Unregistered Securities

Published on: March 20, 2014

Customers of James E. Neilsen Could Recover Promissory Note Losses

Securities fraud attorneys are currently investigating claims on behalf of the customers of James E. Neilsen. These investigations are concerning Neilsen’s conduct and the sale of investment agreements and promissory notes while he was registered with Tradition Asiel Securities, Longship Alternative Asset Management, and Sound Securities.

Customers of James E. Neilsen Could Recover Promissory Note Losses

On January 9, 2014, Neilsen was put under an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Rights to Hearing by the Banking Commissioner of the Connecticut Department of Banking. The order was amended on February 18. According to the allegations laid out in the order, to finance his partners’ business expenses, Neilsen individually and/or on behalf of his partners sold approximately $10 million in promissory notes and investment agreements that weren’t registered and weren’t exempt from being registered with the state. The conduct allegedly occurred between November 2005 and around September 2011. The order also states that though some investors have been partially repaid by Neilsen, $7 million remains outstanding.

Promissory notes are a type of debt sometimes used by companies in order to raise money. Through the note, the company promises to return the investor’s principal and pay fixed interest amounts. They have set terms and repayment periods that should be stated specifically in the note. According to stock fraud lawyers, some promissory notes are fraudulent from the beginning and exist only to convince investors they are entering into a contractual arrangement when, in reality, they are not. Others are real securities that, despite the fact that they should be registered with regulatory bodies, bypass registration and are sold as unregistered securities.

Published on: July 23, 2013

Scottrade Fined for Alleged Failure to Supervise $8.4 Million in Sales of Unregistered Stock

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of the customers of James W. Margulies and Scottrade Inc. in light of a recent Financial Industry Regulatory Authority decision. Reportedly, Scottrade has agreed to pay a fine of $100,000 to FINRA for failing to supervise Margulies, the former Industrial Enterprises of America Inc. chief financial officer, general counsel and board member.

Scottrade Fined for Failure to Supervise 8.4 Million in Sales of Unregistered Stock

Reportedly, Margulies was allowed to improperly sell unregistered stock to investors between February 2005 and October 2007. Securities arbitration lawyers say he reportedly sold $8.4 million worth of unregistered stock. According to FINRA, “Scottrade failed to conduct an independent inquiry to determine whether the shares deposited were freely tradable.”

According to investment fraud lawyers, Margulies was convicted in 2011 of stealing more than $20 million from investors and looting over $90 million in illegally-issued securities by the Manhattan district attorney. He reportedly used more than $7 million of that money for luxury items such as jewelry for his wife, a vacation club membership, expensive homes and travel on a private jet.

Published on: November 15, 2012

Recovery of Whitestone REIT Losses

by InvestorLawyers

Investors of Whitestone REIT are attempting to recover their REIT losses through Financial Industry Regulatory Authority securities arbitration. First offered in 2004 as a public, non-traded REIT under the name Hartman Commercial Properties REIT, shares of the investment were offered at a per share price valuation of $10. Until a statement in 2009, which informed investors that the value of Whitestone REIT had declined to a per share price of only $5.15, investors were unaware of any problems with the REIT.

Recovery of Whitestone REIT Losses

On May 1, 2009, Jack L. Mahaffey, Independent Trustee, Chairman of Compensation Committee and Chairman of Special Committee for Whitestone REIT, issued a letter to shareholders. This statement revealed the $5.15 valuation was considered by Western Reserve Partners, a real estate investment banking firm which was engaged to review Whitestone’s internal management analysis, to be “on the high side of the range of reasonableness for current valuation.”

The letter to shareholders also addressed the question of why investors’ dividends had been reduced despite the fact that they were led to expect a dividend of 7 percent. In addressing this question, Mahaffey stated that “Whitestone had established a pattern of making cash distributions in excess of its FFO and available cash flow, a practice generally avoided by listed REITs.”

Published on: November 14, 2012

Recovery of KBS REIT Losses

by InvestorLawyers

Many investors who suffered significant REIT losses in KBS REIT I and KBS REIT II are exploring their options for loss recovery through a Financial Industry Regulatory Authority arbitration claim. KBS REIT I is a non-traded real estate investment trust with a focus on commercial real estate. It has raised around $1.7 billion from investors. Current estimations indicate that investors’ interests in KBS REIT I are worth $5.16 per share. The last change in valuation occurred in late 2009, at which time the investment was valued at $7.32 per share; the new valuation represents a 29 percent decline from that value and a drop of almost 50 percent from the investment’s initial offering price of $10 per share.

