Securities Fraud Attorney Blog

We’ve seen securities fraud, hedge fund fraud, now private equity fraud? Prosecutors have charged Danny Pang who ran Private Equity Management Group in California with an up to $654 million fraud. The Wall Street Journal reported Friday that Pang allegedly extracted at least $83 million in inflated fees. The Pang case is the first high profile private equity fraud publicly reported.

Considering the enormous size of the private equity market, institutional and individual investors should ensure that any private equity investments in their portfolios are with well established, reputable managers. Just like in the hedge fund world, private equity investments often lack complete transparency. The private investment structure leaves room for potential fraud. A place to start is by doing proper due diligence on a private equity funds’ auditor.
We expect as the hedge fund industry is heading toward greater regulation due to the recent string of Ponzi schemes such as Madoff, that the private equity space will attract its own share of fraudsters. Be careful.

Securities arbitration attorneys seem to be everywhere. Since the market collapse last October and the high profile securities frauds committed by Bernie Madoff and Allen Stanford, the ranks of attorneys who represent investors has grown significantly. As other litigation areas have struggled in this new economic climate, securities fraud is alive and kicking. Many litigators who have little experience in securities fraud arbitration and litigation are now holding themselves as experts in the space. Be wary.

Representing investors who have been defrauded by brokerage firms, investment advisors, banks, hedge funds and trust companies is a very specialized practice area. Investors searching for counsel should ensure that any securities attorney they hire has been through the wars with the investment industry. Significant securities cases are often defended by the large Wall Street law firms. A neophyte will be exposed.

How does one find an experienced securities attorney? A good place to start is PIABA – the Public Investors Arbitration Bar Association (piaba.org). PIABA is a national organization of attorneys who represent investors in arbitration proceedings against Wall Street firms. The PIABA site has a listing of attorneys by state who handle these matters. Speak to multiple attorneys before you hire one. After being taking advantage of once by the investment industry, make sure you’re not making mistake number two. Hire attorneys who practice securities law for a living.

Over-the-counter (OTC) derivatives can be scary. Derivatives may pose an unsuitably high amount of risk for non-institutional investors yet are being sold by dealers around the world to investors who do not clearly understand the products.

According to Reuters yesterday, U.S. Representative Stephen Lynch said that “taking a ‘soft approach" to regulating OTC derivatives would be a mistake, but that appears to be the direction lawmakers are leaning.” Representative Lynch further said "by allowing a significant part of the derivatives market to just go off unregulated ... we're setting ourselves up to fail."

After the meltdown of 2008 and 2009, now is the opportunity to address the concerns related to OTC derivatives. Hopefully, Representative Lynch’s perspective will prevail and public investors will be further protected.

UBS was sued by the New Hampshire Bureau of Securities Regulation last week for selling unsuitable Lehman Brothers structured notes to retail investors as a conservative investment.
These structured notes were debt obligations that also contains an embedded derivative component with characteristics that adjust the security's risk/return profile.

According to Bloomberg, Jeff Spill, deputy director of securities regulation for enforcement, said "The safety of these products was exaggerated” and “UBS presented these notes as simple, safe investments when in fact they are highly volatile and are subject to shifting market conditions."

UBS pitched these notes to investors as safe investments. But they were extremely risky and became worthless when Lehman filed for bankruptcy. Our firm represents former UBS clients who bought Lehman notes from UBS. The New Hampshire complaint may help shed some light on these cases and help investors worldwide. Hopefully, other state securities regulators will weigh in as well.

An employment arbitration award worth $4.1 billion was confirmed this week by the Los Angeles County Superior Court. The arbitration was heard before JAMS and the defendants included iFreedom Communications International Holdings, Limited, and its founder, Timothy Ringgenberg.

This is one of the most significant employment awards ever rendered in arbitration. We have no information regarding the potential collection of said award.

For FINRA registered representatives in the securities industry, employment arbitration is mandatory. Many other industries are including pre-dispute arbitration clauses in their employment agreements as well. We expect to see a surge in employment arbitrations filed in the U.S. due to the declining economy.