Stoltmann Law Offices is investigating cases where brokerage firms haven’t paid their representatives. In a new arbitration filing, 10 ex-Morgan Stanley brokers in the New York City area raised claims that the firm “improperly deferred” compensation in violation of the Employee Retirement Income Security Act of 1974 (ERISA) and also violated New York state law by withholding those funds when they left, according to Advisorhub.com.

“When claimants  (the brokers) – after many years of working for Morgan – decided to part ways with their employer, Morgan Stanley decided to deny them a substantial portion of the compensation that their brokers had earned for their dedicated work, and keep their hard-earned money to itself,” lawyers for the 10 brokers wrote in the complaint, which also tacks on a claim of violations of FINRA’s catch-all Rule 2010 requiring members act with “high standards.,”  advisorhub.com reported.

In 2020, several ex-Morgan advisors filed a class-action lawsuit against the company. The complaint “alleges that financial advisors may lose substantial amounts of their deferred compensation when they leave the company, and that this is not lawful because the deferred compensation plan (it alleges) is governed by the Employee Retirement Income Security Act of 1974 (ERISA).”

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from investing in options strategies that went wrong. Along those lines, an arbitration panel recently ordered UBS to pay more than $1.4 million to a husband and wife who accused the bank of misrepresenting a complex YES options trading strategy that tanked, according to barrons.com.

“Dozens of investors have filed arbitration claims against UBS for alleged misrepresentations in how the strategy was marketed and implemented. A customer has also filed a lawsuit against the company seeking class action status,” Barrons reported. UBS, which has previously denied the allegations, has won some arbitration cases, but lost others.

Approximately 1,500 customers participated in the YES strategy. Assets invested in YES accounts ballooned to $5.7 billion in December 2018, according to the lawsuit seeking class action status. The strategy suffered substantial losses totaling about $1.2 billion, according to the lawsuit.

Stoltmann Law Offices is a Chicago-based securities and investment fraud law firm that offers representation to investors nationwide on a contingency fee basis. We are currently investigating “selling away” claims involving Merrill Lynch and a financial advisor from their San Francisco office, Richard Hogan. The most important take-away from this post is to understand it does not matter that Merrill Lynch calls it, if the misconduct involved investments and clients, Merrill Lynch is responsible for the conduct of its agent – full stop.  “Selling away” is a securities industry moniker used to deflect responsibility for unapproved investment recommendation by rogue brokers.  The law makes it clear that the firm, Merrill Lynch, has an obligation to supervise their broker’s conduct and the law also allows for investors to make agency-based claims agains Merrill Lynch too.

According to a recent filing by the Financial Industry Regulatory Authority (FINRA), Richard A. Hogan conceded to a twelve month ban and a $10,000 fine as a result of an investigation by the regulator into alleged misconduct committed by Mr. Hogan. According to FINRA, Hogan participated in “private securities transactions” involving three Merrill Lynch clients and about $630,000 in Asia-based funds. the funds were a Hong Kong based equity fund and a Vietnam based equity fund. FINRA further stated that Mr. Hogan misrepresented to Merrill Lynch what his involvement was in these funds, which Merrill Lynch apparently did not offer on their platform.  Once Merrill Lynch found out otherwise, in July 2020, Merrill Lynch fired him.

“Private Securities Transaction” is more securities industry code for investments made or solicited by brokers “outside” of the firm with whom they are registered. Brokers like Hogan have an obligation under FINRA Rule 3280 to disclose transactions of this nature and receive approval from the firm, before participating in it.  According to FINRA, Hogan never disclosed that he recommended these Asia-Fund investments to firm clients, which was something he was required to disclose.  Hogan then became a very easy mark for FINRA to exercise its police power over registered brokers, suspend, and fine him.

Chicago-based Stoltmann Law Offices is representing clients who’ve suffered losses from advisors who sold clients cryptocurrencies that have lost value and investors who have lost funds due to identity theft, fraud, and hacking involving their crypto-currency accounts.  One of the biggest stories in finance, has been the epic crash of cryptocurrencies, which were pitched as profitable alternatives to cash, stocks, and bonds. “Cryptos” were sold as sure-fire hedges against inflation, but as inflation continued to rise, digital currencies kept heading south in a big way.

Worse yet, the overselling of cryptos has been tied to $1 billion losses in outright scams involving more than 46,000 people, according to the Federal Trade Commission (FTC). As with most swindles, investors were enticed with the promise of quick wealth with no risk. The “Crypto Crash” goes beyond the perils of high inflation and supply chain issues, though. Many observers believe the promise of crypto wealth is actually a Ponzi scheme that’s not linked to any underlying legitimate investment and is fueled by a stream of new investors being duped by the illusion of instant wealth.

The decline in some cryptos has been devastating. According to Robert Reich in The Guardian: “TerraUSD, a `stablecoin,” – a system that was supposed to perform a lot like a conventional bank account, but was backed only by a cryptocurrency called Luna – collapsed, losing 97% of its value in just 24 hours, apparently destroying some investors’ life savings.”

