by T. GormanPosted on Posted in SECActions

Gregg Mulholland pleaded guilty to charges based the manipulation of the securities of 40 different firms over a four year period, beginning in 2010. The manipulations yielded over $250 million in trading profits which were laundered through attorney accounts. Mr. Mulholland pleaded guilty to money laundering conspiracy. U.S. v. Mulholland (E.D.N.Y. May 9, 2016).

Defendant Mulholland, a citizen of Canada and the U.S., was the secret owner of Legacy Global Markets S.A., an offshore broker-dealer and investment management company. The firm was based in Panama City, Panama and Belize City, Belize.

Three inter-related schemes were used by Mr. Mulholland and a group of associates to conduct the manipulations:

Concealment of ownership: The group sought to induce U.S. investors to purchase stocks in thinly-traded U.S. public companies through the fraudulent promotion of the stock, concealment of their ownership interests and manipulation of artificial price movements and trading volumes;

Circumvent reporting: The IRS reporting requirements under the Foreign Account Tax Compliance Act were circumvented; and

Offshore law firms: The proceeds of the transactions were laundered through five offshore law firms.

Shell companies in Belize and Nevis, West Indies run by nominees were used to conceal the stock ownership of the group. While the group members also used aliases when conducting the market manipulations, in May 2014 Mr. Mulholland was caught on a court ordered wire tap admitting that he owned all the shares of a stock being manipulated. Following that statement the share price for the stock rose from $0.06 to $13.90 per share giving the firm a market valuation of over $ 4 billion at a time when it had no revenue or assets. The services of a U.S. based lawyer were used to launder the proceeds from that transaction and others.

In connection with the plea agreement Mr. Mulholland agreed to forfeit a private aircraft, a Range Rover vehicle, two real estate properties in British Columbia and funds and securities in more than a dozen bank and brokerage accounts.

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by T. GormanPosted on Posted in SECActions

Professional athletes and high net worth individuals who seek concierge type advisory services can become the victims of the advisers they trust to manage their affairs. One such case was SFX Financial Advisory Management Enterprises, Inc., Adm. Proc. File No. 3-16591 (June 15, 2015) where weak controls and an unscrupulous agent resulted in a the misappropriation of client funds. Another is a matter discovered by the Commission’s exam staff, SEC v. Blazer, Civil Action No. 1:16-cv-03384 (S.D.N.Y. Filed May 6, 2016).

Defendant Louis Martin Blazer III created a “premier” personal services advisory firm that catered to professional athletes, entertainers and high net worth individuals and their families. Based in Pittsburgh, Pennsylvania, Mr. Blazer, through a series of controlled entities, two of which were registered investment advisers for a time, performed services such as paying client bills, managing aspects of their personal lives and financial commitments, creating budgets and paying taxes.

Mr. Blazer had other activities. In 2009 he agreed to raise money for two feature films after meeting an actor and producer involved with the projects. Mr. Blazer hoped to raise about $1 million for the two films from his advisory clients. From Client 1 he was able to raise about $550,000 for the films. Client 1, however, was unaware of the investment. When approached by Mr. Blazer about investing in the films prior to the theft he refused. Mr. Blazer then misappropriated the money.

When Client 1 discovered the theft he demanded that the funds be returned. They were. Mr. Blazer misappropriated the funds from Client 2, repaying Client 1. That client did not discover the theft until the Commission’s exam staff uncovered the malfeasance. When the exam staff confronted Mr. Blazer with the evidence of his wrongful acts he lied, claiming the transactions were authorized. They were not. Client 2 immediately terminated his relationship with the adviser when informed of the misappropriation.

Overall it turned out that Mr. Blazer had misappropriated about $2.3 million from clients between October 1, 2010 and January 2013. He had, however, returned about $790,000. The complaint alleges violations of Securities Act Sections 17(a)(1) and (3), Exchange Act Section 10(b) and Advisers Act Sections 206(1) and 206(2). The case is pending.

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