fraud Archives - The Industry Spread

Manraj Virdee Sentenced to 2 Years for Illegally Operating an Investment Scheme and Fraud

February 8, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: consumers, FCA, Financial Conduct Authority, fraud, HHJ Pegden QC, Investment Scheme, investors, Manraj Virdee, trading

In a case brought by the Financial Conduct Authority (FCA), Manraj Virdee was yesterday sentenced at Southwark Crown Court to a 2 year prison sentence suspended for 2 years and he was further ordered to carry out 300 hours of unpaid work in the community. The sentence followed earlier guilty pleas to 4 charges relating to misleading consumers, fraud and the illegal operation of an unauthorised investment scheme worth over half a million pounds.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, commented:
‘The FCA’s prompt action nipped Mr Virdee’s fraud in the bud and stopped it becoming inevitably bigger, causing greater loss to a wider group of victims. The FCA reminds investors to beware of anyone who is not authorised to carry out the activities they are offering.’

Mr Virdee was the sole director of Dynamic UK Trades Ltd and between October 2015 and November 2017 he promoted a deposit taking scheme without authorisation from the FCA mainly targeting wider family and associates. He also entered into an agreement with one investor to manage £192,500 in spread betting trading in which only £10,000 was used as promised. Mr Virdee received a total of approximately £600,000 in funds from investors some of whom were ‘guaranteed’ returns of up to 100% based on his claimed success as a currency trader. In reality, only £457,119 of those deposits were actually traded by Mr Virdee and almost all of these funds were lost or used to fund Mr Virdee’s lifestyle. In sentencing Mr Virdee, HHJ Pegden QC agreed with the prosecution’s description that his trading over the 2 year period was ‘spectacularly unsuccessful’.

The FCA has obtained a financial restraint order against Mr Virdee’s remaining assets and will pursue confiscation proceedings in relation to Mr Virdee’s remaining assets which will hopefully go some way to compensating the victims in this case.

SEC Emergency Action Charges Texas Real Estate Developer for Multi-Million Dollar Offering Fraud

January 30, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Exchange Act, fraud, investors, Ponzi payments, Real Estate Developer, SEC, SEC Emergency Action, Securities and Exchange Commission, Texas State Securities Board, unlicensed brokers

The Securities and Exchange Commission announced today that it filed charges against Texas resident and real estate developer Phillip Michael Carter, two other individuals, and several related entities for conducting a multi-million dollar offering fraud.

The SEC’s complaint alleges that Carter, along with Bobby Eugene Guess and Richard Tilford, raised almost $45 million from over 270 investors across the United States by selling short-term, high-yield promissory notes issued by a number of shell companies intentionally named to confuse investors. The complaint alleges that Carter, Guess, and Tilford claimed to offer investments in Carter’s legitimate real estate development companies, which were purportedly backed by hard assets from actual real estate development projects. Instead, the complaint alleges, the individual defendants sold securities issued by unrelated, but closely-named, entities that had no assets. Carter then misappropriated investor funds to pay $1.2 million towards a personal IRS tax lien, operate a luxury hunting ranch, fund his lifestyle, and make over $3 million in Ponzi payments to investors.

Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office.

“Phillip Carter and his co-defendants lied about the nature of their investments and enriched themselves at their investors’ expense,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office, whose last day at the Commission is today.

The complaint, filed in federal court in Dallas, charges the defendants with violating the anti-fraud provisions of the Securities Act and Exchange Act, participating in the unregistered offer and sale of securities, and functioning as unlicensed brokers, and seeks permanent injunctions, conduct-based injunctions, disgorgement with prejudgment interest, and civil penalties. The complaint also charges four entities as relief defendants, seeking disgorgement and prejudgment interest. Finally, the SEC’s complaint seeks an asset freeze, accounting, and document preservation order over Carter and several entities to protect and preserve assets for the benefit of investors.

In related criminal proceedings pursued by the Texas State Securities Board, Carter and Tilford were indicted on November 6, 2018, for, among other things, securities fraud, sales of unregistered securities, and sales of securities by an unregistered agent or dealer. Those charges remain pending.

