There's No Such Thing as a "Guaranteed" Investment
Guarantees are a tantalizing way to spice up any offer, but there is no such thing in the investment world.
The Financial Industry Regulatory Authority (FINRA) recently issued an investor alert to warn people about the dangers of scammers posing as regulators in an attempt to target potential victims and separate them from their hard-earned money.
“We want you to know that neither FINRA, nor any of its executives, will ever provide a "guarantee" on an investment or offer to facilitate your participation in any sort of money-making scheme,” FINRA wrote. “Never.”
What To Look Out For In Potential Imposter Scams
Recent scammers have gone to great lengths to come across as legitimate as possible, including using FINRA’s logo, name, identity of officials, and posing as FINRA CEO Robert Cook. In messages sent to potential victims, the scammers are claiming that FINRA provided guarantees for an investment pitch that was actually just an advance-fee scam.
Common advance-fee scams attempt to convince potential victims to send money to pay for regulatory or administrative charges associated with buying back stocks that are currently underperforming. These scammers typically attempt to build a rapport with their targets and may send official-looking documents in order to give an air of legitimacy to their offers.
At Meyer Wilson, our investment fraud attorneys have helped over a thousand victims of investment fraud fight for and secure the compensation they deserve. Through our attorneys' efforts, we have recovered more than $350 million in verdicts and settlements for our clients, and are ready to use our knowledge and experience to help you in your case. Send us your information to request a free case consultation, or call us at one of our offices located across the United States to speak with a member of our firm today.
The 10 Most Common Investment Scams
Scammers have spent millennia refining old schemes and creating new ones to separate a mark from their money. While people are constantly testing out new ideas in an attempt to strike gold, the main rotation of scams that you need to look out for remains more or less the same:
- Ponzi Schemes: Ponzi schemes work by paying earlier investors back with later investor’s money. When executed well, this cycle can last for a long time, potentially securing the scammer billions of dollars before they’re caught.
- Promissory Notes: This scam mostly targets senior citizens, the most commonly targeted demographic. These notes are sold to investors looking for investments with high interest rates and low risks in order to keep up their standard of living throughout their retirement.
- Loans: While loans on their own aren’t a scam, they can become one when the lender isn’t actually a credit-worthy, collateralized borrower.
- Currency Scams: These scams are especially popular with criminals because it can feel exotic to trade foreign bank notes, and because the complexity in these transactions can add an extra layer of credibility to the scammer.
- Investing in Precious Metals: Similar to trading currency, investing in precious metals can seem like an exciting prospect. These scams work because scammers are confident that investors won’t visit the company or mine that supposedly contains the metals, and will just take their word that everything is going well.
- Life Settlements: These scammers usually target senior citizens with a terminal illness, though they also go after people worried about what will happen to their dependents after they die. It’s difficult to actually predict when someone is going to die, and investing in these scams can lock up your money for years, if not forever.
- Unregistered Investments: There’s a reason regulatory bodies like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) exist – keeping financial advisors, brokers, and brokerage companies registered allows them to be regulated and tracked. Otherwise, anyone could simply copy official-looking documents and offer “deals” to unwitting investors.
- Prime Bank Scams: These scams target people who believe that the wealthiest people have access to exclusive investment opportunities that produce unbelievable results.
- Investment Seminars: While seminars aren’t necessarily scams, the only people who directly make money from them are the people who do the presentation. When the ideas they teach are useless, attendees gain nothing of value and are out the cost of a ticket.
- Annuities: Fraudulent brokers may attempt to generate additional commission for themselves by replacing your current annuities with lesser products. In most cases, they don’t even inform their client of the transactions.
Meyer Wilson was founded to provide investors with the legal representation they require to fight for the compensation they deserve. Though our efforts over the past 19 years, we have helped our clients recover more than $350 million in verdicts and settlements, and we are committed to using the extensive experience and knowledge of how the legal system works to help each new client get back on their feet and move forwards. Send us your information through our online form to start out with a free case evaluation today, or call us at one of our office locations to discuss your situation with a member of our firm.
Three Scams to Keep an Eye Out For
It’s just about time to put on a costume and go out trick or treating, but full-sized candy bars aren’t the only targets out there this time of year. Fraudsters are out in full force looking for an easy mark to take advantage of, and it’s important to understand the dangers in order to protect your finances. The Financial Industry Regulatory Authority (FINRA) recently published a short list of scams to look out for this fall.
