Operator of Bitcoin Stock Exchange Sanctioned by SEC

By Patricia Uceda, Fall 2014 Graduate Research Assistant

The SEC has sanctioned a computer programmer that was allegedly illegally operating online trading exchanges for securities based on virtual currencies such as Bitcoin without registering the venues. The programmer was also sanctioned for conducting unregistered offerings.  Continue reading

Two Attorneys Charged in Wire Fraud Case: Lawyers Allegedly Used Their Credentials to Legitimize a Scam Targeting the Elderly

By Christopher Pugh, Fall 2014 Student Intern

wireThe SEC recently charged two Florida-based attorneys with receiving wired funds from elderly investors. The funds were destined for a Ponzi scheme.  The investors were allegedly scammed by a Colorado-based company making cold calls that promised investors high yields on their investments, then the money was paid to keep a Ponzi-like scheme afloat.  The two attorneys charged, Jonathan P. Flom and James L. Schmidt II, only kept two percent of the funds transferred to their firm, and were not directly involved with the alleged Ponzi scheme.  But, according to the SEC, the association of their firm name and credentials bolstered the credibility of the alleged fraudsters.  Continue reading

Friday’s Fraud: Advance Fee Fraud

By: Ryan Corbin , Fall 2014 Student Intern

FridayJust from the name you can likely guess what advance fee fraud is. As you probably guessed, this type of fraud occurs when an investor is asked to pay a fee up front in order for the deal to go through, but then you never see your money again.  You’re likely thinking:  I would never fall for that!  However, just a couple weeks ago the SEC released an Investor Alert due to the thousands of complaints that they have received regarding this type of fraud. Continue reading

Beware Penny Stock Scams Involving Hyping Dormant Shell Companies

By Patricia Uceda, Fall 2014 Graduate Research Assistant

questionsThe SEC is warning investors that some penny stocks that are being aggressively promoted are actually stocks of dormant companies that currently have no business operations and are essentially empty shells. Penny stocks are highly susceptible to market manipulation through the use of pump-and-dump schemes.

As we’ve told you before, pump-and-dump schemes involve a fraudster buying a large amount of low-priced penny stocks and then using aggressive advertising techniques to pump up the price of the stock. Once the stock price is artificially inflated, the fraudster will then dump their shares, causing the price to fall and leaving investors with worthless shares of stock. Continue reading

NASAA Warns Investors about Ebola-Related Investment Scams

By Patricia Uceda, Fall 2014 Graduate Research Assistant

fraudIn addition to warnings given by the FTC about Ebola-related charity scams, NASAA has also issued an alert warning investors about opportunistic investment schemes related to Ebola. NASAA states that, based on its many years of experience, it is during periods of uncertainty such as this one that fraudsters usually make their move and target unwary investors. Continue reading

Ebola-Related Charity Scams and How to Guard Against Them

By Patricia Uceda, Fall 2014 Graduate Research Assistant

charityAs Ebola fears run rampant in America, it is unfortunate that some fraudsters have viewed this as an opportunity to make a quick buck by scamming consumers. Earlier this year, Ryan Corbin advised you to avoid Ebola stock scams.  Now, several Ebola-related charity scams have popped up, claiming to have the newest vaccine or drug and urging consumers to donate as soon as possible so that more can be developed.

The FTC and FDA are informing consumers that there are currently no FDA-approved vaccines or drugs to prevent or treat Ebola, and that if you’ve seen companies claiming to have such a vaccine or drug, you should report it to the FTC.

If you want to make a charitable donation in support of the search for a cure to Ebola, here are some tips from the FTC to ensure that you are not scammed: Continue reading

Investor Advocacy Clinic Comments on FINRA Proposed Rule Change 2014-028

By: Ryan Corbin , Fall 2014 Student Intern

LAW_IACThe GSU Investor Advocacy Clinic is committed to protecting the interests of individual investors. Therefore, in addition to providing legal services and participating in investor education and outreach, the clinic is also actively involved in the public comment process relating to rule changes proposed by FINRA.

The Proposal: SR-FINRA-2014-028

FINRA recently proposed SR-FINRA-2014-028, which would “refine and reorganize the definitions of ‘non-public arbitrator’ and ‘public arbitrator.’” Individuals affiliated with the financial industry are typically considered “non-public arbitrators” and individuals unaffiliated with the financial industry are typically considered “public arbitrators.”  The new rule would provide that persons who worked in the financial industry for any duration during their careers would always be classified as non-public arbitrators.  The change would also provide that persons who represent investors or the financial industry as a significant part of their business would also be classified as non-public arbitrators, but could become public arbitrators after a cooling-off period.

The Clinic’s Comment

On November 6, 2014, the clinic submitted a comment letter expressing its opposition to this proposed rule change.  The proposed rule would actually serve to diminish the availability of public arbitrators and remove qualified arbitrators with no ties to the industry from the pool of available arbitrators.  The proposed rule also does not achieve its goal of broadening the definition of “non-public arbitrators.”  This is of significant importance to small investors since they may arbitrate their claims before an all-public panel.  The proposed change will drastically decrease the amount of public arbitrators available to hear these types of disputes.

The clinic recommended that the definition of non-public arbitrators include anyone who has ties, whether current or former, to the financial industry including individuals associated with hedge funds, mutual funds, and non-traded REITS. It is essential that the investing public feel that they have a fair and unbiased tribunal in which to arbitrate their claims.  The clinic further recommended that claimants lawyers and other professionals serving the investing public not be classified as non-public.

The primary student author of the comment letter, Kori Eskridge, was assisted by student interns Ryan Corbin and Kristina Ludwig.