The SEC’s investigation was conducted by Jason A. Braun and Michelle Lama, and supervised by Jim Etri, B. David Fraser, and Eric R. Werner. The litigation is being conducted by Matt Gulde. The SEC acknowledges the assistance and cooperation of the Texas State Securities Board.

Market Volatility Drives FINRA’s Volume to New Record in 2018

January 30, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: customer abuse, electronic records, FINRA, fraud, insider trading, market manipulation, market volatility, New Record, RegTech, regulatory, Volume

Daily Market Activity Soars 87 Percent to New Record
28 of the 30 Most-Active Dates in History Occur in 4Q 2018
New High of 135 Billion Records/Day Almost Quadruples 2017’s Daily Average
Before 2018, All-Time High Was 75 Billion Records in Single Day; That’s 34 Billion Fewer Than an Average Day in December 2018

Exceptional market volatility generated an unprecedented amount of processing volume for FINRA in 2018 – 66.7 billion electronic records per day, an 87.4 percent increase over the average daily volume in 2017. FINRA’s pioneering cloud strategy allowed it to handle the record-setting volume smoothly while continuing to perform vigorous regulatory oversight of securities trading.

“The story of 2018 was not just the individual, breakthrough days that set new records – it was also the sustained, high-volume activity that we managed for days and even weeks at a time,” said CIO and Executive Vice President Steve Randich. “Our mission of protecting investors depends on our staying current with the market and continuously monitoring and analyzing for potential suspicious activity. Cloud storage and processing responds instantly to elastic demand, providing our market-surveillance analysts with access to petabytes of data in seconds or minutes, even during periods of uninterrupted record-breaking activity.”

Trading activity in the stock, options and fixed-income markets creates a variety of electronic records that FINRA monitors for regulatory purposes. Every day, FINRA receives order and trade data regarding 42,000 investment products from 17 securities exchanges, more than 60 alternative trading systems and almost 1,400 broker-dealer firms. FINRA runs almost 200 algorithmic “patterns” to look for more than 300 potential threat scenarios including market manipulation, fraud, customer abuse, insider trading, abusive short selling, inaccurate trade reporting, and other rule violations.

2018 Volume Tops 2017 Activity by 87.4 Percent

Year	Average Daily Records Processed (Billions)
2018	66.7
2017	35.6
2016	37.4
2015	42.3

2018 – A Record Year, Month by Month

Month	Average Daily Records Processed (Billions)
January	42.5
February	67.8
March	63.5
April	67.9
May	54.3
June	52.9
July	52.6
August	51.9
September	57.6
October	93.4
November	89.7
December	108.8

All of the 30 Most-Active Dates in History Occurred in 2018 – 28 of them in 4Q

Date	Records Processed (Billions)	Date	Records Processed (Billions)
12-20	135.1	11-14	111.4
10-11	134.7	12-11	110.7
10-30	132.9	11-02	110.6
10-26	130.0	10-24	109.5
12-27	129.8	10-12	107.9
12-10	127.5	10-10	107.4
11-20	126.8	12-04	107.0
12-06	125.0	11-13	106.3
12-21	124.3	12-17	106.0
12-07	123.7	10-23	104.6
12-28	122.8	11-19	104.2
10-29	117.4	12-18	102.7
12-26	115.6	03-28	101.1
12-19	114.8	02-09	99.1
11-15	113.0	12-13	98.7

Fact Sheet

Dynamic scalability was one of the key factors FINRA considered when it made the decision in 2014 to move 90 percent of its processing and storage work to the cloud by the end of 2016. Randich explained these and other benefits in a podcast and blog post last year.
Adoption of the cloud strategy has made it possible for FINRA to not only stay ahead of growing volume but also perform increasingly sophisticated surveillance across U.S. securities markets. Thomas Gira, Executive VP, Market Regulation and Transparency Services, discussed these advances in a podcast last year.
Before implementing its cloud strategy, FINRA operated with a traditional data-center approach, in which capacity is limited to that of the servers in a data center. Had FINRA stayed with that approach, the volume from any one of the exceptional days of 2018 could have taken days to finish processing, an effect that would compound with heavy activity in succeeding days. As a self-regulatory organization, FINRA was able to make multi-year investments that supported this innovative regtech approach.
In addition developing its own advances in regtech, FINRA recently released a white paper outlining recent regtech developments in the securities industry and potential opportunities and implications these technologies may have for broker-dealers.

