Home to over 19 million people, New York State also known as the “Empire State” carries a diverse experience for different individuals. On one hand, New York City is a bustling business center that is known to be the media, financial, and cultural capital of the world. The geographic diversity of the state is unmatched sharing a border with New Jersey, Pennsylvania, Connecticut, and Massachusetts as well as an international border with Canada. This brings in various populations, diverse ethnic communities, businesses as well as fraud. Tourism and creative liberty through entrepreneurship and young learning spaces such as colleges and universities flourish in New York State. Even with the diverse experiences, this state provides its residents, especially in this new technologically advanced age, every individual is still susceptible to fraud.
In August of 2019, Andrew Cuomo, New York’s Governor, signed legislation providing the New York Attorney General with more leverage in investigating and convicting fraud that is listed under the Martin Act. The Martin Act is a notorious anti-fraud law that was passed in New York in 1921 to give authorities a wide range in which they may probe public companies, particularly as the state is home to NASDAQ and the NYSE. The Martin Act includes provisions that prohibit fraud in companies that issue and sell securities. It is considered to be one of the most stringent “blue sky laws” in the country, which was used extensively post-2008 recession. A unique facet of this piece of legislation is its broad range which means that the fraud does not have to be proven as “intentional” rather must simply demonstrate that some level of fraud, misleading, and deception has in fact occurred. Although some provisions seem to be an overextension of the states’ authority. Despite these restrictive guidelines that do not encourage fraud, fraud still exists and deceives thousands of individuals each day. While the state can pursue its own civil and criminal remedies to stop and deter fraud, the Martin Act does not have civil rights of action for investors to pursue, but investors can seek recovery from federal securities laws and state common law causes of action.
In 2019, Hudson Valley investment manager Brian Roberson was sentenced to 22 months in prison for allegedly falsely encouraging Kevin Wedwalt to invest over $260,000 into a clearinghouse account. This was done under the pretense of supposedly formulating a high-frequency trading algorithm. According to reports, once the algorithm discontinued, Roberson stopped paying the vendor that wrote the program. When Kevin Wedwalt wanted a return of his investment, Roberson purportedly was only able to accrue 50,000 as the remaining funds paid for his personal luxuries, livelihood, and trading losses. The reports supposedly indicate that Roberson attempted to conceal assets to avoid paying increased restitution. Wedwalt, who was 66 at the time and the sole victim of this scheme, reportedly lost his retirement savings as well as needed to move to another part of the country with a lower cost of living so he can survive while still working as an airplane mechanic to make ends meet. Roberson is allegedly ordered to pay $205,000 back to the victim as well as serve 22 months in prison as well as submit to supervision for half a decade post-release.
In 2014, an investment advisory firm based in Buffalo, NY was charged with fraud as they deceived clients by pressuring them into investing in risky hedge funds. Timothy Dembski and Walter Grenda Jr. reportedly misled their clientele at Prestige Health Management and Reliance Financial Advisors, respectively, to invest in a fund that was operated by Scott Stephen - despite his limited exposure to investing. He spent most of his career collecting past due car loans. The target of this scheme was reportedly elderly families and individuals that were about to retire, living on fixed incomes. Through alleged claims that a fully functioning algorithm was in a place and backed by big banks, Dembski and Grenda Jr. were able to bilk $12 million dollars from investors. The trading algorithm that was falsely hailed as superior, but apparently failed to work as intended, which resulted in Stephen placing trades himself and failing to make positive returns. When client saw losses and sought to withdraw, reportedly 80% of the value of the fund diminished. In addition to the current complaints, Grenada had purportedly borrowed money from investors explaining that the capital would be used on loans to boost his business, when instead it was used for his own personal debts and expenses. Dembski and Grenda Jr. was in violation of the Investment Advisors Act of 1940, Securities Act of 1933, and the Securities Act of 1934. Scott Stephen was reportedly barred from the securities industry and the SEC is pursuing disgorgement, injunctions, and penalties against Dembski and Grenda Jr.
In 2017, A New York City-based lawyer was allegedly caught in a scheme in which he took control of publicly trades shell companies while rigging the establishment and their securities for personal gain. According to the SEC complaint, Mustafa David Sayid reportedly took control of two microcap companies, namely Nouveau Holdings Ltd. as well as Striper Energy Inc. Sayid’s exposure as a securities lawyer supposedly aided him in pulling this off and subsequently triggering the companies to transfer convertible debts to his account which could be reclaimed as stock to cover false legal fees. Sayid made financial profits through ostensibly selling the convertible debts to stock manipulators, making false statements to investors, managing pump and dump scheme using these stocks and scrapping large amounts of stock in over the counter markets. Norman Reynolds was brought into the scheme by Sayid in order to purportedly provide falsified letters that facilitated a pump and dump scheme of Nouveus’s stock. Sayid, Reynolds was in violation of the Securities Acct of 1933 and the Securities Act of 1934. the SEC is seeking disgorgement, injunctions, penalties as well as bars from being directors and officers in the field.
These prior cases demonstrate that any individual can be exposed to fraud and their losses. Fraud can severely impact individuals through various walks of life and strain their financial security. Malecki Law has worked to support client needs and strive for favorable results for over two decades. Malecki Law has served whistleblowers, industry professionals, Fortune 500 companies as well as everyday citizens that want justice. If you have been a victim of schemes, affinity fraud as well as unethical broker conduct, call us at calling (212) 943-1233 or emailing jenice@maleckilaw.com.