Binary Options Scams: At first glance, binary options seem like an easy way to make money. They’re a seemingly simple type of options contract where the outcome is entirely based on what happens in a yes-or-no scenario, like whether a specific asset will fall below or rise above a specific amount. When the option expires, it will either pay the investor a set amount of money, or they’ll receive nothing at all and lose whatever they invested. While this practice would be risky enough if the options were real, victims often aren’t even trading real options in the first place.
Boiler-Room Pump-and-Dumps: Fraudsters using this scheme target their marks and overload them with promises that their offer, usually a microcap or penny stock, is a can’t-miss opportunity that will make them rich. Once enough people buy into this stock, the fraudsters sell their own shares for a profit and leave the investors with essentially worthless stocks. More often than not, these stocks are related to something making headlines – one week it could involve a new clean energy technology, and the next it could be some new product promised to make an obscene amount of money in the marijuana industry.
Affinity Investment Fraud: Victims of this type of fraud are taken advantage of because they end up trusting the scammer because they both belong to a group the victim strongly identifies with. This can include a local organization, an alumni group, an ethnic community, a religious affiliation, and more. These scammers take advantage of the fact that their mark is less likely to complete a thorough background check or follow up on nondescript positive reports.
If you were the victim of a scam, our team of investment fraud lawyers at Meyer Wilson are ready to provide you with the experienced legal representation you need. Since we first started working with clients almost 20 years ago, we have successfully secured more than $350 million in verdicts and settlements. You can send us your information through our online form to request a free case evaluation today, or you can give us a call to speak with a member of our firm over the phone.
Columbus Stockbroker Arrested for Stealing $500,000 From an Elderly Upper Arlington Resident, According to Police
Stifel, Nicolaus Broker Jon Schmidhammer Has History of Regulatory Problems
By: David P. Meyer, Esq., Founding Partner of Meyer Wilson
An elderly client living in Upper Arlington, Ohio, had $500,000 stolen from her by her own stockbroker, according to police. As reported by the Columbus Dispatch today, “Upper Arlington police arrested financial adviser Jon Schmidhammer after they say he confessed to stealing more than $500,000 from an elderly client.”
Mr. Schmidhammer is employed by the brokerage firm Stifel, Nicolaus & Company and worked in the firm’s Dublin office. He has been employed with Stifel, Nicolaus since May 26, 2009. According to regulatory filings, he remains employed at the firm as of the writing of this blog. Prior to joining Stifel, Nicolaus, Mr. Schmidhammer worked in Merrill Lynch’s Upper Arlington branch from March 2006 through May 2009. Prior to Merrill, he was employed by UBS Financial but was fired in 2004 for providing inaccurate statements on his pre-employment application, according to regulatory filings.
In 2004, Mr. Schmidhammer was the subject of a regulatory action and was sanctioned $10,000 for inappropriately extending credit to a customer to satisfy margin requirements and for misleading his firm in an attempt to avoid detection.
Back in 2001, I represented former clients of Mr. Schmidhammer in a dispute against him while he was employed with Salomon Smith Barney.
As an investment fraud attorney based in Columbus, I have represented numerous senior citizens who have been the victims of broker theft. This case is certainly not the first time an Upper Arlington family has been the target of theft by their brokers. I represented an elderly couple in Upper Arlington whose broker stole in excess of $1,000,000 from them over several years. The broker worked for a major brokerage firm and our law firm successfully recovered the couple’s hard-earned money. In addition, a financial advisor working for another large brokerage firm in Upper Arlington recently stole hundreds of thousands of dollars from a disabled daughter of an Upper Arlington man. Meyer Wilson represented her as well. In that case, the broker was sentenced to 5 years in jail.
Founded in 1999, Meyer Wilson is a boutique law firm based in Columbus, Ohio, devoted solely to investor claims and class action lawsuits. As a niche firm, our investment fraud attorneys have the ability to focus their time on what they do best: recovering losses for investors with claims against financial advisors, stockbrokers and brokerage firms. Meyer Wilson has achieved jury awards, arbitration awards and settlements with a combined value of hundreds of millions of dollars on behalf of our clients. When it comes to choosing an attorney to handle your case, results matter. In 2015, Meyer Wilson recovered more than $350,000,000 for our clients.
Warning to Investors: Watch Out for High-Yield CD Offers
Some firms are endorsing high CD yields even though they can be extremely costly and risky. Why? While some of these promotional rates may be legitimate, others may just be marketing ploys purely for the purpose of obtaining higher commissions. FINRA believes that some firms and companies may be promoting CDs, but selling a product that is much different – even products that are not FDIC-insured.
