Chicago-based Stoltmann Law Offices has represented investors who have suffered losses as a result of their brokerage or investment accounts being infiltrated by hackers.  How safe are your retirement funds from hackers? With massive hacking activity and cybersecurity in the news every day, that’s an essential question to ask your financial advisor. Cybercriminals are trying to steal money and personal financial information 24-7.

Here’s a series of questions to ask: When financial advisors suspect that your retirement accounts are being hacked, have they reported this information to you? Even more importantly, have they reported it to federal authorities such as the FBI or Treasury Department? That’s not only the right thing to do, they are legally obligated to do so.

Of course, if an advisor or third party fails to report suspicious online activity to regulators, they may be breaking the law. The U.S. Securities and Exchange Commission (SEC), for example, recently imposed a $1.5 million fine and settled charges against GWFS Equities, an affiliate of Great West Life and Annuity Insurance Company, “for violating the federal securities laws governing the filing of Suspicious Activity Reports (SARs).”

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with broker-advisors who’ve recommended variable annuities. There’s little question that when broker-advisors peddle variable annuities to clients that in most cases it’s in the best interests of brokers, not customers.

Variable annuities, or “variables,” are complex investments that combine mutual funds within a “wrapper” of an insurance policy. Beneficiaries will be paid a death benefit when the holder of the annuity dies. In the interim, an investor’s capital is invested in an array of mutual funds that can invest in bonds and stocks.

When variable annuities are combined with other insurance policies, the broker’s pitch is that you can tap funds at any time. But the truth is that you’re paying onerous expenses in this set-up. Such arrangements can run afoul of securities regulations. When variable annuities are paired with a whole-life insurance policy, it could constitute an “unsuitable investment strategy,” according to FINRA, the main U.S. securities industry regulator. FINRA recently reached a $1.3 million settlement with a broker-dealer owned by Ohio National Financial Services (O.N. Equity Sales Company) for selling this package to clients.

Chicago-based Stoltmann Law Offices represents clients who’ve suffered losses as a result of unsuitable and speculative trading recommendations and strategies. If a broker recommends an awful securities trade – and you lose money – is the broker legally liable? Under rules that govern the conduct of securities brokers and financial advisors through FINRA, the prime U.S. securities regulator, if the trades they recommend are unsuitable, unauthorized, or a part of a larger scheme to defraud,  the answer is a resounding “yes”.

A UBS Financial Advisor who promoted to clients the idea of “short-selling” shares of Tesla (symbol TSLA) stock in 2019 and 2020, is accused of multiple violations in a FINRA complaint, according to AdvisorHub.com.

The broker, Andrew Burish, a 38-year industry veteran, recommended shorting Tesla stock, that is, making money on the stock price if it declines.  The problem is, during the relevant time period, Tesla stock price went through the roof  “triggering more than $23 million in losses for four couples—all members of an extended family—and another investor,” according to an arbitration claim filed with FINRA.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with financial advisors and brokerage firms who recommended questionable tax shelters. Broker-dealers frequently peddle investments that are loaded with false bonuses such as earning a return on an investment plus reaping a generous tax break. Yet often those write-offs garner the attention of the IRS and can trigger a stream of tax troubles.

Syndicated conservation easements were offered as a triple win. By donating your land for conservation purposes, you could take a generous federal tax write-off. Brokers selling these partnership deals promised that for every dollar you invested, you could reap up to $4 in charitable tax deductions. The investments were packaged and sold to thousands of investors. The IRS, however, didn’t approve these partnerships and took 1,400 investors and syndicators to court, claiming the operators shorted the U.S. Treasury of some $11 billion through illegal deductions based on inflated land appraisals. Some of the originators and marketers of the partnerships face jail time.

