BITCOIN SCAM

Bitcoin and other digital currencies have garnered considerable attention. Media reports have focused on virtual currency’s potential promise to businesses and consumers—but also on very real abuses and criminal activity associated with it. Government hearings have been held on virtual currencies. In 2013 the US Securities and Exchange Commission (SEC) charged a Texas man and his company with fraud involving an alleged Bitcoin Ponzi scheme. More recently, on February 19, 2014, the SEC suspended trading in the securities of Imogo Mobile Technologies Corp—which had announced testing of a new mobile platform for Bitcoin a few weeks earlier—because of questions about the company’s business, revenue and assets. And on February 24, 2014, the Tokyo-based Mt. Gox, one of the largest bitcoin exchanges, stopped its operations. It subsequently filed for bankruptcy in Japan on February 27^th and in the U.S. on March 10^th.

IPRC is issuing this alert to caution investors that buying and using digital currency such as Bitcoin carry risks. Speculative trading in bitcoins carries significant risk. There is also the risk of fraud related to companies claiming to offer Bitcoin payment platforms and other Bitcoin-related products and services.

How Bitcoin Works

Bitcoin is a peer-to-peer payment system that uses its own currency, called bitcoin, to transact business. Bitcoins are not issued by banks or governments—indeed the Bitcoin platform was designed to offer an alternative to national currencies like the dollar, and commodity-based currencies such as gold or silver coins.

Bitcoin was introduced in 2009 as open source software. Think of it as a sophisticated computer program that encrypts, verifies and records bitcoin transactions. While Bitcoin users are anonymous, a public record or “block chain” is public and shared between Bitcoin system users. Mathematical proofs are used to verify the authenticity of each transaction.

Bitcoins are created by a process called “mining.” Like mining for gold, the process is labor intensive. Mining serves two purposes. First, miners use software algorithms to add transaction records to Bitcoin’s public ledger of past transactions and verify legitimate bitcoin transactions. For their efforts, Bitcoin miners get transaction fees. In addition, if the miner finds a new “block,” the miner is awarded new bitcoins. A finite number of bitcoins can be mined (21 million based on the mathematics underlying Bitcoin mining).

Bitcoins can also be bought and sold online or at physical locations. A growing number of physical establishments and exchanges allow customers to buy and sell bitcoins using cash, credit cards, money orders and other methods. Bitcoins reside in a digital “wallet,” where they can be used to purchase items from establishments that accept bitcoins.

Bitcoins can be traded for traditional currency at exchange rates that fluctuate. Bitcoin prices have been extremely volatile, and subject to wide price swings. Recent IRS guidance notes that Bitcoin, as a virtual currency, is treated as property for U.S. federal tax purposes and subject to the same general tax principles.

Bitcoin Risks

Buying, selling and using bitcoins carry numerous risks:

• Digital currency such as Bitcoin is not legal tender. No law requires companies or individuals to accept bitcoins as a form of payment. Instead, Bitcoin use is limited to businesses and individuals that are willing to accept bitcoins. If no one accepts bitcoins, bitcoins will become worthless.
• Platforms that buy and sell bitcoins can be hacked, and some have failed. In addition, like the platforms themselves, digital wallets can be hacked. As a result, consumers can—and have—lost money.
• Bitcoin transactions can be subject to fraud and theft. For example, a fraudster could pose as a Bitcoin exchange, Bitcoin intermediary or trader in an effort to lure you to send money, which is then stolen.
• Unlike US banks and credit unions that provide certain guarantees of safety to depositors, there are no such safeguards provided to digital wallets.
• Bitcoin payments are irreversible. Once you complete a transaction, it cannot be reversed. Purchases can be refunded, but that depends solely on the willingness of the establishment to do so.
• In part because of the anonymity Bitcoin offers, it has been used in illegal activity, including drug dealing, money laundering and other forms of illegal commerce. Abuses could impact consumers and speculators; for instance, law enforcement agencies could shut down or restrict the use of platforms and exchanges, limiting or shutting off the ability to use or trade bitcoins.

Bitcoin Speculation

Speculators have been drawn to bitcoin trading as a way to make a quick profit. But like any speculative investment, from real estate to gold, you can lose money. With digital currency, profits or losses are virtually impossible to predict.

