Articles Posted in Florida

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Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses with full-service brokerage firms because of the unsuitable recommendation and speculation of U.S. Treasury STRIPS.

Recovering Losses In Speculative U.S. Treasury STRIPS

An arbitration claim was filed in late January on behalf of one investor. According to the claim, the advisor speculated that the value of U.S. Government debt would fall, exposing clients to inappropriate risk levels. Traditional U.S. Treasuries are more stable than STRIPS because the latter is traded at a steep discount to maturity value instead of interest. The claim also alleges that the advisor’s short selling of these products evolved into progressively more distant maturities, further increasing the risk to the investor.

Reportedly, the same financial advisor named in the claim also had a number of investor complaints from multiple states, including California, Washington, Florida and New Jersey. Furthermore, the complaints all seem to involve government debt, including U.S. Treasury STRIPS. Allegations in the claims include misrepresentation of risk, breach of fiduciary duty, over-concentration in client accounts, inappropriate use of leverage and margin and failure to follow instructions. Securities arbitration lawyers believe advisors at other full-service brokerage firms may be speculating with clients’ money in similar ways.

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Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with CRL Management LLC and Charles R. Langston III. Langston, a hedge fund manager, conducts business with Miami-based CRL Management. In October, a lawsuit was filed against both he and the firm, alleging fraudulent solicitation of more than $14 million in investor funds.

CRL Management Charles R. Langston III Investors Could Recover Losses

Allegedly, Langston made material misrepresentations about the nature of the fees, commissions and/or investments. Furthermore, he allegedly claimed that he would invest several million dollars of personal funds in an investment vehicle. According to the claim, CRL Management and Langston misrepresented an investment vehicle they were promoting. In addition, it was allegedly not registered with the Securities and Exchange Commission.

Securities arbitration lawyers say that as a result of the actions of CRL Management and Langston, one investor lost more than $3.5 million. In addition, it cost the investor more than $1 million in commissions and fees. Furthermore, a recent arbitration award from the Financial Industry Regulatory Authority ordered CRL Management to pay $1,312,949.31 for breach of contract.

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According to securities arbitration lawyers, investors who suffered significant losses as a result of their losses in the KBS REIT still may recover those losses through securities arbitration following the withdrawal of a class action against KBS REIT. Plaintiff George Steward led investors in suing KBS REIT in May. Allegations stated that misrepresentations about the REIT were made by KBS. These alleged misrepresentations included the dividend payment policy, investment objects and the REIT’s investments value. Reportedly, a voluntary dismissal was filed by the plaintiffs in the U.S. District Court in Fort Myers, Florida last month.

Following KBS Class Action Withdrawal, Investors Can Still Recover Losses Through Arbitration

In March, KBS REIT I investors were notified that the investment’s value would drop from $7.32 to $5.16 per share, representing a 29 percent decline in value. The investment’s offering price was $10 per share. Furthermore, KBS also stated it would cease distributions to investors. An investor presentation filed with the SEC in March stated that KBS REIT I raised $1.7 billion in equity during its initial offering. The investment holds loans and other debt of $2.3 billion and property assets of $3.4 billion.

Financial Industry Regulatory Authority rules have established that brokers and firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. Non-traded REITs are illiquid and inherently risky and, therefore, not suitable for many investors. According to securities fraud attorneys, because of the high-commissions these investments generally offer, many brokers make unsuitable recommendations of REITs to investors. Based on information now known about KBS REIT, many of the firms that sold this investment will be unable to prove the adequate due diligence was performed before recommending this product to investors.

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Securities fraud attorneys are currently investigating claims on behalf of investors who suffered losses as a result of their investment in ETR Pasco Fund II. ETR Pasco Fund II is, according to its Securities and Exchange Commission Form D filing, a real estate company based in Miami, Florida. Sometime between late 2006 and early 2007, ETR Pasco Fund II applied for a Form D Notice of Sale of Securities in order to generate capital. Certain Financial Industry Regulatory Authority (FINRA)-registered broker-dealers then offered and sold these private placements.

