Seaquake.io of a Scam: Andrew Katz & Former PayPal Finance Exec Matthew Krueger Charged In Crypto Investor Fraud

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(Source: Law360.com ) Andrew R. Katz, aka Ross Katz (photo left) an Arvada, Colorado man who is said to be residing in New York and claims to be both a former UBS equity research analyst and a former FX trader for EFG Bank, and now presents himself as co-founder of  Seaquake.io, a”digital asset infrastructure company”, along with Seaquake CFO Matthew J. Krueger of San Francisco (photo right), who claims to be a former PayPal “Finance Manager” and says he was the former “Head of Finance” for Venmo, along with UK resident Dylan Knight have been named as Defendants in a Federal Court complaint alleging the men advanced a systematic scheme to defraud a Florida-based investor group. The complaint cites multiple accounts of securities fraud, fraud in the inducement, and wire fraud.

A treasure trove of information submitted to the court include a slew of communications to the investors claiming the company was operating an enterprise with several different modules, including a high-frequency trading application for crypto currencies and delivering investors 1%-2% monthly returns. Other representations made within investor offering material and separate communications to the investors include claims the company had received equity investment proposals from an assortment of investors, including industry players Bitmex Ventures and Crimson Ventures. Katz also claimed to have established a strategic partnership with payment processing company PaySafe.

Based on those and other representations made by Katz, who lists former jobs at UBS Bank and EFG Capital-despite neither of those banks having any record of his employment, and Finra having no record of Katz ever being licensed by that securities industry regulator, the investors entered into a so-called “SAFE Agreement” with the company and provided capital to a Seaquake entity for purposes of deploying the funds to the company’s purported high-frequency crypto currency trading application. The entity the investors sent funds to was dissolved within weeks after the investors transferred funds to Signature Bank in New York at the direction of Katz and or  Krueger directions.

According to the federal court complaint, the investors were informed by Katz after he took their funds that the “HFT application isn’t working properly, and your money will moved to a money market fund until its ready.” As acknowledged in a court appearance by a defense attorney hired by Katz, the investors funds were actually disbursed to personal accounts controlled by Katz and Krueger. According to the attorney, “the SAFE agreement did not preclude the defendants to use the money however they wanted.”

In court filings, it appears that nearly every representation made by defendants Katz and Krueger were fictitious, including Katz’s claim to have been summoned by “The Prince of Dubai” who, according to Katz, “oversees the country’s sovereign wealth investments and wants to invest in the company.” With regard to Katz’s claims that representatives of each of Bitmex, UK-based Paysafe and Crimson were moving to invest in the company or form strategic partnerships with the company, representatives of those firms have indicated no record of ever expressing any investment or strategic interest in Katz or Seaquake. A representative for Bitmex Ventures did state “they sent us a pitch deck and a junior analyst spoke to Katz and informed him there was no interest on our part to work with him.”

As indicated in the complaint, within days after receiving the investor’s funds, Katz acknowledged the company was not actually operating a trading application for investors, and that “investors funds would be put into a money market account until such time as they could be properly deployed using the firms high-frequency trading software.” In actuality, Katz and Krueger transferred the investors funds to personal accounts they control at Compass Bank and Bank of America, as well as to ‘digital wallets’ at Coinbase and Binance.

Katz, who claimed within investor offering documents to have backed the company with $1million of his own money, had not in fact made any significant capital investment in the company.  Within four weeks of having transferred funds to Seaquake and upon discovering the assortment of false claims made by Katz and Krueger, the investors demanded the return of their funds. In response to the demand by the investors for the return of their funds, correspondences from both Katz and Krueger both asserted they have “no obligation to communicate with Investor’s attorney or to provide any information..” Two days after the demand letter was delivered via process server to defendants, they dissolved the Seaquake corporate entity that had entered into the agreement with the investors. Based on Signature Bank and Compass Bank transaction documents provided to the court, Katz and Krueger then systematically moved the investor funds to newly-created entities, then transferred tens of thousands of dollars to personal accounts controlled by Katz and Krueger individually, and moved the bulk of the investors’ funds to accounts controlled by the defendants to crypto exchange Coinbase. Soon after, Katz or Krueger moved the funds in the Coinbase account to accounts at UK-based Binance.