Bitcoin prices have fluctuated widely, and wildly, almost from the currency’s inception for a host of reasons. For example, bitcoin prices plummeted following the Mt. Gox incident—and earlier when the Chinese central bank banned banks from accepting bitcoins. Other factors that affect digital currency prices include supply and demand, rumors and even where bitcoins are traded (since prices are far from uniform from one bitcoin exchange to the next). In short, bitcoin speculation is extremely risky. Never speculate with money you cannot afford to lose.

Bitcoin-Related Scams

When the SEC first brought the Texas case involving bitcoins, it issued a warning about the potential for fraud. As with so many other “hot” or new trends, fraudsters may see the latest digital currency trend as a chance to steal your money through old-fashioned fraud.

Warning signs of fraud include business claims that are not backed by financial reality. For example, newsletters or press releases might claim a company has a viable product or service, but the company’s own filings with the SEC show low revenues and describe the company as a development stage entity. For more information on identifying potential stock frauds in any emerging industry, contact us.

If a Problem Occurs

If you believe you’ve been defrauded or treated unfairly by a securities professional or firm, you may FILE A COMPLAINT.

High-Yield CDs: Red Flags That Signal a Scam

Beware of promotions about certificates of deposit (CDs) promising interest rates that are substantially higher than current averages. We have observed offers for “low-risk” products with outsized returns. Investors should be wary of unsolicited emails and calls that offer outsized interest from financial institutions, including banks and brokerage firms, particularly those with which you have not had a business relationship.

What Might the Pitch Look Like?

In one instance of suspected email fraud, the pitch appeared to come from a large U.S. bank that supposedly was promoting a CD offered by an international banking partner. At a time when most CDs at U.S. banks and credit unions were offering just over one percent for a comparable term, this pitch offered a CD with a 15 percent yield, and contained instructions on how to wire funds.

In another instance of suspected fraud a caller posed as a representative from a legitimate brokerage firm and claimed to offer information about CDs that were well above the best rates in the market. The offer appeared to be an attempt to gather personal financial information.

Red Flags that Signal a Scam

Red flags that indicate a CD offer may be fraudulent include:

• Interest rates that are significantly higher than average.
• Emails with addresses that are not originated and sent by the financial institution that is cited in the promotion.
• Emails that contain misspellings or grammatical errors.
• Promotions that claim to be from a U.S. financial institution that has aligned with an international bank.
• Promotions that claim to be for a “limited time only.”
• Promotions that claim to be directed at “best customers” and that require extremely high minimum investments (for example, $100,000 U.S. Dollars).

The federal securities laws require investment professionals and stockbrokers to make appropriate or suitable recommendations to their customers, based on, among other things, the customers tolerance for risk. The sale of unsuitable investments is a form of stockbroker fraud and stockbroker misconduct. Suitability is based on a customer’s age, income, net worth, education, stated investment objectives and prior investment experience.

NASD Conduct Rules require that in recommending to a customer the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to their other security holdings and as to their financial situation and needs. Despite the temptation to realize excessive returns in the stock market, investors should be aware of risk. Those seeking to double their money in the stock market ought to be prepared to lose it all.

The willful disregard of a customer’s stated investment objectives and tolerance for risk through the sale of excessively speculative or volatile securities is a form of stockbroker fraud or misconduct, which is actionable under the federal securities laws.

The sale of unsuitable investments also includes the failure to properly diversify a customer’s investment portfolio, or the over concentration of that portfolio in volatile, or speculative technology, telecommunication or other securities, including junk bonds.

Stockbroker misconduct, in the form of the sale of unsuitable investments, also includes the recommendation of low priced or speculative securities, where the stockbroker has misstated or omitted the risks inherent in a particular investment, and thereby took risk that the customer was or would have been unwilling to accept. This is a form of stockbroker fraud or misconduct.

The most common examples of unsuitable recommendations by a stockbroker or investment advisor relate to:

Excessive risk. The recommendation of a risky investment to a customer who is seeking more conservative investments or cannot afford significant losses is a form of stockbroker fraud or misconduct.

Over-concentration. The recommendation or failure to diversify a portfolio that is over-concentrated in a small number of stocks or one asset class is a form of stockbroker fraud or misconduct.

Illiquidity. The sale of securities that are illiquid or for which no recognized market exists such as limited partnerships or restricted securities is a form of stockbroker fraud or misconduct.

These obligations on the part of the stockbroker arise out of the “Know Your Customer” Rule.

Another form of stockbroker misconduct or investment fraud includes excessive activity or churning. Securities brokers are typically compensated by each transaction effected in your securities account. Sometimes brokers effect these transactions in your account, not for the purpose of reasonably fulfilling your stated investment objectives, but instead in an effort to generate excessive commissions for themselves and their firm. Such conduct is called churning. is It is a form of stockbroker fraud or misconduct and is actionable under the federal securities laws.

