A convicted con artist formerly of Pittsburgh with a propensity for writing frivolous civil suits is believed to have filed an apparently fake motion in Manhattan federal court to dismiss charges against Bernie Madoff, the jailed and infamous Ponzi scheme mastermind. The bizarre, rambling legal document purportedly filed by “Frederick Banks, The Litigator Legal Assistant,” includes numerous misspellings and handwritten scrawl that alleges the “CIA Office of Science and Technology used bio-electric sensors and subcranial voice to skull technology to influence the court.” U.S. Circuit Judge Denny Chin, who as a U.S. District judge sentenced Madoff to 150 years in prison in 2009, ruled the “defendant’s argument is meritless” in an order made public Wednesday alongside the motion mailed to the court. More on Bloomberg [...]

Emphasizing the substantial discretion district courts must give to federal agencies, on June 4, 2014, the Second Circuit held that U.S. District Judge Jed Rakoff had “abused [his] discretion” by applying an incorrect legal standard when rejecting a $285 million U.S. Securities and Exchange Commission settlement with Citigroup Global Markets, Inc. because the bank neither admitted nor denied wrongdoing. The appeals court found that Judge Rakoff committed “legal error” by requiring the SEC to establish the truth of the allegations against Citigroup as a condition to approval of the consent decree proposed by the parties. The court also found that the judge’s disagreement with the “SEC’s decisions on discretionary policy” — such as whether to settle complaints without forcing defendants to admit wrongdoing — was not sufficient to find that such a settlement rose to the level of being “against the public interest.” More on Law360 [...]

A federal judge on Thursday allowed a Securities and Exchange Commission lawsuit against Bank of America to go forward, in a case that alleges fraud in the sale of bonds backed by millions of dollars in home loans. U.S. District Judge Max Cogburn also ruled on a related case brought by the U.S. Department of Justice. A federal magistrate judge had recommended dismissal of that suit, but on Thursday Cogburn granted the department 30 days to file an amended version. The suits were both filed last August in federal court in Charlotte. The SEC and DOJ alleged the Charlotte-based bank concealed information from investors about the risks of the loans that were packed into securities. More in the Charlotte Observer [...]

Every day brings fresh reports of gross misconduct in the financial sector. So it makes sense to worry about how well your money is protected from fraudsters. Your bank account is guaranteed for up to $250,000 by a government agency–the Federal Deposit Insurance Corp. (FDIC). If you have an account at any of our nation’s 4,000 brokerage firms, however, your money is “protected” (for up to $500,000) by a Wall Street agency–the Securities Investor Protection Corp. (SIPC)–with no government guarantee. SIPC was established by an act of Congress in 1970, but Wall Street controls it, and asking Wall Street to protect investors from Wall Street is asking for trouble. Its website boasts: “SIPC protects customers if their brokerage firm fails.” Nothing could be further from the truth. Investors with accounts at firms that fail as a result of fraud can, incredibly, be forced to pay an SIPC-appointed trustee money, rather than the other way round. More on Forbes [...]

When JPMorgan Chase & Co. (JPM)’s Jamie Dimon got a 74 percent raise in January, U.S. Attorney Preet Bharara fumed. He had forced the bank just weeks before to pay $1.7 billion for enabling Bernard Madoff’s Ponzi scheme. And yet Dimon was being rewarded. Now, five months later, Bharara’s frustration is directed at another bank. More on Bloomberg [...]

A top U.S. regulator said on Friday he is worried that investment advisers may be getting away with securities violations that are going undetected, and he called for action to improve how advisers are policed. In a speech in Colorado, Securities and Exchange Commission member Daniel Gallagher unveiled the results of a new SEC review that showed an “eye-popping” percentage of licensed brokers have checkered histories, even though they are routinely inspected by regulators. More on Reuters [...]

The official winding down Lehman Brothers Holdings Inc.’s brokerage business says he plans to return more than $4 billion in cash to former employees and other creditors. James W. Giddens, the court-appointed trustee winding down Lehman’s broker-dealer, said in a statement Wednesday that now that he’s made whole the failed brokerage’s customers, he can turn his full attention to creditors. “With the return of 100 percent of customers’ assets, we are now able to lay out a clear plan for winding down the general estate and distributing assets to general creditors as quickly as possible,” Mr. Giddens said. More in the Wall Street Journal [...]