2018
The following are summaries of administrative actions the Texas State Securities Board took from July 1 through Sept. 30, 2018:
Sunlight Investments: Fine, Reprimand
Texas Securities Commissioner Travis J. Iles levied a $15,000 fine against Sunlight Investments of Katy for rendering services as an investment adviser in Texas without being registered with the Securities Commissioner. The Disciplinary Order, entered July 10, also reprimanded Sunlight Investments and granted its pending application to be an investment adviser representative.
Emad A. Samman is the president of Sunlight Investments.
Sunlight Investments and Samman had acted as an unregistered adviser from March 2008 through February 2018, providing investment management services to five clients.
Mike Chamley: Emergency Cease and Desist
Texas Securities Commissioner Travis J. Iles entered an Emergency Cease and Desist Order on August 6 against a computer repairman who transferred nearly $28,000 from a financial account of an 88-year-old resident of Del Rio.
According to the order, the alleged victim was living in Alpine when he hired Mike Chamley to fix his computer. Shortly after they met, Chamley, a resident of Alpine, began trading securities in an account owned by the elderly person. Chamley promised the individual that he would split the profits earned from trading securities. The order alleges that Chamley has not earned any meaningful profits from trading.
The securities account is maintained in the name of the elderly man at a firm registered as a dealer with the Securities Commissioner. The securities account is also linked to the credit union account of the alleged victim.
Earlier this year, Chamley was added as a co-account holder to the credit union account. From mid-March to mid-July, $27,853 was withdrawn from the elderly man’s securities account without his knowledge. The money was withdrawn in 16 fund transfers. As of July 25, $30 remained in the credit union account.
The 2017 senior financial exploitation law in Texas requires investment advisers and securities dealers to file a report with the Securities Commissioner that details suspected financial exploitation and permits holds to be placed on suspicious financial transactions.
On July 25, the securities dealer where the elderly man’s account is held filed a report detailing suspected exploitation. The dealer also temporarily blocked online trading in the securities account and the withdrawal of funds from the account.
John William Noey: Fine, Reprimand
John William Noey, an investment adviser representative and agent in Addison, was fined $5,000 and reprimanded for failing to report in a timely manner a misdemeanor charge of theft. Texas Securities Commissioner Travis J. Iles entered the Disciplinary Order on Aug. 15.
In 2012, Noey registered with the Securities Commissioner as an agent and investment adviser representative of Principal Securities Inc. In late 2012, Noey was charged with misdemeanor theft of property with a value of less than $500. The charge was dismissed in Janury 2013 after Noey completed the terms of his plea agreement.
Noey, however, did not report the charge until April 2018. Texas State Securities Board rules require a registered individual to report to the Securities Commissioner within 30 days any misdemeanor action or conviction based on fraud, deceit, or wrongful taking of property.
Mohamed H. Eldawy: Suspension
Mohamed H. Eldawy was suspended for 60 days for failing to disclose that Morgan Stanley terminated him for allegedly using a personal e-mail account to solicit clients for his investment advisory and insurance businesses.
The Discliplinary Order, entered Aug. 15, also granted Eldawy's application to be an agent of Vestech Securities Inc.
Morgan Stanley discharged Eldawy on Jan. 4, 2018. On Jan. 11, he began the application process to become a registered dealer with Regulus Advisors LLC. Eldawy failed to inform Regulus of his termination from Morgan Stalney and on Jan. 25 he filed an inaccurate disclosure form with the Securities Commissioner.
Regulus on Jan. 26 learned of Eldawy's discharge from Morgan Stanley, and of his making an inaccurate filing with the Securities Commissioner, and terminated Eldawy's application process.
TK2 Advisers LLC: Reprimand
TK2 Advisers LLC of Houston was ordered to hire an outside compliance consultant after twice failing to pay the fees required to renew its registration. As a result, the firm provided investment advisory services without being registered from Jan. 1, 2016 through Oct. 23, 2017, and from Jan. 1, 2018 through Jan. 29, 2018.
The Disciplinary Order, entered by Texas Securities Commissioner Travis J. Iles on Aug. 15, requires TK2 Advisers to hire a consultant to review the firm's compliance procedures within 60 days. The review, which will include corrective measures taken by the TK2 Advisers, will be sent to the Inspections & Compliance Division of the State Securities Board.
TK2 Advisers also listed inaccurate information on a required securities filing, claiming it had no clients and no assets under management. In fact, the firm had eight clients and $6.8 million in assets under management.
Coins Miner Investment Ltd., Ana Julia Lara: Emergency Cease and Desist Order
Texas Securities Commissioner Travis J. Iles entered an Emergency Cease and Desist Order on Sept. 18 against Coins Miner Investment Ltd., an entity soliciting funds from Texas residents by pretending to represent an established U.S. cryptocurrency platform.
