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Chicago-based Stoltmann Law Offices has represented professional athletes who’ve suffered losses from dealing with broker-advisors who’ve swindled them. Sometimes having fame, extreme riches, and athletic prowess is inadequate protection against getting swindled by a broker. Although professional athletes can certainly afford to hire the best financial advisors, all too often they get thrown in the dirt by dishonest professionals.

Aroldis Chapman is a flame-throwing relief pitcher for the New York Yankees, possessing one of the highest-velocity fastballs in the game. He also briefly helped the Chicago Cubs win a World Series in 2016. But his throwing skill didn’t benefit him when a financial advisor allegedly embezzled millions from him to fund a lavish lifestyle.

In October (2020), Chapman filed a lawsuit against Pro Management Resources in Coral Springs, Florida, for reportedly embezzling $3 million from his account. The company is a commission-based financial advisory firm. Chapman has accused PMR advisor Benito Zavala of “misappropriating Chapman’s funds toward extravagant purchases, including an $836,000 home in Valrico, Fla., first-class plane tickets, clothes, cars and jewelry.” The firm declined to comment on the suit.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with brokers selling unsuitable investment products. Sometimes brokers break so many rules in hurting their clients that they are barred from the industry by FINRA, the industry’s primary regulator.

Case in point: Marshall Owen Isaacson, a former broker with Newbridge Securities of Boca Raton, Florida, was recently expelled from the industry. Isaacson, who had worked with 13 different brokerages, was barred for his involvement in making “unsuitable investment recommendations” while with Newbridge. Of course, one violation doesn’t get you kicked out of the industry. Isaacson had a string of violations going back several years. According to the FINRA BrokerCheck record, which is required to post broker infractions in its public database, Isaacson had 10 separate disclosed complaints, disputes or judgements going back to 2012.

In the last recorded complaint by FINRA, Isaacson  “consented to the sanction and to the entry of findings that he refused to provide documents and information requested by FINRA in connection with its investigation into whether he made unsuitable investment recommendations,” the FINRA record stated.  In plain language, Isaacson didn’t cooperate with FINRA investigators and agreed to the regulator’s final disciplinary action. That means he loses his license to sell securities. Needless to say, there’s more to the story. Brokers can often compile of trail of complaints and customer disputes for decades while still selling investment products.

Stoltmann Law Offices, P.C. is a Chicago-based securities, investor protection, and consumer rights law firm that offers victims representation on a contingency fee basis nationwide.  Our lawyers have grown accustomed to suing telecom carriers like AT&T and Sprint in arbitration for hacking victims. AT&T, Sprint, and T-Mobile customers fall victim all too often to SIM-Swapping or SIM-porting scams where crooks gain access to their cell phone numbers and from there, can execute any number of plays to gain further access to these victims’ banks accounts.  The most common type of account that gets hacked in these situations based on our lawyers’ experiences – by far – are Coinbase accounts where these crooks transfer Bitcoin or other crypto assets to third party accounts. When these investors complain to Coinbase that their accounts were robbed, Coinbase typically goes palms-up and says, too bad, so sad, and victims are left stunned that unauthorized access to their accounts, including transfers to unauthorized third parties, was allowed.

Coinbase is lightly regulated to say the least.  But, it is a money services business and is registered with FinCen (the U.S. Department of the Treasury, Financial Crime Enforcement Network).  On its website, Coinbase admits that it is required to comply with any number of laws and regulations, including on a state by state basis in which they operated, along with the U.S. Bank Secrecy Act, and the U.S. Patriot Act.  Coinbase is not a bank or brokerage firm so although it is regulated, as far as financial services are concerned in the United States, entities like Coinbase are on the fringe of regulation. Crypto is already the wild-wild west of the quasi-securities world and Coinbase is a primary facilitator of that market.  Still, Coinbase must follow certain regulations, including what are generally known as the “Know Your Customer” (KYC) Rule and anti-money laundering (AML) rules and regulations.  At the state level, in Illinois for example, Coinbase is licensed as a Money Transmitter through the Illinois Department of Financial and Professional Regulation.

