Articles Posted in Theft/conversion

Stoltmann Law Offices has been representing victims of SIM Swap scams for the past few years. This sordid scam involves a crook gaining access to your cell-phone SIM card through remote access and then essentially taking control of your phone to serve their purposes.  They’re looking for money, plain and simple. One of the most common security features many people use for their email, bank, investment, and crypto-currency accounts is called “2-step” authentication. If you want to change your password for these accounts, typically, you have to check your email and click a link that will then allow you to change a password.  Another security feature involves a pin or code being texted to you before you can change your password to an email or bank account.  If your cell phone number or SIM is “ported” to another phone not in your control, then someone else gets the text with that code; someone else can change the password to your email, investment, bank, and other accounts.  Your cell phone holds the lock and key to so much personal access, it must be secure or the fallout can be a catastrophe for victims.

On Sunday, October 18, 2020, ABC 7 Chicago aired a story on this ever increasing scam. Stoltmann Law Offices attorney Joe Wojciechowski was featured in this story as an advocate for victims of this fraud.  Stoltmann Law Offices has successfully recovered money lost or stolen as a result of SIM-Swap frauds and continues to represent victims. When suing a cell phone carrier like AT&T or Sprint, the claims must follow the dispute resolution processes outlined in the wireless customer agreements between you and the company. Buried deep in that small print lies an arbitration clause that is binding and requires disputes to be filed in the AAA (American Arbitration Association) under the Consumer Rules.  The good news about the AAA Consumer Rules is the company (AT&T, Sprint, Etc.) have to pay the arbitrator’s fees, which can get pretty high.  The bad news is, you won’t have access to the kind of discovery you would get in court.

Stoltmann Law Offices has a combine 40 years of experience prosecuting investor and consumer related claims in arbitration forums around the world.  If you or someone you know is a victim of a Sim-Swap and had money stolen as a result, please contact Stoltmann Law Offices at 312-332-4200 for a no-obligation, free consultation.  We are a contingency fee law firm which means we do not get paid unless you do!

 

 

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with brokers who’ve fleeced clients. This is a sad occurrence, but sometimes brokers take advantage of clients and steal their money. We’ve investigated countless cases when this has happened.

The instances are all too familiar to us: Usually it’s elderly, retired women who are preyed upon. A recent case involving a 73-year-old client is a case in point. A former LPL broker, Matthew O. Clason, of Chesire, Connecticut, is accused of stealing more than $300,000 from the client, “with whom he formed a personal relationship.” Clason, who had been a registered broker since 2004, sold securities from his client in 45 transactions over the last 20 months, the SEC said in its suit filed against the broker.

“He transferred about $330,000 [from proceeds of the sales of client assets] to a joint checking account they had opened at a large national bank, funding most of it through securities sold from a non-retirement account that charged the client 1.54% of her assets under management,” the SEC reported. The agency is requesting “that the court enter an order freezing Clason’s assets and requiring an accounting. The SEC also seeks permanent injunctive relief, disgorgement plus prejudgment interest, and civil penalties.” Clason, who was registered with LPL and Integrated Wealth Concepts, could not be reached for comment, according to AdvisorHub.com. He was fired by LPL on August 13 for failing to comply with firm policies with respect to handling client funds, the SEC said.

Chicago-based Stoltmann Law Offices is investigating claims made by the Securities and Exchange Commission that financial advisor Scott Fries of Piqua, Ohio engaged in a Ponzi-like scheme , defrauding investors of nearly $200,000.  According to the complaint filed by the SEC last week, Fries raised approximately $178,000 from investors and used that money to pay personal expenses like his mortgage, payday loans, and credit cards. The SEC further alleges that Fries attempted to fraudulently conceal his activities by creating fake account statements which he delivered to his clients that purported to show their money invested in legitimate investments. The SEC alleges Fries’ misconduct violated several federal securities laws including Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5, Section 17(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. § 77q(a), and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”), 15 U.S.C. §§ 80b-6(1) and 80b-6(2).

