A registered rep involved in this week's penny stock bust has been the focus of at least two prior investor complaints surrounding high-risk private placements as well as the sale of so-called penny stocks that were at the center of the alleged “pump and dump” scheme.
Matthew A. Bell, 47, was arrested Thursday, along with the ex-husband of a star from HBO's The Sopranos and five other individuals, on securities fraud charges in connection with market manipulation of penny stocks, according to the U.S. Attorney's Office.
Mr. Bell “really put himself out there as a very Christian individual, and he ran a charitable foundation,” said David Miller, an attorney with Shepherd Smith Edwards & Kantas, a Houston law firm that has filed arbitration claims against him with the Financial Industry Regulatory Authority Inc. In addition to Mr. Bell, the claims name two of his former broker-dealers, WFG Investments Inc. and Securities America, as respondents.
Mr. Bell was a broker with WFG from July 2009 to June 2013 and then was registered with Securities America for two months that year before losing his affiliation with that broker-dealer. According to Mr. Bell's profile on BrokerCheck, he has nine pending customer complaints, 10 settled complaints and was allowed to resign twice.
Mr. Bell sold private placements while he was at WFG Investments, Mr. Miller said. He invested up to 60% of clients' portfolios in such investments, with the remainder in penny stocks such as CodeSmart Holdings Inc., which was cited in the federal indictment.
The private placements Mr. Bell sold include California Proton Treatment Center and Palmaz Scientific Inc., Mr. Miller said. “They are completely illiquid with a valuation that is self-reported,” he said.
He had discretion over his clients' accounts, meaning he controlled the trading, Mr. Miller said.
Mr. Bell did not return a phone call on Friday morning to his firm, GoldBox Wealth Strategies in San Antonio. GoldBox is neither a registered broker-dealer nor an investment adviser.
Securities America spokeswoman Janine Wertheim, said Mr. Bell “was never approved by Securities America. While Finra approved his transfer, we obtained additional information that resulted in his termination. We do not officially make advisers effective until we hear back from Finra and the state. His home state of Texas did not approve him.”
Wilson Williams, chief executive of WFG Investments, declined to comment about Mr. Bell.
Among those also charged was Abraxas “A.J.” Discala, the CEO of OmniView Capital Advisors LLC. Mr. Discala was married in 2003 to Sopranos actress Jamie-Lynn Sigler. The couple separated two years later and then divorced. According to its website, OmniView is a merchant bank. It is not a registered investment adviser with the Securities and Exchange Commission or a registered broker-dealer.
An attorney for Mr. Discala, Joseph Tacopina, said his client intends to vigorously defend the charges.
Between October 2012 and July 2014, the defendants, along with others, allegedly agreed to defraud investors and potential investors in four publicly traded companies: CodeSmart Holdings, Cubed Inc., StarStream Entertainment Inc. and The Staffing Group Ltd., according to the indictment.
They allegedly used false and misleading press releases and filings with the SEC to artificially control the price and volume of shares in those companies, in what is known as a “pump and dump” investment scheme.
The SEC on Thursday also filed a civil complaint against Mr. Bell, Mr. Discala, and three individuals also named in the federal criminal indictment: another broker, Craig L. Josephberg, Marc E. Wexler, managing director of OmniView, and Ira Shapiro, CEO of CodeSmart.
Mr. Wexler did not return a call to OmniView on Friday to comment. A call to Mr. Shapiro at CodeSmart could not be completed, as the number no longer works.
According to the SEC complaint, from May 13, 2013 and May 29, 2013, Mr. Wexler and Mr. Discala, and accounts he controlled, sold about 340,000 shares of CodeSmart's stock. During that time period, the price of the stock spiked, moving from $3.55 when trading opened to $5.47, a 70% increase.
CodeSmart hit a high of $6.98 per share last year and its shares are now worthless.
“The buyers of those shares were mainly (Mr. Bell's) clients,” according to the SEC complaint. “To coordinate the matched trading during the main pendency of the market manipulation, Bell was in near constant touch with Discala and Wexler.”
According to the SEC, Mr. Bell and Mr. Discala spoke or texted close to 6,000 times from May to October last year.
Mr. Bell and another broker involved in the scheme “personally dumped their CodeSmart shares on the market while at the same time purchasing CodeSmart's stock in the accounts of their clients and customers, sometimes on the same day,” according to the SEC. He made more than $500,000 in illicit gains, according to the SEC.