Recovery of KBS REIT Losses

In addition, investors of both KBS REIT I and KBS REIT II have been informed that they would not receive any more distributions. Prior to this announcement, KBS REIT I investors were receiving annual distributions of 5.3 percent. Reportedly, KBS REIT I has also suspended redemptions. This means that investors who hold shares in this investment may have trouble selling their investment or could face serious losses by selling on the secondary market. Secondary market buyers are very unlikely to pay for shares of KBS REIT I at the appraised value.

Typically, REITs carry a high commission, which motivates some brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15% percent. Non-traded REITs carry a relatively high dividend or high interest, making them attractive to retired investors. However, non-traded REITs are inherently risky and illiquid, which limits access of funds to investors. Arbitration claims have already been filed, or are in the process of being filed, against Ameriprise on behalf of KBS REIT investors who were allegedly led to believe that the REIT was safe, similar to investing in a bond, could be liquidated, provided guaranteed monthly distributions, and that the value of the investment would not fall below the initial purchase price of $10 per share.

Published on: November 9, 2012

Recovery of Wells REIT Losses

by InvestorLawyers

Individuals who suffered significant REIT losses in Wells Timberland REIT and Wells REIT II could recover their losses through securities arbitration. In the latter part of 2011, the Financial Industry Regulatory Authority fined an affiliate of Wells Real Estate Funds, Wells Investment Securities Incorporated, for the use of misleading marketing materials. The $300,000 fine was related to the sales practices of the firm in relation to Wells Timberland REIT from May 2007 until September 2009. According to FINRA, 116 “improper, unwarranted or exaggerated statements” were included in the advertising literature. Some of these statements were about the distributions, redemption and diversification of the non-traded REIT. As a result, many of the individuals who invested in this REIT were investing in a product that was unsuitable for them, given their age, risk tolerance and investment objectives.

Recovery of Wells REIT Losses

Furthermore, in June of 2011, Wells REIT II was allegedly offered as a “safe, income-producing” investment. But by November of that year, it had reportedly lost over 25 percent of its initial value with its estimated per share value dropping from $10 to $7.47. Reportedly, this decline occurred even though the REIT’s properties are “some of the most prestigious office addresses and tenant corporations in the U.S.,” according to Wells officials, and despite the fact that these properties had an occupancy rate of 94.3 percent.

The 2010 annual report filed with the SEC for Wells REIT II stated that during that year, distributions to investors totaled approximately $313.8 million. This number includes monies paid to investors who decided to redeem their shares. However, Wells REIT II reported a net income of just over $23 million and total cash from operations of $270.1 million. With distributions exceeding cash from operations by nearly $44 million, investors should be asking themselves where the financing for distributions is coming from. According to the investment’s third quarterly report for 2011, Wells REIT II has paid over $1.1 billion in excess of earnings for cumulative distributions since its beginnings in 2004.

Published on: August 30, 2012

Unregistered Securities: Inofin Investors Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in an Inofin promissory note or Inofin offering. A recent announcement by the Securities and Exchange Commission (SEC) stated that on July 23 and 24, final judgments were entered in a civil injunctive action against Michael J. Cuomo and Kevin Mann Sr. This action was filed in the United States District Court of Massachusetts.

Unregistered Securities: Inofin Investors Could Recover Losses

Allegations included in the SEC complaint were that Inofin and Inofin executives illegally raised money from investors in 25 states and the District of Columbia totaling at least $110 million. These funds were raised through unregistered note sales. Furthermore, Inofin allegedly materially misrepresented the company’s financial performance as well as how it was using investors’ money. Thomas K. Keough and David Affeldt, two sales agents, were also charged by the SEC. Allegations against Affeldt and Keough stated that they offered and sold the aforementioned unregistered securities.

Stock fraud lawyers say Keough’s FINRA Broker Report stated that he was registered with FINRA during a significant portion of the time that he sold these unregistered securities. As a result, investors who, in accordance with Keough’s recommendation, purchased an Inofin investmentvcould be able to recover losses through securities arbitration.

