Perception

11/10/2011
Hustlers, Rustlers and the 49th Parallel
Border, Barrier or Beach Front Property
For Securities Fraud
November 17, 2011
Louis L. Straney
securitiesfraudresearch.org
Professional Profile
(Indicate All That Apply)
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Law enforcement (US criminal)
US accounting/audit
Forensic accounting/investigative
Legal counsel/judicial system
US regulatory/enforcement
Canadian regulatory/enforcement
Currently or in past held any securities license
Geographic Profile
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b)
c)
d)
e)
f)
g)
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Canada
US Eastern/Central
US Mountain/Pacific
US Alaska/Hawaii
Europe
Asia/Australia/Pacific Rim
Mexico, Central or South America
Africa/Middle East
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Professional Experience
a) Never worked on a multi-national securities fraud
case
b) Limited exposure to 1 or more multi-national
securities fraud cases
c) Extensive experience with 1 or more multi-national
securities fraud cases
d) Personal knowledge of victims of investment
misconduct or fraud
Focus
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Explore theory of Shared Interests
Multi-national cases overview
Bre-X, the Olympics of securities fraud
US and Canadian protocols
“Edgarizing”
Sulja Brothers case study
CMKM Diamonds case study
Resources and further consideration
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Louis L. Straney,
2011
The World’s Longest
De-Militarized Border
SECURITIES FRAUD CROSSING
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Foot – Ferry – Flight
Font - Four Wheels
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Athletes, Artists, Actors
Tim Hortons and Tea
Cigarettes and Chevrolets
Firearms and Fords
Pills and Politics
Hockey and Home Depot
Syrup and Sony
Fraud and Fraudsters
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Louis L. Straney,
2011
Perception
Perception + Reality
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Results
Perception
Perception + Reality
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Results
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2011
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2011
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2011
No Respect For The 49th Parallel
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Arbour Energy
Brost and Sorenson
Gold Quest
Broad Capital Associates
Hollinger Int’l/Conrad Black
Beverlee Kamerling
Weizhen Tang
KINGZ Capital Management $300mm fraud
Urban Cassavant $60mm fraud
Bre-X
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Louis L. Straney,
2011
Case Experience or Knowledge
a) -0- of those cited
b) 1 - 5 of those cited
c) 6+ of those cited
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Bre-X
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OTC listed in Canada and US NASDAQ
Canadian based
Indonesian fraud
Fraud against Canadians and Americans
Class Action suits in Canada and US
Corporate officers “relocated” to Caribbean
Olympics of securities fraud
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Louis L. Straney,
2011
Bre-X Globetrotting
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Louis L. Straney,
2011
Securities Regulation
• National securities laws
(1933, 1934, 1940, 2002)
• Harmonized securities
laws (1924, 1930, 1955)
• Autonomy on state level
via Blue Sky laws
• Provincial and territorial
autonomy
• Self Regulatory
Organizations (FINRA,
NFA, MSRB)
• Self Regulatory
Organizations (IIROC,
MFDA)
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2011
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Securities Regulation
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Banks act as broker dealers
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Banks act as broker dealers
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FINRA BrokerCheck
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CSA national registration
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Laws based on British
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British Common Law plus
Napoleonic Civil Code
Common Law
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National security exchanges
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National security exchanges
3-6 year statute of limitations
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2 year statute of limitations
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Louis L. Straney,
2011
Securities Regulation
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Edgaronline for SEC docs
Accredited Investors
Patent protection
LLCs
SIPC
SEC, FBI, US DOJ
Pending reform
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Sedar.com for filing docs
Accredited Investors
Patent protection
Recent use of LLCs
CIPF
RCMP and Crown Court
Pending reform
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Louis L. Straney,
2011
Charles Ponzi
first came to the U.S in 1903
-but we loaned him to Canada for a few
years where he was first imprisoned for
financial fraud.
-It is believed that the Royal Canadian
Mounted Police provided a special
“scholarship”, and a one way ticket back to
Boston.