Manraj Virdee Pleads Guilty to Illegally Operating an Investment Scheme and Fraud

December 11, 2018 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: deposit taking scheme, FCA, Financial Conduct Authority, fraud, Investment Scheme

In a case brought by the Financial Conduct Authority (FCA), Manraj Virdee has today pleaded guilty at Southwark Crown Court to four charges encompassing illegal operation of an unauthorised investment scheme, misleading consumers, and two related counts of fraud and will be sentenced at a date to be confirmed in due course.

The FCA alleges that, between October 2015 and November 2017, Mr Virdee, through a company called Dynamic UK Trades Ltd, promoted a deposit taking scheme, marketed as an ‘investment package’ without authorisation from the FCA. The FCA alleges he received approximately £600,000 in investment funds and misled investors.

The hearing was adjourned till 7 January 2019.

Timeline of investigation:

30 November 2017: Manraj Virdee was arrested by Officers of the City of London Police, following an investigation by the Financial Conduct Authority (FCA) into his activities as the sole director of a company known as Dynamic UK Trades Ltd (Dynamic Trades).

17 October 2018: Manraj Virdee answered a summons at Westminster Magistrates Court where he was charged with: Count 1 (contravening the ‘General Prohibition’, contrary to section 19(1) and 23(1) of the Financial Services and Markets Act (FSMA) 2000), Count 2 (financial promotion, contrary to section 21(1) and 25(1) of FSMA) [not guilty plea entered], Count 3 (creating a false or misleading impression, contrary to section 90 (1) & (2) of Financial Services Act (FSA) 2000), Counts 4 & 5 (fraud, contrary to section 1 of the Fraud Act 2006).

14 November 2018: Manraj Virdee appeared at Southwark Crown Court. The case was adjourned to allow Mr Virdee sufficient time to look at the prosecution evidence and for his counsel to take instruction.

The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
Find out more about the FCA.

Vancouver Man Sentenced to 36 Months in Prison for Fraud

November 30, 2018 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: BCSC, capital, fraud, investment, public interest, Securities Act, Securities Market

Vancouver – A Vancouver man has been sentenced in Vancouver Provincial Court to a total of 36 months in jail for selling fraudulent investments and other securities-related crimes.

Ayaz Dhanani, 38, also was ordered by the Court to pay a total of $194,568 in restitution to five victims, and he will be on probation for a total of 36 months upon his release from prison. He was also ordered to provide a sample of his DNA.

Mr. Dhanani pleaded guilty to four counts of fraud over $5,000, and three offences under the BC Securities Act: disobeying a British Columbia Securities Commission (BCSC) order against trading, failing to file a prospectus (a formal document that provides details of an investment) and misleading investors.

The charges followed a series of investigations by the BCSC’s Criminal Investigations Branch in relation to four of the victims.

Dhanani pleaded guilty in August to fraudulently soliciting a total of $153,800 in investments from three B.C. residents, and received a 23-month jail sentence for those offences in October.

He also pleaded guilty in October to another fraud over $5,000 in relation to a fourth B.C. resident, and to three Securities Act offences relating to his obtaining funds for an investment from a fifth B.C. resident. This week, he received a further 13 months in jail for those offences.

“Dhanani preyed upon people’s lack of knowledge about investments,” said Peter Brady, the BCSC’s Executive Director. “He made promises about businesses or opportunities that simply did not exist.”

The BCSC previously sanctioned Dhanani for fraud under the Securities Act. In 2016, the commission ordered Dhanani to pay an administrative penalty of $225,000. It also permanently prohibited him from trading or purchasing securities or exchange contracts; becoming or acting as a director or officer of any issuer or registrant; becoming or acting as a registrant or promoter; acting in a management or consultative capacity in connection with activities in the securities market; and engaging in investor relations activities.

In 2017, the BCSC recovered $120,000 provided to Dhanani for investment, and distributed that to the three victims involved in the administrative proceeding.