Churning or Excessive activity is examined in light of the customer’s investment objective and the type of securities being traded. For example, it may be inappropriate to pay a sales charge by buying and selling a mutual fund in a period of, let us say, a year. However, during this same period, it may not be inappropriate for a person seeking to trade options turn over their account twenty times.

Churning is often marked by short holding periods without any appreciable change in securities prices. Churning is often measured by the account’s “turnover rate,” or the total purchases divided by the average value of the account, and the “Goldberg rate,” which is the commissions charged divided by the average value of the account. On an annual basis, these calculations show the number of times your account was turned over and how much your account had to return just be break even after paying commissions. Once again, what is reasonable depends on your acceptance of risk and measure of anticipated returns.

However, if you think that you may have been the victim of excessive activity, you should have your account reviewed by a professional and contact the IPRC for a free evaluation.

“The imposition of a duty to investigate the financial capability of an investor entering a margin transaction and to inform that investor of the implications of a margin purchase can also be justified as part of a stockbroker’s professional responsibility.” Piper, Jaffray & Hopwood, Inc. v. Ladin, 399 F. Supp. 292; 1975 U.S. Dist. LEXIS 16441 (S.D. Iowa August 26, 1975).

Even many experienced investors do not understand margin accounts. When you purchase securities on margin, your brokerage firm is lending you money to pay for these securities. Initially, you may use cash equal to half the securities purchased, or pledge certain fully paid securities. Either way, you owe the brokerage firm, or most likely its clearing agent, the debit balance, or the amount borrowed to pay for these securities. Trading on margin increases the risk of loss to a customer for two reasons. First, the customer is at risk to lose more than the amount invested if the value of the security depreciates sufficiently, giving rise to a margin call in the account. Second, the client is required to pay interest on the margin loan, adding to the investor’s cost of maintaining the account and increasing the amount by which his investment must appreciate before the customer realizes a net gain. At the same time, using margin permits the customer to purchase greater amounts of securities, thereby generating increased commissions for the salesperson.

In general, unless you purchase more securities or pay down the balance, the debit or the amount borrowed does not change. Stock prices, however, change and if the market value of the securities in your account declines in value, you will be required to meet margin calls and will be called upon to deposit additional cash, or fully-paid securities, into your account. If you fail to meet a margin call, or if your account falls below minimum maintenance levels, even in the absence of notice of a margin call, by contract, your broker is able to liquidate your investments. Under most circumstances, such conduct is not actionable.

However, many unscrupulous brokers use margin to increase the purchasing power in your account in order to facilitate excessive activity or Margin Account Fraud. Aside from this practice, unless you are able to make and meet margin calls, and have the financial ability to satisfy the debit balance in your account, based on your overall financial condition, you may be unsuited for a margin account. The unsuitable extension of margin credit is a form of stockbroker fraud or misconduct.

While a broker may have no duty or liability with respect to purely unsolicited transactions, the purchase of a security, on margin, even without any recommendation by the broker is actionable. 17 CFR Part 275 SEC Release No. IA-1406; File No. S7-8-94)(Suitability of Investment Advice) 59 FR 13464 (March 22, 1994).

With the advent of on-line discount brokers, the NASD has become increasingly concerned about the extension of credit, particularly with respect to “unsolicited” transactions on margin. According to the NASD, “[t]he recent growth in the level of customer margin account balances, coupled with the increase in customer inquiries and complaints to NASD Regulation and SEC staffs relating to the handling of margin accounts, has raised concerns as to whether investors understand the operation and risks associated with margin trading. NASD Regulation believes that investors’ misconceptions about margin requirements, particularly with respect to maintenance margin, may cause them to underestimate the risks of margin trading.” [Release No. 34-44223; File No. SR-NASD-00-55].

In fact, NASD Regulation is particularly concerned that:

Certain firms may arrange for and/or facilitate loans between customers that are used to finance securities trading and/or meet margin requirements. Customers borrowing funds may incur additional finance charges when credit is arranged by the member, and customers lending funds may face additional, and perhaps undisclosed, credit risks when they extend credit to other customers. NASD Regulation believes that questions arise regarding investor protection and disclosure practices when members become involved in the extension of credit between customers. In addition, such lending activities can result in a conflict of interest between the customer and the member, particularly when such lending activities allow customers to continue to trade when they would not otherwise be in a financial position to do so, thereby generating more commission income to the member.