Responding to a CD Promotion
FINRA explains that many CD promotions require the potential investor to show up to the office and speak with a salesperson face-to-face. During these meetings, FINRA says that the salesperson can then attempt to solicit the investor for a non-CD product. Investors who end up purchasing this type of investment generally put down a sizeable amount – FINRA says about $25,000.
What happens if you say no?
FINRA explains that investors who reject the product that the salesperson is pitching are typically referred to another bank that will offer a regular rate for the CD. In some scenarios, the salesperson still pays the bonus, but the bonus in this case is the difference between the other bank’s CD rate and the company’s promotional CD rate.
What happens if you say yes?
Investors who agree to the CD alternative that the salesperson pitched usually get a discount on the product. This could be to distract from the hefty commission that the company could still take from the other, non-CD product, says FINRA.
The “Yield” in High-Yield CDs
According to FINRA, the “yield” in high-yield CDs may be referring to a bonus that the salesperson pays the investor on top of the CDs average percent yield. FINRA says that this bonus is simply a way that companies are incentivizing investors to put money into these high-commission investments.
To learn more, read FINRA’s investor alert.
Meyer Wilson Investigating Allegations Surrounding NFP Securities Broker Robert Regan
Our securities fraud attorneys are investigating misconduct allegations surrounding Robert Regan of NFP Securities.
According to proceedings brought by the Financial Industry Regulatory Authority (FINRA), Robert Regan (CRD# 2322096) was accused of participating in the solicitation and sale of an outside and unapproved investment to NFP Securities customers without providing accurate written notification to the brokerage firm.
According to FINRA, between March 2010 and September 2010, Regan recommended his customers purchase stock in a private company without getting NFP’s approval. Allegedly, Regan did verbally request permission to refer his customers to the outside investment, but according to FINRA, what he actually did to solicit the sales went beyond what NFP allowed.
The conduct of which Regan is accused violates NASD Rule 3040 and FINRA Rule 2010. In a letter of Acceptance, Waiver and Consent (AWC), Regan accepted and consented to FINRA’s findings, agreeing to a 60-day suspension and $5,000 fine.
Meyer Wilson helps investors recover financial losses caused by investment fraud and misconduct. If you invested with Robert Regan and lost money, we invite you to contact our law firm today for a free review of your legal rights and options.
Update on Former MACC Broker Walter Francis Grenda, Jr.
On February 3, 2016, FINRA filed an order accepting offer of settlement. Walter Francis Grenda, Jr. has been barred from associating with any FINRA member in any capacity.
FINRA recently accepted an offer of settlement in the case of former broker Walter Francis Grenda, Jr. (CRD# 722911). In September 2015, we reportedthat we were investigating allegations against Grenda after the Securities and Exchange Commission (SEC) instituted cease-and-desist proceedings against him and the company he jointly owned.
According to the SEC, Grenda, while registered with Mid Atlantic Capital Corporation (MACC), allegedly made false and misleading statements to his clients in recommending and selling investments in the risky hedge fund Prestige Wealth Management Fund (Prestige). The SEC also accused Grenda of selling to clients who were retired, close to retirement, and had little-to-no investment knowledge.
Walter Grenda Timeline: Important Dates
- June 13, 1995 – Grenda first becomes registered with FINRA.
- November 2010 – Grenda forms Reliance Financial Advisors.
- September 2, 2011 – Grenda becomes registered through MACC.
- March 1, 2012 through September 1, 2012 – FINRA alleges that Grenda has fraudulently induced some of his customers to invest in Prestige.
- December 2012 – Prestige Fund loses over 80% of its value.
- July 31, 2013 – Grenda is voluntarily resigned from MACC.
- December 10, 2014 – The SEC institutes a cease-and-desist proceeding against Grenda and Reliance Financial Advisors.
In light of FINRA’s acceptance of the offer of settlement, Grenda has officially been barred from association with any FINRA member in any capacity.
If you or someone you know invested with Walter Francis Grenda, Jr. and lost money, we invite you to contact our securities fraud attorneys. Meyer Wilson is a firm dedicated to helping investors recover their losses caused by misconduct. Submit a free case evaluation online, or call us at (800) 738-1960.
Lending Company and Brokerage Firm Charged With Fraud
On February 3, 2016, the Securities and Exchange Commission announced charges of fraud against a lending company out of Manhattan and its owner. Fraud charges were also levied against the brokerage firm acting as the placement agent, as well as two executives.