About the British Columbia Securities Commission ( www.bcsc.bc.ca )

The British Columbia Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:

A securities market that is fair and warrants public confidence

A dynamic and competitive securities industry that provides investment opportunities and access to capital

Record Number of Spoofing Cases Examined

November 18, 2018 by Michael Volpe Leave a Comment Filed Under: Feature Articles Tagged: 3 Red Trading, Andrew Busch, CFTC, commodities fraud, Dodd/Frank, fraud, futures contracts, James McDonald, Kamaldeep Gandhi, Proprietary Trading, Spoof Orders, spoofing, wire fraud

James McDonald, CFTC’s Head of Enforcement

The Commodities Futures Trading Commission’s head of enforcement touted increased spoofing cases, but is it all propaganda?

James McDonald is CFTC’s Head of Enforcement and he was the latest guest on the podcast of CFTC’s Chief of Market Intelligence, Andrew Busch.

Spoofing, as McDonald noted, was first written into law and defined in Dodd/Frank, however, spoofing activity was already being prosecuted, it was just referred to as other things.

“Before this specific anti-spoofing provision, we could charge spoofing activity. We charged it as some sort of fraud or manipulation or false recording.”

Spoofing, “is placing orders with the intent to cancel them.” McDonald said.

Busch noted that the CFTC has brought a record 26 spoofing cases in 2018.

Busch also noted that often these cases are brought in conjunction with criminal charges from the US Department of Justice (USDOJ).

The CFTC can only deliver civil punishment while criminal punishment is done by the USDOJ, because spoofing is considered a federal crime.

Indeed, a check of the CFTC press releases for the year will show that much more has been done by the agency than in previous years.

Busch and McDonald spoke about an action in January, brought against multiple banks, on different continents, and with criminal charges in many cases.

“CFTC Files Eight Anti-spoofing Enforcement Actions against Three Banks (Deutsche Bank, HSBC, and UBS, and six individuals.” Their press release stated at the time.

More recently, the CFTC took another action on October 12, 2018, which also culminated in criminal charges as well.

“The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Kamaldeep Gandhi, in which Gandhi admits to engaging in manipulative and deceptive schemes, along with other individuals, which involved thousands of acts of spoofing (bidding or offering with the intent to cancel the bid or offer before execution) with respect to a variety of futures products traded on the Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, and the Commodity Exchange, Inc.” That press release stated. “The Order finds that Gandhi engaged in this unlawful activity while placing orders for, and trading futures contracts through, accounts owned by his former employers, two proprietary trading firms named as Firm A and Firm B in the Order.”

Ghandi, along with another defendant, then pleaded guilty to criminal charges in November, according to a USDOJ press release: “Krishna Mohan, 33, of New York, New York, pleaded guilty today to one count of conspiracy to engage in wire fraud, commodities fraud and spoofing. Sentencing is scheduled for Feb. 28, 2019 before U.S. District Judge Gray H. Miller of the Southern District of Texas.

“Kamaldeep Gandhi, 36, of Chicago, pleaded guilty on Nov. 2 to two counts of conspiracy to engage in wire fraud, commodities fraud and spoofing. Sentencing is scheduled for Feb. 22, 2019 before U.S. District Judge Ewing Werlein Jr. of the Southern District of Texas.

“As part of their pleas, Gandhi and Mohan admitted that, from March 2012 to March 2014, they conspired with Yuchun‘Bruce’ Mao and others at the first firm (Trading Firm A) to mislead the markets for E-Mini S&P 500 and E‑Mini NASDAQ 100 futures contracts traded on the Chicago Mercantile Exchange (CME) and E-Mini Dow futures contracts traded on the Chicago Board of Trade (CBOT). Gandhi and Mohan further admitted that they and their co-conspirators placed thousands of orders that they did not intend to execute, or ‘spoof orders,’ in order to obtain executions of other orders, or ‘primary orders,’ at better prices, quantities and/or times than otherwise possible, to the benefit of the co-conspirators and Trading Firm A. Gandhi and Mohan further admitted that the United States has calculated that the scheme resulted in market losses of over $60 million.”

Busch and McDonald both noted that spoofing is a form of manipulation which is a sign of the times.

Busch said that spoofing could never be done in a trading pit because that would quickly become the trader’s reputation, and no one would trade with them.

While the numbers have grown, that is also to be expected given how new the crime is.

