Securities Fraud

The Securities and Exchange Commission has charged a self-proclaimed psychic with fraudulently raising $6 million by telling investors he could predict stock market highs and lows. The SEC's charges were filed against Sean David Morton, who bills himself as "America's Prophet," as well as three corporate entities that Morton co-owns with his wife Melissa Morton under the umbrella of the Delphi Associates Investment Group. 

Gaston and Teresita Cantens, the prominent Miami-based founders and co-owners of the real estate development company Royal West Properties Inc., have been charged with fraud for conducting a $135 million Ponzi scheme with real estate investments from hundreds of elderly Cuban-American investors living in South Florida. 

Stock options backdating cases have been relatively quiet for a while – but there still are some moving through the courts. Yesterday, for example, the former general counsel at Monster Worldwide Inc., the online employment behemoth, who earlier had pleaded guilty to securities fraud and conspiracy, was sentenced to a year’s probation, ordered to forfeit $381,000, and fined $6,000. 

It’s not necessarily what someone may or may not say orally that determines whether a fraud suit will succeed or not – it can be that what’s written down will be crucial. That’s the message from a recent decision by a federal district court in Manhattan, striking down a securities fraud claim. 

The Securities and Exchange Commission has filed securities fraud charges against two Sarasota, Florida, investment advisers, alleging that they distributed materials to investors that overstated the historical returns and asset values of three hedge funds they managed and controlled. The defendants: Neil V. Moody and his son, Christopher D. Moody. 

Here’s the first big name to leave the SEC for private practice since we chose lawyer movement from the government to private practice and from private practice to the government as the #10 Financial Fraud Law issue of 2009: George Curtis, Special Advisor to the Director of the Division of Enforcement, has returned to the private sector to rejoin the law firm of Gibson, Dunn & Crutcher as partner.

One might think that $50 million to settle a class action is a lot of money. It certainly sounds as if class members would receive a good payout from such a settlement.

New York City-based investment adviser Value Line Inc., its CEO Jean Buttner, its former Chief Compliance Officer David Henigson, and its affiliated broker-dealer, Value Line Securities, Inc. (“VLS”), agreed today to settle fraud charges brought by the Securities and Exchange Commission.

Here’s more info on the guilty plea today by David Friehling, Madoff’s accountant: Friehling pleaded guilty to a nine-count Superseding Information charging him with securities fraud, investment adviser fraud, four counts of filing false audit reports with the Securities and Exchange Commission, and three counts of obstructing or impeding the administration of the internal revenue laws.

Can any single person engage in a massive fraud all alone, without any help?  If today’s development in the Marc Dreier case is any indication, the answer is probably not.