Securities Lawyers Blog

Ridgewood Energy Oil and Gas Private Placements

March 23, 2016 | by Staff Attorney

The investment attorneys at Gana Weinstein LLP are investigating the potential unsuitable sales of securities sponsored by Ridgewood Energy Corporation (Ridgewood Energy). Ridgewood Energy is a private upstream oil and gas investment company based in Houston, Texas and Montvale, New Jersey and sponsors several oil and gas private placements and investments.

Ridgewood Energy issued a press release announcing that it had closed its latest private equity fund Ridgewood Energy Oil & Gas Fund III, L.P., its largest fund to date, with total capital commitments of more than $1.9 billion. The Fund is a continuation of Ridgewood Energy’s investment program focused on finding and developing oil in the deepwater Gulf of Mexico. Ridgewood Energy other offerings include Ridgewood Energy Bluewater Institutional Fund, LLC, Ridgewood Energy Bluewater Oil Fund II LLC, Ridgewood Energy Bluewater Oil Fund IV, LLC, Ridgewood Energy Oil & Gas Fund II, L.P., Ridgewood Private Equity Partners Energy Access Fund LLC.

Investors often do not understand the substantial risks of oil and gas private placements. As recently reported in Reuters, when offerings by Atlas Energy LP, another issuer of oil and gas private placements were analyzed, investors only get to see 65-70% of their capital actually put to work on oil and gas projects. Further, the returns on these projects had more in common with running profitable casinos than investments. Reuters found that slightly more than half of 43 private placements Atlas issued over the past three decades investors lost money or just broke even. While investors lost in more than half of the deals in 29 or 67% of those deals, Atlas actually out-performed their own investors.

Investors File Churning Complaints Against Broker Joel Benanti

March 23, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Joel Benanti (Benanti). According to BrokerCheck records Benanti has been the subject of at least eight customer complaints. The customer complaints against Benanti allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

The most recent complaint was filed in March 2015 and alleged churning and unsuitable trades from April 2013 through April 2014 causing $35,595 in damages. The complaint was settled.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

SEC Accuses American Growth Funding II and Brokerage Firm Portfolio Advisors Alliance of Securities Fraud

March 22, 2016 | by Staff Attorney

The securities fraud attorneys of Gana Weinstein LLP are investigating fraud charges by The Securities and Exchange Commission (SEC) against American Growth Funding II, LLC, Portfolio Advisors Alliance, Inc., Ralph C. Johnson (Johnson), Howard J. Allen III (Allen) and Kerri L. Wasserman (Wasserman) accusing the defendants of repeatedly lying to investors purchasing high-yield securities. Portfolio Advisors Alliance is the brokerage firm that acted as the placement agent for the fund. The SEC alleged that between March 2011 and December 31, 2013, the Fund sold approximately $8.6 million worth of its units to at least 85 investors.

According to the SEC American Growth Funding II and Johnson promised investors 12-percent annual returns and falsely claimed its financial statements were being audited each year. The Fund also made misrepresentations in offering documents about its management and concealed details about deteriorating loan values. The SEC also alleged that Portfolio Advisors Alliance and its owner Allen and president Wasserman knew the offering documents were inaccurate and yet continued using them to solicit sales of the Fund.

According to the SEC’s complaint a number of misrepresentations and omissions were made to investors including: (1) that the company represented in offering documents that its financial statements had been audited and would continue to be audited each fiscal year when Johnson knew this statement was false and no audit of the Fund’s financials occurred until 2014; (2) that the offering documents represented that the Fund was governed by a Board of Managers comprised of Johnson and two other individuals when the two individuals never agreed to serve; (3) that Johnson caused the Fund to send out monthly account statements to investors that concealed the precariousness of its business because the company could not have possibly paid investors their stated account balances; (4) that Allen became aware by no later than June 2012 that the Fund’s offering documents were not accurate but continued using them to solicit investors; and that Allen informed Wasserman that the Fund offering documents contained false information but Wasserman took no action and the firm’s brokers continued using misleading documents to solicit investors.

Credit Suisse X-Links and Velocity Shares ETN Investor Recovery Options

March 22, 2016 | by Staff Attorney

The investment attorneys of Gana Weinstein LLP are investigating investor claims of unsuitable investments in oil and gas related products such as exchange traded notes (ETNs), structured notes, MLPs, and leveraged ETFs. Some of the ETNs, leveraged ETNs, and structured products underwritten by Credit Suisse in the X-Links and Velocity Shares ETNs include:

Credit Suisse S&P MLP ETN (NYSE: MLPO)
Credit Suisse X-Links Commodity Benchmark ETN (NYSE: CSCB)

SandRidge Permian Trust (PER) Mississippian Trust I (SDT) and II (SDR) Investor Loss Recovery

March 21, 2016 | by Staff Attorney

The investment attorneys with Gana Weinstein LLP are investigating and representing investors who were inappropriately recommended oil and gas and commodities related investments. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. Several royalty trusts linked to SandRidge Energy have suffered substantial declines. SandRidge Permian Trust (Stock Symbol: PER) has lost 81% in value over the last two years, SandRidge Mississippian Trust I (NYSE: SDT) lost 68% over the last two years, and SandRidge Mississippian Trust II (NYSE: SDR) lost 81% over the last two years.

