According to the complaint, in 2013, Discala and Wexler conspired with Bell and Josephberg, both registered representatives with different brokerage firms, to inflate the price of the stock of CodeSmart. The SEC found that Discala, Wexler, Bell, and Josephberg then profited by selling their shares at inflated values at the expense of Bell’s clients and Josephberg’s customers.
Bell was taken into custody by the FBI and appeared in federal court in San Antonio. In Court, Bell was informed of a 10-count indictment returned in Brooklyn, New York, and was released on bond. Bell has a long history of customer complaints and two firm terminations.
From October 2012, to June 2013, Bell was registered with broker-dealer WFG Investments (WFG). Thereafter, from August 2013 to October 2013, Bell was registered with Securities America. Bell has at least 25 customer complaints filed against him. Some of the complaints relate to unsuitable recommendations to purchase penny stocks including CodeSmart. Other complaints allege inappropriate investments in debt securities, limited partnerships, and direct private placements. In some instances the complaints allege that the trading was unauthorized. In addition, Bell was terminated by WFG for allegedly trying to settle a customer complaint without bringing the complaint to the firm’s attention. Bell was terminated four months later from Securities America for allegedly failing to follow the firm’s procedures concerning private securities transactions.
Under the securities laws brokerage firms that employed Bell, WFG and Securities America, were obligated to properly supervise the activities of Bell. Brokerage firms owe a duty to investors and the public to stop illegal business activities by properly supervising its employees to ensure that their activities do not take advantage of the trust placed in them. Pump and dump schemes often occur when brokerage firms fail to put in place a reasonable supervisory system to monitor their broker’s activities or simply fail to implement their own rules.
In addition to Bell, Josephberg, the other broker alleged to be involved in the scheme, has a long and troubled regulatory, criminal activity, debts, customer complaints, among a host of other supervisory “red flags” of potential misconduct in the handling of his clients. Josephberg was associated with eight different firms including Maxim Group LLC, ICM Capital Markets, LTD, vFinance Investments, Inc., Halcyon Cabot Partners, LTD. (Halcoyon), and most recently Meyers Associates, L.P. (Meyers Associates). Indeed, when Josephberg was terminated from Halcoyon he was under investigation by the firm for sales practice violations including the selling of unsuitable securities, unauthorized trades, and securities fraud in connection with the sale of penny stocks including VHGI and Cell Therapeutics.
The attorneys at Gana Weinstein LLP are experienced in representing investors concerning unfair practices by their financial advisors. Our consultations are free of charge and the firm is only compensated if you recover.