Like our cases against AT&T and Sprint for losses in connection with SIM Swap scams, claims against Coinbase have to be brought through the American Arbitration Association (AAA) Consumer Rules process.  First though, customers have to comply with a specific pre-dispute complaint process or risk having their case thrown out of arbitration for failing to comply with these policies.  If you had more than $50,000 stolen from you as a result of your Coinbase account being hacked or accessed, you should call Stoltmann Law Offices, P.C. at 312-332-4200 for a no-obligation, initial consultation with an experienced arbitration attorney.  We are a contingency fee law firm which means we do not get paid unless you do.

 

Chicago-based Stoltmann Law Offices continues to investigate the Vida Longevity Fund. Managed by Vida Capital, the limited partnership invests in annuities and life- and structured settlements. It’s a complex product that has mostly invested in insurance products.

Vida managers had originally promised investors a 10% to 14% annualized return, although in recent years, the fund has been posting negative returns. Managers may have mispresented the investments and risk profile of the vehicle, which is operated as a hedge fund.

Like many investments promising high returns, Vida seemed appealing at a time when savings rates are near rock bottom, especially for federally guaranteed accounts. That’s why companies offering “alternative” products with “non-correlated” strategies have attracted billions in investor dollars. They promise high returns with seemingly little risk.

Stoltmann Law Offices, P.C., a Chicago-based securities and investment fraud law firm offering nationwide representation to investors who are victims of fraud and negligence of their financial and investment advisers, is currently representing clients who have suffered losses in connection with several Eco-Vest sponsored conservation easements, including Hammersmith Landing Holdings LLC.

Investors in Hammersmith Landing Holdings run the risk of facing steep IRS penalties as a result of the potentially fraudulent nature of the easement structure. On its face, Hammersmith offered investors a 4.1 – 1 deduction to investment ratio, which is more than double the ratio considered by the IRS to be reflective of a questionable tax avoidance transaction.  EcoVest, the issuer of Hammersmith and hundreds of other conservation easements, has been under active investigation by the Department of Justice since 2018 and by the Senate Finance Committee since as early as 2016.  A new wrinkle in the governments enforcement and investigation into these tax avoidance schemes is the recent revelation that President Trump has taken advantage of these conservation easements for many years and could have participated in structures that the IRS now considers to be illegal.

What investors actually get when they purchase a conservation easement is a Regulation D private placement – it is a security sold by a broker/dealer. As such, financial advisors and brokerage firms have numerous duties and obligation to vet the investment and to perform reasonable due diligence on the security prior to even offering it for sale.  There are several regulatory notices from FINRA that speak directly to this obligation, including Regulatory Notice 10-22, NASD Notice to Members 03-71 which discussed vetting of “non-conventional investments”, NASD Notice to Members 05-26, which discusses the vetting of “new products” and more recently, FINRA Regulatory Notice 13-31 which addresses supervision issues specific to advisors who sell a lot of these same products to several clients. Fundamentally, the due diligence and vetting process is rooted in FINRA’s Suitability Rule, specifically, FINRA Rule 2111.05(a).

Stoltmann Law Offices is a Chicago-based securities and investment fraud law firm that offers nationwide representation to victims of Ponzi schemes and other securities frauds.  We are currently investigating allegations made by the United States Securities and Exchange Commission (SEC) and the US Attorney for the Southern District of New York that contend the Belize Infrastructure Fund I, LLC was a Ponzi scheme.  According to published reports, Minish “Joe” Hede and Kevin Graetz sold $9.6 million worth of promissory notes to their clients, many of whom were customers of their brokerage/dealer firm Paulson Investment Company.

