Rulebook

The Blotter Report: When the Jig is Up

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Outta Luck

Despite being barred from the broker-dealer industry, a New York financial advisor continued to operate his allegedly shady business as an RIA. But that may change after the SEC gained a temporary order freezing his assets Monday.

The regulator claims Scott Valente and his firm the ELIV Group fraudulently raised more than $8.8 million from approximately 80 clients, according to a complaint filed earlier this month. Valente promised consistent, positive returns for his clients’ funds, but instead made large cash withdrawals, spending their money on home improvements, mortgage payments, jewelry and a vacation condominium. 

The complaint also notes Valente failed to tell clients about his two previous bankruptcies, as well as the fact that he launched ELIV Group after FINRA kicked him out of the broker-dealer industry in 2009 for alleged misconduct against customers.

The former Purshe Kaplan Sterling advisor reached an initial settlement with the SEC last Wednesday, agreeing to the temporary asset freeze and order prohibiting any further securities violations—which a judge put into effect Monday. The case continues in New York federal court.

 

Fraud & Basketball

In a slam-dunk for prosecutors, an Ohio investment advisor received an 18-month prison sentence for drafting a phony contract with the NBA players' union.

A judge sentenced Joseph Lombardo last Tuesday, saying the founder of Prim Capital’s actions constituted fraud. The trouble began for Lombardo when the association’s president, Derek Fisher, called for a review of Prim’s business practices, including nepotism.

Fearing the union was going to fire the firm, Lombardo created a bogus contract in 2011 that sought to have the union on the hook for $3 million in fees for 5 more years. Additionally, Lombardo forged the signature of the union’s general counsel, Gary Hall, according to the Manhattan U.S. Attorney’s office.

The fraud was discovered after an investigation revealed the contract was drawn up months after Hall’s death. Lombardo—whose firm managed $250 million of the union’s assets, as well as reviewed players’ investments and taught investment seminars—later admitted he used a signature stamp.

 

 

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Compliance, regulatory and legal issues, with a fair amount of cops and robbers for fun.

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