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from getting fleeced in Ponzi schemes. All too often, financial advisors assign fancy names to “investments” that turn out to be swindles. The Securities and Exchange Commission (SEC) filed suit against Michael Mooney, Britt Wright, and Penny Flippen in connection with their participation in a Ponzi scheme that raised more than $110 million from approximately 400 investors.

The former representatives of Livingston Group Asset Management Company (doing business as Southport Capital), “recommended clients invest at least $62 million in `Horizon Private Equity III.’ Horizon was billed as a private fund controlled by John Woods, Southport’s former owner and manager.” In August 2021, the SEC charged Woods and Southport with multiple counts of securities fraud for operating Horizon as a Ponzi scheme, according to thediwire.com.

As with many, if not most, Ponzi schemes, the fake investments were marketed heavily to older clients, who thought they were legitimate. According to the SEC, “many of the defendants’ clients were elderly and inexperienced investors who communicated that they wanted safe investment opportunities for their assets, a large percentage of which were earmarked for retirement.”

Chicago-based Stoltmann Law Offices is representing clients who’ve been the victims of cybersecurity hacks. Third Parties who store and use your personal data have an obligation to keep that information secure. But in the online universe, cyberthieves are working 24/7 to steal this valuable commodity. Stolen data is bought and sold on the internet’s black market and used by other scamsters to open credit accounts with stolen identities.

Aon Corporation, the massive global insurance company, was recently hit with a class-action lawsuit over a cyber-hacking incident, or “data breach,” that allegedly lasted more than a year.  “The 25-page lawsuit comes after Aon revealed that it had been hit by a data breach that went undetected for over a year, from late December 2020 to February 2022, according to class-action.org. Per the complaint, cybercriminals breached the company’s systems to access insurance files containing consumers’ names, addresses, dates of birth, Social Security and driver’s license numbers and, in some cases, benefit enrollment information.”

The lawsuit also claims that Aon “lacked the security necessary to prevent such a hack” or stop unauthorized parties from stealing consumers’ personally identifiable information. Per the suit, Aon has disregarded consumers’ privacy rights and exposed their information to a heightened risk of misuse.” According to the complaint, Aon’s data breach notice “deliberately underplayed the severity of the breach and misrepresented that the insurer had no evidence cybercriminals had copied, retained, or shared the data, even though Aon knew cybercriminals had accessed its files for an extended period.” The suit states “Aon has offered data breach victims only 24 months of free credit monitoring services “despite the significant [personally identifiable information] that was compromised over a two-year period.”

Stoltmann Law Offices, P.C. represents investors who have lost cryptocurrency as a result of hacks and theft from their accounts.  In December 2021, a security breach at crypto-exchange BitMart resulted in customers losing more than $200 million in cryptocurrency.  What is newsworthy, is that since May 2022, the Federal Trade Commission has been investigating BitMart in connection with this hacking incident.  According to court filings, the FTC is evaluating 1) whether BitMart engaged in deceptive, unfair, or otherwise unlawful acts or practices regarding the marketing and representations made by BitMart to its clients about account security, in violation of Section 5 of the FTC Act, 15 U.S.C. Section 45; and 2) violations of Gramm Leach Bliley Act, 15 U.S.C. Sections 6801-27, which is a federal law that, amongst other things, requires financial institutions to protect the private information of its customers.

This investigation is significant because it is reportedly the first time the FTC has investigated the crypto-exchange market. Surely, the ten-fold increase in crypto-related hacks and identity thefts from 2020-2021, has drawn the attention of the FTC, which investigates scams and identity thefts on behalf of consumers. Also significant is the possible application of the Gramm-Leach-Bliley Act to crypto-currency exchanges.  Since their inception, exchanges like Coinbase, Voyager, and Gemini, to name a few, have heavily lobbied Washington to stay out of their business.  These exchanges are profit centers for their owners and shareholders and they do not need layers of consumer protection regulations to crimp their style. Recently, as hacking, identity theft incidents, and bankruptcies rock the crypto-exchange world, whispers of CFTC and SEC regulations are becoming calls for action.

Crypto-Exchanges argue consistently that cryptocurrencies like Bitcoin are not securities – because if they are, then the purchase, sale, and exchange of Bitcoin will have to be handled like any securities transaction offered through a brokerage firm. What’s the big deal?  Securities Exchange registration would require companies like Coinbase to spend exponentially more money on compliance, surveillance, and supervision of accounts to ensure record keeping, and security, as opposed to taking all that money they generate in transaction fees, and allowing their founder to buy the most expensive real estate in Los Angeles County.  Notwithstanding all of the representations about account security and how crypto-exchanges prioritize account security, their resistance to registering as securities brokers/dealers should tell consumers all they need to know about how they prioritize consumer protections over profit.