According to the complaint filed by the SEC, Brent Borland, the principal of the Belize Infrastructure Fund who is also under indictment, approached Paulson Investment Company to act as “placement agent” for this fund. After the sales pitch, Paulson declined to act as the placement agent and disapproved of the investment. Whether Paulson Investment Company approved of the deal or not, meant nothing to Hede and Graetz who went on to sell almost $10 million worth of notes issued by the bogus company to at least 21 Paulson clients.  In so doing, Graetz and Hede violated numerous FINRA Rules and SEC rules and regulations by selling a fund that was not approved of by their broker dealer.  The SEC complaint also alleged that Hede and Graetz received hundreds of thousands of dollars in illicit commissions from selling notes issued by the Belize Infrastructure Fund.

Paulson Investment Company can still be held liable for the conduct of the firm’s registered brokers, Hede and Graetz. First, even though Paulson Investment did not formally approve of these sales, Hede and Graetz were still registered with the firm as brokers when these sales occurred so that means Paulson had an obligation to supervise their activities pursuant to FINRA Rule 3010. Additionally, “red-flags” that brokers may be “selling away” increase that responsibility. Certainly, having sold almost $10 million in this fund to 21 Paulson clients means there was, at a minimum: 1) a paper trail that they were selling these notes; 2) communications via email discussing the Belize fund; 3) transactional records, including the sale of securities in the clients’ legitimate Paulson accounts in order to fund the Belize Fund investments; and 4) client meetings.  Furthermore, brokers with numerous disclosures on their CRD Report require firms to put those advisors on “heightened supervision.”  According to his FINRA BrokerCheck Report, Graetz had numerous tax liens and customer complaints on his record before he started selling the Belize Fund to his clients.  Paulson Investment Company should have had him under a supervisory microscope. Instead, as is typical at brokerage firms like Paulson, the company invests minimally in its compliance and supervisory structure and brokers like Graetz and Hede end up selling firm clients almost $10 million in a Ponzi scheme.

Chicago-based securities law firm Stoltmann Law Offices continues to represent investors nationwide in claims involving bogus tax-shelter investments like syndicated conservation easements. One of the most troublesome products sold by brokers in recent years have been vehicles that offer investors substantial tax breaks that skirt the US tax code. Although the promise of reducing taxes is always a powerful incentive for high net-worth investors, the vehicles themselves may not be allowed by the Internal Revenue Service (IRS) or Tax Courts. The IRS can be ruthless and unforgiving and an investor invested in a “tax shelter” that the IRS determines lacks legitimacy, it is the investor that will owe every nickel of those tax savings back, plus penalties and possible criminal prosecution. It can be a scary and expensive situation.

Syndicated conservation easements offer buyers generous tax deductions for donating property for conservation purposes. Although mostly done by landowners for ecological preservation and restoration, brokers have “bundled” these vehicles to sell them to unsuspecting clients, who buy them thinking they will be gaining outsized tax write-offs. Last year, the IRS announced that it would step up enforcement on these vehicles, which it included in its “Dirty Dozen” list of abusive tax scams to avoid. Two years ago, the U.S. Department of Justice shut down a Georgia-based firm marketing these schemes.

The way a conservation easement scheme works is initially based on a legitimate tax write-off. Say you have a piece of property that has some significant ecological or preservation value. Under IRS rules, you can directly donate the real estate by placing it in a land trust or gift it to a charity, ensuring that it won’t be developed in perpetuity. If it’s a legitimate transaction, you can take a write-off based on the fair value of the land.

Chicago-based Stoltmann Law Offices, P.C. is a securities investor protection law firm offering representation nationwide to investors seeking to recover investment losses.  Our team is monitoring and reviewing information in connection with former LPL  financial advisor Donald Stephen Woods. According to published reports, Mr. Woods, of Louisville, Kentucky and currently registered with Thurston Springer Financial, intentionally manipulated and changed documents at LPL to qualify non-traded REIT sales that would have otherwise not been approved. LPL has certain limitations on how much of an investor’s declared liquid net worth can be concentrated in alternative investments, like non-Traded REITs.  Typically, LPL limits this exposure to 25% of liquid net worth, but can be lower for elderly investors and those with more conservative investment objectives. Brokers like Woods get around this limitation by inflating the client’s net worth numbers adjusting them upwards by a few hundred thousand dollars can be the difference between compliance approving the transaction and the broker getting paid his massive commission, and not approving it, leaving the broker to find something else to sell the client.

