Sep 28, 2018 | Shareholder & Investor Protection
CFTC Orders an Iowa Introducing Broker and Its Principals to Pay $11.9 Million in Restitution to Farmers and a $1.25 Million Civil Monetary Penalty for Fraud, Unauthorized Trading, and False Statements to the CME, Among Other Violations
On September 26, 2018, the Commodity Futures Trading Commission (“CFTC”) announced that it issued an Order filing and simultaneously settling charges against Kooima & Kaemingk Commodities, Inc. (“K&K”), Lauren Kaemingk (“Kaemingk”), and Bradley Kooima (“Kooima”), all of Iowa, for Kaemingk’s fraud, unauthorized trading, and making false or misleading statements to CME Group Inc. (“CME”), for a former employee’s fraud, unauthorized trading, and violation of CME position limits in live cattle futures contracts, and for K&K’s, Kaemingk’s, and Kooima’s supervision failures.
The CFTC Order requires K&K, Kaemingk, and Kooima to pay $11,920,857.05 in restitution to their customers, which are almost entirely comprised of individual farmers and large-scale farming operations. The Order also requires K&K, Kaemingk, and Kooima to pay a civil monetary penalty of $1,250,000 and orders that they cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged.
CFTC Director of Enforcement Comments
James McDonald, CFTC Director of Enforcement, stated: “Many farmers depend on the futures markets to help protect their operations from financial uncertainty. Those farmers should be able to trust that their Introducing Broker will deal with them honestly. Brokers are also expected to respond truthfully and completely to CME and other exchanges when misconduct is being investigated. When brokers defraud their customers and then seek to cover it up — as in this case — the Commission will vigorously pursue them.”
As noted in the Order, K&K fraudulently solicited customers and opened investment accounts for certain customers beginning around January 2012. Further, the Order finds that, between January 2012 and February 2016, K&K, through two of its associated persons, a former employee and Kaemingk, defrauded customers by its unauthorized trading, which caused net customer losses of approximately $11.9 million.
Further, the Order finds that when the CME opened an investigation into the former employee’s position-limit violation, K&K, through Kaemingk, engaged in a cover-up to conceal the scope of the unauthorized trading at K&K. Kaemingk encouraged a customer to withhold information from CME during its investigation. Kaemingk also made misleading statements to CME during an interview.
CME issued a Notice of Disciplinary Action in which K&K, Kaemingk, and Kooima agreed to pay a fine of $1.25 million arising out of the conduct that is the subject of the CFTC’s Order. In imposing its civil monetary penalty, the CFTC took into account the fine imposed by CME in its related action.
Source: CFTC.gov
Sep 26, 2018 | Shareholder & Investor Protection
On September 26, 2018, the Securities and Exchange Commission announced that a Des Moines-based broker-dealer and investment adviser has agreed to pay $1 million to settle charges related to its failures in cybersecurity policies and procedures surrounding a cyber intrusion that compromised personal information of thousands of customers.
The SEC announced that it charged Voya Financial Advisors Inc. (“VFA”) with violating the Safeguards Rule and the Identity Theft Red Flags Rule, which are designed to protect confidential customer information and protect customers from the risk of identity theft. This is the first SEC enforcement action charging violations of the Identity Theft Red Flags Rule.
According to the SEC’s order, cyber intruders impersonated VFA contractors over a six-day period in 2016 by calling VFA’s support line and requesting that the contractors’ passwords be reset. The intruders used the new passwords to gain access to the personal information of 5,600 VFA customers.
The SEC’s order finds that the intruders then used the customer information to create new online customer profiles and obtain unauthorized access to account documents for three customers. The order also finds that VFA’s failure to terminate the intruders’ access stemmed from weaknesses in its cybersecurity procedures, some of which had been exposed during prior similar fraudulent activity. According to the order, VFA also failed to apply its procedures to the systems used by its independent contractors, who make up the largest part of VFA’s workforce.
“Customers entrust both their money and their personal information to their brokers and investment advisers,” said Stephanie Avakian, Co-Director of the SEC Enforcement Division. “VFA failed in its obligations when its deficiencies made it vulnerable to cyber intruders accessing the confidential information of thousands of its customers.”
Without admitting or denying the SEC’s findings, VFA agreed to be censured and pay a $1 million penalty, and the company will retain an independent consultant to evaluate its policies and procedures for compliance with the Safeguards Rule and Identity Theft Red Flags Rule and related regulations.
Source: SEC.gov
Sep 25, 2018 | Whistleblower
On September 24, 2018, the Securities and Exchange Commission announced that it has awarded nearly $4 million to an overseas whistleblower whose tip led it to open an investigation and whose extensive assistance helped it bring a successful enforcement action.
“Whistleblowers, whether they are located in the U.S. or abroad, provide a valuable service to investors and help us stop wrongdoing,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “This award recognizes the continued, important assistance provided by the whistleblower throughout the course of the investigation.”
The SEC has now awarded over $326 million to 59 individuals since issuing its first award in 2012. In that time, more than $1.7 billion in monetary sanctions have been ordered against wrongdoers based on actionable information received by whistleblowers.
Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.
By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.
Source: SEC.gov
Sep 25, 2018 | Consumer Protection, Employment & Technology Archive
On September 25, 2018, the Federal Trade Commission announced that it is sending out 22,671 refund checks to people who lost money to a mobile cramming operation that placed tens of millions of dollars in charges on their mobile phone bills without their permission.
The refunds stem from a major FTC crackdown first announced in 2013.** As part of the scheme, the defendants sent text messages containing celebrity gossip alerts, horoscopes, or “fun facts” to consumers and placed monthly subscription fees for these “services” on their mobile phone bills without their authorization. The practice of placing unauthorized charges on a consumer’s mobile phone bill is known as mobile cramming.