Furthermore, McDonald said that his department was, “Growing our whistleblower program and providing whistleblowers extra protections.”

But as The Industry Spread has documented, that was not the case with Edwin Johnson, who continues to face retaliation even though the CFTC settled with the subject of Johnson’s disclosure: Igor Oystacher and 3 Red Trading.

The CFTC has also been criticized, specifically in Forbes, for not being able to develop cases on mass scale, like with Oystacher and Jon Corzine.

“Big fraud allegations often mean big settlements will follow. But the settlements the Commodity Futures Trading Commission reached with former MF Global CEO Jon Corzine in early January and Igor Oystacher and his Chicago firm, 3Red Trading LLC, in December were surprisingly puny.” Forbes said in 2017.

It’s important to note that the investigation which nabbed three banks and six traders came after this article came out and would provide some evidence this was not necessarily so, but even in that case, the numbers recovered were not enormous: the banks were ordered to repay $46.6 million in penalties combined.

One problem for the CFTC, and a topic not covered on the podcast, was the budge for the CFTC Enforcement Department, $51,299,154 in 2017, according to figures from the CFTC.

Here’s what Forbes noted about the budget: “That is the explanation former CFTC enforcement chief Aitan Goelman gave to Reuters in an interview last week. Taking Corzine, a former US Senator and New Jersey governor, and Oystacher to trial would have absorbed more than half of the enforcement division’s entire operating budget for 2017, Goelman said. That put the CFTC in a very weak position to push for larger settlements.”

Oystacher, according to one expose from The Industry Spread, hired fifteen lawyers to defend himself.

Corzine had equally unlimited resources for lawyers.

Oystacher paid a relatively small fine, $2.5 million, and 3 Red Trading not only continues to trade today but is still a major player on the CME.

Meanwhile, Johnson was terminated, had his ownership shares removed, and has been in litigation since.

SEC Charges Investment Adviser With Running $3.9 Million Fraud

November 5, 2018 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: financial industry, FINRA, fraud, investigation, investment, Investment Adviser, Kingdon Kase, pennsylvania, SEC

Washington D.C., Nov. 2, 2018 — The Securities and Exchange Commission today charged a former registered representative and investment adviser in Altoona, Pennsylvania, with operating a long-running offering fraud.

The SEC’s complaint alleges that Douglas P. Simanski raised over $3.9 million from approximately 27 of his brokerage customers and investment advisory clients, many of them retired or elderly, by telling them that he would invest their money in either a “tax free” fixed rate investment, a rental car company, or one of two coal mining companies in which Simanski claimed to have an ownership interest. He allegedly told the investors to write checks payable to personal bank and brokerage accounts he opened in his wife’s name. The complaint alleges that instead of investing the money as he promised, Simanski largely used the money to repay other investors and for his personal use. According to the complaint, Simanski’s scheme collapsed when one of his clients contacted the Financial Industry Regulatory Authority (FINRA) and Simanski admitted his scheme to his employer.

“This matter highlights the need for retail investors – and retirees and elderly individuals in particular – to remain skeptical of investments that sound too good to be true and confirm that investments recommended by brokers and investment advisers are approved for sale by their respective brokerage or advisory firms before transferring funds,” said Kelly L. Gibson, Associate Regional Director for Enforcement in the SEC’s Philadelphia Regional Office.

In a parallel action, the U.S. Attorney’s Office for the Western District of Pennsylvania today announced that Simanski pleaded guilty to criminal charges.

The SEC’s complaint, filed in federal court in Johnstown, Pennsylvania, charges Simanski with violating antifraud provisions of the federal securities laws. Simanski has agreed to settle the charges against him. The settlement, which is subject to court approval, orders injunctive relief and disgorgement of ill-gotten gains plus interest.

Simanski also agreed to the entry of an SEC order that, when entered, will bar him from the securities industry for the rest of his life.

The SEC’s investigation was conducted by Jack Easton and Kingdon Kase in the Philadelphia office with assistance from Karen Klotz, and supervised by Ms. Gibson. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Western District of Pennsylvania, U.S. Secret Service, Internal Revenue Service, and FINRA.

