Legal Matters

It was announced on September 29 that JPMorgan Chase agreed to settle with U.S. authorities and will pay fines and penalties to the Commodities Futures Trading Commission and the Securities and Exchange Commission. JP Morgan Chase agreed to pay $920 million in fines and penalties for its illegal manipulation of markets for precious metals and U.S. Treasuries through the tactic known as “Spoofing.” During an eight-year period, fifteen traders and two trading desks acted under the direction of JP Morgan Chase and used this “spoofing” tactic to send misleading trading signals into the market for silver, gold, and other precious metals, with no intention of buying or selling at the stated prices, to move the market to “more favorable prices than J.P. Morgan would have otherwise been able to obtain,” and then profit from the activation of the intended trade. According to newly published documents from the Department of Justice, the unlawful trading in the futures market for precious metals [...]

The Frankowski Firm is investigating potential claims related to investor losses in the Sierra Income Corporation. Sierra is a non-traded business development company (“BDC”). As a non-traded investment, Sierra Income is considered an illiquid and high-risk investment and therefore should never have been recommended or sold to investors who needed cash flow from their investments or were not looking to engage in speculative trading. On May 5, 2020, Sierra terminated a merger with Medley Capital Corporation due to “changed circumstances and the unpredictable economic conditions caused by the coronavirus pandemic.” The termination has led to a large decline in investment value for Sierra’s investors. Soon after the termination of its merger, Sierra Income announced the temporary suspension of monetary and reinvestment distributions. Sierra Income Corporation invests in first lien and second lien secured debt, as well as subordinated debt of middle market companies. According to the Sierra Income Fund Prospectus, Sierra Income Fund investors were charged with high fees and [...]

The Financial Industry Regulatory Authority (FINRA) has expelled Sandlapper Securities, LLC, from the securities industry based on FINRA findings that the firm willfully defrauded investors by charging unreasonable and undisclosed markups on sales of fractional interests in saltwater disposal wells in violation of the Securities Exchange Act. The firm, along with its president and CEO, Jack Charles Bixler, and Trevor Lee Gordon, were ordered to pay over $3.3 million, plus interest, to customers in restitution for defrauding an investment fund. Bixler and Gordon were permanently barred from the securities industry. According to FINRA’s findings, Bixler and Gordon formed Tiburon Saltwater Reclamation Fund I (“TSWR Fund”) to invest in saltwater disposal wells operated in the Permian Basin in Texas. Bixler, Gordon and associates owned and controlled the fund’s manager, served as the fund’s investment committee, and made all investment decisions for the fund. Investors purchased units in this fund for about $12.5 million. Bixler, Gordon, and their associates also created TSWR Development to [...]

The Securities and Exchange Commission, the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC) have announced settlements with Interactive Brokers related to anti-money laundering failures in which the registered broker-dealer agreed to pay penalties of $11.5 million, $15 million, and $11.5 million, respectively, for a total of $38 million in penalties paid to the three agencies. The penalties are to settle charges that Interactive Brokers repeatedly failed to file Suspicious Activity Reports (SARs) for U.S. microcap securities trades it executed on behalf of its customers. Broker-dealers like Interactive Brokers are required to file SARs for transactions suspected to involve fraud or a lack of an apparent lawful business purpose. According to the SEC’s order, over a one-year period, Interactive Brokers failed to file more than 150 SARs to flag potential manipulation of microcap securities in its customers’ account, some of the trading accounting for a significant portion of the daily volume in certain of the microcap issuers. [...]