According to background searches, Andrew Katz has a lengthy criminal history, including two arrests in 2018 in Los Angeles on domestic violence charges. A 2006 class action lawsuit against World Wide Association of Specialty Programs and Schools, a Utah-based facility for emotionally-troubled youth, identifies both Andrew Katz and his mother, Alyson Katz, also of Arvada, Colorado, among the plaintiffs.

Despite the charges, a man by the name of David Streltsoff, who is listed as Senior Vice President for San Francisco broker-dealer “US Capital Global” is apparently not deterred from associating himself with Seaquake. According to his LinkedIn profile Streltsoff signed on as “Business Development Executive” for the company in September. Federal court filings indicate Streltsoff has failed to respond to a federal court subpoena for information. Jeffrey Sweeney, the CEO of US Capital Global has not replied to inquiries.

Since the litigation was filed, at least one other investor has been identified as having been scammed. That investor was apparently introduced by a former Seaquake.io employee, an individual who is said to be cooperating with law enforcement authorities.

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NYSE DMM GTS Making Markets Better: Aligns With Boutique Investment Bank Mischler

NYSE DMM GTS in pact with veteran-owned broker-dealer mischler
NYSE’s Top DMM – GTS – Takes Stake in Boutique Investment Bank Mischler Financial Group

GTS and Veteran-Owned Mischler Financial Group Forge High-Tech, High-Touch Alliance to Serve Corporate Issuers, Investment Managers and Other Market Participants

New York, NY – November 19, 2018 – GTS, the New York Stock Exchange’s largest Designated Market-Maker (“DMM”) and a leading electronic trading firm, and Mischler Financial Group, Inc. (“Mischler”), the financial services industry’s oldest minority broker-dealer owned and operated by service-disabled veterans, today announced a strategic alliance that will establish a best-in-class offering for primary debt and equity market underwriting as well as secondary market best execution across the capital markets.

The partnership, which is anchored by a technology-powered offering for public companies and a broad universe of capital markets participants, will yield a low-cost, more efficient and more effective trade execution experience. Mischler will become a “forward operating base” for the growing GTS capital markets franchise, affording clients access to technology and sources of liquidity that are generally only available to the world’s most sophisticated investors.

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(l)Ari Rubenstein,GTS co-founder & CEO (r) Dean Chamberlain (SDV),CEO,Mischler Financial Group

Founded in 2006 as a proprietary, quantitative trading firm, GTS is now a recognized leader in market structure and proudly oversees trading for more than one-third of NYSE-listed companies. The firm has an extensive track record developing and deploying proprietary, industry-best technology to bring better price discovery, trade execution and transparency to the markets.

“This is a high-tech, high-touch partnership designed to meet the needs of a new generation of issuers, asset managers, and trading and investment professionals seeking low-impact market liquidity and best-in-class execution,” said Ari Rubenstein, Co-Founder and Chief Executive Officer of GTS. “Clients are rightfully demanding innovation in the marketplace, and this alliance is uniquely designed to provide that and much more.”

Mischler, established in 1994, is an active underwriter across global equities, corporate and municipal debt, government securities and structured products. In the last three years alone, Mischler has played a role in almost 700 primary debt and equity market transactions. The firm also provides conflict-free share repurchase services for corporate treasurers as well as secondary market trade execution in equities and fixed income for a discrete universe of public plan sponsors and institutional investment managers.

Dean Chamberlain, Mischler’s Chief Executive Officer and a West Point graduate and former U.S. Army Officer, added: “The combined GTS-Mischler offering holistically provides a powerful arsenal of primary and secondary market solutions for the most demanding capital markets constituents. Mischler’s pedigree, capital markets expertise and front-line position – where we engage with a discrete network of corporate treasury executives and investment managers – is now further strengthened by the unrivaled technology and multi-asset trade facilitation platform that GTS has pioneered.”

Mischler is a fully-certified Service-Disabled Veteran Business Enterprise (SDVOBE) and FINRA’s oldest veteran-owned investment bank and institutional brokerage. “For issuers and investment managers focused on retaining truly expert capabilities while fulfilling their Diversity & Inclusion goals, the combined GTS-Mischler platform will not merely meet, but will exceed all expectations,” added Mr. Chamberlain.

Mr. Rubenstein concluded: “This partnership is another trans-formative moment for the build-out of our capital markets business and reflects the next phase of an evolution in which GTS and Mischler constituents can more easily access and benefit from quantitative, algorithmic, and next generation AI applications. The current environment and the landscape of the future will reward market participants who responsibly leverage technology. If we can arm all investment professionals with these assets, they can thrive in new ways.”