Before the SEC took action, the Financial Industry Regulatory Authority (FINRA) barred Fries from the securities industry in November 2019 for violating FINRA Rule 8210. In response to being terminated for cause by his broker/dealer firm TransAmerica, FINRA launched an investigation into the allegations which led to Fries’ termination. If a broker/advisor fails to respond to these requests for information under FINRA Rule 8210, they can be barred for life from the securities industry. In many instances, brokers refuse to answer Rule 8210 requests because doing so would put them in the untenable position of having to answer question under oath.  It is likely, given the SEC’s allegations, that Fries chose not to answer FINRA Rule 8210 requests because it was not in his best interest for their to be a record of whatever this scheme actually was.

Investors who were caught up in this scheme run by Fries have legal options to attempt to recover their losses.  First and foremost, at all times relevant, Fries was a registered, licensed, representative of TransAmerica. This means victims – even those that were not contractual customers of TransAmerica – can file an arbitration action against TransAmerica to seek recovery of their losses. As a FINRA registered broker/dealer firm, TransAmerica is legally obligated to supervise the conduct of its financial advisors. This supervision requirement is rooted in the Securities Act and all applicable state laws, including myriad FINRA Rules and regulations, including FINRA Rule 3110.  Case law also supports the proposition that even non-customers of the firm can sue for the firm’s role in facilitating or failing to supervise their advisors. See McGraw v. Wachovia Securities, 756 F. Supp. 2d 1053 (N.D. Iowa 2010). When “red flags”of misconduct present themselves, firms like TransAmerica have a duty to act and to take steps to protect investors.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses as a result of financial advisors who sell investments that are technically “unauthorized” by their firms. These side gigs, while profitable for the broker due to high commissions, are prohibited by FINRA, the industry regulator.

Brokers may pitch clients on a private securities transaction, for example. Of course, the investors rarely have any clue that what they are being asked to invest in is “unauthorized” or a “private securities transaction.” Sometimes these take the form of stock offerings that are unlisted. Broker Henry A. Taylor III, for example, then working for the Cetera brokerage firm, sold $30,000 in private stock that invested in a trucking firm. Taylor did not notify his firm of the sale and had initially deposited his client’s check in his personal account.

After a FINRA arbitration claim was filed, the regulator fined Taylor $7,500 and suspended him for three months earlier this year. Taylor neither admitted nor denied the findings of the FINRA action. The original transaction took place three years ago.

Chicago-based Stoltmann Law Offices is investigating reports of selling away and securities fraud engaged in by Douglas Kiffmeyer.  On July 27, 2020, Douglas Kiffmeyer pleaded guilty to 17 counts delivered via indictment in June 2018.  Kiffmeyer pleaded guilty to two counts of wire fraud, 18 U.S.C. Section 1343, 14 counts of failing to timely file income tax returns, 26 U.S.C. Section 7203, and one count of engaging in a financial transaction in criminally derived property, 18 U.S.C. Section 1957.  Kiffmeyer has yet to be sentenced but under federal criminal sentencing guidelines, should received between 46-57 months in prison. At times relevant to perpetrating his criminal scheme, Kiffmeyer was a registered representative and financial advisor for FINRA broker/dealer Brokers International Financial Services, LLC.

According to Kiffmeyer’s FINRA BrokerCheck Report, many of the entities through which he conducted his fraudulent investment scheme were disclosed as “outside business activities” to his member-firm. According to the Stipulation of Facts entered on July 27, 2020, Kiffmeyer’s scam began as investments he solicited in a company called Creative Digital, Inc., which he represented was designing a digital trigger for the M-16 rifle. In total, Kiffmeyer raised $827,000 for Creative Digital, Inc., but spent almost all of the money on a GMC Sierra 1500 truck, a Hummer H2, a motor coach, a Corvette, a Nissan 370, and an engagement ring. According to the Stipulation, of the $827,000 raised, only $1,500 was returned to investors.

Kiffmeyer’s scheme took a different and even more sordid turn next. He began selling promissory notes to elderly investors, convincing them to surrender IRAs and annuity products in exchange for promissory notes bearing interest. One of his victims was 90 years old. The last part of Kiffmeyer’s scam involved selling interests in a medical marijuana clinic. Little, if any, of the $206,000 raised for this company was used for the business and was instead converted for personal use.

