New York Securities Brokers Charged in Fraudulent Scheme
General securities representatives Timothy Stephen Dembski and Walter Francis Grenda Jr., both former employees with Mid Atlantic Capital Corporation (“MACC”) in Cheektowaga, NY, were charged by FINRA’s Department of Enforcement in a Complaint containing allegations that the individuals engaged in fraudulent misrepresentations and omissions in violation of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, and FINRA Rules 2020 and 2010, and in the alternative, misrepresentations and omissions in violation of Section 17(a) of the Securities Act of 1934, and that Grenda took improper loans from customers in violation of NASD Conduct Rule 2370 and FINRA Rule 2010 as well as providing false testimony to FINRA in violation of FINRA Rules 8210 and 2010. Dept. of Enforcement v. Dembski. No. 2013036168701 (Filed Dec 10, 2014).
Also on December 10, 2014, the SEC sought a parallel complaint and public administrative and cease-and-desist proceedings against Dembski and Grenda, alleging fraud charges against the individuals for making misleading and false statements to their clients in the recommendation of a risky hedge fund. In the Matters of Reliance Financial Advisors, LLC, et al., File No. 3-16311 (Filed Dec 10, 2014). The Enforcement Division of the SEC alleges that the individuals along with Reliance Financial Advisors had violated antifraud provisions of the Securities Act of 1933, Securities Act of 1934, Investment Advisers Act of 1940. Additionally, the Enforcement Division is alleging that the individuals aided and abetted and had caused the violations of such provisions by Reliance Financial Advisors along with the general partner to Prestige Wealth Management Fund (explained infra).
The Complaints allege that between March 1st of 2012 and September 1st of 2012, two customers were fraudulently induced by Dembski, and three by Grenda, to invest in what was referred to as a hedge fund called Prestige Wealth Management Fund, LP (“Prestige”). Both individuals were associated with Mid Atlantic Capital Corp. The Complaints state that Dembski’s and Grenda’s misrepresentations and omissions led multiple investors to assume that Prestige was a growth fund that carried stop-losses and risk protections in order to limit losses. The Complaints further state that Prestige’s chief investment officer, SMS, had total control over all investments held within the Fund, and was not actually subject to any algorithm that would prompt stop-losses and risk protections despite differing prior representations to investors. The Complaints indicate that in December of 2012, while in the last month of trading, Prestige’s value had plummeted by over 80%.
Additionally, the Complaints allege that Dembski and Grenda knew that upon providing the confidential private placement memorandum for Prestige to prospective investors, the information carried material misleading misrepresentations regarding SMS’s professional background. The Complaints state that SMS never managed a prior portfolio of securities and was a VP of an investment company, despite the private placement memorandum stating otherwise.
The Complaints further indicate that approximately from September 2009 to March 2010, when Grenda was registered with FINRA via Wall Street Financial Group, that he borrowed money from two of his customers without first seeking his firm’s permission. Grenda, according to the Complaints, lied repeatedly to FINRA investigators regarding the nature of such loans.
Public Disclosure Records
Public disclosure records reveal that Dembski is the subject of a pending customer dispute. On March 1, 2013, a client alleged unsuitable investment in hedge funds and that the product was not represented accurately. The client is requesting damages of $35,000.
Public disclosure records reveal that Grenda, Jr. has been subject to at least 3 customer disputes. On August 28, 2005, a party was awarded $115,000.00 against Grenda after allegations of misrepresentations, unsuitable recommendations and excessive amounts of commission and fees in the purchase of variable annuities and equities. On October 3, 2005, Grenda settled a customer dispute for $47,500.00 after a customer alleged that Grenda, as successor financial advisor on her accounts, made unsuitable investments and unauthorized trades. On July 21, 2006, Grenda settled a customer dispute for $18,475.00 after allegations of misrepresentations, unsuitable recommendations and unsuitable commissions and fees for conduct occurring from May of 1998 through January 2006. The SEC has permanently barred Grenda from acting as a broker and investment adviser, or otherwise associating with firms that sell securities or provide investment advice to the public.
Guiliano Law Group
Investors suffering losses or damages caused by Dembski and Grenda, Jr. may be able to recover their investment losses. Our practice is limited to the representation of investors in claims, for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.