A New York City based retail broker is accused of running his firm rampant with stock manipulation and fraud. I reported today for Growth Capitalist that FINRA wants to shut down and impose hefty fines on George Carris, founder of John Carris Investments, along with executives with in his broker-dealer for a bucket list of nearly everything illegal a broker-deal could do to cheat main street investors and his staff.
John Carris Investments made headlines last year after former New Jersey Governor and failed MF Global CEO, John Corzine, was seen looking for office space to sublet in the firm’s office in the downtown Trump building. Corzine’s connection to the firm began when his investment manager in his family office, Nancy Dunlap, got involved in a private placement deal for an electric car. Dunlap was on the board of directors of AMP Holdings who hired George Carris’ firm to raise funds through a debt security called a PIPE. It’s unclear how much money was ever raised on the deal.
Carris stands accused of selling PIPE deals to mom and pop retail investors who are not accredited. If true, it’s a blatant violation of securities laws to sell debt instruments like this to non-sophisticated investors. On top that, his top lieutenants used the firm’s retail clients to make large buy orders in penny stocks in an effort to prop up the stock even though the clients had not ordered the stock buys.
Former staff says there were days they couldn’t trade because net capital limits were violated and bills were overdue with their clearing agent. Meanwhile, Carris would spend thousands on personal entertainment with the firm’s cash, according to the regulator’s complaint.
When retail brokers were fighting to keep their jobs after the financial crisis Carris got some bucks from his Dad to start the broker dealer firm in 2009 promising big bonuses and robust salaries to retail brokers who could bring in clients. When George decided the firm needed more cash, instead of natural revenue growth, they set up Invictus Capital and sold investor subscriptions into the fund through their retail brokers promising annual dividends off the revenue of John Carris Investments. Millions were raised but the first dividend payments were from new clients investing in Invictus. John Carris Investments was operating at millions in loss that year so it would have been impossible to pay real dividends as the offering documents said they would.
Growth Capitalist wrote, “In 2011, John Carris Investments operated at a net loss of $3,090,148 yet $39,342 of dividends were paid out during that year.” FINRA called those moves a Ponzi scheme.
Carris plans to fight the FINRA suit and is still running his firm at 40 Wall St. He would not comment about the litigation. It’s unclear how much capital is left within the broker dealer. The regulator said he also choose not to pay payroll taxes for his staff and owes the IRS around $600k.
FINRA quotes from mounds of internal firm documents it gathered and clearly did their home work building the complaint but this is not the first time Carris or others at the firm have had FINRA violations. Which begs to question how affective FINRA sanctions can be to protect retail clients. If all the evidence in their case is true I’d expect the justice department to come knocking on George Carris’ door sometime real soon.