To read the entire story, please visit www.mischlerfinancial.com/mischler-gts-connection

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Minority Broker-Dealer Makes Annual Veterans Day Pledge

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Newport Beach, CA & Stamford, CT – November 1, 2018 — Each year, Mischler Financial Group, Inc. (“Mischler”), the securities industry’s oldest investment bank and institutional brokerage owned and operated by service-disabled veterans, pledges a percentage of the firm’s profits to veteran and service-disabled veteran philanthropies as part of its annual Veterans Day charitable initiative. This year, Mischler is proud to announce that Army Ranger Lead The Way Fund will be the recipient of the Mischler 2018 Veterans Day Month pledge.

Established in 2007, Army Ranger Lead The Way Fund, Inc. (“LWTF”) is a 501c3 Non-Profit created in honor of Sgt. James J. Regan (“Jimmy”) who served with Charlie Company, 3d Battalion, 75th Ranger Regiment. Jimmy was killed in action while serving in Baqubah, Iraq on February 9, 2007, at the age of 26. Since its formation, the organization has been dedicated to raising funds to support disabled U.S. Army Rangers and the families of Rangers who have died, have been injured or are currently serving in harm’s way around the world. LTWF provides spouses and children of deceased, disabled or active duty Rangers with assistance for acute medical care, recovery and wellness programs, warrior transition programs and other services determined to be vital to the family’s well-being, beyond what the government can offer.

Dean Chamberlain, Chief Executive Officer of Mischler and a graduate of the US Military Academy at West Point who served as a Captain in the U.S. Army 4th Infantry Division from 1985-1990 stated, “We are grateful to the many clients of our firm who provide us with the opportunity to demonstrate our capabilities and in turn, afford us the ability to pay back and pay forward to carefully-selected philanthropies throughout the year. When paying tribute to Veterans Day, in particular, we believe that Army Ranger Lead The Way Fund meets and exceeds the objectives of our firm’s philanthropic mission.”

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Mischler CEO Dean Chamberlain (center), General Joseph Votel (right) attending Lead The Way Fund Gala honoring General Votel and Steve Cohen ,Founder Cohen Veteran Network

About Lead The Way Fund, Inc.

Army Ranger Lead The Way Fund, Inc., A 501c3 Non-Profit, Is An Active Duty, Casualty Assistance, Recovery, Transition And Veterans Organization That Provides Financial Support, Beyond What The Government And Veterans Affairs Can Offer, To U.S. Army Rangers And The Families Of Those Who Have Died, Have Been Disabled Or Who Are Currently Serving In Harm’s Way Around The World. The organization website is https://www.leadthewayfund.org/.

About Mischler Financial Group, Inc.

Mischler is a federally-certified Service-Disabled Veteran-owned Small Business (SDVOSB). Established in 1994, the firm is FINRA’s oldest investment bank and institutional brokerage owned and operated by Service-Disabled Veterans. Within the primary capital markets, Mischler provides investment banking, underwriting, and distribution of corporate debt and equities, and municipal debt issuance. Mischler’s secondary market, conflict-free capabilities extend across the U.S. and global equity markets, exchange-traded funds and the U.S. fixed income markets. Mischler also provides asset management for liquid and alternative investment strategies. Clients of the firm include leading institutional investment managers, Fortune corporate treasurers and municipal officials, public plan sponsors, endowments, and foundations. The firm’s website is located at www.mischlerfinancial.com

 

 

Federal Judge View Re: Broker Rebates From Exchanges: Securities Fraud?

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Class Action Lawsuit Against TD Ameritrade for taking Broker Rebates From Exchanges and HFT Firms “May Be Securities Fraud,” Says Federal Judge; PFOF is Under the Gun, Again

(Below re-published with permission from MarketsMuse.com)– Broker Rebates, Payment-for-Order-Flow and “Pay-to-Play” have become synonymous with new world order in which exchanges, dark-pool operators and high-frequency trading (“HFT”) firms, (the so-called “flashboys”) dominate the world of stock trading. While many Wall Street geniuses will argue “the genie is out of the bottle” when it comes to payment-for-order-flow, it doesn’t mean this practice is right-minded, no less legal-and it hasn’t stopped naysayers from arguing that customers’ best interests are clearly not part of the equation. A Federal judge in Nebraska seems to agree, based on his ruling last week that allows a class action lawsuit aimed at TD Ameritrade in connection with their receiving payment-for-order-flow rebates from high-frequency trading (“HFT”) (and not even sharing those rebates with customers!) to proceed. The plaintiff argument is that TD has violated best execution guidelines. Should anyone be shocked?! After all, the topic of payment-for-order-flow and barely-disclosed rebates paid to brokerages by exchanges and electronic market-making firms in consideration for routing orders to them has been a topic of spirited debate for more than several years.

