Forefront Capital Markets Charged With Securities Fraud
Demitrios Hallas, of New York, New York, a stockbroker formerly registered with Forefront Capital Markets, LLC, has been charged by the Securities and Exchange Commission (SEC) in a Complaint alleging that he effected fraudulent securities transactions and misappropriated funds from customers. Securities and Exchange Commission v. Demitrios Hallas, 1:17-cv-029991:17-cv-02999 (Apr. 25, 2017).
According to the Complaint, from September of 2014 to October of 2015, one-hundred and seventy-nine leveraged exchange traded notes and exchange traded fund purchases and sales were effected in customer accounts by Hallas, despite the transactions having failed to be suitable for the customers. Apparently, the securities were designed to provide two to three times the returns to customers than what was provided via foreign equities indices, gold mining indices, and the Standard and Poors 50 VIX Short Term Futures Index. The Complaint alleged that these products were generally meant for advanced investors who intended on holding the products for no longer than a day.
Apparently, the customers affected by Hallas’ activities were not sophisticated investors. Hallas allegedly failed to ascertain customers’ objectives for investing, and did not relay information to them regarding the leveraged exchange traded notes and exchange traded fund risk factors. Hallas reportedly failed to confer with customers about the transactions prior to placing them. The SEC alleged that Hallas’ unsuitable transactions in these customers’ accounts occurred on a repetitive basis.
The Complaint further indicated that Hallas’ failure to conduct due diligence on the products contributed to his ignorance regarding the risks that the products posed for customers. Specifically, Hallas failed to comprehend the risks that customers faced by way of holding the leveraged products for extended periods. The SEC stated that customers’ positions were held in the notes and funds for longer than a trading day in one-hundred and sixteen occasions, wherein the extended holding periods caused them to incur investment losses. Consequently, the SEC claimed that Hallas failed to have an adequate basis for concluding that the products were appropriate for the customers. The Complaint revealed that customers ultimately sustained a total of $150,000.00 in losses.
Moreover, Hallas was alleged in the Complaint to have effected a fraudulent scheme involving an unsophisticated customer, in which he retrieved $170,750.00 in funds from the customer based upon the notion that the funds would be utilized to effect securities transactions. The funds were purportedly misappropriated by Hallas to cover his personal expenses. Particularly, in four circumstances, securities were sold from the brokerage accounts owned by the customer and transferred to the customer’s bank account, where Hallas then deposited $115,000.00 worth of the customer’s checks into a personal banking account that Hallas owned.
The SEC alleged that the customer’s monies, meant for purposes of investing, were instead used to pay Hallas’ rent, student loans and bar tabs. Hallas apparently concealed his scheme from the customer when the customer inquired in May of 2016, and the funds have not been repaid. The SEC alleged that Hallas’ conduct in this regard was violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, and Securities Act of 1933 Section 17(a).
Financial Industry Regulatory Authority (FINRA) Public Disclosure reveals that Hallas has been subject of two prior regulatory infractions. Specifically, on April 19, 2016, he was suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon allegations that he failed to provide FINRA personnel with information concerning his business activities. Case No. 2015047828801 (Apr. 19, 2016). Further, on July 7, 2014, he was fined $5,000.00 and suspended by FINRA pursuant to a Decision & Order of Offer of Settlement containing findings that while associated with Chase Investment Services Corp., Hallas made unsuitable recommendations pertaining to unit investment trusts, mutual funds and annuities. FINRA found that Hallas’ conduct was violative of FINRA Rules 2010 and NASD Rules 2310.
Furthermore, on October 27, 2011, a customer filed an investment related written complaint involving Hallas’ conduct, where the customer requested $23,414.00 in damages based upon allegations that Hallas, while associated with PNC Investments, made misrepresentations to the customer concerning the terms and conditions of a variable annuity. Subsequently, on March 8, 2016, a customer initiated investment related written complaint regarding Hallas’ activities was resolved for $14,000.00 in damages based upon allegations that he effected in inappropriate variable annuity transaction.
Hallas’ registration with Forefront Capital Markets LLC was terminated on July 28, 2015. Between August 3, 2015 and December 3, 2015, he was associated with PHX Financial, Inc.
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