SandRidge Energy, Inc. is an oil and natural gas company headquartered in Oklahoma City, Oklahoma that focuses on exploration and production. SandRidge and its subsidiaries also own and operate gas gathering and processing facilities, saltwater disposal and electrical infrastructure facilities and conduct marketing operations.

Sandridge Energy (SDOC) fell to the bottom of Standard & Poor’s credit ladder with a D rating after deferring interest payments. Sandridge is unlikely to make good on its $22 million interest payment that was due and many believe that SandRidge’s $4 billion debt load is unsustainable in the face of a $681 million loss over the last four reported quarters.

Broker Investigation: Gerald “Jerry” Tagge Promissory Note Sales

March 21, 2016 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating a customer complaint brought before the Financial Industry Regulatory Authority (FINRA) against Gerald “Jerry” Tagge (Tagge) working out of Omaha, Nebraska alleging the sale of $125,000 in promissory notes. The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”. In addition to the promissory note complaint there have been two other customer complaints against Tagge.

At this time it unclear the nature and scope of Tagge’s outside business activities and private securities transactions. However, according to Ingros’ public records his outside business activities include the d/b/a he operates out of Tagge Rutherford Financial Group, an insurance business, and real estate related business. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance agents to clients of those side practices.

Tagge entered the securities industry in 1991. Since August 2006 Tagge has been associated with Cetera Advisors LLC.

Bradford Energy Capital Oil and Gas Private Placements

March 21, 2016 | by Staff Attorney

The investment attorneys at Gana Weinstein LLP are investigating the potential unsuitable sales of securities sponsored by Bradford Energy Capital (Bradford). Bradford claims on its website that the company was formed in 1994 to focus on creating investment opportunities in the the oil and natural gas industry. Bradford Exploration, Inc., Bradford Energy, LLC, and Bradford Energy Capital, LLC have been the managing general partner of 42 limited partnerships which investing more than $270 million in approximately 2,000 oil and natural gas wells, natural gas processing plants, natural gas pipelines, mineral leases, and royalty interests. Bradford is active in the Appalachian Basin, the Illinois Basin, the Permian and the Western Gulf Basins, and the Williston Basin.

The company sponsors many oil and gas private placements and investments that incorporate Bradford Drilling Associates into the name. According to public disclosures, brokerage firms that sell Bradford oil and gas interests include Centarus Financial Inc., Commonwealth Financial Network, Sigma Financial Corporation, Sammons Securities, Madison Avenue Securities, Inc, M Financial Holdings Securities, Inc., Lincoln Investment Planning, Berthel Fsher & Company Financial Services Inc., Kalos Capital, Inc., G.F. Investment Services LLC, and Sethi Financial among others.

Investors often do not understand the substantial risks of oil and gas limited partnerships and private placements. As recently reported in Reuters, when offerings by Atlas Energy LP, another issuer of oil and gas private placements were analyzed, investors only get to see 65-70% of their capital actually put to work on oil and gas projects. Further, the returns on these projects had more in common with running profitable casinos than investments. Reuters found that slightly more than half of 43 private placements Atlas issued over the past three decades investors lost money or just broke even. While investors lost in more than half of the deals in 29 or 67% of those deals, Atlas actually out-performed their own investors.

Andrew Yocum Customers Complaint About Unsuitable Oil and Gas Investments

March 20, 2016 | by Staff Attorney

The investment attorneys of Gana Weinstein LLP are investigating investor claims of unsuitable investments in oil and gas related products. Our firm is currently representing a number of investors who lost substantial savings due to poor advice to concentrate holdings in speculative commodities investments like master limited partnerships (MLPs). According to Brokercheck records, Andrew Yocum (Yocum) formerly with Morgan Stanley operating from their offices in The Villages, Florida has recently received at least 12 customer complaints with similar allegations that the broker overconcentrated them in oil and gas equities. Eight complaints have been filed against Yocum in 2016 alone.

One of the most popular energy related investments that have become increasingly popular in the brokerage industry in recent years are MLPs. MLPs are publicly traded partnerships. About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. There are about 130 MLPs trading on major exchanges that focus on energy related industries and natural resources.

