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Rogue Brokers in the News; Fraudsters and Thieves of Client Funds

By Erwin J. Shustak, Esq. of Shustak Reynolds & Partners, P.C. posted on Tuesday, April 24, 2018.

Erwin J. Shustak

Erwin J. Shustak

Managing Partner

LocationSan Diego, California
New York, New York
Phone: (619) 696-9500 (Ext. 109)
(800) 496-5900 (Ext. 109)
Email[email protected]

Erwin J. Shustak, Esq.
619.696.9500 ext. 109
[email protected]

Two rogue brokers made the news this week.  One, a former Ameriprise broker in Los Angles, was arrested by the FBI and charged with money laundering and federal fraud.  The second, a former New Jersey based Morgan Stanley representative fired 15 months ago for stealing client funds, was sued by Morgan for $6 million.

The U.S. Attorney’s office in the Central District of California announced it had arrested Li Lin Hsu and charged her with pilfering client funds from 11 of her former Ameriprise clients while employed at the firm and after she was fired by Ameriprise in 2015. She allegedly trolled for clients through ads in Chinese language newspapers, stole their funds and used their money to pay credit card bills and personal loans and to buy real estate and luxury items 

Hsu is accused of stealing $1 million from one of her victims and using that money to buy a condominium in Diamond Bar, California.  She faces three counts of mail fraud, three counts of wire fraud, one count of money laundering and one count of obstruction of justice. She pleaded not guilty and was released on $50,000 bond, according to federal authorities. She will stand trial on June 12 and faces a maximum sentence of 20 years on each fraud count, 10 years on money laundering and five years for obstruction of justice if convicted.

In September 2017, Hsu was ordered by a Finra arbitration panel to pay Ameriprise $675,000 to cover the cost of a settlement it made with one of her clients.  An Ameriprise spokeswoman said the firm was not aware of the U.S. Attorney’s Office action and is not facing any regulatory questions related to its supervision of Hsu.

Hsu, who allegedly carried out a Ponzi scheme by using money she wrongfully took from new victims to repay other clients from whom she had pilfered money and sent clients fabricated account statements and investment purchase confirmations, was barred from the securities industry in February 2016.  She had spent her nine-year career as a broker with Ameriprise which fired her in March 2015.

And in an unrelated matter, another Finra arbitration panel ruled that former Morgan Stanley broker Barry F. Connell is liable to pay Morgan $6 million in compensatory damages related to his February 2017 arrest for stealing $5 million from clients. Last November, another arbitration panel ordered Connell to pay Morgan the $300,000 balance on promissory notes he owed plus interest on signing bonuses.

Connell, who represented himself in both Finra hearings, was suspended from the securities industry indefinitely by Finra for failing to pay the arbitration award.

Shustak Reynolds & Partners, P.C. regularly represents firms and individuals in SEC, FINRA, securities, investment, and financial services matters, including litigation, arbitration, enforcement and investigation matters. If you or your company require counsel in these areas, contact us today for a confidential, complimentary consultation.

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