Chicago-based Stoltmann Law Offices is investigating allegations made by the United States Securities and Exchange Commission (SEC) regarding former LPL Financial Advisor Eric Hollifield and stealing over $1 million from a client.  This is not the first time an LPL financial advisor has been caught red-handed stealing from LPL firm clients. Given the independent contractor model employed by LPL Financial over its financial advisors, these sorts of scams are all too easy to pull off and continue to happen.

According to the SEC’s complaint, Hollifield, who worked out of Dacula, Georgia, executed several fraudulent ruses designed to hide his true intent. First, he solicited investors to put money into a company called Century Warehouse, Inc., which was allegedly involved in the warehousing and shipping industry. From October 2019 through October 2020, Hollifield is alleged to have raised $5.35 million from advisory clients for Century Warehouse. Hollifield’s alleged fraud were his representations to investors that Century intended to use investors funds to buy PPE and other COVID-related supplies for the benefit of veterans.  According to the SEC, at least $1 million of the money raised from investors went back to Hollifield’s bank account where he spent the money on personal expenses.  The SEC also alleges that Hollifield used $1.7 million in misappropriated investor money to purchase a home sitting on 37 acres in Winder, Georgia.  The SEC alleges further that Hollifield lied to a client about setting up a “high yield” account at Goldman Sachs and instead stole the money.

There are two primary compliance and supervisory models that have existed in the brokerage industry for decades.  The first is the one most people think of when they hear the term “brokerage firm”.  They envision a huge office with fifty cubicles and telephones ringing. This office model is still common in the large “wire house” brokerages like Merrill Lynch and Morgan Stanley. In that structure, a branch manager is stationed at his post on-sight, reviews all incoming and outgoing correspondence, reviews a daily trade blotter, and reviews a daily transaction ledger that shows all checks sent and received for accounts in his branch. This branch manager wanders the office, peaks over shoulders, and should ensure his brokers are living up to the standards of a licensed securities broker.

Chicago based Stoltmann Law Offices represents victims of identity and data-breaches nationwide in class representation or FINRA arbitration to recover damages caused from data breaches by brokerage firms, investment companies, and other institutions which are obligated to keep your private information safe.  We are currently investigating claims made by the Maine Attorney General’s office which was reported this week against Cetera Financial Group.  According to the the report, the Social Security numbers of 2,188 Cetera clients were potentially exposed when a printer company used by Cetera, R.R. Donnelly, was reportedly hacked.

The cybersecurity of proprietary information for brokerage firm clients is a huge issue for regulators. As the world continues to be run through electronic means using the internet and electronic storage networks, the security of those systems is of paramount importance.  Hackers gain access to this information and then sell it en masse on the dark web to criminals who will use the credentials they obtain to hack into the personal financial accounts and cellular phone accounts of unsuspecting victims sometimes to ruinous ends.  If you have been notified by Cetera that your information was potentially exposed or compromised, you have legal claims that can be pursued against both Cetera and R.R. Donnelly.  These companies have strict compliance obligations to ensure these hacks do not happen. In some instances, these hacks are the result of poor security controls and could be preventable.

In January 2021, it was reported that thousands of Voya Financial Advisors’ clients’ personal identifiable information was exposed as the result of a Russian hack. As a result of that hack, Voya Financial Advisors paid a $1 million fine to the Securities and Exchange Commission The SEC Order and fine was based on the allegations that Voya Financial lacked sufficient written policies and procedures to ensure compliance with Rule 30 of Regulation S-P, 17 C.F.R. § 248.30(a), known as the “Safeguard Rule”. The SEC also alleged that Voya Financial failed to develop and implement a written Identity Theft Prevention Program, in violation of Rule 201of Regulation S-ID, 17 C.F.R. § 248.201, which is known as the Identity Theft Red Flags Rule.

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from dealing with financial advisors who fleece older clients. In our practice, we’ve seen countless scams where older investors are lured into fraudulent investments. Unfortunately, investment and financial advisors frequently exploit and rip off elderly clients, who are often trusting yet vulnerable.

Common ruses involve “estate planning” seminars that come with a “free” lunch or dinner. Afterwards, brokers are known to peddle scam investments to those who show up. Lately though, investors are aggressively pitched through emails, texts and phone calls. These swindles mushroomed during the pandemic. According to the FBI, the number of scams targeting Americans over the age of 60 exploded during the pandemic, with upwards of 92,000 victims in 2021 alone involving estimated losses of nearly $2 billion, a 74% increase from 2020.

In the typical phone scam, fraudsters call older Americans, who are most likely to pick up the phone and listen to a pitch – and send money. Even former FBI and CIA director William Webster was targeted in a Jamaican lottery scam in 2014 when a caller claimed he won a sweepstakes, reports CBS News. The unsolicited caller became threatening when Webster declined to pay $50,000 to collect the winnings.  “If it can happen to me, it can happen to you,” Webster warned in a public service announcement.

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