Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from dealing with broker-advisors who have violated securities laws. When brokerage houses or investment advisers make big “block” stock trades, there are numerous rules they must follow to ensure that other investors don’t get burned. They are not allowed to “front run,” an illegal brokerage practice of a stockbroker placing an order for their own account ahead of the client’s, knowing when the client’s order is placed it will move the market and create a profit for the broker.

Disruptive Technology Solutions LLC, a software services company, and affiliated funds, have filed a demand for arbitration against Morgan Stanley with FINRA, the federal securities industry regulator, according to The Wall Street Journal.

“Disruptive alleges that Morgan Stanley and a senior executive there leaked information ahead of the fund’s sale of more than $300 million of Palantir in February 2021, resulting in tens of millions of dollars in damages,” the Journal reports. Disruptive is seeking compensatory and punitive damages. Palantir is a software firm that provides a wide range of platforms from artificial intelligence to supply chain products.

Stoltmann Law Offices, a Chicago-based investor rights law firm, represents investors across the country in suits against brokerage firms, investment advisors, investment banks, and insurance companies. Typically, we offer our services on a contingency-fee basis which means we do not get paid until you do.  We understand most of our prospective clients come to us having already been financially burned and rarely have the wherewithal to pay out of pocket for legal services.

Our attorneys are currently investigating claims by investors against Morgan Stanley involving fired Morgan Stanley broker Robert David, Jr., of Farmington Hills, Michigan. According to a regulatory filing, Robert David Jr. played fast and loose with client information on Morgan Stanley documents used by compliance to approve investments by clients in high risk junk bonds.  The information David manufactured included client net-worth, liquid net-worth, and changing the risk tolerance on client documents. Morgan Stanley has limitations in place for soliciting investments in high risk junk bonds to protect against over-concentration risk. David altered these documents to avoid these compliance protocols and restrictions. It was also alleged by FINRA that David made 538 unauthorized trades in eight client accounts.

Investing in junk-bonds can be a high risk investment plan. These sorts of corporate bonds offer considerably higher coupon payments, usually 7% per year or higher, but carry with them a substantially higher risk of default. If a company goes out of business, runs into cash shortfalls, and then seeks some sort of restructuring, like through a Chapter 11 Bankruptcy filing, the bond holders can be wiped out completely. Most public companies that issue bonds to investors publicly are rated by the three primary ratings agencies – Standard & Poor’s, Moody’s, and Fitch.  Although each is slightly unique, generally, all three rate bonds using a AAA to D structure. AAA is reserved for the absolute highest credit reliability, like that of United Kingdom. According to published reports, only two United States companies have earned a AAA rating, Microsoft and Johnson & Johnson. In order for a bond to be rated junk, its ratings typically need to fall below BBB- on the Standard and Poor’s scale, and are considered to be “high risk” by definition. Investing in junk bonds may be suitable for investors seeking high income so long as they are comfortable with the high risk inherent in such a strategy. In a rising interest rate environment, this strategy could spell doom for investors.

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from dealing with broker-advisors who have violated their firms’ compliance rules. If they are following the law, broker-advisors have to follow a set of rules to ensure that they are doing right by their clients. In the real world, though, this doesn’t always happen. Sometimes firms don’t supervise what their brokers are selling along with inappropriate investment strategies.

Few investors know that brokerage firms must employ a professional called a “chief compliance officer (CCO).” This person acts as a watchdog to oversee broker activities and police trades so that rules and guidelines set by federal securities regulators such as FINRA and the Securities and Exchange Commission (SEC) are followed to the letter. What if the CCO isn’t doing their job? They can be sued.

FINRA states “that if a CCO has other business responsibilities (such as at firms where the CEO also serves as CCO), the CCO can be held liable for failure to supervise in his or her business line capacity, notwithstanding the CCO title.”

Chicago-based Stoltmann Law Offices represents investors who’ve suffered losses as a result of conflicted, fraudulent, and negligent financial advice.  Sometimes the investments advisors recommend are themselves engaged in a fraud or some other scheme. These sorts of games can happen in any investment fund, but are far more common in private equity or other private investment funds.

