Thursday, March 23, 2023 | Back issues
Courthouse News Service Courthouse News Service

Judge Levies $36M in Fines for Global Fraud

LAS VEGAS (CN) - A federal judge order $36 million in fines and restitution against a group she found had defrauded investors of more than $10.59 million over two years.

The U.S. Securities and Exchange Commission brought the case against the Malom Group and its principles and partners last year, alleging six counts of securities violations through two "advanced-fee investment schemes" perpetrated from about August 2009 to November 2011.

Malom is an acronym for "Make a Lot of Money," and the SEC says the group based in Switzerland and Las Vegas defrauded 30 investors of nearly $11 million.

The Malom Group used "forged documents, fake histories of success and the promise of risk-free investments and astronomical returns," the SEC said in its complaint. "In fact, Malom was nothing more than a sham company, and the investments the defendants peddled were nothing more than vehicles used to steal investors' money," the SEC claimed. "Several of the defendants, through at least October 2013, continued to lie to investors that transactions would occur or that refunds or returns were forthcoming."

Taking aim at Malom principles, the commission said Martin Schlapfer and Hans-Jurg Lips of Switzerland "directed the scheme together with Malom's U.S.-based officers, executive vice president James C. Warras and compliance officer Joseph N. Micelli."

"Anthony B. Brandel, through his Las Vegas company M.Y. Consultants served as Malom's agent and main point of contact for investors," the complaint continued. "Sean P. Finn, through his company M. Dwyer, solicited investors for the schemes."

The first scheme described by the SEC involved charging investors a fee for them to enter into joint-venture agreements and access Malom's financial resources to convince third parties to enter into investment transactions that would create profits for investors and Malom.

Since Malom was allegedly supposed to share profits with investors if the transactions posed no risks, the SEC said Malom instead "took the fees and proceeded to reject every proposed trading program on the grounds that the transactions were fraudulent, carried some risk of loss to Malom funds, or for other deficiencies."

"In a few instances, Micelli, Brandel and Finn actually provided investors with particular trading programs to propose to Malom, which the defendants later rejected after taking the investors' funds," the complaint continued.

Malom "never used investors' upfront fees for any proposed transaction with Malom," according to the action. "Instead, they diverted the funds for their personal use."

The SEC said Malom promised in the second scheme "to generate funding through the creation of structured notes that would be listed on 'Western European' exchanges, in some cases supported by Brazilian sovereign bonds from the 1970s that the Brazilian government has publicly disclaimed as worthless."

To induce investors to pay an 'underwriting fee,' Malom and Lips issued corporate and personal guarantees to repay investors' fees if Malom did not successfully generate funding within 90 to 120 days," according to the complaint.

The complaint also accused the group of acting as securities broker-dealers without registering with the commission.

U.S. District Judge Gloria Navarro presided over the matter and ruled against the Malom Group and its members Monday, levying more than $36 million in fines.

M.Y. Consultants must pay more than $12.33 million, including more than $10.59 million in illegal profits, more than $760,000 in interest and more than $980,000 in fines, Navarro ordered.

Micelli must pay more than $12.26 million, including more $10.59 million in profits illegally obtained, more than $760,000 in interest and more than $890,000 in penalties, Navarro ordered. Micelli is banned from future trading of securities.

Warras owes more than $12.04 million, including more $10.59 million in illegal profits, more than $760,000 in interest and $680,000 in penalties, Navarro ordered. Warras is banned from future securities trading.

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.