Tuesday, January 16, 2018

Bitcoin Losses?

We are investigating claims for investors who lost money in the cryptocurrency hype.

With 35 years of securities experience and a computer geek I know what's what.

Call me. 212.509.6544.


Tuesday, December 26, 2017

SEC News - Ponzi Scheme, Cash Kickbacks, and Insider Trading

Broker Charged With Giving Special Access to IPOs for Cash Kickbacks
A Wall Street stockbroker has been charged with illegally accepting more than $1 million in undisclosed kickbacks for giving certain customers preferential access to lucrative IPOs, enabling them to reap major trading profits in the secondary markets.

SEC Charges Biopharmaceutical Company With Failing to Properly Disclose Perks for Executives
A biopharmaceutical company has been charged with committing a series of accounting controls and disclosure violations, including the failure to properly report as compensation millions of dollars in perks provided to its then-CEO and then-CFO.

Stock Trader Charged in Insider Trading Ring
The SEC charged a former day trader with making more than $1 million in illegal insider trading profits as part of a ring that allegedly stole confidential information from investment banks and clients so they could trade in advance of secondary stock offerings.

The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Thursday, December 21, 2017

Coinbase Freezes Bitcoin Cash Trades, Launches Insider Trading Probe

Here we go. If you lost money in the Bitcoin fraud, give us a call.


Wednesday, December 13, 2017

Mortgages for Bitcoin?

This is simply mindboggling.

"We’ve seen mortgages being taken out to buy bitcoin. … People do credit cards, equity lines,” Joseph Borg, president of the North American Securities Administrators Association, told CNBC today. “This is not something a guy who’s making $100,000 a year, who’s got a mortgage and two kids in college ought to be invested in.”

It should be obvious that this is not a good idea, but according to Joe Borg, folks are actually taking mortgages on their homes to buy Bitcoin.

Put aside for the moment whether Bitcoin' valuations have a factual basis, and whether it is real or not. You cannot mortgage your home to make any investment - not IBM, not Google, not Berkshire Hathaway.

We are truly in a craze when folks are mortgaging their homes to buy something that swings in value thousands of dollars, multiple times, in a day.

No, you shouldn’t mortgage your house to buy Bitcoin – BGR

Lost money in cryptocurrency? Call Mark Astarita at 212-509-6544.

Tuesday, December 12, 2017

Trouble Ahead - FINRA Focus on Outside Business Activities. Are Yours Fully Disclosed?

By now, most registered representatives are aware that FINRA has been actively investigating the backgrounds of registered persons for undisclosed judgments and liens. There have been questions as to how they are conducting those investigations, and a few folks have suggested to me that FINRA is running credit checks on brokers.

That would be of questionable legality, but there is no evidence that it is happening. What has happened is FINRA was very successful at sanctioning registered representatives who did not fully disclose such items. Some reps were charged with willfully failing to disclose, which is a small trap laid by FINRA. You see, while FINRA will take a settlement with a fine for a willful failure to disclose, many state regulators will use a willful failure as a reason to bar the broker!

Fortunately, for the reps that I represented, there were no suspensions or bars and no findings of willful violations. I managed to convince FINRA in some cases that there was no failure to disclose, and in all cases that any such failure was not willful.

Having fought that battle, the next one is starting. FINRA has no identified outside business activities and private securities transactions as the next regulatory concern. FINRA has stated that it has found that some individuals failed to notify their firms of proposed OBAs or PSTs, including situations where a new hire or current registered or associated person failed to notify their prospective or current firm in writing of an existing OBA or PST. 

FINRA acknowledges that in some cases, individuals did not understand what constitutes an OBA or PST, or did not satisfy important provisions of the rules (e.g., the requirement for written rather than verbal notice). In other cases, individuals failed to provide the information with sufficient detail for a firm to make an adequate determination as to whether to allow a proposed OBA or PST to proceed.

This is important not only to avoid an issue with FINRA, but with the firms. Most large firms will jump at the opportunity to terminate a broker and seize his assets under management for failing to disclose an outside business activity, and certainly for failing to disclose a private securities transaction.

