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Tag: SEC Fort Worth Regional Office

  • URGENT >> BULLETIN >> MOVING: Investment Scam Targeted Military Personnel At Fort Hood In Texas, SEC Says

    breakingnews72URGENT >> BULLETIN >> MOVING: (Updated 9:05 a.m. EDT April 15 U.S.A.) An investment scam known as LB Stocks and Trades Advice LLC was targeted at military personnel at Fort Hood in Texas and perhaps other installations, the SEC has alleged.

    Charged in the scheme were the company and alleged operator Leroy Brown Jr., 32, of Killeen, Texas. The SEC described Brown as a member of the U.S. Army between 2001 and 2013.

    “Trust is a bedrock principle to our military, and we allege that Brown exploited his own military experience and abused that trust for his own personal gain,” said David Woodcock, director of the SEC’s Fort Worth Regional Office. “Investment fraud is always wrong, but it’s especially pernicious when perpetrated against those who have sacrificed so much for our freedom.”

    A federal judge imposed an asset freeze and temporary restraining order, the SEC said.

    Brown, the SEC said, claimed a longstanding presence in the investment trade, offices in New York and San Francisco, “guaranteed” returns, an ability to double or triple money in 120 days and business associations with “Walmart, Apple, Sony, Microsoft, Best Buy, HP, USA Today, and McAfee.”

    From the SEC’s complaint (italics added):

    Based on these intentional misrepresentations, Brown solicits investors to purchase $1,000 membership certificates in LB Stocks to participate in the Company’s purported investments in undeveloped real estate that Brown guarantees will double or triple the investors’ investments. Brown also represents that he and LB Stocks trade stocks, mutual funds, exchange traded funds (“ETFs”), commodities, and foreign exchange currencies for their clients.

    In a statement, the SEC said Brown “specifically claimed to have all the necessary licenses and registrations to conduct securities business. In reality, Brown is not a licensed securities professional and his firm is not registered with the SEC, Financial Industry Regulatory Authority, or any state regulator. Brown and his firm have no evident experience with investments.”

    Some of Brown’s claims were bizarre. Among them, according to the SEC, was that Brown would offer an “IPO” under a ticker symbol already in use by another company.

    “Thank you God. BOOM POW BAM[,]” Brown allegedly wrote on Facebook.

    As part of his scheme, Brown copied information from the website of E*Trade to his own website — and then swapped in “LB” names, the SEC alleged.

    The precise dollar sum gathered by the scheme was not immediately clear.

    “Beginning in the first quarter of 2014, Brown began receiving substantial deposits of funds into his personal brokerage account,” the SEC charged. “These deposits show that Brown received funds from investors who intended to invest in, or with, LB Stocks. In fact, wire transfer details for several of these deposits specifically reference LB Stocks as the ‘Acct Party’ in the receiving account field — even though the funds were deposited or transferred directly into Brown’s personal brokerage account.”

    “Nearly all” of the funds went from the personal brokerage account into Brown’s personal bank accounts, the SEC alleged.

    Although Brown didn’t leave the Army until July 2013, he claimed to have 65,000 investment clients, the SEC charged.

    Americans are very sensitive to events involving Fort Hood. In 2009, the base was the site of a mass shooting carried out by Nidal Malik Hasan, a former Army major now on Death Row. Thirteen individuals were killed, including officers, enlisted personnel and one civilian employee.

    Thirty-two more individuals were wounded, many of them struck by bullets.

    Read the SEC’s Investor Bulletin for military personnel.

  • Global Corporate Alliance, Dallas-Based Medical Insurance Firm, Allegedly Was $10 Million Ponzi Scheme; Operators Charged Civilly, Criminally; Purported Opportunity Tried To Build Street Cred By Tying Itself To Racing Sponsor

    Duncan MacDonald was touted as an IndyCar sponsor on YouTube. The SEC now says he was running a $10 million Ponzi scheme.
    Duncan MacDonald was touted as an IndyCar sponsor on YouTube. The SEC now says he was running a $10 million Ponzi scheme.

    Global Corporate Alliance (GCA) was not an MLM or HYIP firm. Even so, some of the allegations against the Dallas-based company read like U.S. government complaints filed against Zeek Rewards, Profitable Sunrise and AdSurfDaily. Perhaps most notable is the SEC’s allegation that GCA had no underlying profitable business through which it generated payments to investors, making the payments it did generate Ponzi payments. Moreover, the SEC alleged that the scheme spread in large part because commission-based pitchmen selling GCA’s unregistered securities repeated “false information that [Duncan] MacDonald [III] told them when introducing them to the program.”

    “MacDonald and [Gloria] Solomon knew that the brokers were repeating their false claims to potential and existing investors, and intended for them to do so,” the SEC charged.

    MacDonald, GCA’s President and CEO, is 50; Solomon, GCA’s chief administrative officer, is 71. She now joins a long list of alleged senior-citizen Ponzi schemers. Both Solomon and MacDonald are Dallas residents and have been charged civilly and criminally, the SEC said.

    With the scheme in a state of collapse, GCA allegedly concocted excuses to explain why investors were not getting paid. Among the excuses, according to the SEC, was that “GCA’s legal department needed to suspend payments to confirm that the program was following all regulations.”

    Such an excuse could have come straight out of HYIP Ponzi Land. GCA, according to the SEC, also told investors that money “was stuck in GCA’s overseas account.” If that weren’t enough, GCA also allegedly created numbers on a screen to dupe investors, something that HYIP Ponzi schemes promoted on various forums and social-media sites do every day.

    Just how made-up were GCA’s numbers?

