#BahamasLeaks


Chinese reverse mergers a growing problem

The number of lawsuits against Chinese reverse merger companies nearly tripled since 2010, according to a study by Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research. "Securities Class Action Filings: 2011 Mid-Year Assessment," reports that 24 class action lawsuits were filed against Chinese reverse merger companies in 2011. Reverse mergers work as follows: a Chinese business is acquired by an American shell company that is publicly traded. The board then resigns, a Chinese-appointed board takes control and changes the company name. Voila: it now can issue new stock to investors, all without IPO costs and paperwork.

Offshore firms promised 318% return--in 190 day period

Mass. Sec. of State Securities Division filed a complaint against offshore firms Eagle Trades Ltd. and controlling member Terrance Osberger, as well as Osiris FX and FX Capital Services (and Osiris' Evan Andersen, Glenn Manterfield and Alberto Sciola). All are accused of violating state securities laws and, in some instance, defrauding investors. Eagle Trades claimed return rates between 299% and 318% --in just 190 days. The firm’s promotional literature included remarks like “ . . . we have reengineered the mold regarding HYIPS...think of it as a full-throttle upgrade to the typical HYIP routine you may or may not be familiar with....”

Due diligence by investors would have easily raised red flags: Andersen had been barred for life from the securities industry in Massachusetts after he and Manterfield were charged both by Massachusetts and the Securities and Exchange Commission with defrauding investors in 2007.

FINRA BrokerCheck fixes gaping hole in database.

Our tests show that changes to FINRA's Brokercheck have finally closed a major loophole in a database long criticized as outdated and difficult to use (previous editions were cumbersome: for example, users were required --in an era when name searches are the norm on almost any database--to specify past employers for a broker before checking their background; otherwise the search did not work).

Some estimate that more than 15,000 individuals who left the securities industry after facing regulatory action did not have their disciplinary history available on BrokerCheck. Those records became available this month. Many of those former brokers returned to the business world in different capacities and, like stock market vampires, found new victims. Repeated scandals in 2009 finally forced the industry to make this necessary change.

Trader sues after being fired for relationship with Ponzi schemer Nicholson

Lindy Boville, a former trader, has sued RBC Capital Markets for gender bias over her firing, which she said stemmed from her dating a hedge fund manager later charged with fraud for running a Ponzi scheme. Boville accused RBC of using her relationship with James Nicholson as a pretext to fire her in March 2009 and assign her accounts to male workers, RBC spokesman Kevin Foster denied those allegations: "Ms. Boville showed poor judgment in helping Jim Nicholson raise money for his hedge fund and failing to disclose her activities to her supervisors. It is irrelevant that she had a personal relationship with Nicholson, and she should have told RBC what she was doing."

Nardizzi & Associates had warned an investment banking client in 2007 that something was amiss with Nicholson and his Westgate Capital firm. A grand jury in April indicted him for a scheme that caused $150 million of losses.

Kroll, USIS, OPM investigators charged with falsifying background checks

Washington Post reported that employees for Office of Personnel Management as well as subcontractors Kroll and USIS, which handle the background inquiries for more than 100 federal agencies, lied about interviews they never conducted and submitted false statements.
In the race to the low price swamp, it has long been suspected that some firms offer background checks at prices they cannot afford without cutting corners ( "national criminal check"' for $4.95 anyone?). A shabby product is the logical result.