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Note: Anthony Fields (Fraudster) used two sole proprietorships, Anthony Fields & Associates (AFA) and Platinum Securities Brokers (Platinum), to solicit clients to purchase bank guarantees and mid-term notes. Fraudster had registered AFA with the US Securities and Exchange Commission (SEC). AFA had no other paid employees other than Fraudster and AFA never had any clients, assets under management, or revenue from investment. Fraudster also attempted to register Platinum with the SEC but was told that he did not meet the minimum registration requirements.

Fraudster advertised both AFA and Platinum on LinkedIn and TradeKey. The advertisements stated that he sought buyers for bank guarantees and mid-term notes worth up to USD 500,000,000,000 for as low as 40% of their face value. One of the ads posted on LinkedIn stated:

“Bank Guarantees, Cash Backed, Deutsche Bank, Credit Suisse, HSBC, JP Morgan Chase, BNP Paribas, UBS, RBS or Barclays. One (1) year and one (1) day, Fresh Cut USD 500 Billion (USD 500,000,000,000) with Rolls and Extensions 40% or better plus 1% commission fee to be paid, to buy side and sell side consultants 50/50. First Tranche: 500M USD. If you are interested you can email for particulars at [Fraudster’s email address].”

The client also had to pay 1% of the face value as a commission for the service. While people did contact him about these offers, no one bought any of these guarantees from him.

Fraudster claimed that he had millions of dollars under management from many high worth investors and had several contracts that he was managing on the company websites and SEC fillings. Fraudster claimed he had numerous clients and resources and advertised AFA’s relationship with Platinum, claiming that AFA clients could receive deals with Platinum as a registered brokerage with the SEC.

When the SEC discovered that Fraudster’s bank guarantees and notes did not exist and that he had no customers or money to manage, it brought an administrative action against Fraudster seeking a cease-and-desist order, employment bar, and fines for violation of the anti-fraud acts. An administrative law judge ruled against Fraudster who appealed to the Commission. The Commission affirmed the decision.

The Commission found Fraudster to be in violation of all acts under which Fraudster was accused and found that Fraudster acted with scienter. It stated that: “Scienter includes recklessness, defined as conduct that is 'an extreme departure from the standards of ordinary care ... to the extent that the danger was either known to the [Fraudster] or so obvious that the [Fraudster] must have been aware of it.” The Commission concluded that Fraudster acted with scienter because he should have been aware of the non-existence of the bank guarantees and did not exert due diligence to discover if the guarantees were legitimate. It noted that he also provided highly questionable documents to the Commission as evidence on his behalf and never regretted his actions.

The Commission noted that: “The bank guarantees and mid-term notes that [Fraudster] offered are, notwithstanding their fictitious character, securities subject to the antifraud provisions of the securities laws.” The Commission imposed a cease-and-desist order, a bar of employment or relationships with anyone in the financial investment industry, an order deregistering AFA, and a USD 150,000 fine for the scienter.

The opinion noted:

“An overview of prime bank investment schemes will help situate the remainder of this discussion. Prime bank schemes have attracted significant attention from regulators, in part because their victims collectively have lost billions of dollars worldwide. Although the details of these schemes vary, the broad outlines are the same. Potential investors are told that their money will be used to purchase instruments supposedly representing obligations of well-known international banks -- which the promoters call "prime banks" -- at a steep discount. The schemes derive their credibility from supposed association with reputable financial institutions, while at the same time their promoters often insist on secrecy, thereby making it impossible to verify the claims with the banks themselves. Other common features of prime bank schemes include the use of complex-sounding jargon (e.g., ‘rolls,’ "’ranches,’ ‘fresh cut,’ ‘slightly seasoned’); the involvement of many layers of participants and intermediaries; and the very large size of the purported transactions (often running into the hundreds of millions and billions of dollars).

Prime bank instruments promise implausibly high returns at no risk. The purported instruments go by many different names; for example, the Division's expert had encountered prime bank schemes peddling ‘bank guarantees,’ ‘letters of credit,’ ‘bank notes,’ ‘bank debentures,’ and a ‘hodgepodge of similar-sounding’ products. He explained that the perpetrators of prime bank frauds frequently change the names of the instruments offered to avoid regulatory scrutiny. … [W]hatever the nomenclature, the prime bank instruments offered in these fraudulent schemes are imaginary, as is the secondary market on which they purportedly trade.”

[JAH]

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The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of the ICC or Coastline Solutions.