This is the third round of refunds issued as part of the FTC’s crackdown on mobile cramming. The latest round of refunds, totaling $2,107,156.24, comes from assets recovered as part of a settlement with Tatto, Inc. The average check amount is $92.95.
According to the FTC, recipients should deposit, or cash, checks within 60 days, as indicated on the check. The FTC never requires individuals to pay money or provide account information to cash a refund check. If recipients have questions about the refunds, they should contact the FTC’s refund administrator, Epiq, at 888-457-2202.
For additional information, see Tatto, Inc., also d/b/a Winbigbidlow and Tatto Media, et al.
**In December 2013, the FTC announced that it took action to stop a mobile phone cramming operation that has placed tens of millions of dollars on consumers’ mobile phone bills without their permission. In its complaint, the FTC sought to shut down the operation and recover money lost by consumers.
The FTC’s complaint charged that Lin Miao and Andrew Bachman, through a number of companies they owned and controlled, pitched “love tips,” “fun facts,” and celebrity gossip alerts sent by text message to consumers, but placed monthly subscription fees for these “services” on consumers’ mobile phone bills without their authorization. The practice, known as mobile cramming, relies on the fact that consumers often don’t closely examine their monthly statements, or many assume that charges are legitimate.
According to the complaint, consumers, allegedly, received text messages with random factoids that they dismissed as spam without realizing they had received them through a paid subscription service they did not knowingly buy. The defendants also allegedly used misleading website offers to obtain valid consumer phone numbers that they used to sign up consumers for their services without their knowledge.
In one instance, a website told visitors they had won free Justin Bieber tickets, which they could claim by filling out an online quiz. Part of the process required consumers to enter their phone number, and while consumers did not receive the Justin Bieber tickets, their phone numbers were likely signed up for one of the defendants’ paid services.
The charges continued to appear on consumer bills, until the consumers noticed them and took action to unsubscribe. The charges, typically $9.99 per month, often appeared on consumer bills with enigmatic names like “77050IQ12CALL8663611606” and “25184USBFIQMIG,” and in many instances, consumers did not notice the variations in the amount of their bills from month to month.
When consumers noticed the charges, the process of getting a refund was often highly cumbersome. In some cases, consumers could reach representatives of the company, who would promise refunds that never arrived. In other cases, consumers were able to get partial refunds from their phone company, but only for a limited number of months – sometimes far less than the length of time they were billed. The number of consumers seeking refunds from their phone companies was as high as 40 percent in some months, and some carriers suspended the defendants from placing charges on consumer bills.
The FTC’s complaint alleges that the defendants violated the FTC Act by deceiving consumers, leading them to believe they were obligated to pay for the defendants’ premium text message services. The defendants, according to the FTC, also violated the FTC Act by unfairly billing consumers for services they did not ask for.
The listed defendants were Tatto, Inc. (also doing business as WinBigBidLow and Tatto Media); Bullroarer, Inc. (also doing business as Bullroarer Corporation Pty. Ltd.); Shaboom Media, LLC (also doing business as Tatto Media); Bune, LLC; Mobile Media Products, LLC; Chairman Ventures, LLC; Galactic Media, LLC; Virtus Media, LLC; Lin Miao and Andrew Bachman.
Source: FTC.gov
Sep 25, 2018 | Consumer Protection, Employment & Technology Archive
On September 24, 2018, a class action complaint was filed in United States District Court, Central District of California, against Subway Franchisee Advertising Fund Trust, Ltd. (“Subway”) for “negligently and/or intentionally contacting Plaintiff on her cellular telephone, in violation of the Telephone Consumer Protection Act.”
According to the complaint, Defendant Subway, a corporation which “provides marketing and advertising services for Subway restaurants,” sent “one or more automated marketing text messages to [Plaintiff’s] cellular telephone number . . . from short code 782-929.”
Subway, allegedly, sent an automated marketing text message to Plaintiff which stated:
FREE CHIPS RULE! Right now @SUBWAY, get ANY bag of chips FREE with a sub purchase. Exp 12/6: http://mfon.us/rk6srrfdjue HELP/STOP call 8447887525
When the Plaintiff sent a “STOP” reply to the unwanted text, she, allegedly, received “an immediate computer-generated responsive text” that stated:
Subway: You have been unsubscribed from all programs on 782929 and will no longer receive any text alerts. Q’s? Reply HELP. Msg & data rates may apply.
According to the class action complaint, Plaintiff, however, received a subsequent automated text message which stated:
Your weekly SUBWAY offer is waiting. Don’t miss out! Expires 12/6: http://mfon.us/rk6srrfdjue HELP/STOP call 8447887525
The class action seeks, among other things, statutory damages and injunctive relief.
Do You Believe You Are a Victim of Illegal Robocalls, Text Messages, “Junk” Faxes or Telemarketing Sales Calls?
If you have received illegal robocalls, text messages, “junk” faxes or telemarketing sales calls, you may be able to recover at least $500 for each illegal call, text or fax you received and, possibly, as much as $1,500 for each illegal call, text message or facsimile that was made either willfully or knowingly in violation of the Telephone Consumer Protection Act.
To help evaluate your potential legal claims under the Telephone Consumer Protection Act, please complete KLF’s confidential Robocall Questionnaire or, if you prefer to speak with an attorney, please complete the form above on the right, e-mail [email protected] or contact Michael Yarnoff, Esq., [email protected], (215) 792-6676, Ext. 804, for a free, no-obligation evaluation of your potential legal rights.