According to Bloomberg News, “two brothers who pleaded guilty to federal charges — Stein Agee, 42, and Corey Agee, 38 — said they prepared false tax returns for clients and that each received $1.7 million in commissions from 2013 to 2019. They arranged bogus deductions on syndicated land-conservation investments around Asheville, North Carolina, and near the coast in Georgia and the Carolinas, court records show. They each could face as much as five years in prison but would likely receive less time. That’s because they are cooperating with prosecutors in Charlotte investigating an accountant and developer named Jack Fisher, who organized at least 23 such deals across the U.S., people familiar with the probe said.”

Chicago-based Stoltmann Law Offices, P.C. offers contingency fee representation to investors nationwide who have been hit by the IRS for tax issues related to conservation or land easement investments sold by investment and financial advisors.  High-income investors are lured into investing in these products based on the promise of legal tax savings.  Through a complicated and circuitous waterfall, investors in conservation or land easements, can receive income tax breaks sometimes worth several times the amount of their actual investment. As the old adage goes, if it sounds too good to be true, it probably is.

A recent article by Investment News lifted the lid on three specific easements that resulted in an arbitration complaint by the investors, and includes an unsavory connection to motivational speaker Tony Robbins. The easements at issue in the investor complaint are:

  • GWM Capital Real Estate

Stoltmann Law Offices, P.C., a boutique Chicago-based law firm that offers representation nationwide to investors, has been fighting brokerage firms and investment firms for decades over variable annuities and insurance products.  Variable annuities, equity-indexed annuities, whole life insurance, variable life insurance, whatever they are called, and the names can get really complicated, these insurance products are designed to do two things.  First, they are designed to move money from your pocket to the insurance company.  Second, they are designed to pay handsome commissions to the salesmen who solicit clients to invest or purchase these annuity and insurance products.

Recently, FINRA, which is the regulatory body responsible for policing the brokerage/investment markets, fined O.N. Equity Sales Company, out of Cincinnati, Ohio, for failing to supervise and surveil the sale and switching of annuities and insurance policies by their clients.  FINRA penalized ON Equity $275,000 and ordered the firm to pay restitution to aggrieved investors in the amount of $1,001,146.86.  FINRA’s investigation found that O.N. Equity (ONESCO) failed to establish, maintain, and enforce a supervisory system reasonably designed to supervise the sale of variable annuities. Because of ONESCO’s failures, the firm failed to detect and deter sales practice abuses by Richard Wesselt. In a parallel action, Wesselt consented to a permanent bar from the securities industry as a result of his misconduct. According to the FINRA action, he violated FINRA Rule 2111 (suitability), in connection with the recommendation to 78 investors to purchase variable annuities, that were inconsistent with the customers’ investment profiles, risk tolerance, liquidity needs, and time horizon.  Using what he called his “Infinite Banking” strategy, he pursued investors to liquidate their retirement accounts, including 401(k)s or IRAs, and use the  proceeds to buy variable annuities, and then liquidate the variable annuities to build cash value in whole life insurance policies. Wesselt was ONESCO’s highest producer in 2016 – big surprise given his proclivity to sell high commission products like variable annuities and life insurance policies.

If a financial advisor ever recommends the liquidation of mutual funds or other securities in an IRA or 401(k) account in order to buy a variable annuity, stop what you are doing and start looking for a new financial advisor.  The main attraction to variable annuities has always been that the money grows tax-deferred like an IRA.  By investing IRA funds in a variable annuity, that benefit is irrelevant. Instead, what you are doing is agreeing to pay your broker a huge 5%+ up front commission and the insurance company 3%-4% of your money per year in various fees and charges.  Variable annuities also charge huge surrender fees for money withdrawn in the first several years, although some offer a 10% withdrawal without penalty. Lastly, the mutual fund options for variable annuity sub-accounts are greatly reduced versus what an investor can invest in through a traditional IRA.  Variable annuities are rarely suitable for any investor. Unless you check the following boxes, variable annuities are not for you: 1) you maximize your tax-deferred retirement savings every year, i.e., you are contributing the max amount to your 401Ks and IRAs; 2) You actually need life insurance; and 3) you are young enough that you don’t need the money invested in the annuity for at least ten years.  Few people check these boxes, and yet according to reports, there is almost $2 trillion dollars locked away in these products, with more than $35 billion in sales in 2020.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses in Ponzi schemes.  All of the most egregious swindles start out with a simple dual promise: High returns and no risk. That was the case with JJMT investments, which sold bogus promissory notes.