The Securities and Exchange Commission (SEC) has charged James Velissaris, the former Chief Investment Officer and founder of Infinity Q Capital Management, with overvaluing assets of funds his company sold by more than $1 billion while pocketing tens of millions of dollars in fees. The SEC’s complaint alleges that, “from at least 2017 through February 2021, Velissaris engaged in a fraudulent scheme to overvalue assets held by the Infinity Q Diversified Alpha mutual fund and the Infinity Q Volatility Alpha private fund.” According to the SEC complaint, “Velissaris executed the overvaluation scheme by altering inputs and manipulating the code of a third-party pricing service used to value the funds’ assets. Velissaris allegedly collected more than $26 million in profit distributions through his fraudulent conduct and without disclosing his activities to investors.

“While Velissaris marketed the mutual fund as a way for retail investors to access investment strategies typically reserved for high-net-worth clients,” the SEC alleges, “what he actually offered them were fraudulent documents, altered performance results, and manipulated valuations.” The SEC also alleges that, “by masking actual performance, Velissaris sought to thwart redemptions by investors who likely would have requested a return of their money had they known the funds’ actual performance, particularly in the volatile markets in the wake of the COVID-19 pandemic. The complaint alleges that at times during the pandemic, the funds’ actual values were half of what investors were told.”

Chicago-based Stoltmann Law Offices represents investors who’ve suffered losses from investing in unregistered securities based on the recommendation of their financial advisor.  All too often, brokers pitch investors on making a quick profit on unregistered securities. These investments, typically not on the radar screen of regulators, can easily lose money. They can skirt the safeguards of state and federal securities laws.

A group of securities regulators recently launched a crack-down on a company marketing unregistered securities. The North American Securities Administrators Association (NASAA) and the U.S. Securities and Exchange Commission (SEC) jointly announced a “$100 million settlement with BlockFi Lending, LLC (BlockFi) concerning its lending products and practices. Thirty-two state securities regulators have agreed to the terms of a settlement with BlockFi to resolve its past unregistered activities. More jurisdictions are expected to follow.”

The settlement focused on BlockFi’s sales of unregistered securities to retail investors through BlockFi interest accounts (BIAs).  “BlockFi promoted its BIAs with promises of high returns for investors who purchased the products. The company took control of and pooled its investors’ loaned digital assets, and exercised sole discretion over the pooled digital assets, including how to use those assets to generate a return and pay investors the promised interest.”

Chicago-based Stoltmann Law Offices is representing investors who’ve been victims of cryptocurrency thefts. These days, cryptocurrencies or “digital cash” are all the rage. You can speculate with it, buy a few consumer goods, and even play games. Unfortunately, like any currency that is a store of value, it can be stolen.

One of the largest heists in the short history of cryptocurrencies occurred recently when customers of Axie Infinity, a play-to-earn online game, lost some $625 million to a thieving hacker.

It was reported that the Axie account was hacked on March 23rd, although it was only revealed on Tuesday, March 29th.  According to Yahoo News, “Axie Infinity remains one of the most popular play-to-earn games, and users continued to log on Wednesday after news of the crypto heist. Hackers targeted a vulnerability in the bridge — or a software mechanism for exchanging types of crypto tokens — to drain funds in two separate transactions.”

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered as a result of financial advisors recommending high risk leveraged exchange-traded funds (ETFs).  Broker-dealer Purshe Kaplan Sterling Investments was charged by the Massachusetts Securities Division with selling “unsuitable investments to investors while operating as independent investment advisers of Harvest Group Wealth Management,” according to thediwire.com.  “Despite warnings from FINRA that leveraged exchange-traded funds are typically unsuitable for average investors who plan to hold them for more than a day, the Harvest Group invested more than 340 client accounts in leveraged exchange-traded funds for days, weeks, months, and even a year,” the state regulator stated. FINRA is the federal regulator of the U.S. securities industry.

