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This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

Mishcon Fraud Watch - January 2015
 Briefing 
Date
29 January 2015

Mishcon Fraud Watch - January 2015

Welcome to the January edition of Mishcon Fraud Watch. Its aim is to provide businesses and their advisors with a snapshot of what has been happening in the world of fraud in the last month.

 

UNITED KINGDOM

Magnus Peterson, the founder of Weavering hedge fund, has been found guilty on 8 counts of fraud, forgery and furnishing false information by Southwark Crown Court. Weavering collapsedin 2009, after the discovery that over $600m of assets were swaps trades with an offshore company also controlled by Peterson, a fraud he achieved by secret trades and forging the signatures of other directors. He has been sentenced to 13 years in jail.
Caroline Binham,
Financial Times, 24 January 2015

KPMG's latest edition of the Fraud Barometer has found that the number of fraud cases going through British courts has risen by 25% in the past year, while the value of fraud has fallen by 14% to £717m.
Chris Warmoll,
Accountancy Age, 13th January 2015

Currency trader Alex Hope has been found guilty of fraud after using more than £2m in investors' money for his own personal expenditure between 2011and 2012. He had told investors that he could double their money on the foreign exchange markets.
Daily Telegraph, 10 January 2015

West Midlands police officer Osman Iqbal was arrested after turning up to work in a £170,000 Ferrari – despite earning only £40,000 a year. He has been sentenced to 7 years and 2 months for conspiracy to money launder, and unauthorised attempts to access the police intelligence service, amongst other related charges. Iqbal was part of a London-based gang who organised for clients to be collected from strip clubs and taken to brothels, where their bank cards would be overcharged.
Andy Dolan,
Daily Mail, 9 January 2015

 

NORTH AMERICA

Following the collapse of the Serious Fraud Office's UK inquiry into founder Mike Lynch's sale of Autonomy to Hewlett Packard in 2011, the FBI and the Securities Exchange Commission will take over the investigation. Lynch has been accused of inflating sales figures and hiding less profitable deals to improve Autonomy's attractiveness.
Christopher Williams,
Daily Telegraph, 20 January 2015

The Department of Justice announced that Christopher Luck was sentenced by a California federal court to ten years in prison and ordered to pay more than $33 million in restitution for his participation in a securities fraud scheme involving GLR Growth Fund, an investment fund managed by his company, Geringer, Luck, and Rode LLC.  According to the plea agreement into which Mr. Luck entered, after his partner, John Geringer, disclosed to Mr. Luck that he had been falsifying GLR Growth Fund’s records, Mr. Luck began recruiting investors through false and misleading statements.  Between May 2009 and 2012, Mr. Luck purportedly defrauded investors out of more than $33 million.
Department of Justice Press Release, 16 Jan 2015

The Securities and Exchange Commission announced charges against Canada-based attorney and stock promoter John Briner for running a microcap scheme involving shell companies allegedly exploring mining activities.  According to the SEC, Mr. Briner, who had already been sanctioned by the SEC, recruited clients and associates to act as figurehead executives of the shell companies, resulting in false registration statements.  The SEC also named Colorado-based attorney Diane Dalmy, Nevada-based audit firm De Joya Griffith LLC and its partners Arthur De Joya, Jason Griffith, Philip Zhang and Chris Whetman, and Texas-based audit firm M&K CPAS PLLC and its partners Matt Manis, Jon Ridenour and Ben Ortego.
SEC Press Release, 15 Jan 2015

The Securities and Exchange Commission announced charges against Aleksandr Milrud, a resident of Ontario, Canada, with engaging in a market manipulation scheme to defraud investors.  According to the SEC, Mr. Milrud recruited online traders in China, Korea, and elsewhere to engage in a practice known as ‘layering,’ in which a trader places orders solely to dupe others into trading securities at artificially inflated or deflated prices.  The SEC also alleges that Mr. Milrud gave the traders he recruited access to trading accounts, technology, and training on how to avoid detection, as well as tried to protect himself through the use of an offshore bank account and having money delivered in a suitcase filled with cash.  The U.S. Attorney’s Office for the District of New Jersey also announced the commencement of a parallel criminal proceeding against Mr. Milrud.
SEC Press Release, 13 Jan 2015

The Department of Justice announced that Robert L. Holloway, a California-based investment manager, was sentenced to almost 19 years in prison and ordered to pay more than $15 million in restitution for his role in a $33 million Ponzi scheme that caused more than $15 million in losses to investors.  Mr. Holloway was the CEO and managing partner of US Ventures LC, and was alleged to have made false representations to investors between October 2005 and April 2007.  Mr. Holloway was found guilty on four counts of wire fraud and one count of filing a false tax return by a jury following a trial in California federal court.
Department of Justice Press Release, 18 Dec 2014

 

SOUTH AMERICA

Eike Batista, once the 7th richest man in the world, is on trial in Brazil facing two charges of insider trading, and further charges of market manipulation, criminal conspiracy, misleading investors and false representation. The main charges relate to his use of Twitter in 2013 to encourage followers to invest in his oil company, OGX, at the same time as he was selling his shares, with the aim of manipulating the share price. A verdict is expected early in 2015.
Samantha Pearson,
Financial Times, 19 November 2014

 

AUSTRALASIA

The Republic of Vanuatu's opposition leader, Moana Carcasses, will face trial after being accused of paying more than (US)$300,000 to 14 opposition MPs. Several weeks earlier Mr Carcasses filed a criminal complaint against the Prime Minister, Joe Natuman, claiming that he has been interfering with an investigation into a police mutiny.
Radio New Zealand News International, 8 January 2015