Started by fraternity brothers from Indiana University, JJMT lured investors with 30% to 40% returns on notes that financed movie deals in Hollywood.  According to Bloomberg, “Zachary Horwitz, a former actor, duped his old college friends and their families out of tens of millions of dollars. Three of Horwitz’s buddies from Indiana University said he tricked them into providing him with hundreds of millions of dollars in loans to fund bogus Latin American licensing deals with Netflix Inc. and HBO.”

From mid 2015 to late 2019, “JJMT Capital provided financing to Horwitz’s company 1inMM in exchange for promissory notes with a total principal value of approximately $485 million, Bloomberg stated. Horwitz’s company still allegedly owes investors “around $165 million before interest – including more than $42 million of their own money.”

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses in the LJM Preservation and Growth Fund. When broker-dealers sell you investments, they are responsible for fully informing you of the risks at the point of sale. When they fail to give you an honest, transparent disclosure on what they are selling – and the investments tank — you may have an arbitration case that you can pursue to get your money back.

Cambridge Investment Research, Merrill Lynch, and other brokerage firms sold a mutual fund called the LJM Preservation and Growth fund to their customers. The fund’s “value plummeted 80% over two days in early February 2018, after brokers in the previous two years sold $18 million of its shares to more than 550 customers, prompted by sales calls in May 2016 from an LJM wholesaler,” the securities regulator FINRA stated. “The fund was liquidated and dissolved in March 2018.”

What made the fund so volatile that led to its demise? It employed a risky strategy called “uncovered options,” but failed to tell investors that it was a highly complex vehicle prone to catastrophic losses.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with broker-advisors who lost money in retirement plan investments. Hands down, one of the most secure things you own should be your retirement assets. Nobody should be able to pilfer them. But in the internet age, criminals are finding ways into company-sponsored plans.

The Government Accountability Office (GAO), the congressional watchdog agency, recently warned that retirement plans may be compromised by cybercrooks who break into programs like 401(k)s through the Internet. Why are cybercriminals going after these supposedly secure entities? Because that’s where the money is: As of 2018, there were 106 million people in private retirement plans that had more than $6.3 trillion in assets. The main issue with retirement plan security is that plan providers may share data with third parties. That may expose the plan to breaches. Since there’s little to no modern federal guidance how to protect this valuable information, that’s a huge threat.

Why is this information at risk? There are any number of ways that thieves can break in and steal valuable personal data. The GAO found that “personally identifiable information is shared throughout the chain of providers, starting at the plan sponsor and moving back and forth through third-party administrators, recordkeepers, custodians and payroll providers.” That means crooks may be able to take Social Security and bank account numbers.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from fraudulent investments scams for over fifteen years.  Recently, common scams involve precious metals and the latest craze, cryptocurrency. When the price of any commodity goes up dramatically – from gold to digital cryptocurrencies – you can bank on the fact that scammers are pitching hard to lure investors into a trap. Many investments pitched on the internet fall into this murky pool.

The top threats to investors, not surprisingly, are Internet- and social-media based promotions, according to the North American Securities Administrators Association (NASAA), a securities regulator trade association. These frauds are often pitched to owners of self-directed Individual Retirement Accounts (IRAs), many of which are tied to brokerage services.

“Self-directed individual retirement accounts, which lack the services and protection of traditional IRAs, can be fertile soil for scammers, especially those involving cryptocurrency-related and precious metals-based investments,” Investment News reported.

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