New York Securities Lawyer Blog
On September 3, 2013, the Securities and Exchange Commission (“SEC”) filed a complaint in the United States District Court for the Southern District of New York which alleged that Ronald Feldstein, Mara Capital Management LLC (“Mara Capital”) and Vita Health of America LLC (“Vita Health”) defrauded three unnamed brokerage firms of $2 million and defrauded customers of $450,000. According to the SEC Complaint, Feldstein pretended to be a money manager and opened accounts at three different broker-dealers in the name of two purported investment funds named Mara Capital and Vita Health. The complaint further alleges that Feldstein engaged in an illegal free-riding scheme where he would purchase securities through deliver versus payment accounts (“DVP accounts”) at the three broker-dealers with no intention of remitting payment or settling trades that were unprofitable. The complaint states, “by definition, such [DVP] accounts allow a customer to buy securities at the executing broker and not pay for them until delivery and settlement, usually arranged with a different custodial account held by the customer at another firm, which the customer identifies to the executing broker upon opening the DVP account.” The SEC claims that Feldstein misrepresented to the three brokerage firms that he held sufficient cash in custodian accounts at third-parties to cover any losses in his DVP accounts, when in reality, he did not have sufficient cash to cover any losses. From September 2008 through February 2009, this free-riding scam resulting in over $2 million in losses to the three broker-dealers.
Additionally, the SEC alleges that from 2009 through late 2011, Feldstein induced investors to give him $450,000 to invest in Trademore Capital Management LLC for penny stock investments, to invest in a fashion company’s initial public offering (“IPO”), and to invest in a purported successful hedge fund. The SEC claims that rather than using the investor funds for the stated legitimate investments, Feldstein converted the money for his own personal use, including, but not limited to, purchasing a Bentley automobile, summer trips to the Hamptons and trips to casinos.
The SEC complaint alleges that Feldstein, Mara Capital and Vita Health violated Section 10(b) of the Securities Exchange Act of 1934 and Section 17(a) of the Securities Act of 1933. The SEC Complaint seeks an injunction from future violations of SEC Rules, disgorgement, civil monetary penalties, and an order barring Feldstein from investing in penny stocks.
Lax & Neville LLP has nationally represented small broker-dealers, investment advisers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Additionally, Lax & Neville has extensive experience in successfully prosecuting claims on behalf of customers and investors who have suffered losses. Please contact our team of attorneys for a consultation at (212) 696-1999.