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Louis L. Straney,
2011
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Canadian Enforcement
• 2/10 Ex-Blackmont Branch Manager fined $50,000
• Financier Earl Jones receives 11-year sentence for
$50mm fraud
• Ex-iForum rep ordered by IIROC to pay $625,000
and banned for 44 months for mutual fund
misconduct
• Former Haywood broker fined $40K by IIROC for
breach of KYC rule
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2011
Canadian Enforcement
• MDFA disciplines Branch Manager through fine $10K for
lax supervision
• Quebec’s AMF fines total $82mm for 2009
• Ex-Canaccord Vancouver rep rec’d 10 year suspension
• Canadian fraudster, Georgiou, convicted in US of
manipulating microcap stocks and faces $21.25mm in
fines and restitution
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Louis L. Straney,
2011
 Lead investigation by OSC, IIROC and
RCMP
 U.S. SEC and FBI part of the joint force
 $9 million insider trading case
 Surreptitiously obtained from law firms
 January 2010, pleaded guilty to criminal
charges
 Sentenced in Toronto to 39 months
imprisonment
All Rights
Louis L. Straney,
2011
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Vadim Tsatskin
Global Energy Group LTD
OSC initiative – 2011
$15M of gold securities
Kentucky oil and gas leases
Sentencing November 2011
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Louis L. Straney,
2011
OTC Markets
• NASDAQ, Bulletin Board, Pink Sheets, Grey
Markets, Scripophily
• NASDAQ = Extensive filing requirements (e.g.
AAPL)
• Bulletin Board = Required SEC filings (can be
removed if fail to file)
• Pink Sheets (OTC Markets Group, Inc.), since 1913
- OTCQX, OTCQB, and OTC Pink
- Private company and not a stock exchange
- No SEC filing requirements
- Ask for 15c-11 (under the 1934 Act) information
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2011
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Louis L. Straney,
2011
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EDGARIZING
 Objective is listing on US Exchanges
 Typically multi-national in scope
 Often involves rollup or reverse stock split
 Commodity-related assets
 Bogus press release announcements
 “Pump and Dump” by insiders
 Bre-X, CMKM Diamonds
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Louis L. Straney,
2011
MEET
Black Pete our CEO
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Louis L. Straney,
2011
“Black Pete” SLJB CEO
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Louis L. Straney,
2011
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SLJB – “Edgarized”
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Louis L. Straney,
2011
(SLJB) US OTC Pink Sheet
SULJA Brothers Building Supplies LTD
SULJA Nevada
Kore Inter’l Management, Inc.
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Formed in 2006 after reverse merger with LOFTWERKS
Sulja Nevada, US Corp., managed by resident of Texas
Sulja Brothers Building Supplies - Harrow, Ontario
Insiders pirated stock and sold through nominee accounts
(07/2006-12/2006)
Approximately $11.5M found
Trading halted 08/04/2010
Trading range $0.0003 - $0.025
JSIU-IMET-OSC-RCMP
Fake claims of auditing relationships with PWC and KPMG
Class Action Litigation pending
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Louis L. Straney,
2011
1 Million Millionaires
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Louis L. Straney,
2011
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CMKM Diamonds (CMKX)
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Louis L. Straney,
2011
Diamonds & Funny Stuff
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Louis L. Straney,
2011
Destination
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2011
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CMKM Diamonds (CMKX)
2002 - 2008
• Formed in 2002 through asset consolidation of
rights to Canadian mineral assets operation with
Nevada-based Cyber Mark Int’l (OTC)
• Cyber Mark Int’l was a video game company
• Cyber Mark Int’l balance sheet (SEC 10-Q)
- $344.00 in cash
- Overdrawn bank account ($1,672)
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Louis L. Straney,
2011
CMKM On the Move
• Listed on OTC Pink Sheet market
• Filed Form-15 with SEC claiming exemption to reporting
requirements
• 2003, declared a 2 for 1 stock split
• Authorized additional 500 billion shares
• Capital structure = 800 billion shares
• Targets the NASCAR crowd
• Avalanche of press releases
• Goal of a “Million Millionaires”
• 2003-2005 deficient with SEC filings
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Louis L. Straney,
2011
Grit Into Gold
Dirt Into Diamonds
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Valuation = $0.00010 - $0.00070
Never reached a penny per share
1,000,000 shares at $0.00010 costs investor $100
Insiders and “friends of the company” manipulated
- Information
- Transfer Agent
- Stock issuance process
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Louis L. Straney,
2011
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Fast Forward
• Nearly 400 billion shares of CMKM were illegally
issued
• Nearly 400 billion shares were sold into the public
market by insiders and friends of the company
through grantor trust and nominee accounts
• Approximately $100 million of proceeds from the
OTC sales were converted from the CMKM treasury
to the conspirators.