Chicago-based Stoltmann Law Offices  represents investors who’ve suffered losses from dealing with unscrupulous investment brokers. On April 28, 2020, the Financial Industry Regulatory Authority’s (FINRA) Department of Enforcement filed a complaint against an ex-Ameriprise representative, alleging he converted more than $42,000 of an elderly client’s funds for his own use. Sean Michael Refsnider, of Haddon Heights, New Jersey, was a representative at Ameriprise from 2012 until Aug. 20, 2019. The company stated he was fired after it concluded that his client’s funds were “misappropriated.” FINRA is the chief U.S. regulator of broker dealers.

According to the FINRA complaint, Refsnider allegedly “procured a check from `Customer A’ in the amount of $20,000 and then used the funds to pay his mortgage and other personal expenses.” Refsnider allegedly also had used a debit card linked to the client’s account to make purchases totaling about $17,317, in addition to $4,300 in cash withdrawals, the complaint said. Ameriprise said in a statement that it “quickly detected and stopped the activity, ensured the client was fully reimbursed, terminated the advisor and notified the proper authorities.”

In the past, Ameriprise has been cited by regulators for failure to protect customer assets. The U.S. Securities and Exchange Commission (SEC) fined Ameriprise $4.5 million in 2018 to settle charges “that it failed to safeguard retail investor assets from theft by its representatives.” According to the SEC’s order, five Ameriprise representatives “committed numerous fraudulent acts, including forging client documents, and stole more than $1 million in retail client funds over a four-year period.” The SEC also found that Ameriprise, a registered investment adviser and broker-dealer, “failed to adopt and implement policies and procedures reasonably designed to safeguard investor assets against misappropriation by its representatives.” The five Ameriprise representatives were based in Minnesota, Ohio, and Virginia, and three previously pled guilty to criminal charges. Each of the representatives was terminated by Ameriprise for misappropriating client funds and barred from selling securities by FINRA.

Stoltmann Law Offices has been following the Justice Department’s case against former Ameriprise Financial advisor Yilin Hsu Lee, a/k/a Li Lin Hsu, since 2016 when she was barred by the Financial Industry Regulatory Authority (FINRA).  On Friday, January 31, 2020, the Justice Department announced that Hsu had been sentenced to 136 months in prison – more than 11 years – for swindling her clients out of almost $8.2 million dollars. Amongst her more than 20 victims were members of her family, an all too common fact in Ponzi scheme cases like this.  Although she has been ordered to pay over $5 million in restitution as part of her sentence, it is unlikely she will ever be able to repay even a fraction of what she owes to the victims.

According to the U.S. Department of Justice, Hsu’s scam ran from February 2014 to May 2018. During this time, it was alleged that she falsely represented to investors that she would invest their money safely.  Instead of investing the money conservatively as she represented, Hsu converted her clients’ money and used the funds to buy homes in Diamond Bar, California, a Tesla automobile, an expensive stay at the Peninsula in Paris, France, and spent thousands of dollars of her clients’ hard-earned money during shopping sprees at Hermes and Chanel.

Hsu gained the trust of her victims, mostly members of the Chinese American community in Southern California, by speaking to them in their native Chinese or Mandarin. This is called Affinity Fraud which is a specific type of scam where the schemer solicits his victims from a select community, usually one he is actually a part of. Affinity Fraud scams impact specific ethnic and religious groups. In Hsu’s case, she focused her fraudulent scheme on the Chinese American community.  Her ability to speak the same language and understand the customs of her victims made her even more dangerous, and even easier for her victims to fall for her fraudulent sales pitch.  As pointed out by the Securities and Exchange Commission, Affinity Fraudsters may not actually be members of the community they seek to victimize, they just pose as a member, in a true crime sense.