According to the Massachusetts complaint, “more than $2.3 million in losses were incurred as a result of unsuitable investments in leveraged ETFs. Purshe Kaplan had a duty to review the transactions as part of their supervisory responsibilities, even though they were conducted outside of the firm.”

Investments like ETFs can be highly leveraged, which means they carry high downside risk and can easily lose money under certain market conditions. Brokers are under a legal obligation to carefully vet all trades and investments with you to ensure that the investments they are selling meet your financial goals and risk tolerance. Leveraged ETFs specifically, are designed to be trading vehicles, not held long-term, because they will not achieve their stated objectives long-term. They are designed to achieve their objectives daily, and are totally unsuitable for buy-and-hold investors. Unfortunately, many financial advisors do not understand this.

Stoltmann Law Offices, P.C. is a Chicago-based investor-rights and consumer protection law firm offering representation nationwide on a contingency fee basis to defrauded investors and consumers alike. If you are a victim of the alleged Ponzi scheme perpetrated by former Morgan Stanley financial advisor Shawn Good, you likely have sustainable legal claims against Morgan Stanley.  It is critical to your chances to recover what was taken from you to consider all legal options and to not depend on the Securities and Exchange Commission or criminal prosecutors to make you whole.

The attorneys at Stoltmann Law Offices have over fifty years of combined experience representing victims of Ponzi schemes. According to published reports, Shawn Good is alleged to have stolen millions of dollars from victims of a scam he ran while he was a financial advisor at Morgan Stanley.  The SEC has filed a civil complaint against Good, and Morgan Stanely fired him in February for failing to cooperate with an internal investigation in connection with his scheme.

Morgan Stanley can be held liable for Shawn Good’s scheme for two primary reasons.  First, as an agent of Morgan Stanley, the company is responsible for Good’s conduct in the course and scope of that employment. Sure, running a criminal scheme is not necessarily what his employment with Morgan Stanley was about, but offering investment advice and financial services was.  You are not seeking to hold Morgan Stanley liable because Good broke into a jewelry store, the agency liability stems from Good’s solicitation to invest in securities and products in furtherance of providing investment advice. That falls squarely inside the agency relationship with Morgan Stanley.

Chicago-based Stoltmann Law Offices represents elderly investors who’ve been defrauded by financial advisors, insurance agents, and investment advisers. Did you know that brokerage firms are required to maintain a list of “trusted contacts” for their older clients? That ensures that investors have a safeguard against broker abuses. A relatively new rule from FINRA, the federal regulator for the U.S. securities industry “requires firms, for each of their non-institutional customer accounts, to make a reasonable effort to obtain the name and contact information for a trusted contact person (TCP) age 18 or older.”

Why does such a rule exist? To protect senior investors, who are frequently the target of scam investments, excessive trading, and sales of products that take on unnecessary risk.

“A trusted contact,” according to FINRA, “is a person you authorize your financial firm to contact in limited circumstances, such as if there is a concern about activity in your account and they have been unable to get in touch with you. A trusted contact may be a family member, attorney, accountant or another third-party who you believe would respect your privacy and know how to handle the responsibility. You may establish more than one trusted contact.”

Chicago-based Stoltmann Law Offices represents investors who’ve suffered losses from being scammed by their financial advisors and the firms for whom they work. For operators peddling scam investments, every crisis is an opportunity. The tragic war in Ukraine is a sad example. Scamsters are ramping up their games to take advantage of people concerned about the crisis – and those hoping to profit from it.

Since the U.S. and European Union have frozen conventional Russian assets, global attention has shifted to the marketing of cryptocurrencies. These “virtual” coins are computer code not backed by hard assets or governments. They can be “minted” by anyone at any time. They are seen are alternative forms of cash, although many of them can be fraudulent.

Ukraine had been a center of cryptocurrency scams before the war.  Last year Ukrainian officials shut down “six illegal call centers. The operation carried out by the Security service of Ukraine has stopped these operations from continuing their cryptocurrency investment scams. From their base of operations, the crypto scammers were reaching out to countless potential victims to try to defraud them with promises of non-existent investment opportunities.”

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