Category Archives: SEC News

SEC Fines John Thomas Financial for Role in Fraudulent Hedge Funds

Securities Broker-dealer firm John Thomas Financial Inc. (JTF) and its chief executive Anastasios “Tommy” Belesis recently reached a settlement agreement with the Securities and Exchange Commission in an enforcement action relating to their roles in the management of two fraudulent hedge funds.  These hedge funds — John Thomas Bridge and Opportunity Fund LP, and John Thomas Bridge and Opportunity Fund II, LP – were managed by an affiliate of JTF.

The SEC has also determined that the hedge funds’ manager breached fiduciary duties owed to the hedge funds when he caused the hedge funds to pay millions of dollars in fraudulent management fees; that JTF aided and abetted the managers’ breaches of fiduciary duties; and that JTF itself received improper finder fees when the hedge fund made various investments.

The SEC’s cease and desist order suggests that Belesis caused these hedge funds — which he pushed on his broker-dealer firm’s customers — to be looted.  It appears that these funds were ultimately run for Belesis’ benefit at the expense of his firm’s broker customers.

According to the SEC’s cease and desist order:  “the Manager abandoned his fiduciary duties to the Funds and negotiated arrangements whereby the borrowing companies – in which the [hedge funds] were invested and from which the [hedge funds] sought repayment – would pay unwarranted finder fees to Respondent JTF out of the proceeds received from the [hedge funds]. Thus, the Manager of the Funds, when negotiating bridge loans between the [hedge funds] and the borrowing companies, placed the interests of Respondents above the interests of the [hedge funds]….”

The settlement requires Respondent JTF to pay a civil fine to the SEC of $500,000.

Investors who were sold investments in these hedge funds by JTF may have claims against JTF for unsuitable investment recommendations and fraud.  It is possible that investors in these funds may recoup losses by pursuing claims in arbitration against JTF at FINRA Dispute Resolution.

Blau & Malmfeldt invites JTF customers who invested in the John Thomas Bridge Opportunity Fund LP and/or the John Thomas Bridge and Opportunity Fund II, LP to contact us at 312-443-1600 for a complimentary case evaluation.  Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership and shareholder rights disputes.

Mark Cuban Cleared of SEC’s Insider Trading Charges

On October 16, 2013, a federal jury returned a verdict in favor of Mark Cuban, the outspoken, billionaire owner of the NBA’s Dallas Mavericks, in a securities fraud and insider trading case prosecuted by the SEC.  (Here is a copy of the SEC’s complaint.)

The SEC’s charges revolved around a phone conversation Cuban had in June 2004 with Guy Faure, the former CEO of Mamma.com.  Cuban owned a six and a half percent interest in Mamma.com stock when Faure called Cuban about participating in a private investment in public equity (PIPE) deal.

Faure alleged in a July 2011 deposition that Cuban agreed to keep confidential the information that Faure transmitted to him during the June 2004 telephone conservation and not to act on that information.  Cuban sold his interest in Mamma.com shortly after his phone conversation with Faure.  The government charged that Cuban traded illegally on insider information.

At trial, Cuban testified that he did not remember the June 2004 conversation with Faure and that he certainly did not enter into any sort of confidentiality agreement.  Faure refused to testify in person at the trial but instead testified via video conference.  Cuban’s lawyers cast doubts on Faure’s credibility, and argued that the volatility in Mamma.com stock before Cuban executed his trade was evidence that Mamma.com’s search for a PIPE investor was public information.

The SEC’s case showed early signs of weakness.  The trial court dismissed the SEC’s complaint in 2009.  While the U.S. Court of Appeals for the 5th Circuit reversed the trial court’s order of dismissal, the opinion described that the decision was a close one.

Cuban’s defense costs were likely far in excess of what the government would have accepted in settlement.  Cuban was adamant throughout the process that he did nothing wrong and accused the SEC of engaging in abusive conduct.

Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership, and shareholder rights disputes.  Contact us to learn more about the services that we offer.