Shustak Reynolds & Partners, P.C. announces that it has been retained to represent several individuals in connection with the Ponzi scheme fraud allegedly perpetrated by PAUL TABET, his wife,JENIFER TABET and former Oregon politician CRAIG BERKMAN. PAUL TABET and CRAIG BERKMAN purportedly managed venture capital fund VENTURES TRUST II which, they claimed, had special access to pre-IPO shares in high-tech companies about to go public, including Facebook and others.
An SEC investigation, which lead to the arrest of CRAIG BERKMAN in Florida and initiation of cease and desist proceedings, found that between October 2010 and September 2012, Berkman fraudulently raised at least $13.2 million from approximately 120 investors by selling membership interests in limited liability companies that he controlled. According to other reports,PAUL TABET allegedly co-managed venture capital fund VENTURES TRUST II with Berkman and raised more than $3 million from investors mostly in the Encinitas and San Diego area. The SEC previously issued subpoenas for financial records from PAUL TABET and his wife JENIFER TABET in connection with its investigation.
Please contact Erwin Shustak, our Managing Partner, for more information and to discuss our firm’s possible representation of you. Erwin can be reached at 619.696.9500 or shustak@shufirm.com.
The North American Securities Administrators Association (NASAA) was founded in 1919 and is one of the oldest investor protection organizations in the country. NASAA routinely publishes a list of its “top investor threats.” For 2013, a rapidly growing, often risky investment vehicle referred to as “crowdfunding” was first on the list.
The Securities and Exchange Act of 1933 prohibits entities from offering or selling securities to the public unless the offering is registered with the Securites and Exchange Commission (SEC) or exempt from registration. According to NASAA, the 2012 “JOBS Act” will loosen those restrictions and significantly broaden the capital-raising methods available to startup businesses and entrepreneurs.
One such method is equity crowdfunding. Equity crowdfunding involves the use of social media and other web portals to entice the public to invest in new, often risky startup ventures. New regulations governing crowdfunding still are being implemented, but the JOBS Act generally will allow companies to raise up to $1 million per year through selling small lots of shares to ordinary investors. This type of investment previously was available only to accredited investors.
While individual investments are capped (up to $2,000 for investors whose net worth or annual income is under $100,000 and 10% for investors whose net worth or annual income exceeds $100,000), NASAA cautions that internet-based investments in small startups often are among the riskiest; securities fraud is not uncommon. And while the capped investment amounts may limit investor losses, they also make it less likely defrauded investors will bring a claim to recover those losses.
FINRA recently issued new guidance to arbitrators further tightening the already limited grounds under which brokers may obtain expungement of customer information from their CRD record. The move follows a recent tide of criticism against FINRA and the SEC for, critics say, looking the other way when member firms, registered representatives and their attorneys require customers to agree not to oppose expungement requests as a condition of settling FINRA arbitration claims.
Under FINRA Rules, arbitrators generally cannot order expungement unless they hold an evidentiary hearing and conclude that: (1) the claim, allegation or information is factually impossible or clearly erroneous; (2) the registered person was not actually involved in the alleged investment-related sales practice; or (3) that the claim, allegation or information is false. Arbitrators also must issue a written decision explaining the reasons for awarding expungement if they choose to do so.
FINRA’s new guidance instructs arbitrators to inquire and fully consider whether a party conditioned settlement of the arbitration upon an agremeent not to oppose an expungement request. The implication is that if settlement is conditioned on expungement, arbitrators should be even more careful in deciding whether to order expungement. The new guidance also indicates that expungement of customer information is an “extraordinary remedy that should be granted only under appropriate circumstances”–e.g., when [the information] has no meaningful investor protection or regulatory value.”
While the new guidance does not change FINRA’s actual expungement rules, it is a clear sign that FINRA may view expungement claims with increasing scrutiny in the months ahead.
