Securities Lawyers Blog

Bio-Tech Company uBiome Raided By FBI – Investor Recovery Options

December 2, 2019 | by Staff Attorney

The investment fraud lawyers at Gana Weinstein LLP are investigating reports and accusations that health start-up uBiome routinely billed patients multiple times without consent and pressured doctors to approve tests. According to a CNBC report in May 2019, the FBI raided the company’s offices its co-CEOs and founders Jessica Richman and Zac Apte went on administrative leave. Our firm is analyzing private placement offerings by uBiome and believe that brokerage firms that sold this investment may have done so unsuitably and otherwise failed to conduct due diligence would have revealed problems with the company.

The company’s product, the SmartGut test, promised users to provide new insights into the bacterial makeup so that they can make improvements to their health. However, according to users and CNBC report when patients one one test uBiome sends multiple kits in the mail. uBiome then charges insurance companies for these tests which are reported to be up to $2,970 per test. According to CNBC’s investigation uBiome was routinely billing patients multiple times without their consent causing insurance plans to start rejecting claims. In addition, uBiome has been accused of pressuring doctors to approve tests with minimal oversight.

It is possible that uBiome sought to over bill in order to increase the valuation of the company to investors. uBiome was founded in 2012. The company raised more than $100 million in venture funding and was valued at about $300 million at its most recent round of financing last September. The company reported used used billable samples, rather than reimbursement rates, as the key growth metric for the company and routinely shared these figures with investors.

Broker Peter Monson Under Regulatory Investigation For Excessive Trading

November 25, 2019 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Peter Monson (Monson), currently associated with Van Clemens & Co. Incorporated (Van Clemens), has been subject to a regulatory investigation by FINRA. The focus of the regulatory investigation is for potential violations of NASD Conduct Rule 2510(b) – Authorization and Acceptance of Account, FINRA Rules 2111 – Suitability, and 2010 – Standards of Commercial Honor and Principles of Trade. This investigation appears to be related to a regulator action FINRA took against his firm Van Clemens concerning allegations of high frequency trading activity also referred to as churning or excessive trading.

FINRA alleged that Van Clemens, from June 1, 2015, through June 30, 2016, failed to establish and maintain a supervisory system reasonably designed to ensure that the firm reviewed transactions in customer accounts for potentially unsuitable excessive trading in order to achieve compliance with FINRA’s suitability rule. FINRA found that the firm’s procedures did not directly address quantitative suitability and, as such, did not set forth a process or identify personnel responsible for reviewing customer accounts for potentially excessive trading.

Accordingly, FINRA determined that Van Clemens did not instruct its supervisors to review account activity for potential excessive trading nor did it train its supervisors to do so. In addition, FINRA found that the firm lacked the necessary tools to even make a determination that excessive trading occurred such as reports for turnover rates or cost-to-equity ratios. FINRA found that a registered representative referred to by the initials “PM”, believed to be Monson, recommended transactions to a firm customer that resulted in the customer’s account having an annualized turnover rate above 9.0 and an annualized cost-equity ratio of 32.3%. FINRA found this activity was excessive, given the customer’s investment objectives and financial situation, and coincided with losses in the account of more than $100,000 during the 13-month period

Advisor Robert Smith Accused of Selling Fraudulent GPB Capital Investments

November 25, 2019 | by Staff Attorney

Our firm represents multiple clients who have collectively lost millions in the sale of fraudulent GPB Capital Holdings (GPB Capital) related investments. Our firm has analyzed the GPB Capital offerings and believe that brokerage firms did not review these offerings in any significant detail. Any serious due diligence would have revealed that GPB Capital was an investment fraud scheme.

Advisor Robert Smith (Smith), according to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA), has been accused of selling GPB Capital. Smith is currently registered with member firm Concorde Investment Services, LLC (Concorde Investment). In addition, Smith disclosed four total customer complaints. If you have been a victim of Smith’s alleged misconduct our firm may be able to assist you in recovering funds.

Our firm’s investigation has found that brokerage firms failed to conduct due diligence and investigate multiple aspects of GPB Capital’s business including its senior management, fantastical business claims, and intra-fund lending practices. For instance, with respect to GPB Capital’s senior management the company was founded by David Gentile (Gentile). Had brokerage firms investigated GPB Capital’s senior manager it would have found that prior to founding GPB Capital, Gentile’s experience was as a CPA and company advisor with the accounting practice his family ran at Gentile Pismeny & Brengel, LLP (GP&B) in New York. Nonetheless, GPB’s PPMs claimed expertise in these areas. GPB Holdings II, LP, PPM, pg. 9 (Apr. 13, 2015) (“GPB’s senior management have a great deal of experience investing in the Automotive Retail, Managed IT Services and Life Sciences sectors.”).

