Finra has charged brokerage chief Tommy Belesis and his firm, John Thomas Financial, with fraud in a front-running scheme to make $1 million on a penny stock. Bruce Kelly has the story.
Anastasios “Tommy” Belesis, the high-profile owner and chief executive of Wall Street brokerage John Thomas Financial, bullied brokers and lied to senior staff at his firm as part of a plan to profit more than $1 million in penny stock trades, according to a complaint released today by the Financial Industry Regulatory Authority Inc. The trades of a penny stock benefited John Thomas while hurting its clients, according to the Finra complaint.
The complaint alleges that Mr. Belesis and John Thomas, which has 125 independent-contractor reps, committed securities fraud in February 2012 when it sold the firm's shares of American West Resources Inc. while preventing the execution of customers' orders.
Noted for a bit part in film director Oliver Stone's sequel to Wall Street, John Thomas and Mr. Belesis allegedly traded ahead of customer orders, breached their duty of best execution, failed to follow customer orders, lied to reps and clients, and falsified ticket orders. Four other John Thomas executives also were sued by Finra.
A spokesman for John Thomas, David Pitts, did not return phone calls on Monday to comment.
Mr. Belesis routinely threatened and intimidated John Thomas executives and brokers, according to the complaint. In one instance, he threatened to run over an executive and a rep in the street; in another, he threatened to put negative information on the same executive's employment termination record, known as a form U5.
Mr. Belesis also used threatening and intimidating language this year to an unnamed executive who left John Thomas in February, according to the complaint, allegedly telling the executive he was “done in this business.”
John Thomas was steeped in a culture of intimidation, according to the complaint. For example, chief compliance officer Joseph Castellano, who was also sued by Finra, last year verbally intimidated a broker who sought $27,000 in back commissions, telling the broker, “I'm gonna get you.” He then physically assaulted the rep.
The complaint focuses on trades of American West Resources in February 2012.
John Thomas and many of its customers owned stock in American West Resources, a coal company, as a result of participation in the company's private financings. According to the complaint, on Feb. 23, 2012, the price of the common stock, which at the time was thinly traded on the OTC Bulletin Board, spiked higher, by over 600%, opening at 28 cents per share, peaking at $1.80 per share and eventually closing the day at $1.29.
On the same day, JTF sold 855,000 shares, the majority of its proprietary position in American West Resources, reaping proceeds of more than $1 million. According to the Finra complaint, John Thomas and Mr. Belesis prevented at least 15 customer orders to sell more than 1 million shares of the company the same day the firm was selling its own shares.
Mr. Belesis and branch manager Michele Misiti also gave false and misleading information to Finra, according to the complaint.
Mr. Belesis is already the target of an investigation by the Securities and Exchange Commission. In March, the SEC filed an administrative action against Mr. Belesis and George Jarkesy, a Houston radio host, for allegedly deceiving investors in two hedge funds Mr. Jarkesy managed in order to enrich themselves at the expense of the investors.