Stoltmann Law Offices is investigating on behalf of defrauded investors claims made by the Securities and Exchange Commission that Lester W. “Chad” Burroughs, a financial advisor for Lincoln Planning of Torrington, Connecticut, misappropriated client money for personal use. Burroughs was also a registered investment advisor through Capital Analysts. According to the SEC complaint filed on December 9, 2019 in the Federal District Court, District of Connecticut, Burroughs ran his scheme from November 2012 through at least January 2019.  It was a simple scam, one that is all too common in fact.  Burroughs offered victims an investment called a “Guaranteed Interest Contract”, also known as a “GIC”.  The terms of these “GICs” offered by Burroughs included interest at either 4% or 7% per year for the term of the contract. Once again, and these scams are becoming so much more common, 4% to 7% per year is not an exorbitant return people typically think of when being sold a fraudulent investment.  In fact, 4% per year barely pays more than the average rate of inflation.

In furtherance of his scheme to defraud his clients, Burroughs created fake account statements, and according to the SEC, the reason he sold GICs to subsequent investors was to pay off previous investors – the hallmark of a Ponzi scheme. According to his FINRA BrokerCheck Report, Burroughs is no stranger to customers complaints. When he was hired by Lincoln Planning, Burroughs had fourteen customer complaints disclosed on his CRD Report, which is a statistically enormous number.  Burroughs also paid a fine to the Insurance Commission of the State of Connecticut in 2003 for violations. This history of complaints and compliance issues put Lincoln Planning on notice when they hired Burroughs in 2012 that he was a compliance risk.  Standard operating procedure at a brokerage firm like Lincoln Planning under these circumstances would be to place the advisor on “heightened supervision”.  These heightened supervision programs regularly require increased compliance surveillance like random, unannounced on-sight branch audits and direct communications with clients without the knowledge of the advisor. Certainly, had Lincoln Planning put the necessary resources into supervising Burroughs, he would not have so brazenly created and sold these phony GICs to clients.

This “heightened supervision” requirement for brokers like Burroughs with a history of customer complaints has been part of the regulatory lexicon required by FINRA for almost 20 years.  In NTM 03-49, then NASD (now FINRA) explained to brokerage firms like Lincoln Planning that brokers with a history of customer complaints should be more closely monitored because they are a compliance risk. NASD provided some statistics in this notice which were pretty shocking when one considers the number of complaints Burroughs had on his record prior to even being hired.  According to this notice, only 3.3% of all registered brokers had at least one customer complaint; 0.71% had two; 0.22% had three, and only 0.09% were subject to at least four customer complaints. The Fourteen complaints on  Burroughs record put him in extremely rare company.  Lincoln Planning had an obligation to adequately supervise Burroughs and the firm clearly failed to do that.  As such, Lincoln Planning can be liable for the damages caused by Burroughs to his clients.

Stoltmann Law Offices continues to investigate allegations that Robert Walberg of Arlington Heights, Illinois, defrauded a few dozens investors, including family, friends, and the Northwest Suburban Montessori School. As we previously discussed, on January 24, 2019, the Illinois Securities Department issued a Temporary Order of Prohibition against Robert C. Walberg, Chartwell Strategies LP, and Chartwell Advisory Group LLC. Chartwell Strategies LP is a hedge fund created and sold by Robert C. Walberg and his company, Chartwell Advisory Group LLC. According to the Illinois Securities Department, Mr. Walberg solicited an Illinois resident at the end of 2017 and early 2018 to invest in Chartwell Strategies LP. Mr. Walberg allegedly commingled his client’s funds with his personal assets. Walberg was charged in early October with wire fraud, investment advisor fraud, securities violations, and theft by deception. According to court papers, Walberg is alleged to have converted more than $600,000 from the Montessori school he acted as Treasurer for, which puts the school’s future at risk.  It was reported recently that Walberg also stole $45,000 worth of retirement money from his Aunt and Uncle.

Mr. Walberg was a registered FINRA broker on and off from 1984 through 2013, but he has not been registered with the SEC or FINRA since November 2013. Because he was not registered, in furtherance of his scheme, Walberg had his investor “clients” open accounts at Fidelity.  He then used the clients’ credentials to log-in to their accounts and transfer funds from their Fidelity accounts to Chartwell Strategies, a private entity allegedly created for investment purposes.