Investors of ETR Pasco Fund II Private Placement Could Recover Losses

According to stock fraud lawyers, private placements allow smaller companies to use the sale of debt securities or equities to raise capital without it becoming necessary for them to register these securities with the Securities and Exchange Commission. Because these investments are typically more complicated and carry more risk than other traditional investments, they are usually only suitable for sophisticated, high-net-worth investors.

They also tend to carry high commissions. Securities fraud attorneys say that because the creation and sale of private placements often carry such high commissions, these investments continue to be pushed by brokerage firms despite the fact that they may be unsuitable for investors. FINRA rules have established that brokers and firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance.

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David Lerner Associates is in the spotlight once again as it is threatened by charges alleging that the company and its principle, David Lerner, deceived customers — many of whom were elderly, unsophisticated investors. David Lerner, 75, is surrounded by controversy regarding 20 years of real estate investment sales. As a result of his alleged misdeeds, an abundance of complaints, regulatory sanctions and litigation have been left in his wake. Lerner has used seminars and radio to sell shares of a Virginia-based Real Estate Investment Trust (REIT) that, in turn, invests in extended-stay hotels. Stock fraud lawyers and industry regulators say that David Lerner Associates has sold shares of Apple REIT amounting to almost $7 billion, in 120,000 customer accounts, since 1992. Those sales have generated a staggering $600 million in fees.

News: David Lerner Associates to Face FINRA Panel in September

Furthermore, according to FINRA’s complaint, David Lerner Associates allegedly earns 10 percent from the Apple REIT offerings, and that these fees account for 60-70 percent of the firm’s business since 1996. The complaint also alleges that the firm is “targeting unsophisticated and elderly customers” while making false claims and omissions about market values, investment returns, prospects and performance of the REIT.

Investment fraud lawyers say that sales strategies employed by the 350 or more brokers employed by Lerner include mailings, cold calls and seminars at hotels, restaurants, country clubs and senior centers. Lerner is also known in New York and Florida for his spots on an AM radio station.

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Investment fraud lawyers are currently investigating potential claims on behalf of customers of Gurudeo “Buddy” Persaud, an Orlando, Florida broker. A recent announcement by the Securities and Exchange Commission stated that the SEC has charged Persaud with defrauding investors. Allegedly, Persaud’s fraud involved the use of an investment strategy based on astrology.

Broker Charged with Fraud Related to Astrology-based Investment Strategy

According to the charges, which were filed in the U.S. District Court for the Middle District of Florida, Persaud allegedly persuaded investors to give him money for investments he promised were “safe” and that would return 6-18 percent on their investment. Persaud managed to raise $1 million from investors. However, SEC enforcers allege that Persaud’s market-timing service made forecasts that were based on gravitational pull and lunar cycles. The strategy is apparently based on the idea that mass human behavior and, as a result, the stock market, are affected by gravitational forces. Investors were not made aware of the alleged basis of Persaud’s strategy and most securities arbitration lawyers would agree that astrology is not a sound basis for an investment strategy.

Furthermore, Persaud allegedly misappropriated around $415,000 of investor money for his personal use and lost $400,000 as a result of the investment strategy.

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A Financial Industry Regulatory Authority (FINRA) announcement dated June 4, 2012, stated that a hearing panel ruled in favor of claimants against Brookstone Securities of Lakeland, Florida, along with one of its brokers, Christopher Kline, and its owner and CEO, Antony Tuberville. Brookstone, Kline and Tuberville apparently made fraudulent sales of CMOs, or collateralized mortgage obligations, to elderly, retired and unsophisticated investors. Brookstone was fined $1 million in addition to an order of restitution payment of more than $1.6 million to customers. Of that amount, $1,179,500 was imposed jointly with Kline and the remaining $440,600 was imposed jointly with Tuberville. Securities arbitration lawyers say Kline and Tuberville were also barred by the panel from working again in the securities industry. In addition, David Locy, former chief compliance officer of Brookstone, was barred from acting in any principal or supervisory capacity. Locy was also fined $25,000 and was barred for two years from acting in any capacity.

