July 24, 2024

TD Bank ended up parting with a hefty $95 million in October, to settle claims related to the infamous TelexFree fraud, a global Ponzi scheme affecting around 2 million potential investors. This was affirmed by a Massachusetts court.

The bank first opened an account for TelexFree in September 2012, yet it wasn’t long before the company was flagged due to suspicious account activity. Even with media coverage pointing to TelexFree’s fraudulent practices and contradictory business profile, TD bank didn’t close the first account until July 2013. It then went onto open a second, third, and fourth account for the firm, flagrantly neglecting the warning signs.

The bank subsequently carried out large transactions between these new accounts, ignoring previous legal claims against TelexFree. Even indications of fraud via receipt markings didn’t halt TD’s dealings with the company.

In the second worst loss this month, General Electric agreed to a $61 million settlement. The allegations? That GE manipulated employees’ retirement savings to inflate the attractiveness of an affiliate. This led to the undervaluation of their savings due to a strategy which underperformed compared to similar investment options.

In third, Met Commercial Bank was hit with a total $29.5m fine from the New York State Department of Financial Services and the US Federal Reserve. This was due to failure in identity verification while issuing MovoCash cards, which was linked to Covid-19 benefit fraud.

Coming fourth was Allstate, which settled<$25 million for alleged unwarranted inflation of auto insurance premiums. Last but not least in fifth place was ADM Investor Services. The company’s fine was a steep £6.5 million ($8.1 million) by the UK’s Financial Conduct Authority. This was due to a series of consistent failures in its risk management.

Frequently Asked Questions

What was the TelexFree Ponzi Scheme?

TelexFree is believed to be one of the largest frauds ever committed. It affected approximately 2 million potential investors worldwide. The company was meant to be selling Voice over Internet Protocol (VoIP) calling plans, but it primarily earned revenue from new investors’ fees rather than product sales, which is indicative of a Ponzi scheme.

Why was ADM Investor Services fined by the UK’s Financial Conduct Authority?

The UK’s Financial Conduct Authority fined ADM Investor Services for a series of failures in its risk management. Among these failures were not assigning risk ratings to customers, onboarding customers from blacklisted countries, and not properly recording onboarding decisions.

What was Allstate alleged to do wrong with their auto insurance policy-holders?

Allstate was accused of unlawfully optimising the price of insurance by adjusting for demand elasticity, a practice that had been prohibited by the California Department of Insurance since February 18, 2015. As a result, it’s alleged the insurer charged certain policyholders higher premiums than warranted. Allstate denied the claims.HSBC Securities has been hit with a [$2 million](https://www.finra.org/sites/default/files/fda_documents/2021073545201%20HSBC%20Securities%20%28USA%29%20Inc.%20CRD%2019585%20AWC%20lp.pdf) penalty from the US Financial Industry Regulatory Authority (Finra). The fine is due to incorrect disclosures of conflicts of interest in their research articles. These inaccuracies were due to issues within the data system.

HSBC had no system in place to verify the precision of its data feeds. There were no assigned personnel or branches to handle this function. As a result, the firm missed about 314,000 incorrect disclosures. These inaccuracies were in its equity and debt research articles, which were published from January 2013 to December 2021.

![HSBC USA](https://investmentshoax.com/wp-content/uploads/2024/06/EDITORIAL USE ONLY HSBC USA New York City Getty 1221391363.jpg.webp)
*HSBC Securities was penalized $2 million by Finra for not properly disclosing conflicts of interest*

The data feeds, used to generate conflict disclosures in research articles, were the source of these inaccuracies. Conflicts between aggregated affiliates operating under another company name were not identifiable or disclosed due to the way affiliates were categorized.

Incorrect disclosures were also created for investment banking relationships, compensation sources, and other non-existent conflicts. New client relationships were not promptly added to the data feeds, and inconsistent naming conventions for the same clients were used, adding to the problem.

The bank fell short by excluding services related to asset-backed securities, private placement bonds, and certain structured products from its definition of investment banking products. As these weren’t included in data feeds, disclosures were insufficient. In addition, it wrongly reported investment banking revenue based on two years of data, when the regulation only allows referencing one year’s data.

In comparison, Wilmington Trust Investment Management was fined [$1.3 million](https://www.sec.gov/files/litigation/admin/2023/ia-6455.pdf) by SEC. They had diverted client assets into more expensive investments and failed to fully disclose conflicts of interest to advisory clients.

The information from ORX News is collected from public sources and may not be completely accurate or reliable. The information does not include information from other ORX services and has not been confirmed by any ORX member.

#### Frequently Asked Questions

##### What is the reason for the fine against HSBC Securities by Finra?
The $2 million fine against HSBC Securities by the US Financial Industry Regulatory Authority (Finra) was due to incorrectly presenting conflicts of interest in their research reports. The inaccuracies were due to errors within their data system and no existing process to ensure the accuracy of their data feeds leading to approximately 314,000 inaccurate disclosures.

##### Why was Wilmington Trust Investment Management fined by the SEC?
The Securities and Exchange Commission fined Wilmington Trust Investment Management $1.3 million as they were found to be knowingly directing client resources into costlier investments. The firm falsely stated that it would opt for the most cost-effective mutual fund share class for its clients but it failed to thoroughly and fairly disclose all the conflicts of interest.

##### What problems were found with HSBC’s data system?
HSBC’s data system had issues with categorizing conflicts of interest, leading to inaccuracies. It grouped affiliates under a single company instead of maintaining individual data, which led to missed conflict disclosures. It also created disclosures for non-existent conflicts like investment banking relationships and compensation sources. The system also fell short on updating new client relationships promptly and using consistent naming conventions.