CFTC Enforcements Up

October 9, 2018 by Michael Volpe Leave a Comment Filed Under: Feature Articles Tagged: 3Red Trading, CFTC, CFTC Enforcements, Christopher Giancarlo, Economic Club of Minnesota, Edwin Johnson, enforcement actions, fraud, MF Global, monetary penalties, Whistleblowers

Chris Giancarlo, CFTC Chair

The Commodities Futures Trading Commission (CFTC) announced an increase in enforcement actions.

“During the last Fiscal Year, the CFTC filed 83 enforcement actions. That’s among the highest number of actions in the Commission’s history, and an approximately 25% increase from each of the last three years of the prior administration. A 25% increase.”Said Christopher Giancarlo, CFTC Chair.

Giancarlo made the comments during a speech he made last week at the Economic Club of Minnesota in Minneapolis, Minnesota.

The speech was entitled;“Regulatory Enforcement & Healthy Markets: Perfect Together!”

Giancarlo said the good news did not stop there with more enforcement action leading to more penalties: “Not surprisingly, the penalties resulting from those cases also reflect our commitment to combating wrongdoing in our markets. The total amount of civil monetary penalties imposed by the Agency during the last Fiscal Year was approximately $900 million. That total is higher than five of the eight years from 2009 to 2016. And of those $900 million, we collected about $800 million—or just under 90 percent. That would have ranked second highest during that same eight year period from 2009 to 2016. The second highest.”

And, he claimed that the CFTC was not merely nailing nickel and dime scams but going after more big players: “This year’s enforcement effort reflects the broadest range of significant actions in the history of the Commission. During the last Fiscal Year, we brought more large-scale matters, against those whose actions threaten the basic integrity of the market, than in any previous year in Commission history. From 2009 to 2016, the CFTC imposed monetary judgments of more than $10 million in an average of three cases per year. This past year, we imposed such monetary judgments in ten cases. That’s more than three times the previous average.”

Despite his optimism, The CFTC has previously been criticized for not being able to do many large scale investigations.

A 2017 story from Forbes noted:“Big fraud allegations often mean big settlements will follow. But the settlements the Commodity Futures Trading Commission reached with former MF Global CEO Jon Corzine in early January and Igor Oystacher and his Chicago firm, 3Red Trading LLC, in December were surprisingly puny.

“Now the reason why they were relatively small – $5 million and $2.5 million, respectively – has been revealed: The CFTC doesn’t have the funds to investigate and litigate many major cases any more.”

Giancarlo also said that more whistleblowers have been helped: “On top of all this, we’ve developed our whistleblower program in unprecedented ways. We strengthened the protections we provide to whistleblowers that come forward. We granted more whistleblower awards this past Fiscal Year than in the entire history of the program. And we issued the largest whistleblower awards in the history of the Agency. All of this has been designed to ensure more whistleblowers come forward to tell the Agency about any misconduct occurring in our markets. It seems to be working, as we’ve received more whistleblower tips and complaints this past year than in any previous year.”

Andrew Busch, Chief Market Intelligence Officer for the CFTC

This is an echo of a thought recently made by the head of the CFTC Whistleblower office, Chris Ehrman when Ehrman appeared with Andrew Busch, CFTC’s head of Market Intelligence, on Busch’s podcast.

But as The Industry Spread has shown this does not apply to at least one whistleblower, Edwin Johnson, who was not only denied a whistleblower award but has faced repeated retaliation, even as the CFTC looks the other way.

Johnson blew the whistle on major spoofing at his employer 3 Red Trading; his disclosure led to a $2.5 million fine, none of which he received and a judge in a separate civil suit forced him to reveal his contacts with law enforcement including the CFTC; the CFTC did not step in when the judge forced him to do this.

