Penny Stock Purveyors
The Securities and Exchange Commission issued administrative proceedings against five securities professionals from now defunct Leeb Brokerage Services, for facilitating unlawful sales of penny stocks to investors from 2005 to 2007. The SEC alleges that Ronald Bloomfield, John Earl Martin Sr., and Victor Labi allowed the sales without sufficiently investigating whether they were facilitating illegal underwriting, resulting in Leeb's failure to file Suspicious Activity Reports (SARs) as required under the Bank Secrecy Act. The Enforcement Division further alleges that the firm's president Eugene Miller and its chief compliance officer Robert Gorgia failed to reasonably supervise the conduct of these representatives.
According to the SEC, the Leeb representatives ignored obvious signs their customers were violating securities laws. One group of customer accounts was affiliated with an individual who had previously been involved in a pump-and-dump scheme, and with a stock promoter who routinely received shares in compensation for promotional services for penny stock companies. The accounts earned more than $20 million in proceeds while repeatedly depositing privately obtained shares and then selling them to the public. Another Leeb customer wired more than $30 million in penny stock proceeds to a bank in Liechtenstein, a tax haven. A hearing has been scheduled.
Bad Stock Tips
The SEC charged Gryphon Holdings, a Staten Island, N.Y.-based investment advisory firm, its owner, and four associates with operating an Internet-based scam that charged investors fees for phony stock tips and investment advice from fictional trading experts. The SEC obtained an emergency court order to freeze the assets of the firm and individuals in an ongoing investigation.
According to the SEC's complaint, filed in U.S. District Court for the Eastern District of New York, investors who followed the guidance of Gryphon's purported experts have suffered significant losses by trading on those tips or, in at least one instance, by allowing Gryphon to trade on their behalf. Gryphon and its associates made numerous material misrepresentations and omissions since at least 2007 to entice unsuspecting clients to purchase its services, and it obtained more than $17.5 million from its operations over the past three years.
According to the complaint, Gryphon marketed itself as a publisher of financial information and frequently posted investment tips on the Internet using at least 40 different monikers such as “Wolves of Wall Street,” “Wall Street's Most Wanted,” “Pure Profit,” and “Mafia Trader.” But, the SEC alleges in its complaint, these investment tips served instead as a vehicle to attract unsuspecting clients to pay fees for personalized investment recommendations, portfolio analysis, and money management services that Gryphon purportedly provided.
