The following are summaries of administrative actions the Texas State Securities Board took from April 1 through June 30, 2019:
FxBitGlobe: Emergency Cease and Desist Order
Texas Securities Commissioner Travis J. Iles entered an Emergency Cease and Desist Order on April 9 to stop FxBitGlobe from offering of investments in cryptocurrencies, foreign currency, binary options, and insurance investments. FxBitGlobe says it was founded in 2014 and has locations in Houston, the United Kingdom, Germany, China, and Malaysia.
The order found that FxBitGlobe is using a phony address and falsely claiming it is registered as a broker-dealer and investment adviser. The company is promising monthly returns of between 25% and 70%, depending on the size of the initial investment.
The company is intentionally failing to disclose any information about how it can generate those returns, however.
According to the order, FxBitGlobe is not disclosing its principals or their experience. Nor is it informing investors about its assets, liabilities, capitalization, and any other financial information that demonstrates it can pay a fixed rate of return from dealing in historically risky and volatile assets.
FxBitGlobe is telling potential investors that any risks associated with the investments are described in filings with the Securities and Exchange Commission. There are no such filings, according to the order, and FxBitGlobe is not, as it claims, registered with the SEC and the Financial Industry Regulatory Authority.
LPL Financial: Fined
LPL Financial LLC paid a $450,000 fine to the State of Texas and will repurchase certain securities it sold to investors as part of an April 11 Consent Order with the Texas State Securities Board. The order is part of national settlement between state securities regulators and LPL over the brokerage firm’s long-standing and widespread regulatory failures that allowed the sale of unregistered and non-exempt equities and fixed-income securities to its clients.
Under terms of the settlement, LPL agreed to offer to repurchase from Texas investors the unregistered securities that were sold since Oct. 1, 2006. If the securities have been sold, LPL agreed to pay damages to the investor. LPL will pay 3% interest per year on the value of securities it pays in damages or by repurchasing.
State securities regulators concluded that LPL offered and sold unregistered, non-exempt securities and failed to reasonably supervise the flow of information to ensure full and proper compliance with state securities registration requirements.
LPL failed to maintain adequate systems to reasonably supervise agents, staff, and employees to prevent the sale of unregistered, non-exempt securities.
State investigators also determined that LPL failed to maintain the books and records necessary to comply with state securities registration requirements; acted negligently in canceling third-party services that were critical for compliance with state securities registration requirements; failed to supervise agents, staff, and employees to ensure compliance; and failed to invest sufficient resources in personnel, expertise, systems, and operations.
Metals.com, Walter Vera, Michael Kendall, Athena Hunter: Emergency Cease and Desist Order
Texas Securities Commissioner Travis J. Iles on May 1 entered an Emergency Cease and Desist Order against Metals.com, an unregistered firm accused of cold-calling elderly investors to convince them to liquidate their securities in registered firms and invest in precious metals.
According to the order, the firm convinced an 80-year-old Dallas woman to liquidate $850,000 in her retirement accounts and transfer the money to invest with the company. The order arose from a report to the State Securities Board of suspected financial exploitation of a vulnerable adult, defined as a person 65 or older or having a cognitive disability.
Metals.com salespeople cold-call potential investors in Texas and elsewhere to try to convince them that their money isn’t safe at registered brokers and investment advisers, according to the order, and they should move their funds into precious metals investments.
The order names TMTE Inc., which does business as Metals.com, Chase Metals LLC and Chase Metals Inc., and salespeople Walter Vera, Michael Kendall, and Athena Hunter. The firms list addresses in Beverly Hills, Calif., and Wyoming.
According to the order, Vera, Kendall and Hunter are acting as unregistered investment adviser representatives because they are being compensated for advice related to investing in, purchasing, or selling securities.
LFS RIA LLC, Clair Crossland: Repayment, Reprimand
In a June 6 Disciplinary Order, the Securities Commissioner ordered Clair Crossland of Dallas to repay $88,933 to clients who purchased stream-of-income investments tied to the payouts from pensions. The payment is double the amount of commission Crossland earned from the sales.
Crossland is president of LFS RIA LLC, a Dallas investment advisory firm.
Crossland did not understand the complexities of stream-of-income investments and the risks they posed to his clients.
At the time Crossland sold the investments to his clients, state and federal regulators had issued warnings about the risks of the transactions – including the fact that some transactions may be illegal under federal law – and sanctioned several companies selling investments based on pension-income streams.
Mark A. Trewitt: Suspension
The Securities Commissioner on June 6 suspended investment adviser representative Mark A. Trewitt for 90 days for selling unsuitable investments to clients, including one couple who invested half of their liquid assets in an Oregon-based private fund that collapsed in 2016.
Trewitt is an investment adviser representative for Delta Investment Management LLC of Plano. He told the unsuitable investments while employed at VFG Advisors Inc.
Trewitt's clients invested $173,306 in the fund, which was exactly half of their liquid assets. Investors nationwide lost as much as $600 million in the fund, which was one of the investment vehicles managed by Aequitas Management of Portland, Ore.
Trewitt also recommended that two other clients, a husband and wife in their 70s who had stated a preference for moderate risk in their portfolio, invest $275,000 in high-risk, illiquid private placement investments, non-listed Real Estate Investment Trusts, and Business Development companies.
The couple's investment accounted for 40% of their liquid assets.
InnerGeo LLC, WaterReco LLC D/B/A/ OilReco: Cease and Desist Order
The Securities Commmissioner on June 6 entered an Order finding that InnerGeo LLC of Corpus Christi, a renewable energy firm, was selling investments not registered in Texas.
The order found that InnerGeo and a related company, WaterReco LLC, sold membership interests to investors in Texas in an effort to develop oil and gas related technology.
An investor could acquire 1% ownership of InnerGeo for $100,000. An investment of $250,000 supposedly provided an investor with 2% ownership of WaterReco.
TintX Mining Pool and Maxi Samantha Fortune: Emergency Cease and Desist Order; Madeline O'Farrell: Emergency Cease and Desist Order; Mikhail Rania Safiya: Emergency Cease and Desist Order
The Securities Commissioner on June 28 entered three Emergency Cease and Desist orders against promoters of fraudulent cryptocurrency-related investments who were soliciting Texas residents through Facebook "work from home"forums.
The promoters are advertising on public Facebook groups for Texans working from home or interested in doing so. People who respond to the ads were being directed to contact the investment promoters through Facebook-owned WhatsApp, an encrypted instant-message platform.
Two of the promoters – Mikhail Rania Safiya of London, and Madeline O’Farrell, who lists an address in Belize – are promising investors they can earn lucrative profits for them by trading bitcoin and other cryptocurrencies and foreign currencies.
Neither Safiya nor O’Farrell are registered to sell securities, according to the orders, and both are intentionally failing to disclose the risks of trading cryptocurrencies, foreign currencies, and other products.
A third order alleges that Tint X Mining, based in India, is fraudulently offering Texas investors the opportunity to earn lucrative returns through bitcoin mining.
The company and a promoter, Maxi Samantha Fortune, are recruiting potential investors through ads on the public Facebook Group titled “Texas Work From Home.”
Tint X Mining is telling investors they can earn $213,300 over three months on an initial investment of $5,100 in the company’s bitcoin mining operation.
According to the order, Tint X Mining is falsely claiming it is a licensed firm. The company is also not disclosing any of the risks in mining cryptocurrencies, nor is it providing any information about its expertise or track record in bitcoin mining.