Short-Selling Scheme Hides Margin Problems from Clearing Firm - - - Final judgment was entered against David Davidson, former chairman and CEO of D.L. Cromwell Investments, a defunct broker-dealer, and Lloyd Beirne, its former president, for their involvement in a fraudulent short selling scheme involving the stock of Expedia, Inc. From October 2002 through March 2003, the two used online access to its clearing broker's system to fraudulently enter and then cancel fictitious Expedia buy orders, in order to conceal Cromwell's short position and its margin problems. When the fraud was discovered, after the announcement of a tender offer for Expedia, the clearing broker was required to pay $18mn to cover the short position. Each was sentenced to 5 years probation and ordered to pay, among other things, $7mn in restitution. [SEC Litigation Release 20659, 7/29]
Canadian Couple's Commodity Pool Operated as Ponzi Scheme - - - The CFTC filed enforcement action against Robin States (dba Infinity Online Investors Group), and his wife Bernadette Bowden, charging them with fraudulent solicitations and misappropriation of commodity pool participant funds. Brother Paul States was named as a relief defendant. From October 2004 through Sept. 2005, Robin States accepted at least $650K from at least 900 individuals to participate in a commodity pool, which never engaged in trading but rather operated as a Ponzi scheme. [CFTC Release 5524-08, 7/29]
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