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Colorado Securities Attorneys: What Every Coloradan Should Know

Securities Fraud Cases in Colorado

Colorado In April 2017, our client won an arbitration against Wilbanks Securities, who sold her a variable annuity out of their Grand Junction, Colorado branch. He promised her a 7% return. When that return never materialized, the claimant alleged fraud, breach of contract, negligent supervision, and breach of fiduciary duty. As reported by InvestmentNews, “Grace S. Huitt won a total of $1,073,440 — with $536,720 coming in compensatory damages and $536,720 in punitive damages — against Wilbanks in the case decided by a three-person all-public Financial Industry Regulatory Authority Inc. arbitration panel.”

This is not the only high-profile case of securities fraud originating in Colorado. On August 28, 2019, Joseph David Ryan of Madyson Capital Management in Colorado Springs, Colorado was sentenced to 24 years in prison after scamming $11 million out of 93 investors in Colorado, Nevada, Arizona, Oklahoma, and elsewhere. He exploited senior investors by encouraging them to cash out their annuities and invest with him instead, ultimately defrauding them of their life savings. He used the funds for his personal enrichment, buying a Range Rover and indulging in other luxuries.

Colorado’s budding legal marijuana industry is also rife for securities fraud. Guy Jean-Pierre, also known as Marcelo Dominguez de Guerra, was convicted in January 2019 of 28 counts of securities fraud, wire fraud, mail fraud, money laundering, and conspiracy. He sold fraudulent shares of FusionPharm Inc., a company that converted used shipping containers into greenhouses for growing cannabis. By selling shares to other companies that he controlled, he inflated the stock price artificially, leading brokers to believe that the company was a good investment and generating $12.2 million in revenue for FusionPharm Inc.

While the above cases are certainly disconcerting, they provide an important lesson: no one is safe from securities fraud, so you may need a Colorado securities attorney. The experienced securities attorneys of Fitapelli Kurta are qualified to practice throughout Colorado through two means: through the Financial Industry Regulatory Authority (FINRA) or by association with local counsel in Colorado.

How are Colorado Investors Protected?

The Colorado Division of Securities, a branch of the Colorado Department of Regulatory Agencies (DORA), protects investors and monitors the securities market in Colorado.

The stated mission of the Division of Securities, according to its website, is “to protect investors and maintain confidence in the securities market, while avoiding unreasonable burdens on the marketplace by licensing securities professionals, enforcing securities law violations, and helping Coloradans become more informed investors.” The current Securities Commissioner is Chris Myklebust, who assumed the role on December 2, 2018.

The Colorado Department of Regulatory Agencies (DORA) also educates investors, issuing Investor Education resources. With their award-winning “Take 5 to Get Wise” awareness campaign, which features 30-second TV spots designed to educate citizens on everything from movers insurance to senior financial exploitation, the Colorado Department of Regulatory Agencies (DORA) works to protect Coloradans from fraud.

In their investor education notice entitled “Marijuana-Related Investments: Greener Pastures or Just Another Scam?”, DORA warns investors to be wary of marijuana investment scams and schemes, including:

  • Reverse merger scams, in which a marijuana company’s promoters buy the stock of a dormant public company to lend a sense of legitimacy to the marijuana business

  • Pump and dump scams, when scammers “pump” (artificially inflate) a stock price and then “dump” their shares when the price gets high, turning a profit and harming investors

  • Crowdfunding, in which start-ups use the Internet to raise capital from a wide base of supporters; while these companies may not intend to commit fraud, they are risky ventures

  • Jurisdiction-specific illegal marijuana schemes, in which scammers assert they have “inside information” about a new regulation that may legalize marijuana in a jurisdiction where it is currently outlawed; they may pressure investors to “get in on the ground floor”

Regulations surrounding marijuana change frequently, which can make the sphere confusing, even for seasoned investors. As with any investment, investors should ask questions, do research, and verify that the required licenses and registrations are in place.

The Colorado Division of Securities issued the bulletin “What to Know About ICOs” in April 2018, educating investors about the dangers of Initial Coin Offerings (ICOs), investment opportunities borne out of the cryptocurrency space. Initial Coin Offerings (ICOs), sometimes known as Initial Token Offerings (ITOs) consist of either utility tokens or equity tokens. Utility tokens are designed to allow the holder to exchange the coin for goods or services that will be provided by the venture in the future. Equity tokens are designed to entitle the holder to a percentage of the venture’s revenue. In reality, these companies may never produce goods or services or generate meaningful revenue, meaning these tokens often amount to nothing more than donations of investors’ hard-earned money. The value of these coins fluctuates constantly and they can be hard to sell. ICOs can be tricky to navigate because they are sometimes considered securities and sometimes are not. If an ICO is considered a security, it should be registered with the appropriate securities regulator, like the Colorado Division of Securities. If an ICO is not considered a security, then typical investor protections do not apply, leaving investors at risk for fraud and significant losses. Some ICOs are fake and are just a way for fraudsters to steal money from early adopters who get caught up in cryptocurrency hype. Regulators are trying to crack down on these phony offerings as part of their commitment to investor protection.

What Makes Us the Right Attorneys?

We are different. If you’re looking for a Colorado securities attorney, you should know that we bring the benefit of inside knowledge. Our securities attorneys have years of experience defending brokerage firms against investor claims; now, every securities attorney in our firm works exclusively on behalf of investors. Tapping into their years working for the “enemy,” our attorneys advocate and fight for investors.

Most securities complaints are not adjudicated in court; rather, they are heard in binding arbitration before a FINRA panel. This is where we excel. Though we cannot guarantee success, our securities attorneys have recovered millions of dollars on behalf of our clients. Our excellent record speaks for itself. Both of our founding partners are SuperLawyers®, and our firm has received various industry awards—the Avvo Client’s Choice Award for Arbitration, for instance, as well as a “Preeminent” rating by Martindale-Hubbell. Our attorneys are regularly quoted in the media on investment-related issues, appearing in trade publications and national media, including the Wall Street Journal and ABC News.

What Should I do?

Armed with the right tools and the right mindset, there is no need to be hesitant about investing in the stock market, but you should proceed with caution when considering investment in new ventures, such as cannabis or cryptocurrency. it is important to stay informed about fraud so that you can protect yourself and your financial future.

If you fear you may have been a victim of a financial crime involving securities fraud, please call a Colorado securities attorney. Contact the experienced securities attorneys of Fitapelli Kurta. Our securities fraud attorneys have worked with investors from Colorado. Whether you’re in Denver, Boulder, Fort Collins, Colorado Springs, Aurora, Loveland, or any other city in Colorado, we’re here to help you. We get only paid if you do. Our attorneys work on contingency: we only collect a fee from clients if we can recover money on their behalf. Call (877) 238-4175 or email info@fkesq.com for your free case consultation.