investment gains or income from the old variable annuity. If, however, an investor gives up his or her old annuity for cash and then uses that money to buy a new annuity, he or she will have to pay taxes on the old annuity.

Variable annuities can be fraught with hidden costs.
An additional problem with variable annuities is that exchanging and replacing them often results in surrender charges. Customers must pay these charges when annuities are surrendered before the end of their given surrender period. Usually, that’s six to eight years from the purchase date. Because surrender charges reduce the amount of money available for reinvestment in a new annuity, they also lower an investor’s potential return. And if that weren’t bad enough, the new replacement annuity has a new surrender period, so funds are ordinarily locked into place for another six to eight years.

In general, seniors shouldn’t invest in them.
Because of the risks, high fees and surrender charges associated with variable annuities, they’re poor financial choices for most investors over 65. In fact, California law requires that selling agents prove that an annuity replacement is of “substantial benefit” to their senior clients.

FINRA oversight of variable annuities is increasing.
The Financial Industry Regulatory Authority (FINRA) has recently implemented new rules regarding broker recommendations to purchase and exchange variable annuities, making variable annuities one of the few securities products with its own suitability requirements. These new rules require that brokerage firms put supervisory procedures into practice for the detection and prevention of “inappropriate exchanges.”

Should you contact a securities attorney?
If you’re an older investor whose financial advisor has advised to exchange or replace variable annuities, resulting in a loss in your annuity either fraom annuity fraud or simple negligence, call Carlson Law for a free consultation at 619-544-9300. Furthermore, if your broker failed to facilitate a tax-free 1035 exchange of variable annuities, contact our firm. Your broker may be liable for any or all fees, taxes and financial loss you incurred as a result.

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Posted in Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Fraud, Stock Loss | Comments (4)

Improper Leveraged and Inverse ETF Trading Spells Big Financial Loss for Investors

May 9th, 2011

Recently, many investors have experienced significant financial loss in their securities accounts because of the inappropriate and improper trading of exchange traded funds (ETFs) by their stockbrokers.

A number of leveraged and inverse ETFs, including some funds by Direxion and Proshares, had risk associated that may not have been fully disclosed to some investors. Although these ETFs were built to seek out multiples of the exchange that they were created to track, many were also structured to reset daily. The result is radical disparities in their performance in the long term compared to the index that they were intended to follow.

Often, stockbrokers did not tell their clients about the extremely risky nature of holding these types of funds for any period of time, a risk that the Financial Industry Regulatory Agency (FINRA) clearly recognizes. In a June 2009 Regulatory Notice (09-31), FINRA underscored the high-risk character of these ETFs, asserting their unsuitability for many investors that intend to hold them for longer than one trading session, especially if the markets are volatile.

Have you incurred financial loss due to your broker’s advice on leveraged or inverse ETFs and/or the amount of time you were advised to hold those funds? Contact Carlson Law to discuss your potential claim with an experienced securities attorney today at 619-544-9300 or www.securities-fraud-attorney-san-diego.com

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Posted in Broker Fraud, Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Fraud, Stock Loss | Comments (1)

Senate Panel Chair Accuses Goldman Sachs CEO of Perjuring Himself before Congress

May 5th, 2011
Carl Levin

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Should Lloyd Blenkfein, the CEO of Goldman Sachs, be brought up on perjury charges? U.S. Senator Carl Levin, head of the Senate panel investigating investment fraud, obviously thinks so. Furthermore, Levin doubts the veracity of other investment professionals who testified before Congress during the 2010 financial crisis.

In an April 2011 Bloomberg.com article titled “Goldman Sachs Misled Congress, Duped Clients, Levin Says,” the Senate Democrat is quoted as saying that the company “misled their clients.” And according to Levin, they “misled the Congress,” too, when Blankfein denied that Goldman Sachs pursued its own financial gain in clear disregard of its clients’ potential (and, as it turns out, actual) investment loss.

It its defense, Goldman Sachs claims that it did not hold an overwhelming net short position. Senate findings, however, contradict that assertion. In at least in one case, that of Hudson Mezzanine Funding 2006-1, the investment firm purportedly told clients that its financial interests were in keeping with theirs—despite the fact that it held 100 percent of the short side. Senior Republican Tom Coburn, who is also on the panel, called such breaches of fiduciary duty not only unethical, but also a threat to our country and its financial institutions.

In general, the Senate panel report points the finger at banks on Wall Street for the financial crisis of 2010. It particularly castigates investment banks like Deutsche Bank AG and Goldman Sachs for purportedly pushing CDOs that even their own traders thought unsound. Levin wants the SEC as well as the Justice Department to determine whether Goldman Sachs is guilty of securities fraud by not disclosing their financial gain if the CDOs they sold fell in value. The report also criticizes credit-rating agencies, Washington regulators and poor lending standards for their role in bank failures.

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Trusting Your Financial Advisor – Do You Really Know Who is Handling Your Life Savings?

April 15th, 2011

There are over 210 possible different credentials available to financial advisors.  Very few of those credentials are regulated and some mean little or nothing.  It is important for every investor to do their homework and really get to know their financial advisor, their credentials, licensing and experience.  Simply because your advisor has many credentials or friends have recommended them is not enough.

While the CFP (Certified Financial Planner) and CFA (Certified Financial Advisor) designations require course work, exams and continuing education many certifications in the financial industry do not.   So what should an investor do in order to select a financial advisor? There are a number of things that can be done.

  1. Everyone can go and look up the record of the advisor they are considering using on the Financial Industry Regulatory Authority’s BrokerCheck service.  The BrokerCheck service will give you important information about the advisor you are considering; such as if that advisor has had prior complaints, been sued before, where he or she has worked in the past and for how long,  the reason they left a prior employer, in addition to information about licensing and credentials.
  2. Next, look at the information from state securities regulators at the North American Securities Administrators Association.
  3. Also, review the National Association of Insurance Commissioners website regarding the advisor you are considering using.

A good question to ask a prospective advisor regarding their credentials is what percentage of people who apply for the credential obtain it?  Also, feel free to ask about the qualifications of the instructors for the credential program touted.  As an investor interviewing a financial advisor, you should be careful if the advisor is put off or unable to answer such simple questions.

If you have already fallen victim to an unqualified investment advisor and suspect an incidence of investment fraud, please call the Carlson Law Firm at (619) 544-9300 or contact a San Diego securities fraud attorney today.

 

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