The fall-out continues from a $110 million fraudulent scheme
created by the former Chief Financial Officer and General Counsel of Industrial
Enterprises of America, Inc. In 2011,
Andrew Marguilies was convicted defrauding investors through the illegal sale
of unregistered securities in Industrial Enterprises. He is currently serving a seven-to-21 year
prison term for his crime.
In response to Marguilies’ fraud, the Financial Industry
Regulatory Authority (FINRA) has now assessed a $100,000 fine to Scottrade for
failing to supervise his sale of unregistered stock. According to FINRA, Scottrade “failed to
conduct an independent inquiry to determine whether the shares deposited were
freely tradable.” FINRA charged that
Margulies sold $8.4 million of the unregistered securities through Scottrade.
Scottrade is not the first firm sanctioned for failing to
supervise Margulies’ scheme to defraud investors. In March, 2013, FINRA assessed a $200,000
fine against WFG Investments, Inc. for similar transgressions. In that case, FINRA charged that WFG failed
to supervise Margulies’ sale of $18 million worth of Industrial Enterprises of
America stock as part of a pump-and-dump operation run in 2006 and 2007. As
with Scottrade, FINRA charged that WFG Investments also “failed to conduct an independent
inquiry to determine whether the shares . . . were freely tradable.”
Investors who lost money due to the fraudulent sale Industrial
Enterprises of America stock should consult with experienced securities
attorneys to determine if they have a claim they should pursue. The attorneys at Block & Landsman are
experienced in representing investors who have lost money due to securities
fraud. Call Block & Landsman for a
free consultation.
