Erez Law recently filed a FINRA arbitration against Wells Fargo. The Erez Law client alleges that James Seijas (CRD# 2392901), who was a registered representative of Wells Fargo in Short Hills, New Jersey from 2013 to 2019, played a pivotal role in the Q3 Trading Club Ponzi scheme.
The Erez Law client, who was retired and of advanced age, alleges the following in the newly filed FINRA claim:
The retired investor entrusted Seijas with his investment account. Seijas managed the client’s account, which was a fee-based investment advisory account whereby the client was charged a percentage of his assets annually as a fee for investment advisory services. Brokers such as Seijas who charge a fee based on assets under management such rather than transaction-based commissions are deemed to be acting as investment advisers under the Investment Advisers of 1940 which creates a high legal standard that is referred to as a “fiduciary duty” and the advisor is encumbered with certain explicit legal obligations. Sadly, Seijas blatantly disregarded his fiduciary duties to his client.
Starting in or about 2017, Seijas and his partners Michael Ackerman and Quan Tran had formed Q3 Trading Club and Q3 I, LP. Seijas, Ackerman, and Tran promoted the Q3 Trading Club and Q3 I, LP as an opportunity to invest in cryptocurrencies. Specifically, they represented that the Q3 Trading Club and Q3 I, LP had developed a proprietary trading algorithm that took advantage of volatility in cryptocurrencies to earn profits while minimizing risks.
According to the claim, in or about January 2019, Seijas solicited the client to invest in Q3 I. Seijas represented to the client that he could achieve superior returns by investing in Q3 I. He represented to the client that he, Ackerman and Tran Companies had developed a proprietary trading algorithm that took advantage of volatility in cryptocurrencies to earn profits while minimizing risks.
Erez Law alleges that Seijas recommended his client sell securities in his accounts in order to raise money to invest in the funds. The client followed Seijas’s recommendations, sold securities in his account, and invested the proceeds in Q3 I. Additionally after the client invested in Q3 I, he received reports from Q3 I that his investment was generating significant monthly returns. Regrettably for the Erez Law client, the Q3 Companies was a completely fraudulent enterprise designed to enrich Seijas, Ackerman, and Tran.
The Q3 Trading Club was formed by Seijas and Quan Tran, a certified surgeon, and Michael Ackerman, a former UBS Securities broker, in 2017. It is alleged that the brokerage firm failed to inquire into the activities of Seijas, who is accused of co-masterminding the scheme with Tran and Ackerman. It is alleged that the Q3 Trading Club was used to pool investor funds to trade crypto assets using a “proprietary algorithm” that helps to generate profits by trading cryptocurrencies.
The investment was promoted to physicians on social media, including in a private Facebook Group “Physicians Dads’ Group.”
According to public records, after the Q3 Trading Club raised $1 million, it became a limited partnership and expanded its reach to $33 million from 150 investors spread across the United States. It is also alleged that just $10 million was used to invest in virtual currencies. At least another $10 million was misappropriated by Seijas, Tran, and Ackerman for their personal use or lost in unsuccessful trades. It is also alleged that about $4 million in “licensing fees” for access to the proprietary algorithm was diverted to Seijas, Tran, and Ackerman’s personal bank accounts.
The Q3 Companies raised at least $33 million from more than 150 investors. The Q3 Companies did not realize significant trading profits and the Q3 Companies falsely reported monthly profits in excess of 15% and provided false reports to investors including the Erez Law client. Additionally, it is alleged that only a fraction of the funds raised from investors were ever actually invested at all.
According to the claim, Seijas, Ackerman, and Tran each misappropriated millions of dollars for themselves. Ackerman misappropriated $7.4 million and invested the funds primarily in real estate as well as in jewelry and cars. Tran used investor funds to buy luxury cars, a yacht, and a luxury vacation. Seijas used $3.6 million of investor funds to buy a home in Florida.
On February 11, 2020, the SEC sued Ackerman for securities fraud. That same day, the United States Attorney for the Southern District of New York charged Ackerman with wire fraud and money laundering.
It is alleged that Seijas engaged in multiple violations of the law, FINRA rules, and industry standards for which Wells Fargo is liable. Erez Law alleges that Seijas engaged in illicit conduct including “selling away” in connection with the sale of Q3 1 to his client and possibly others for which Wells Fargo is legally responsible. Seijas’s wrongful conduct for which Wells Fargo is responsible caused the Erez Law client significant damages.
The claim alleges that Seijas sold the investment in Q3 I to the Erez Law client and possibly others without Wells Fargo’s required approval. By recommending that the client invests in an unapproved investment, Wells Fargo did not do any required due diligence on the investment and it was therefore unsuitable.
The investment in Q3 I was a fraudulent investment and was unsuitable for the Erez Law client or any investor for that matter.
Seijas also engaged in an undisclosed outside business activity and he failed to disclose his involvement in the Q3 Companies.
It is also alleged that Seijas engaged in misleading communications regarding the sale and performance of Q3 I. Seijas’s representations to the Erez Law client about the intended use of investor funds, the investment strategy of the Q3 Companies, past returns and anticipated returns were misleading, not fair and balanced and also lacked a foundation. Additionally, Seijas failed to adequately disclose the risks attendant to the investment.
Wells Fargo had a legal obligation to supervise Seijas and to ensure that he complies with all applicable securities laws and rules. The brokerage firm failed to adequately supervise Seijas. By failing to detect and terminate Seijas’s illicit conduct, the Erez Law client invested in Q3 I and lost his entire investment.
In addition to the case above, Seijas has been the subject of one customer complaint in 2020, according to his CRD report:
March 2020. “Plaintiff alleges that from August 2017 to December 2019, FA misrepresented investments as part of a Ponzi scheme.” The customer case is currently pending.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.