Advisory Theft:
A financial advisor accused of stealing more than $1 million from investors pleaded guilty in February to securities and wire fraud charges. Bruce E. Hammonds, a former Merrill Lynch advisor in San Antonio, admitted that for more than two years, starting in August 2006, he enticed Merrill Lynch clients to invest in a partnership he assured them was a Merrill Lynch fund. It wasn't, of course, and the firm had no knowledge of Hammonds' activities. Hammonds was fired in June for co-mingling investor funds with his personal funds and not disclosing the partnership. After his termination, he kept soliciting investors for the partnership, the U.S. Attorney's Office said in a filing with the court. Hammonds used the money for himself and gave some to relatives and business partners, prosecutors said. No one else has been charged in the case, but Hammonds faces up to 10 years in prison when he is sentenced May 29.
Ponzi Targets the Deaf:
The SEC halted a Ponzi scheme that specifically targeted members of the U.S. Deaf community. In its complaint, the SEC alleges Hawaii-based Billion Coupons, Inc. (BCI) and its CEO, Marvin Cooper, raised $4.4 million from 125 investors starting as recently as September 2007. He did so by, among other things, holding investment seminars at deaf community centers. The SEC also alleges that Cooper misappropriated at least $1.4 million in investor funds to pay for a new home and personal expenses. Through a court order, the SEC froze the assets of BCI.
The complaint alleges BCI and Cooper told investors the funds would be invested in the foreign exchange markets and that returns would be as high as 25 percent compounded monthly from trading. They were also told their investments were safe. The complaint says BCI put to work only $800,000 of the money it received from investors in Forex trading and ultimately lost $750,000 of it. Without generating sufficient returns to pay investors as promised, BCI operated as a Ponzi scheme paying new investors with the money contributed by previous investors.
“A Ponzi scheme targeting members of the Deaf community is particularly reprehensible,” said Rosalind Tyson, regional director of the SEC's Los Angeles regional office. “This case is an example of successful coordination between federal and state agencies to protect vulnerable investors.”