According to the order, Coins Miner is manipulating its email solicitations to make them appear as if they came from Coinbase, a San Francisco-based company that operates an online platform for buying, selling, and storing digital currency. Ana Julia Lara, a person affiliated with Coins Miner, falsely claims to work at Coinbase as a cryptocurrency trader.
Lara is also sending prospective investors a photograph of herself with the president of Ripple, a cryptocurrency and transaction company, but the person identified as Lara is a vice president of CoinTelegraph Media Group.
The solicitation directs prospective investors to a website maintained by Coins Miner, where the company offers investments in programs tied to the mining of cryptocurrencies. On the site Coins Miner makes numerous fraudulent misrepresentations to try to make its investment offering appear legitimate.
The company claims it is based in the United Kingdom, but it operates in the Russian city of Volgograd.
Coins Miner has also misappropriated a video of a Fortune journalist to promote its offering. The video on the Coins Miner site shows the journalist discussing cryptocurrencies next to a superimposed Coins Miner logo. Neither the journalist nor Fortune authorized the use of the video, which was filmed for Fortune as part of its coverage of cryptocurrencies.
Coins Miner has manipulated publicly available media in other ways. It posted stock video footage that purports to shows its “expert team” of technical and financial professionals, its office, and its computer hardware.
The Coins Miner investments are securities under Texas law, but the offerings are not registered for sale in Texas and neither Coins Miner nor Lara are registered to sell securities.
DGBK Ltd. AKA DigitalBank, Tim Weiss, Ranka Romic, Kim Joseph Manning: Emergency Cease and Desist Order
DGBK Ltd., also known as DigitalBank, is a Belize-based company that says it is developing a hack-proof device to store and transfer cryptocurrencies. According to an Emergency Cease and Desist Order entered Sept. 18, DigitalBank is soliciting funds to develop a digital wallet for cryptocurrencies that can be opened using a person’s biometric data.
Digital wallets that store virtual currencies are usually opened with a lengthy password known as a private key.
The company claims the wallet, which it calls a Photon Encrypted Ledger Key, will also permit the anonymous, untraceable transfer of both cryptocurrencies and fiat currency such as the U.S. dollar.
The Enforcement Division of the State Securities Board started investigating DigitalBank after a tip from a Texas resident who works in the cryptocurrency industry and was approached by a principal of DigitalBank.
DigitalBank is offering prospective investors both shares in the company and the opportunity to buy its own virtual currency, a digital token called DGBK. According to the company, investors who purchase the token now can earn a return of 1,900% once it is sold in an initial coin offering next year.
DigitalBank is making liberal use of a 33-second video of Barack Obama to promote itself. In the video, taken at the 2016 South by Southwest interactive festival in Austin, President Obama generally discusses advances in technology and encryption that may allow the creation of impenetrable devices and systems.
DigitalBank is telling investors to view the video to “try to understand what Obama in 2016 already understood about the company.” The company embedded the video throughout its website, on social media, and in correspondence to investors.
DigitalBank is not, however, informing prospective investors about its technical expertise or financial support. The company says it employs cybersecurity experts, blockchain and encryption engineers, and has the support of a major financial institution, but it is not naming or providing the background of most of them.
The investments DigitalBank is offering are securities regulated by Texas law, according to the order. Neither the company nor the principals named in the order are registered to sell securities in Texas.
Ultimate Assets LLC, Daniel Dishmon, John Jason Woodard: Emergency Cease and Desist Order
Ultimate Assets, which lists an address in Arlington, Mass., is publishing online advertisements soliciting Texas residents for its cryptocurrency and foreign exchange trading program. Ultimate Assets is telling potential investors that an initial investment of $1,000 will turn into $10,000 in three weeks.
Ultimate Assets and its representatives claim an initial investment in the trading program is fully guaranteed, according to an Emergency Cease and Desist Order entered Sept. 18. Its investment contract says, “a refund will be issued in cases where [the] investment could not yield profits.”
The investments being offered are securities under Texas law. Daniel Dishmon and John Jason Woodard, the individuals named in the order, are violating the Texas Securities Act by offering securities investments without being registered with the Securities Commissioner.
Ultimate Assets, Dishmon and Woodard are also engaging in fraud by failing to inform investors of the regulatory, market, and technical risks in the trading of cryptocurrencies and foreign currencies.
Ultimate Assets itself appears to be a phantom entity. It is not located at the address listed on its investment contract and the state of Massachusetts has no record of corporate filings by Ultimate Assets.