Outside business activities are covered by FINRA Rule 3270 and must be disclosed on Form U-4 in item 13

3270. Outside Business Activities of Registered Persons
No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member. Passive investments and activities subject to the requirements of Rule 3280 shall be exempted from this requirement.

Form U-4 Item 13.
Are you currently engaged in any other business either as a proprietor, partner, officer, director, employee, trustee, agent or otherwise? (Please exclude non investment-related activity that is exclusively charitable, civic, religious or fraternal and is recognized as tax exempt.) If YES, please provide the following details: the name of the other business, whether the business is investment-related, the address of the other business, the nature of the other business, your position, title, or relationship with the other business, the start date of your relationship, the approximate number of hours/month you devote to the other business, the number of hours you devote to the other business during securities trading hours, and briefly describe your duties relating to the other business.

There is a bit of a mis-match between the rule and the dislosure, as the rule limits the activity to those which involve compensation, or the expectation of compensation, and the disclosure item is not so limited - it purports to require a yes answer for any position with any other business.

Take a look at your own disclosures. Have you disclosed all of your outside business activities to your employer and on Form U-4? Have you obtained written approval of the activity from your employer? Verbal approval from your manager is not enough - you need it in writing.

Have a question about an outside business activity? Received an 8210 request about your U-4 disclosures? Give me a call at 212-509-6544, let's see if you have a problem, and if so, how we can fix it.

Next up: Private Securities Transactions

Monday, December 11, 2017

Bitcoin Fraud On the Rise

I have been representing targets and witnesses in securities fraud investigations and litigation for decades. I have litigated the aftermath of Ponzi schemes, pump and dumps and bubbles for investors, and have represented countless witnesses and targets in SEC and FINRA investigations.

Aside from my extensive securities litigation experience - 30 years and counting and am also more computer literate than most. I have litigated dozens upon dozens of cases caused by the crash in 1987, the tech bubble in 2001, the housing crisis in 2008 and dozens of fraud cases in between, as well as Internet securities fraud cases.

However, I don't know that any of us have seen anything near this Bitcoin craze, and the losses that investors are have already suffered and may suffer in the future.

The potential for loss is not simply from the direct loss in an investment which has soared in recent weeks, but in potential fraud surrounding the technology and the hacking of platforms.

After all, the coincurrencies are computer based. Your investment is "stored" online, and only online. Lose your password, you lose your money. And if hackers hack the exchange or the currency platform, you lose your money.

This is not a hypothethical overblown risk. Just last Wednesday NiceHash, which describes itself as the largest marketplace for mining digital currencies, reported  that it was suspending its operations for at least 24 hours because of a security breach which resulted in the theft of approximately 4,700 bitcoins which were worth roughly $75 million.

Bitfinex, a Hong Kong-based bitcoin exchange, was briefly shut down last year after hackers stole nearly 120,000 bitcoins -- worth more than $65 million at the time. The year before, cyber thieves made off with about 19,000 bitcoins after breaking into European exchange Bitstamp.

Then there is the risk of securities fraud. The SEC is aware of the potential for fraud and has opened a number of investigations. The SEC has warned investors to be on the lookout for "potential scams" involving Initial Coin Offerings. ICOs function similarly to an Initial Public Offering on the stock market, but without the governmental regulation. They typically receive investments in the form of cryptocurrency in exchange for shares known as tokens. But ICOs can be for any sort of startup -- they don't necessarily have to be for cryptocurrency companies.

The SEC's newly created Cyber Unit has started to take action on "pump and dump" schemes where fraudsters lure investors, take their money, and run. Add to this the hacking of coincurrency exchanges, and the potential for the inability to cash in coincurrency for dollars, and there is the potential for significant losses.

My office has been receiving inquiries from individuals looking to start coin exchanges, and a trickling of inquiries from investors who have lost money in coincurrency transactions. We are continuing to investigate and review these cases. If you have lost money in coincurrency, or have been contacted by the SEC or the FBI regarding coincurrency or cryptocurrency transactions, give our office a call at 212-509-6544, or email me directly at mja@sallahlaw.com.