NASD Notice to Members 01-06 (emphasis added).

If your broker has placed your account on margin, and you do not understand, or are unwilling to trade on margin, you should have your account evaluated by a professional. Such practices are a form of stockbroker fraud or misconduct and are usually the warning sign of other inappropriate activity in your account. “The imposition of a duty to investigate the financial capability of an investor entering a margin transaction and to inform that investor of the implications of a margin purchase can also be justified as part of a stockbroker’s professional responsibility.” Piper, Jaffray & Hopwood, Inc. v. Ladin, 399 F. Supp. 292; 1975 U.S. Dist. LEXIS 16441 (S.D. Iowa August 26, 1975).

Even many experienced investors do not understand margin accounts. When you purchase securities on margin, your brokerage firm is lending you money to pay for these securities. Initially, you may use cash equal to half the securities purchased, or pledge certain fully paid securities. Either way, you owe the brokerage firm, or most likely its clearing agent, the debit balance, or the amount borrowed to pay for these securities. Trading on margin increases the risk of loss to a customer for two reasons. First, the customer is at risk to lose more than the amount invested if the value of the security depreciates sufficiently, giving rise to a margin call in the account. Second, the client is required to pay interest on the margin loan, adding to the investor’s cost of maintaining the account and increasing the amount by which his investment must appreciate before the customer realizes a net gain. At the same time, using margin permits the customer to purchase greater amounts of securities, thereby generating increased commissions for the salesperson.

In general, unless you purchase more securities or pay down the balance, the debit or the amount borrowed does not change. Stock prices, however, change and if the market value of the securities in your account declines in value, you will be required to meet margin calls and will be called upon to deposit additional cash, or fully-paid securities, into your account. If you fail to meet a margin call, or if your account falls below minimum maintenance levels, even in the absence of notice of a margin call, by contract, your broker is able to liquidate your investments. Under most circumstances, such conduct is not actionable.

However, many unscrupulous brokers use margin to increase the purchasing power in your account in order to facilitate excessive activity or Margin Account Fraud. Aside from this practice, unless you are able to make and meet margin calls, and have the financial ability to satisfy the debit balance in your account, based on your overall financial condition, you may be unsuited for a margin account. The unsuitable extension of margin credit is a form of stockbroker fraud or misconduct.

While a broker may have no duty or liability with respect to purely unsolicited transactions, the purchase of a security, on margin, even without any recommendation by the broker is actionable. 17 CFR Part 275 SEC Release No. IA-1406; File No. S7-8-94)(Suitability of Investment Advice) 59 FR 13464 (March 22, 1994).

With the advent of on-line discount brokers, the NASD has become increasingly concerned about the extension of credit, particularly with respect to “unsolicited” transactions on margin. According to the NASD, “[t]he recent growth in the level of customer margin account balances, coupled with the increase in customer inquiries and complaints to NASD Regulation and SEC staffs relating to the handling of margin accounts, has raised concerns as to whether investors understand the operation and risks associated with margin trading. NASD Regulation believes that investors’ misconceptions about margin requirements, particularly with respect to maintenance margin, may cause them to underestimate the risks of margin trading.” [Release No. 34-44223; File No. SR-NASD-00-55].

In fact, NASD Regulation is particularly concerned that:

Certain firms may arrange for and/or facilitate loans between customers that are used to finance securities trading and/or meet margin requirements. Customers borrowing funds may incur additional finance charges when credit is arranged by the member, and customers lending funds may face additional, and perhaps undisclosed, credit risks when they extend credit to other customers. NASD Regulation believes that questions arise regarding investor protection and disclosure practices when members become involved in the extension of credit between customers. In addition, such lending activities can result in a conflict of interest between the customer and the member, particularly when such lending activities allow customers to continue to trade when they would not otherwise be in a financial position to do so, thereby generating more commission income to the member.

NASD Notice to Members 01-06 (emphasis added).

If your broker has placed your account on margin, and you do not understand, or are unwilling to trade on margin, you should have your account evaluated by a professional. Such practices are a form of stockbroker fraud or misconduct and are usually the warning sign of other inappropriate activity in your account.

Unauthorized trading is a form of stockbroker fraud or misconduct. Unless you have signed discretionary papers giving your broker permission to trade your account without your authorization, your broker is required to obtain your permission before buying or selling securities in your account.