    “MacDonald and Solomon created fake monthly statements to falsely portray GCA as a thriving health insurance company successfully enrolling thousands of premium-paying policyholders each month,” said David Peavler, associate director of the SEC’s Fort Worth Regional Office. “In reality, they never had more than 40 policyholders, and half of those were GCA’s own employees.”

    GCA also tried to escape its bitter Ponzi reality by falsely claiming it “previously sold a portion of its revenue stream from paying members to a Chinese hedge fund,” the SEC charged.

    But if there is a topper — if there is one thing that investors contemplating joining an HYIP can learn from the experience of GCA — it’s that heavy marketing perhaps can produce Ponzi-sustaining cash flow for a limited time, but it cannot undo what effectively is a criminal business plan.

    Like its MLM-style HYIP cousins, GCA allegedly launched as a Ponzi and only made the Ponzi deeper by burning through money to put on a show for investors and prospects. At this precise moment, any number of schemes promoted on the Ponzi boards are using an HYIP/MLM version of the very “plan” GCA used in the brick-and-mortar world. They’re launching/operating with no underlying profitable business, perhaps trading on the names of famous business entities to create legitimacy by osmosis and even claiming they’ve been vetted by attorneys. And they’re relying on commission-based salespeople to create cashflow for their schemes.

    Whose name did GCA trade on? None other than IndyCar. MacDonald even cited the name of “Danica” in a video playing on YouTube, although he did not use her last name of “Patrick.” News stories in 2010 tout GCA as “the official insurance program of IndyCar.”

    Like GCA, each and every one of the HYIP schemes will end in disaster. The only real question is how much money they’ll steal before the inevitable collapse, how much damage they’ll do to business partners and how much cash the operators will siphon.

    From the SEC’s GCA complaint (italics added):

    19. MacDonald believed that the new venture required $15 million of initial capital and envisioned that this funding would come from a single investor. During 2008 and 2009, MacDonald was introduced to and spoke with a number of people he understood to have access to these kinds of funds, including potential investors and brokers. But MacDonald and Solomon began spending money on the business before raising any capital. They began hiring employees, heavily marketing the program, and pursuing sponsorship agreements with large groups. Indeed, by June 2010, GCA had entered into a multi-year, multi-million dollar sponsorship.

    20. MacDonald tried for months to find a single investor, but was unsuccessful. Accordingly, MacDonald decided to fractionalize the program—for example, seeking 15 investors to invest one million dollars each, rather than a single $15 million investment. When pitching the business to a least some of these investors, and to brokers who were assisting him in identifying investors, MacDonald significantly misrepresented the history and state of GCA and NACA’s business. First, MacDonald led them to believe that NACA already had more than 100,000 premium-paying members. Further, he told them that GCA had previously sold a portion of its revenue stream from these paying members to a Chinese hedge fund. MacDonald told them that these kinds of purchases were normally not offered to individual investors but were typically reserved for large institutional investors. In reality, when MacDonald made these statements, GCA and NACA had no paying members, no revenue, no history of selling interests in a revenue stream, and no relationships with institutional investors or a Chinese hedge fund.

  • BULLETIN: Now, An Affinity-Fraud Scheme Targeting Lebanese And Druze Communities, SEC Says; Agency Seeks Asset Freeze Against Firas Hamdan And FAH Capital Partners

    From an SEC evidence exhibit.
    From an SEC evidence exhibit.

    BULLETIN: The SEC has gone to federal court in Houston, alleging that Firas Hamdan was conducting an affinity-fraud scheme targeted at the Lebanese and Druze communities. The agency is seeking an asset freeze against Hamdan and his unregistered company, FAH Capital Partners Inc. The scheme is alleged to have gathered about $6 million over five years.

    “Hamdan’s affinity scam preyed upon people’s tendency to trust those who share common backgrounds and beliefs,” said David R. Woodcock, director of the SEC’s Fort Worth Regional Office. “Hamdan raised money by creating the aura of a successful day trader among friends and family in his community, and he continued to mislead them and hide the truth while trading losses mounted.”

    Hamdan is 49. The SEC says he has an address in Houston and previously used an address in Sugar Land.

    “Hamdan is well-known in the Houston-area Lebanese and Druze communities and has enjoyed a reputation as a successful day trader,” the SEC said in its complaint.  “He is also a former treasurer of the Houston branch of the American Druze Society (‘ADS’), a non-profit cultural organization to which many Houston-area members of the Druze religion belong.”

    Falsified records helped drive the scam, the SEC said.

    As has been the case in other scams, Hamdam allegedly claimed he used a “proprietary trading algorithm.”

    “Hamdan explained to investors that his algorithm was ‘plugged into’ his trading account at TD Ameritrade to further minimize investor loss,” the SEC charged. “Hamdan promised investors that, as a result of this algorithm, he could guarantee the fixed monthly return based on the amount they invested with him.”

    As has been the case with other scams, Hamdan also talked about “promissory notes.”

    “Although the precise terms of the notes appear to vary among investors, the notes generally provide for returns of approximately 30% per year,” the SEC charged.

    Read SEC Investor Alert on affinity fraud.

    A snippet (italics added):

    Fraudsters who carry out affinity scams frequently are (or pretend to be) members of the group they are trying to defraud. The group could be a religious group, such as a particular denomination or church. It could be an ethnic group or an immigrant community. It could be a racial minority. It could be members of a particular workforce – even members of the military have been targets of these frauds. Fraudsters target any group they think they can convince to trust them with the group members’ hard-earned savings.

    At its core, affinity fraud exploits the trust and friendship that exist in groups of people who have something in common. Fraudsters use a number of methods to get access to the group. A common way is by enlisting respected leaders from within the group to spread the word about the scheme . . .

    Read the SEC complaint against Hamdan.