Depending on the nature of the transactions and specifically how Walberg gained access to his clients’ funds, Fidelity could be responsible for either negligence, or aiding and abetting breach of fiduciary duty. All too frequently, fraudsters use big named, well known companies like Fidelity to give their schemes an aura of legitimacy.  Fidelity has duties and obligations to all of its clients, including purported victims of Walberg’s scam, to at a minimum, perform its compliance, execution, and supervisory functions at or above the standard of care. Further, Fidelity, as a FINRA member firm, has explicit responsibilities to its clients to ensure it adaquetly monitors and supervises electronic access to their accounts and have reasonable measures in place to ensure someone other than the client is not logging-in using their credentials. This is a bright red flag that someone is acting in a questionable manner. In the normal investment advisor-client relationship which uses Fidelity as the broker/dealer, that investment advisor has his own log in credentials and uses the Fidelity RIA platform to run his business.  That Walberg did not do this and instead used client credentials is an indicia that he was not licensed or registered to act as an investment advisor. Upon information and belief, Walberg abused his trust in this way to numerous clients resulting in the theft of as much as $5 million.  Fidelity could have liability for these losses.

Stoltmann Law Offices is investigating allegations that Linan Abrego (aka Ma Rosa Linan Abrego) misappropriated client funds at Merrill Lynch. According to published reports,  Abrego was barred by FINRA for failing to appear or respond to an inquiry in connection with her termination from Merrill Lynch on June 10, 2019 for misappropriating client funds. The misconduct reported by FINRA alleges that Linan Abrego of McAllen, Texas, failed to appear as required by FINRA Rule 8210 and accepted a lifetime ban from the securities industry, instead of answering FINRA or providing information in furtherance of FINRA’s investigation. According to her publicly available FINRA BrokerCheck Report, Ms. Linan Abrego was registered with Merrill Lynch as a broker and financial advisor from December 6, 2016 to June 10, 2019 when she was terminated for cause by Merrill Lynch for “misappropriating client funds.” Pursuant to FINRA Rule 8210, if FINRA requests a broker sit for on the record testimony (called an OTR) and the broker either refuses or simply does not show up or refuses to provide answers to written questions, or refuses to produce documents requested by FINRA in the course of their investigation, this can be grounds for being permanently barred from the securities industry. It is the equivalent of a career death sentence. Once a broker is barred for life by FINRA, absent extraordinary circumstances, that person will need to seek a career change.

Typically, brokers who refuse to show up for a Rule 8210 request do so knowing they are sacrificing their securities licenses. Some brokers may be near retirement or are not interested in maintaining their licenses, so they rather not submit themselves to an OTR, which can be stressful and require retaining legal counsel. Other brokers fail to show up for an OTR because they fear the testimony they will give may be incriminating if they are truthful. The FINRA AWC agreed to and signed by Ms. Linan Abrego only states he failed to show up for the OTR and provides no further explanation for barring her from the securities industry. Linan Abrego did this willingly, and instead of providing testimony from FINRA about why she was fired by Merrill Lynch, she chose to accept a lifetime ban from the securities industry.

Routinely, financial advisors who steal money from their clients do it in such a manner which should have alerted the firm’s compliance or supervision departments. Many times this sort of theft is facilitated by the broker simply forging withdrawal forms or requests. Another common way brokers steal money is to set up a third party LLC or other entity to which the broker directs client money directly from their accounts through wire transfers.  Sometimes the clients allow these transfers because the broker tells them these transfers are an investment in a company, or it’s where her commissions are paid to. No matter the ruse, sophisticated brokerage firms like Merrill Lynch are required to have procedures in place to catch their brokers if they attempt to steal client money. Whether there were unauthorized withdrawals or transfers from your accounts, every FINRA brokerage firm, like Merrill Lynch must have robust Anti-Money Laundering rules and regulations in order to ensure a level of alertness in these circumstances. Failing to properly execute these procedures which results in a broker stealing client money results in liability for the firm for negligent supervision, putting Merrill Lynch on the hook for the losses.

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