Advisor Bobby Coburn Barred by Regulator Over Private Securities Dealings

November 23, 2019 | by Staff Attorney

The law offices of Gana Weinstein LLP are currently investigating claims that advisor Bobby Coburn (Coburn) engaged in undisclosed outside business activities (OBAs) and private securities transactions that were not approved by the brokerage firm. Coburn, formerly registered with Securities America, Inc. (Securities America) was subject to a regulatory investigation and barred form the industry according to records kept by The Financial Industry Regulatory Authority (FINRA). In addition, Coburn disclosed one employment termaintion for cause and two customer complaints.

In August 2019, FINRA alleged that Coburn accepted a bar from the financial industry, after consenting to sanctions and to the entry of findings that he refused to provide FINRA with requested information and documents. FINRA stated that Coburn’s member firm had terminated his association and stated on his Form U5 that he was involved in the solicitation of multiple clients to invest in an unapproved private securities transaction and engaged in the settlement of a related customer’s complaint without the firm’s knowledge or consent.

In March 2019 Securities America discharged Coburn and accused him of misconduct.

At this time it is unclear what the activity was that was the focus of FINRA’s investigation or the scope of Coburn’s activities. Coburn’s publicly available BrokerCheck information discloses one OBA called Born to Retire which appears to be an insurance sales business. It is unknown whether the activity investigated by FINRA involves any of these entities.

Advisor David Rockwell Accused of Misappropriating Client Funds – Recovery Options

November 23, 2019 | by Staff Attorney

The law offices of Gana Weinstein LLP are currently investigating claims that advisor David Rockwell (Rockwell) was discharged by his employer after being accused of misappropriating client funds. According to BrokerCheck records, Rockwell is formerly registered with The Financial Industry Regulatory Authority (FINRA) member firm Cetera Advisor Networks LLC (Cetera). In addition, Rockwell disclosed two customer complaints related to misappropriating funds. If you have been a victim of Rockwell’s alleged misconduct our firm may be able to assist you in recovering funds.

Rockwell also discloses multiple criminal events, firm terminations, and one regulatory event. In May 2013 Rockwell discloses a guilty plea for assault and battery along with operating while intoxicated. Then in November 2018 Rockwell was accused of aggravated stalking.

In July 2015 the State of Florida accused Rockwell of making material false statement on the application for registration and denied his securities registration in the state.

In June 2019 a customer complained that Rockwell violated the securities laws by alleging that Rockwell misappropriated money from his investment accounts to invest in a private security related to a company owned by Rockwell. The claim alleges $500,000 in damages and settled for $215,000.

In July 2019 a customer complained that Rockwell violated the securities laws by alleging that Rockwell was involved in forgery and fraud regarding their accounts. The claim alleges $700,000 in damages and is currently pending.

Broker Steven Orr – A Case Study For Investor Complaint Expungement Abuse

October 21, 2019 | by Staff Attorney

Recently, Steven Orr’s (Orr) attorney reached out to our firm to inform us our posts on Orr was inaccurate. The post detailed that Orr had been subject to five customer complaints concerning allegations of securities law violations including unsuitable investments and misrepresentations among other claims. Many of the complaints involve direct participation products (DPPs) and private placements including oil and gas partnerships, non-traded real estate investment trusts (REITs), and other alternative investments.

Orr’s attorney has brought it to our attention that Orr has succeeded in using The Financial Industry Regulatory Authority (FINRA) flawed expungement process system to remove all five complaints from his BrokerCheck record. As shown in Orr’s expungement “award”, Orr sued his own employer, H. Beck, Inc. (H. Beck) for damages of $1.00 due to the placement on his record of five customer complaints. The “hearing” that took place appears to have been perfunctory at best. The hearing concerning five customer complaints took only one hearing session to complete. Usually there are two hearing sessions a day – meaning in this case five cases were probably decided in time for the arbitrator to catch lunch. The total cost to Mr. Orr by FINRA to expunge five customer complaints from his record was $100 – excluding any fees he privately paid his counsel.

During this less than four hour hearing to decide five cases, H. Beck did not contest the request for expungement. In FINRA expungement cases, brokerage firms like H. Beck profit from being sued by their own brokers to clean their records. Of the five investors that complained concerning Orr’s investment recommendations – four of which resulted in documented settlements and compensation for the victims – none of the investors participated in the short hearing. Only one investor submitted a letter to the arbitrator opposing expungement. In sum, there was no meaningful opposition to Orr’s expungement request.

Without any significant opposition, the arbitrator found that there was “credible evidence presented demonstrated that Claimant made suitable recommendations to each of the Customers, fully and accurately representing the recommended investments including, but not limited to, any associated risks.” Further, “public disclosure of the false and clearly erroneous allegations made by the Customers does not offer any public protection and has no regulatory value.” In other words, the arbitrator found that Orr was the subject of lies by five of his clients – all of which astonishingly appear to have told the same or similar lie concerning Orr’s investment advice. From the record, it appears the arbitrator made this determination without ever speaking to a single client.