Wall Street loves MLPs because they provide high yields to investors and require companies to pay Wall Street in order to continue to grow. In 2013 banks earned fees of $890.3 million from MLP issuance. Bloomberg quoted an analyst stating that “MLPs are Wall Street’s dream,” because “[t]hey’re fee machines.” Naturally, in order to entice investors to continue to invest in MLPs Wall Street pumps up MLPs every chance they get. According to Bloomberg, in May 2014 “[a]nalysts predict that 93 of the 114 MLPs in existence will rise in value in the next year…” Astonishingly, “all but five MLPs are recommended by the majority of the analysts who cover them.” At that time professionals without conflicts called MLPs “the next great investment debacle” and warned that “many MLP shareholders…may not understand what they’ve gotten into.”

Recovery Options for VFG Securities Clients Invested in Non-Traded REITs, Equipment Leasing, Oil & Gas, and Other Alternative Investments

March 20, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating a complaint filed by The Financial Industry Regulatory Authority (FINRA) against brokerage firm VFG Securities, Inc. (VFG) and its CEO Jason Vanclef (Vanclef) (FINRA No. 2013038283001). The complaint alleges that approximately 95 percent of VFG’s revenue was obtained from the sale of non-traded direct participation products (DPPs) and non-traded REITs and other alternative investments such as equipment leasing programs and oil & gas private placements between approximately November 2010 and June 2012. Even though alternative investments are highly speculative and illiquid investments that have little to no place in the average investor’s portfolio, FINRA alleged that VFG failed to reasonably supervise the sale of illiquid alternative investments, including non-traded DPPs and non-traded REITs, to ensure that customers did not become overly concentrated in these products.

According to FINRA, VFG’s alternative investment strategy comes from a book distributed by the firm to customers and authored by Vanclef entitled Wealth Code: How the Rich Stay Rich in Good Times and Bad (The Wealth Code). FINRA found that Vanclef used The Wealth Code as sales literature to promote investments in non-traded DPPs and non-traded REITs, and to lure potential investors to VFG. FINRA claims that Vanclef repeatedly claimed in The Wealth Code that non-traded DPPs and non-traded REITs offer both high return and capital preservation among other claims. However, FINRA has found that the these claims are false, inaccurate, misleading, and contradicted information provided in the prospectuses of the products that Vanclef and VFG sold.

FINRA stated that non-traded DPPs and non-traded REITs are speculative investments that contain a high degree of risk, including the risk that an investor may lose a substantial portion or all of his or her initial investment. Yet, Vanclef claimed in The Wealth Code that by investing in “real” or “tangible” assets and other instruments that he recommended, investors could “reasonably achieve 8-12% results,” on their investments and “get consistent returns” that provided “piece [sic] of mind.”

FINRA Sanctions Ameriprise Financial Broker William Marshall and Supervisor John J. Kolinofsky, Jr. Over BioChemics Stock Sales

March 20, 2016 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating a regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Ameriprise Financial Services, Inc. (Ameriprise) broker William Marshall (Marshall) (FINRA No. 2012033291204) and his supervisor John J. Kolinofsky, Jr. (Kolinofsky) working out of the firm’s Plano, Texas office. According to the FINRA action against Marshall, from January 6, 2011 through May 2, 2012, Marshall participated in the sale of $1.72 million of privately issued preferred stock of BioChemics, Inc. (BioChemics) to his immediate firm supervisor, Kolinofsky, his Complex Manager, two other Ameriprise registered representatives, and several firm customers, all without having provided prior written notice to Ameriprise.

According to FINRA, Marshall received compensation for facilitating the private securities transactions in the form of common stock purchase warrants from BioChemics. Marshall is also alleged to serve as a member of BioChemics’ Scientific Advisory Board during his association with Ameriprise and received common stock purchase warrants from BioChemics as compensation. Moreover, FINRA found that Marshall used an unapproved personal e-mail account to communicate with firm customers about investing in BioChemics. FINRA also alleged that Marshall distributed sales literature prepared by BioChemics to investors that failed to disclose his business and personal financial interest in BioChemics and otherwise contained misleading, exaggerated, and/or unwarranted statements and inadequate risk disclosures.

BioChemics was later found to be an investment fraud. On December 14, 2012, the U.S. Securities and Exchange Commission (SEC) filed a civil enforcement action in the United States District Court for the District of Massachusetts against BioChemics. In March 2015, the District Court enjoined BioChemics from violating the antifraud provisions of the federal securities laws and ordered BioChemics to pay over $17 million in disgorgement of ill-gotten gains and prejudgment interest and $750,000 as a civil penalty.