SEC obtains final judgments against New York investment adviser in multi-million dollar Ponzi scheme
New York investment adviser Brian Callahan, along with his brother-in-law Adam Manson and their entities, have received final judgments from the US District Court for the Eastern District of New York for their involvement in a Ponzi scheme. The scheme, which was halted by the SEC in 2012, defrauded investors out of millions of dollars.
According to the SEC’s complaint, Callahan raised over $90 million from 45 investors between 2005 and 2012. He managed the investment decisions for five offshore funds, charging inflated management fees. Callahan misused investor assets to pay off certain investors and cover personal expenses. He also diverted funds to Manson’s real estate project. Manson aided Callahan by creating false documents to conceal the scheme.
Without admitting guilt, Callahan, Manson, and their entities consented to permanent injunctions from violating securities laws. The SEC-appointed receiver and criminal authorities have collected over $51 million for distribution to affected investors.
In a parallel criminal case, Callahan and Manson pled guilty to securities fraud charges. Callahan received a 12-year prison sentence and restitution of over $67 million, while Manson was sentenced to two years in prison and paid certain monetary amounts.
Federal Court finds AMP companies in breach of law for charging deceased customers’ accounts
The Federal Court of Australia has determined that four companies associated with the AMP Group violated the law by charging life insurance premiums and advice fees from the superannuation accounts of more than 2,000 deceased customers. As a result, two of the AMP companies have been ordered to pay a total penalty of AUS$24 million for their misconduct.
ASIC Deputy Chair Sarah Court expressed disappointment, stating that the AMP companies were aware of the customers’ deaths but continued to charge premiums and fees on their super accounts. Court emphasized that customers and their beneficiaries expect financial service providers to have adequate systems in place to cease charging fees upon notification of a customer’s death, and the inadequate systems of the AMP companies let down the affected customers.
AMP Life Limited and AMP Financial Planning have admitted to engaging in unconscionable conduct by deducting and/or failing to refund insurance premiums and advice fees from deceased superannuation members. ‘This misconduct represents a fundamental breach of trust between a customer and their financial services provider’, added Ms Court.
The AMP companies received over $500,000 in insurance premiums from the accounts of deceased customers, with at least $350,000 charged between May 2015 and August 2019. Additionally, they collected over $100,000 in advice fees from deceased customer accounts, with at least $75,000 charged during the same period. It was also revealed that the AMP companies accepted these premiums and fees despite having reasonable grounds to believe that they would not be able to provide the insurance or advice.
Furthermore, the Court found that all four AMP companies failed to fulfill their overarching obligations as Australian financial services licensees to act efficiently, honestly, and fairly.
Justice Hespe, who presided over the case, described the misconduct as “very serious, wrongful behavior,” highlighting that the deceased customers were vulnerable and dependent on the representatives of their estates. Hespe further criticized AMP’s lack of oversight and executive management awareness, emphasizing the failure to establish a process capable of identifying, investigating, and addressing systemic issues for many years.
The ruling serves as a further reminder to financial service providers to fulfill their responsibilities and obligations to their customers, particularly in situations involving deceased individuals. The AMP companies’ conduct demonstrated a disregard for their customers’ trust and reinforces the need for robust systems and practices within the industry.
SIFMA: hot topics in AML and financial crime for BDs
US trade association the Securities Industry And Financial Markets Association (SIFMA) has published a helpful article reviewing some of the current topics in anti-money laundering and financial crime affecting boker-dealers.
The article covers:
- AML Act of 2020 + CTA;
- Beneficial Ownership Reporting;
- AML for Investment Advisers;
- Marijuana and Broker-Dealers;
- Digital Assets; and
The article concludes with a plea to legislators to continue to enact new rules “for a noble purpose” but noting too that “any legislation and rulemaking should be thoughtful, so as to not impose requirements where none should exist”.