ECB Report Shows a Fall in Card Fraud in 2016

September 29, 2018 by industryspread Leave a Comment Filed Under: Central Bank Annoucements Tagged: Card Fraud, ECB, ECB Report, EU regulators, Euro Payments, fraud, fraudulent transactions, Online card fraud, security, SEPA, transactions

Total card fraud involving Single Euro Payments Area cards fell to €1.8 billion in 2016, 0.4% less than in 2015
Card fraud at ATMs dropped by 12.4% from 2015 to 2016
Online fraud rose slightly from 2015 and accounted for 73% of total value of card fraud in 2016

In 2016 €1 in every €2,428 spent on credit and debit cards was lost to fraud. The total value of fraudulent transactions conducted using cards issued within the Single Euro Payments Area (SEPA: the EU Member States plus Switzerland, Iceland, Lichtenstein and Norway) amounted to €1.8 billion in 2016 – a decrease of 0.4% from 2015. In relative terms, i.e. as a share of the total value of card transactions of €4.38 trillion, fraud dropped by 0.001 percentage point to 0.041% in 2016, down from 0.042% in 2015. This is the first decrease since 2011.

The fifth ECB report on card fraud published today shows that 73% of the value of card fraud resulted from card-not-present payments (which are mainly online fraud), 19% from transactions at points of sale (POS) and 8% from transactions at automated teller machines (ATMs). In 2016 there was a significant decrease in card fraud at ATMs (-12.4%) and POS (-3%) compared with 2015. With €1.32 billion in card fraud losses in 2016, online card fraud is the only category to have increased from the previous year, by 2.1%. As online card fraud had been growing at much higher rates in previous years, the 2016 slight increase in relative terms can be cautiously considered a positive sign that, in future, such fraud would decrease and e-commerce payments would become safer.

This trend can be explained by increased security measures in the industry, encouraged by EU regulators. A significant decrease in counterfeit card fraud and fraud using lost and stolen cards, combined with the adoption of “Chip and PIN” (the EMV standard), explain the significant decrease in fraud at ATMs and POS, particularly for transactions outside the EU. Meanwhile since 2015 the “two factor” customer authentication adopted by banks and supported by merchants has also been helping to limit online card fraud.

Data also show that cards issued inside SEPA and used outside SEPA are less subject to fraud than cards issued outside SEPA and used inside SEPA, which should reassure European cardholders when traveling abroad.

Online card fraud is naturally increasing as digital services develop further and is becoming more and more sophisticated. The most common types of online fraud reported by the industry are “clean fraud” – where criminals obtain genuine cardholder details including 3D Secure and Address Verification credentials – and “identity theft” – where the fraudster steals the cardholder’s personal data in order to make unauthorised online transactions. However, in recent years there has been an increase in “friendly fraud”, where the payer first makes a genuine transaction then claims that their card has been used fraudulently and asks for money back.

While increased security measures may explain the recent decrease in card fraud, market representatives are warning against complacency: payment fraud is constantly evolving and new types may still emerge. The banking sector has identified the increased usage of mobile payments as a new area to focus on.

Five Sentenced in FCA Prosecution of £2.8m Investment Fraud

September 6, 2018 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: FCA, FCA Prosecution, Financial Conduct Authority, Five Sentenced, fraud, investment, investment fraud, Operation Tidworth

Operation Tidworth was the FCA’s second largest ever criminal prosecution. The instigator and main beneficiary of the fraud, Michael Nascimento, will be sentenced separately on 14 September 2018.

In a case brought by the Financial Conduct Authority (FCA), 5 individuals have been sentenced to a total of 17.5 years’ imprisonment for their roles in a share fraud carried out through a series of boiler room companies which led to the loss of more than £2.8m of investors’ money.

The sentencing of 5 defendants was concluded today at Southwark Crown Court. The sixth defendant, Michael Nascimento (DOB 28 June 1977), will be sentenced on the 14 September 2018. He was the controlling mind, instigator and the main beneficiary of the fraud.

Mark Steward

Commenting on the case, Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

“These fraudsters callously targeted investors who were often elderly and vulnerable, lying to them to get them to part with significant sums of money. Despite efforts to conceal and destroy evidence, the FCA, in one of its largest ever investigations, was able to ensure that these criminals faced justice and ended up behind bars.
Applications under Proceeds of Crime legislation remain on foot and the FCA is determined to recover as much money from these defendants as possible for the benefit of investors.”

Vulnerable victims targeted

In sentencing the defendants, the trial judge, His Honour Judge Hehir, remarked these were “scams from start to finish” and that “some victims have lost everything they had.” He also added that it was “particularly repellent” that elderly people had been specifically targeted and their stories “were at times positively heart-breaking.”