Many unscrupulous brokers place transactions in customer accounts without authorization, and when the client calls to complain, they may convince you to retain the shares because they have increased in value, or will increase in value. Sometimes, this activity may be also blamed on a “computer error.” In either event, if your broker has entered unauthorized transactions in your account, chances are you have fallen prey to other fraudulent devices by this person.

If you have been the victim of unauthorized trading, take action. The failure to act may be deemed tacit approval of these acts, and you cannot be said to have complained later, knowing that you own a particular security, when its price goes down.

If your broker solicits you to purchase securities away from the brokerage firm, your broker is “selling away,” which is a violation of self-regulatory rules and federal securities laws. Typically, these investments are in the form of private placements, or other non-public investments. If you are the client of a brokerage firm, and your broker solicits the sale of these securities away from the brokerage firm. The sale of unregistered securities is a form of stockbroker fraud or misconduct. Under certain circumstances, you may recover from the brokerage firm.

Securities Brokerage firms have a duty to supervise their brokers and the sales practices of their brokers, and to review customer statements for, among other things, evidence of suitability, unauthorized trading, or excessive activity. But for the performance of these duties, most cases of securities fraud may be reasonably prevented. The failure to supervise is a violation of self-regulatory rules. Courts have recognized a cause of action for the negligent failure to supervise, and brokerage firms are liable for the acts of their registered representatives under the common law doctrine of respondent superior, and as control persons under Section 20(a) of the Exchange Act. The failure to supervise is a form of stockbroker misconduct and is actionable under the federal securities laws.

Actions based on the failure to execute are difficult, and your broker has a reasonable time to enter orders. However, actions may exist based on your broker’s failure to execute limit orders, or stop loss orders. Actions may also be based upon your broker’s refusal to sell particular securities, or based upon their dissuading you from selling particular securities. If you think that you may have a claim for failure to execute, contact us for a free evaluation.

State and federal securities laws prohibit brokers from making false statements or omissions of material fact in connection with the sale of securities. False statements often include guaranties, price predictions, or purported special information regarding an important contract, approval, earnings announcement or other newsworthy event. This is a form of stockbroker fraud or misconduct.

Fraud may also take the form of omission by failing to disclose, among other things, the broker’s relationship with the issuer, the domination and control of the market for the security by the brokerage firm, the limited market for the company’s stock, or the lack of any appreciable assets or operating history of the company. However, information is only material if a reasonable investor would rely upon it. Remember, if something is too good to be true, it definitely is.

It is a fraudulent and deceptive practice to engage in the sale of back-end loaded, Class “B” mutual fund shares, where a customer would otherwise be entitled to quantity discounts or “breakpoints” from the sale of front end loaded Class “A” shares. This is a form of stockbroker fraud or misconduct.

For example, if a client purchased five different funds totaling $100,000 within any particular family of funds, by investing $25,000 in each fund, in Class B Shares, the broker will receive fees or commissions of typically 5% or $5,000. Should the client sell these Class B shares, there is a surrender penalty associate with the sale of these securities, and this penalty decreases each year. Typically after 5 years, there is no penalty. However, the broker gets paid upon the initial purchase of these shares, in this example, $5,000 or the 5% commission.

Had this same customer purchased $100,000 of Class A shares, and sought to purchase five different funds, within a particular family of funds that customer would otherwise be entitled to quantity discounts, or “break-points” and could pay a commission, albeit front end loaded of less than 2% or in our example, $2,000.

In an effort to maximize commissions, at the expense of a customer, a broker may purchased back-end loaded or “B” shares, as opposed to front-end loaded “A” shares, where the customer would be eligible to earn “break-points.” This practice has been declared “fraudulent and deceptive,” per se, by securities regulators. ( See, e.g. NASD Press Release, June 25, 2003 (“NASD Brings Enforcement Action For Class B Mutual Fund Share Sales Abuses”)).

This is a form of stockbroIt is a fraudulent and deceptive practice to engage in the sale of back-end loaded, Class “B” mutual fund shares, where a customer would otherwise be entitled to quantity discounts or “breakpoints” from the sale of front end loaded Class “A” shares. This is a form of stockbroker fraud or misconduct.

For example, if a client purchased five different funds totaling $100,000 within any particular family of funds, by investing $25,000 in each fund, in Class B Shares, the broker will receive fees or commissions of typically 5% or $5,000. Should the client sell these Class B shares, there is a surrender penalty associate with the sale of these securities, and this penalty decreases each year. Typically after 5 years, there is no penalty. However, the broker gets paid upon the initial purchase of these shares, in this example, $5,000 or the 5% commission.