American Growth Funding II LLC and Ralph Johnson are accused of repeatedly lying to investors purchasing high-yield securities, promising a 12% annual return to investors in AGF II. They allegedly falsely claimed that the financial statements were being checked with an annual audit and misrepresented documents regarding details of loan values and management. According to the complaint, AGF II raised roughly $8.6 million from investors during the time period from March 2011 to December 2013.
Portfolio Advisors Alliance, a brokerage firm and the placement agent for AGF II—are also accused of fraud. The SEC alleged the firm knew of the inaccurate documents, but still continued to use them in order to solicit sales.
Andrew A. Calamari, Director of the SEC’s New York Regional Office said this:
“We allege that AGF II misled investors and overstated the true value of these investments, which are worth far less than presented because many of the company’s loans are non-performing. We further allege that Allen and Wasserman looked the other way and allowed PAA to facilitate the fraud as the placement agent.”
If you lost money with American Growth Funding II LLC, learn about your legal rights to seek compensation. Call our securities fraud attorneys at Meyer Wilson for a free consultation today.
Ponzi Scheme Suspected in West Virginia
Budget Finance Company abruptly closed recently, causing many of its clients to worry about the security of their investments. Last month, federal agents raided the West Virginia investment and lending company, taking computers and other records to analyze. The several hundred clients of Budget Finance are unsure whether they will get their money back.
The Wetzel County Prosecuting Attorney’s office, the West Virginia State Auditor’s Office Securities Division, and the U.S. Attorney’s Office of the Northern District of West Virginia are currently investigating this case. These agencies claim that potential victims are coming forward every day with new information.
U.S. Attorney William Ihlenfeld II said that Budget Finance Company is suspected of running a Ponzi scheme that caused millions of dollars in investor losses.
Budget Finance has been a fixture in its small-town community for decades. Some said that just about everyone used the company for lending and investments, and many residents of the community knew the president of the company well. Those familiar with Budget Finance’s dealings said that the company promised returns up to 10 percent, and many of its clients had thousands and even hundreds of thousands of dollars invested with them.
The first signs of trouble came about a month ago, when investors could not reach anyone at Budget Finance. The Division of Financial Institutions also attempted to contact the president and others at the company to inform them that Budget Finance was required by law to stay open for at least four days per week, but the answering machine said that Budget Finance was “closed indefinitely.”
One former Budget investor told the Charleston Gazette-Mail that she got a bad feeling about the company earlier this year, and advised others of her concerns. She did not specify her reasons for believing the company was in trouble.
Officials investigating the Budget Finance closure are also attempting to find a potential link between Budget Finance and the other company its president owned, River Rentals Inc., a real estate business.
For more information, you can view the order by the Commissioner of Financial Institutions for the State of West Virginia.
Matthew A. Bell, Craig L. Josephberg Accused of Involvement in Pump & Dump Scheme
According to the SEC, registered representatives Matthew Bell and Craig Josephberg were involved in an elaborate pump and dump scheme.
The U.S. Securities and Exchange Commission (SEC) accuses Matthew Bell and Craig Josephberg, along with three other individuals, of participating in a sophisticated pump and dump scheme involving three companies between 2013 and 2014. The SEC alleges that the scheme generated millions of dollars through illegal means.
Matthew A. Bell (CRD# 3091864) and Craig L. Josephberg (CRD# 2709288) were registered representatives at the time of the alleged misconduct. Bell was most recently registered with Securities America and Josephberg with Meyers Associates.
According to the SEC Complaint, Abraxas Discala, CEO of OmniView Capital Advisors, and Marc Wexler, President of OmniView, allegedly approached Bell and Josephberg and asked them to help inflate the stock price of CodeSmart Holdings. All four of them allegedly planned to profit by selling their personal shares high at the expense of the brokerage firm clients. A fifth individual, Ira Shapiro, CEO of CodeSmart, also allegedly participated in the scheme by making misleading statements on multiple occasions regarding stock price and volume.
The SEC accuses Bell and Josephberg, among other things, of failing to disclose to their customers that they had financial incentives to buy and recommend shares of CodeSmart, and acting improperly by recommending the investment knowing that the price had been inflated through manipulation.
Want more information about Pump and Dump Scams? Read Meyer Wilson’s helpful article on “How Pump and Dump Scams Work.” You can also contact Meyer Wilson for a free review of your case if you believe that you are the victim of a similar type of misconduct to what Josephberg and Bell are accused of.