Gana Weinstein Represents Clients With Losses Due To Structured Note Products

October 21, 2019 | by Staff Attorney

The law offices of Gana Weinstein LLP are currently representing investors who were surprised to find out that the “bonds” that were recommended by their advisors have almost completely stopped paying interest while plummeting in value. What many investors in this situation did not realize was that they were not sold bonds at all but instead complex structured products that go by a variety of names including steepener notes, adjustable rate market notes, spread linked notes, or structured notes. Regulators have already stated that it is improper to sell these investments as a fixed income substitute or to compare them to bonds in terms of producing a revenue stream. However, in our firm’s experience it appears that many brokers have been selling structured products as bond alternatives.

Structured products range in risk from benign to extreme. However, most structured products produce inferior risk/return profiles than ordinary debt or equity instruments because the brokerage firms that issue these products seek to profit from the spread between the payment to investors and the amount of money the brokerage firm can make from the issuance. When dealing with complex structured products most investors will lack the ability to understand the merits of investments nor are they appropriate for investors seeking a fixed or reliable income and have a desire for preservation of capital.

Some of the more complex structured products that our firm is seeing reference two different bond yield curves and sometimes one stock market index in order to compute if interest will be paid and how much. A math degree is needed to even begin to comprehend the probabilities of payment on these kinds of instruments. The biggest driving factor on payment – assuming the S&P 500 Index performs well – is the spread between interest rates on various treasuries. The structured products often reference the spread between either the 2 year and the 5, 10, and 30 year treasury bonds for the most part. The wider the spread the greater the profit and payment from the structured product.

Broker Lawrence Delhagen Subject to Customer Complaints Over Investment Recommendations

October 18, 2019 | by Staff Attorney

The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor Lawrence Delhagen (Delhagen), currently employed by Stifel, Nicolaus & Company, Incorporated (Stifel Nicolaus) has been subject to at least four customer complaints during the course of his career. According to records kept by The Financial Industry Regulatory Authority (FINRA), Delhagen’s customer complaints alleges that Delhagen recommended unsuitable investments, negligence, fraud, misrepresentations, and breach of fiduciary duty among other allegations of misconduct relating to the handling of their accounts.

In September 2018 a customer complained that Delhagen violated the securities laws by alleging unsuitable investments, negligence, fraud, misrepresentations, breach of fiduciary duty, and violations of state and Federal securities laws. The claim settled for $30,000.

In June 2018 a customer complained that Delhagen violated the securities laws by alleging unsuitable investments, negligence, fraud, misrepresentations, breach of fiduciary duty, and violations of state and Federal securities laws. The claim settled for $270,000.

Broker Update – Additional Complaint Filed Against Broker William Byrd

October 18, 2019 | by Staff Attorney

As we have previously reported, according to BrokerCheck records financial advisor William Byrd (Byrd) had several customer complaints filed against him in connection with his management of client accounts. Byrd is currently employed by B.B. Graham & Company, Inc. (BB Graham) and now been subject to at least five customer complaints and one civil lien for $47,782.23. According to records kept by The Financial Industry Regulatory Authority (FINRA), Byrd’s customer complaints allege that Byrd recommended unsuitable securities recommendations among other allegations of misconduct in the handling of customer accounts.

In March 2019 a customer filed a complaint alleging that Byrd violated the securities laws by engaging in, among other violations, unsuitable concentrated mutual fund transactions and products, and lacking any reasonable investment strategy. The claim alleges $300,000 and is currently pending.

In October 2018 a civil judgement was entered against Byrd. Large tax liens, civil judgement, or bankruptcy filings on a broker’s CRD can be a red flag that the broker may be influenced to engage in high commission activity in order to satisfy personal debts. In addition, a broker’s inability to manage their own finances is relevant in a customer’s decision to use their services.

Advisor Anthony Hobson Has Complaints Over Alternative Investments

October 17, 2019 | by Staff Attorney

Advisor Anthony Hobson (Hobson), currently employed by Money Concepts Capital Corp (Money Concepts) has been subject to at least three customer complaints during the course of his career. According to a BrokerCheck report some of the customer complaints concerns alternative investments such as direct participation products (DPPs) like non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs. The attorneys at Gana Weinstein LLP have represented investors who suffered losses caused by these types of products.

In June 2019 a customer complained that Hobson violated the securities laws by alleging between April 2008 and November 2010, Hobson over-concentrated accounts in high-risk and speculative alternative investments. The claim alleges $218,500 in damages and is currently pending.

In January 2015 a customer complained that Hobson violated the securities laws by alleging that Hobson misrepresented a non-traded REIT. The claim was settled by the firm for $32,500.

DDPs include products such as non-traded REITs, oil and gas offerings, equipment leasing products, and other alternative investments. These alternative investments virtually never profit investors and are almost always unsuitable for investors because of their high fee and cost structure. Brokers selling these products are paid additional commission in order to hype these inferior quality investments providing a perverse incentives to create an artificial market for the investments.