Retired, Unsophisticated Investors Targeted Again: Brookstone Found Responsible

According to the panel’s findings, from July 2005 through July 2007, Kline and Tuberville made intentional fraudulent misrepresentations and omissions regarding the risks associated with CMOs. The affected customers were all retired investors seeking an alternative to equity investments that was safer. Despite the fact that the negative effects that increasing interest rates were having on the CMOs by 2005 were evident to Kline and Tuberville, they failed to explain these conditions to their customers. The clients were instead led to believe that the CMOs were “government-guaranteed bonds” that would generate 10 to 15 percent returns and preserve capital.

For a long time, investment fraud lawyers have been warning investors that retired and elderly investors are often the targets for investment fraud, and this was certainly the case here. Of the seven customers named in the original complaint, all were retired, elderly and/or unsophisticated investors. Furthermore, two were elderly widows who were convinced to put their retirement savings in the risky CMOs and then told that because they were “government-guaranteed bonds,” their money could not be lost. However, in total, the seven investors lost $1,620,100 while Brookstone racked up $492,500 in commissions.

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The Securities and Exchange Commission (SEC) recently posted an alert on its website which warns investors about scams that offer shares of popular tech companies, like Facebook and Twitter, that have not yet been released to the public. According to investment fraud lawyers, while some pre-IPO shares offerings are legitimate, and are not uncommon, they are typically limited only to sophisticated investors.

Investors Beware of pre-IPO fraud, Warns SEC

According to the SEC, the U.S. security regulator is “aware of a number of complaints and inquiries about these types of frauds, which may be promoted on social media and Internet sites, by telephone, email, in person or by other means.” In recent years, pre-IPO schemes have been a cause for concern, according to the SEC. According to securities arbitration lawyers, investors may be tempted by offerings that capitalize on the popularity of media sites like Facebook.

An order in a bid to stop allegedly fraudulent securities sales of an investment vehicle was issued by the U.S. District Court for the Southern District of Florida in Miami in early April 2012. The investment vehicle claimed to hold pre-IPO shares of Facebook.

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Investment attorneys turn their eyes to Bank of America once again, only two months into the New Year. Bank of America Corp. has been subpoenaed by William Gavin, the Massachusetts securities regulator, over LCM VII Ltd. and Bryn Mawr CLO II Ltd., two related collateralized loan obligations. These two CLOs led to investor losses totaling $150 million. The subpoena will, hopefully, help authorities in determining if Bank of America knew it was overvaluing the assets of the portfolios. Both Bryn Mawr and LCM were sold in 2007, prior to the 2008 merger between Bank of America Securities and Merrill Lynch.

News: Bank of America Faces More Allegations In 2012

Bank of America held commercial loans from small banks amounting to around $400 million in 2006. In 2007, securities packages were put together from these loans and then sold to investors. The subpoena arrives only one day after Bank of America, JP Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. settled allegations of engaging in abusive mortgage practices. These abusive practices included engaging in deceptive practices in the offering of loan modifications, a failure to offer other options before closing on borrowers with federally insured mortgages, submitting improper documents to the bankruptcy court and robo-signing foreclosure documents without proper review of the paperwork.

The settlement amounted to $25 billion and involved federal agencies plus authorities in 49 states. This settlement is designed to give $2,000 to around 750 borrowers whose homes were foreclosed upon after the home values dropped 33 percent from their 2006 worth, and to provide mortgage relief. In addition, all five banks will pay $766.5 million in penalties to the Federal Reserve. This is considered to be the biggest federal-state settlement ever. Bank of America will also pay $1 billion to settle allegations that it, together with its Countrywide Financial unit, engaged in fraudulent and wrongful conduct.

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