Ultimately, the responsibility for this sort of amateur chicanery engaged in by Mr. Woods falls on his firm. Stoltmann Law Offices has represented hundreds of investors in cases just like this. Almost always, there is an obvious disconnect or contradiction between the net worth numbers on the alternative investment forms, and the client’s new account forms. Compliance has a responsibility to ensure that brokers like Mr. Woods are not artificially inflating client net-worth numbers on these forms in order to qualify them for the investment. Most of the time all it would take is a simple phone call from compliance to the client to determine the accuracy of these numbers and reveal that the broker either forged the documents altogether, or advised the client to ignore the net worth numbers included on the form, to trust their adviser, and not worry about it.

Non-Traded REITs have been selling at rates not seen since before the financial crisis in 2008. There is one reason for this – commissions.  Non-Traded REITs like those offered by Northstar, Cottonwood, Highlands REIT, KBS Growth & Income REIT, Resource Innovation Office REIT, and InvenTrust Properties Corp., pay brokers like Mr. Woods and their firms like LPL commission rates that are many times higher than if they just sold clients publicly-traded, liquid REITs.  The SEC, FINRA, and NASAA all warn about issues related to these non-traded REITs.  Scholarly articles decry them as being poor investments long term compared to their publicly-traded cousins. Some of the issues about these non-traded REITs include:

Chicago-based Stoltmann Law Offices has represented investors for fifteen years in arbitration cases against their  brokerage firms and investment advisory firms to recover investment losses.  In times like these, when the stock market heaves violently downward, it is retired investors and the elderly who fall victim to what was years of mismanagement and negligence.  There is an old saying: “Everyone is a genius in a bull market”.  In times like this, we are reminded of another quote from the incomparable Warren Buffett: “Only when the tide goes out do you discover who’s been swimming naked.”

For the better part of the last decade, investment and financial advisors have been piling client money into variable annuities, structured products, private placements, and stocks. The Bull Market run is over and accounts that became over-exposed to equities through either stocks, mutual funds, annuities, or structured products, are bearing the brunt of this undisciplined approach. Herd mentality has caused more money to flow into the stock market than ever before and a lot of that money belongs to retirees in their IRAs and retirement nest eggs. Failing to diversify and asset allocate a retiree’s account is at a minimum, negligent, and could qualify for a FINRA Arbitration claim.

Stoltmann Law Offices has filed nearly 2,000 arbitration cases for investors over the year, recovering tens of millions of dollars of otherwise lost investment capital.  Our experience in FINRA Arbitration is unmatched. Stoltmann Law Offices has prosecuted cases against banks and brokerage firms involving the failure to diversify and asset allocate, along with securities product cases. Now, the failure to asset allocate and diversify – the cornerstone of investment advice that is so easily overlooked – is costing investors, especially retirees, money they cannot afford to lose. Asset Allocation is the simple concept that investors should never have all of their eggs, or too many eggs, in one basket.  Investments must be split across different asset classes like stocks, bonds, mutual funds, Exchange-Traded Funds, municipal bonds, commodities like gold and silver, and cash. The higher your risk tolerance, the more skewed this balance gets towards the equities and stocks side of the ledger.  The more conservative, the less exposure you should have to stocks and equity-based mutual funds and ETFs.  The reality is, maintaining an appropriate asset allocation takes discipline. As your equity portfolio grows in a bull market, the more concentrated you become in that high risk sector. Money should be continuously taken off the table during a bull market and re-allocated to more conservative, income producing assets like bonds.

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.

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