Published on: April 26, 2012

News: SEC Bars Penny Stock Promoter

by InvestorLawyers

On April 10, 2012, the United States Securities and Exchange Commission (SEC) announced its decision to enjoin Timothy Page of Malibu, Calif., Ryan Reynolds of Dallas, Phillip Offill Jr. of Dallas, Steven Fischer of Bonita Springs, Fla., Page Properties LP, RSMR Capital Group Inc. and ATN Enterprises LLC from violating Section 5 of the Securities Act of 1933. The decision was passed by the Honorable Sidney A. Fitzwater of the United States District Court for the Northern District of Texas.

News: SEC Bars Penny Stock Promoter

Stock fraud lawyers say that according to the SEC’s complaint, these individuals and entities allegedly violated securities laws. They did so by acting as underwriters in order to engage in a scheme that would allow them to evade securities registration requirements. This was accomplished by the selling and offering of securities to at least one of six companies where no registration statements were available to provide information to public investors.

Penny stocks are equity securities that are traded at a price that is less than five dollars per share. The six companies issued these stocks and, in the over-the-counter market, initiated public trading under the following: Ecogate Inc. (ECGT), American Television & Film Company (ATFT), Auction Mills Inc. (AUML), Vanquish Productions Inc. (VQPI), Media International Concepts Inc. (MEIC) and Custom Designed Compressor Systems Inc. (CUPY).

Published on: April 19, 2012

Broker Sentenced for Fraud; Investors Could Recover Losses

by InvestorLawyers

Former securities broker Gregory Bartko has been found guilty of fraud and sentenced to 23 years in prison. Allegedly, Bartko defrauded 200 investors in a scheme that took $3.3 million from his clients. Bartko’s sentencing took place April 4 in the Federal District Court in Raleigh, North Carolina. According to stock fraud lawyers, Bartko’s victims may be able to recover losses through a Financial Industry Regulatory Authority (FINRA) arbitration claim.

Broker Sentenced for Fraud, Investors Could Recover Losses

Together with Scott Hollenbeck, Bartko’s fraud took place through the sale of unregistered securities. Hollenbeck, a Kernersville, North Carolina resident, was a member of Gospel Light Baptist Church and used his religions connection to target church members. Hollenbeck made false promises of 12 to 14 percent guaranteed interest rates through a fund that was owned by Bartko, the Caledonia Fund.

In April 2004, North Carolina’s secretary of state’s office issued a cease and desist order. Despite the order, Hollenbeck and Bartko continued to raise money for another fund developed by Bartko, the Capstone Fund. According to stock fraud lawyers, the money raised from investors was used for Hollenbeck’s and Bartko’s personal use.

Published on: March 30, 2012

Victims of Former LPL Financial Representative, Arthur Lin, Could Recover Losses

by InvestorLawyers

Securities arbitration lawyers are currently consulting with investors who suffered losses because of their association with Arthur Lin. A former LPL Financial representative, Lin has been accused of selling “…$5,360,000 in unregistered promissory notes issued by Malarz Equity Investments LLC to at least 20 investors, including 15 LPL customers,” according to Securities and Exchange Commission documents. Lin was registered with the Financial Industry Regulatory Authority (FINRA) member firm LPL Financial; investors who suffered losses during the time he was registered may be able to recover their losses through FINRA arbitration.

Victims of Former LPL Financial Representative, Arthur Lin, Could Recover Losses

According to the SEC, Lin was permanently enjoined from future violations of federal securities law on January 25, 2012. Between September 2006 and December 2008, Lin allegedly sold unregistered promissory notes to LPL Financial clients. Some fraudulent promissory notes should be registered with applicable regulatory bodies but, instead, bypass registration. Unregistered promissory notes that should have been registered are in violation of federal securities laws and victims of this fraud may be able to recover losses through securities arbitration.

Furthermore, according to the complaint, “Lin knowingly or recklessly made material misrepresentations or omitted to state material facts to investors regarding the risks of the investments and the use of investor funds,” according to the SEC.

Published on: March 29, 2012

Promissory Note Scams: What You Need to Know

by InvestorLawyers

With promissory note scams on the rise, investors need to know both how to spot them and when they need to contact a stock fraud lawyer if they suspect fraud has occurred. Promissory notes are a type of debt sometimes used by companies in order to raise money. Through the note, the company promises to return the investor’s principal and pay fixed interest amounts. They have set terms and repayment periods that should be stated specifically in the note.

Promissory Note Scams: What You Need to Know

According to securities arbitration lawyers, fraudulent promissory notes come in three main forms:

Some are fraudulent from the beginning and exist only to convince investors they are entering into a contractual arrangement when, in reality, they are not.