The Judge also said “..none of the victims chose to be swindled, others chose to swindle them. No victim of these sort of offences should blame themselves. Those who commit these offences cannot expect anything but firm punishment.”

Charanjit Sandhu (DOB 3 December 1989) was sentenced to 5.5 years’ imprisonment. He was a senior broker, often using bullying sales tactics and false names. The Judge commented that he was “dazzled by the rewards of crime” and had “lost his moral compass”. In terms of two of the investors he said that Mr Sandhu “had pestered them mercilessly by telephone” and that his conduct was “cruel and callous” and “chilling”.

Hugh Edwards (DOB 13 July 1982) was sentenced to 3 years and 9 months’ imprisonment. He recruited and trained brokers, drafted and sent misleading brochures to potential investors, and personally pitched the product as a senior broker using false names.

Stuart Rea (DOB 12th February 1968) was sentenced to 3 years and 9 months’ imprisonment. He fronted one of the companies, recruited and managed the sales brokers, and circulated the misleading promotional material.

Jeannine Lewis (DOB 15 September 1967) was sentenced to 2.5 years’ imprisonment. As PA to Nascimento she assisted him to launder the proceeds of the fraud through various bank accounts including her own. She hid and destroyed documents and computers to prevent them falling into the hands of FCA investigators. The Judge described Mrs Lewis as “Michael Nascimento’s devoted personal assistant” and that she was “in truth a thoroughly dishonest woman.”

Ryan Parker (DOB 26 November 1992) was sentenced to 2 years’ imprisonment to be suspended for 18 months. He was also ordered to carry out 180 hours of unpaid work. He fronted two of the boiler rooms for Nascimento and his personal bank accounts were used as a conduit for some of the money. His sentence was suspended by the Judge due to his age and personal mitigation and lower level of involvement. The Judge said that Mr Parker had “been exploited in a significant way by Michael Nascimento”.

The six defendants were charged by the FCA with offences of conspiracy to defraud, fraud, money laundering and perverting the course of justice, as well as breaches of FSMA, and either pleaded guilty or were convicted by the jury. Sandhu, Edwards and Rea were also made subject to Serious Crime Prevention Orders, and are prohibited from involvement in financial services or the sale of any form of investment for a period of 5 years after release from prison. Sandhu, Rea, Edwards and Parker are also banned from being company directors for periods of between 7 and 14 years.

Overview of the facts

Between July 2010 and April 2014, members of the public were cold-called and subjected to high pressure sales tactics to persuade them to purchase shares in a company that owned land on the island of Madeira. The investors were told that the value of the shares would increase substantially when permission to build 20 villas was granted, thereby enhancing the land’s value. Investors were promised guaranteed returns of between 125% and 228%. None were ever paid.

Potential investors were persuaded to purchase the shares by numerous lies: (i) the schemes were partnered with Barclays Bank; (ii) planning permission had been obtained for the 20 villas; (iii) that there was a guaranteed share buy-back; (iv) the Four Seasons or Hilton Hotel chains had agreed to buy the completed development for £43m. None of this was true and Barclays and the hotel chains had no involvement in the fraud.

Investors’ money was used to maintain the fraud and particularly to fund the lifestyle of Nascimento. Over 170 members of the public invested over £2.8m in the shares. Many were elderly or vulnerable, and lost life-changing sums, in some cases all their life savings.

The shares were sold through 5 different companies: Morgan Forbes (UK) Ltd, First Capital Wealth Ltd, Bishops of Mayfair Ltd, Wallberg Dillion Reid Ltd and Sterling Capital Corporation Ltd.

Notes to editors:

This was one of the FCA’s most complex fraud investigations, and the first FCA prosecution of an offence of perverting the course of justice. It involved:

4 separate search operations and one unannounced visit
Seizure of over 100 computers and other digital devices
4 million documents and (after de-duplication) over 1.4 million documents ingested into the FCA’s Evidence Management System requiring evidential assessment and review.
142 witnesses
287 witness statements (2,406 pages)
3,682 exhibits (23,642 pages)
3 defendants remanded in custody for breach of court bail by committing further offences.

On 1 April 2013, the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
Find out more information about the FCA.