Had this same customer purchased $100,000 of Class A shares, and sought to purchase five different funds, within a particular family of funds that customer would otherwise be entitled to quantity discounts, or “break-points” and could pay a commission, albeit front end loaded of less than 2% or in our example, $2,000.

In an effort to maximize commissions, at the expense of a customer, a broker may purchased back-end loaded or “B” shares, as opposed to front-end loaded “A” shares, where the customer would be eligible to earn “break-points.” This practice has been declared “fraudulent and deceptive,” per se, by securities regulators. ( See, e.g. NASD Press Release, June 25, 2003 (“NASD Brings Enforcement Action For Class B Mutual Fund Share Sales Abuses”)).

This is a form of stockbroker fraud or misconduct.

Investment professionals, including stock brokers, have a duty to refuse unsolicited transactions when the transactions are inappropriate or unsuitable for a customer based on the financial condition of that customer. Cohen, The Suitablity Doctrine: Defining Stockbrokers’ Professional Responsibilities , 1978 J. Corp. L. 533 (1978); In re Philips & Co. , 37 S.E.C. at 70 (representative’s knowing recommendation of unsuitable security not excused by customer’s belief that security was suitable); In re Powell & McGowan, Inc. , 41 S.E.C. 933 (1969)(registrant had obligation not to recommend a course of action even if he fully disclosed all risks to customer whose financial and physical condition made the recommendations unsuitable); In re Harold R. Fenocchio , ’34 Act Release No. 12194 (given the advanced age of customer, representative had a duty “to make a serious inquiry into the situation of the customer’s investments and to prevent the dissipation of the customer’s capital by excessive turnover”); In Board of Trustees v. Chicago Corp., No. 88-C-3855 (N.D. Ill. 1988) (1988 U.S. Dist. LEXIS 14031)( the court held that a broker had a duty to monitor a client’s investment decisions, which were effected by client’s trustee, and to advise client of soundness of the trustee’s decisions); Duffy v. Cavalier , 215 Cal. App. 3d 1517, 264 Cal. Rep. 3d 740 (1989) (court held that as a fiduciary, the broker had a duty to tell a client that the client’s investment objectives were improper and unsuitable and “to refrain from acting except upon the customers express orders”); Nobrega v. Futures Trading Group, Inc., [1999] Sec. L. Rep. (BNA) Vol. 31, No. 28, p. 950 (CFTC 1999) (broker sanctioned for failing to correct client’s “erroneous beliefs” about safety of commodities trading and failing to stop client from continued trading once aware of these erroneous beliefs).

It is well established that a broker has a duty to provide adequate warnings about investment strategies particularly when trading on margin. See, e.g. Gochnauer v. A. G. Edwards & Co., 810 F.2d 1042 (11th Cir. 1987) (holding broker liable when he advised and assisted customers with conservative investment objectives in establishing a speculative options trading account); Beckstrom v. Parnell , 730 So.2d 942 (La. App. 1998)(imposing liability on broker for failure to warn elderly customer about high costs of switching mutual funds when broker aware of customer’s diminished capacity); Nulph v. First Security Investor Services, Inc., 1998 WL 1179858 (N.A.S.D. Nov. 19, 1998)( unsophisticated divorcee awarded $70,000 for failure of broker to warn of speculative information gathered from internet chat rooms and then placed trades on the telephone without any recommendations).

Under these circumstances, the broker has an affirmative duty to cut a customer off, and stop what has become to be known as “financial suicide.” See, e.g., J. Gross, Economic Suicide: A Primer for Securities Arbitration Lawyers , Securities Arbitration 2003 Vol. I at 387 (PLI 2003). See also, Problem Gambling in the Stock Market and Extent of Brokerage Firm Responsibility for Prevention , Marvin A. Steinberg. Ph.D., Connecticut Council on Compulsive Gambling, Judah J. Harris, J.D., Milford, Connecticut, 1994; Gambling and Problem Gambling in the Financial Markets, Marvin A. Steinberg, Ph.D., Connecticut Council on Problem Gambling, July, 1998; Investing and Gambling Problems, “Some Investors May Be At Risk For Gambling Out Of Control In The Stock Market And Other Financial Markets”; See also, Model Employer Management of a Case of Stock Market Gambling , Judah J. Harris, J.D., Milford, Connecticut, Marvin A. Steinberg, Ph.D., Connecticut Council on Compulsive Gambling, 1994.