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Louis L. Straney,
2011
From the Bench
• June 2009, SEC files a civil fraud case against four
individuals associated with the company
• Among other things, US District Judge cites
- Writing false opinion letters (legal transfer)
- Publishing false press releases
- Populating false internet message boards
- Use of company assets for personal purposes
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Louis L. Straney,
2011
CMKM Today
• Remains viral
• Shares continue to trade as “Scripophily”
• Conspiracy theories related to money laundering for
terrorist organizations
• Insider jailed in London fighting extradition
• No one jailed in the US or Canada where investors
were defrauded out of $100 million
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2011
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Tale of the Tape
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Louis L. Straney,
2011
Examiner’s Benchmarks
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Corporate structure and balance sheet
Current SEC filings
Evaluation of assets (and not estimates of “rights”)
Stock splits and new issuance of shares
Stock transfer agent
Nevada connection
Internet blogs and representations
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Louis L. Straney,
2011
RESOURCES: Websites
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State Department's Bureau of Diplomatic Security:
www.ds.state.gov/index.html
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Bureau of Alcohol, Tobacco & Firearms (ATF):
www.atf.treas.gov
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Commodity Futures Trading Commission (CFTC):
www.cftc.gov
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Customs and Border Protection: www.customs.gov
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Federal Bureau of Investigation (FBI): www.fbi.gov
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Federal Trade Commission (FTC): www.ftc.gov
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Financial Crimes Enforcement Division (FINCEN):
www.fincen.gov
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RESOURCES: Websites (continued)
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Financial Industry Regulatory Authority (FINRA): www.finra.org
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Internal Revenue Service Criminal Investigative Division (IRS-CID):
www.irs.gov/compliance/enforcement
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National Futures Association (NFA): www.nfa.futures.org
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Postal Inspection Service: www.usps.gov/websites/depart/inspect
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Secret Service: www.treas.gov/usss/index.shtml
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Securities and Exchange Commission: www.sec.gov
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Treasury Inspector General for Tax Administration: www.tigta.treas.gov
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iiRoc.CA: Investment Industry Regulatory Organization of Canada
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Securities – Administrators. CA: Canadian Securities Administrators
(CSA/ACVM)
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MFDA.CA: Mutual Fund Dealers Association of Canada
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Fair Canada.CA
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US Financial Fraud Enforcement Task Force: stopfraud.gov
For Further Consideration
• The Naked Truth, Mark Faulk (CMKM Diamonds)
• The Bre-X Fraud, Douglas Goold and Andrew Willis
(Bre-X0
• The Barlow Clowes Affair, Lawrence Lever (UK)
• Free Rider, J. L. Reynolds (Canada)
• Securities Fraud: Detection, Prevention and
Control, Louis L. Straney (global issues)
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Louis L. Straney,
2011
Approachable Resources
• Investor information: English, French, Spanish
Chinese, toll free numbers
• Required response from public offices
• Informational meetings and seminars by regulators
• There are limits for active cases
• Patience
• Whistleblower programs
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Louis L. Straney,
2011
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QUESTIONS?
Louis L. Straney
[email protected]
505-466-2219
securitiesfraudresearch.org
Hustlers, Rustlers and the 49th Parallel
Border, Barrier or Beach Front Property
For Securities Fraud
November 17, 2011
Louis L. Straney
[email protected]
505-466-2219
securitiesfraudresearch.org
ACFE Webinar
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