Here’s the excerpt from WSJ reporting by Cezary Podkul:

Mom-and-pop investors who think their brokers are prioritizing high-frequency traders over them may soon have a chance to try to prove their case in court.

A federal judge in Nebraska this month ruled a class-action lawsuit could proceed against TD Ameritrade Holding Corp. AMTD -1.09% , one of the nation’s largest discount brokerages. In his ruling, the judge cited “serious and credible allegations of securities fraud” stemming from the company’s order routing practices.

Plaintiffs allege the discount brokerage prioritized its profits over their best interest on stock transactions

The TD Ameritrade customers who brought the suit alleged the company, which provides investing and trading services for 11 million client accounts, prioritized its profits over their best interests. They claim it did so by accepting incentives from stock exchanges and large electronic trading firms to route customer orders to them without ensuring the customers would get the best prices available – an obligation that along with related factors is known as “best execution.”

A spokeswoman for TD Ameritrade said the company disagrees with the judge and will appeal his ruling.

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The Great Rebate Debate..Broker Disclosure IS Front-Burner Topic

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Exchange rebates paid to brokers for routing orders to their respective venues and the general issue with regard to the now ubiquitous “payment-for-order-flow” model that extends throughout the electronic trading ecosystem has been a topic of discussion for many years now. It may be confusing, but is certainly not an unknown concern to the universe of informed buy-side investors. For those who may be still be uninformed as to how/where/why/when (and how much?!) broker-dealers are on the receiving end of rebates, suffice to suggest its time you get yourself up to speed; your bottom-line can depend on it.

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Image Courtesy of April 2014 Wall Street Journal

Courtesy of financial industry media outlet MarketsMedia’s all-star journalist Terry Flanagan most recent dissertation “Got Transparency?” it is one that deserves an accolade from altruists within the industry, if not a check under the hood or bottom of Terry’s car before he starts the engine.

“One aggravating factor is a lack of transparency. Many market participants do not know either the amount of the rebate or where it ends up.”

As Flanagan points out, “..In institutional equity trading, rebates have been a point of contention since the late 1990s, when Bill Clinton was U.S. President and the Dow Jones Industrial Average scaled 10,000 for the first time.

Supporters say exchanges paying rebates on order flow is a perfectly legitimate practice of rewarding customers and offering volume discounts. Helped by rebates, trading commissions have dropped substantially over the years; the biggest decline from 2005 to 2017 was 68% for the lowest-touch direct market access / algorithmic trades, according to Tabb Group research.

“Most buy-side firms operate with ‘all-in’ pricing models and aren’t provided granularity into fees by order, but the decisions on when and how to route to particular venues significantly impact execution performance…” according to Stino Milito, Co-Chief Operating Officer at Dash Financial Technologies.

On the other hand, critics say rebates create conflicts of interest, and shortchange end investors if brokers route in ways that disadvantages clients……Helped by rebates, trading commissions have dropped substantially over the years; the biggest decline from 2005 to 2017 was 68% for the lowest-touch direct market access / algorithmic trades, according to Tabb Group research.

 “There is absolutely crap disclosure about broker-dealer routing strategies,” according to Dave Weisberger of ViableMkts. “If you can’t get a high-level view of how brokers route and what the outcomes are, then how can you be talking about a transaction fee pilot, or making claims about what rebates do to destroy the market?

Are you a startup fintech or blocktech firm that is seeking to raise capital and finding yourself ‘short of’ a cogent business plan or the proper investor offering documents?

Schedule your call with the senior executives at Prospectus.com LLC today

To read the entirety of Terry Flanagan’s piece in the latest edition of MarketsMedia, click here

The Great Rebate Debate..Broker Disclosure IS Front-Burner Topic