SEC Charges Unregistered Security-Based Swaps Broker with Defrauding Retail Customers
Litigation Release No. 24513 / June 25, 2019
Securities and Exchange Commission v. Worldwide Markets, Ltd., TAB Networks, Inc., and Thomas F. Plaut, No. 2:19-cv-14205 (D.N.J. filed June 25, 2019)
The Securities and Exchange Commission today filed charges against an international securities broker and its New Jersey-based CEO for its fraudulent marketing and other deceptive conduct in connection with the unlawful sale of security-based swaps to foreign retail investors. The SEC complaint also charges a New Jersey-based company with aiding and abetting the broker's unlawful offerings and sales of security-based swaps to retail investors, and its failure to register as a broker in the United States.
According to the SEC's complaint, Worldwide Markets, Ltd., registered in the British Virgin Islands, and its CEO, Thomas Plaut, solicited foreign investors with offers to "own and trade" U.S. stocks. The SEC further alleges that customers were offered "quick and easy" account opening and promised that any withdrawal requests would be processed within two business days. However, instead of providing its customers with stocks, Worldwide Markets-at Plaut's direction-sold its unwitting customers single-security contracts for difference (CFDs). CFDs are a derivative product that provide exposure to an underlying asset without ownership, and materially differ from traditional stock ownership.
The SEC alleges that Worldwide Markets furthered its fraudulent scheme by improperly misappropriating at least $400,000 of customer deposits. Worldwide Market used the customer deposits for undisclosed purposes such as financing other business lines and reimbursing employee expenses. Despite its representations that customer withdrawals would be processed within two business days, Worldwide Markets allegedly has not honored a single customer withdrawal request since 2017. In addition, the SEC alleges that Worldwide Markets failed to register its security-based swap offerings and sales, transact its security-based swaps on a registered national exchange, and register as a broker as required by the federal securities laws.
The SEC's complaint, filed in U.S. District Court for the District of New Jersey, charges Worldwide Markets with violating the antifraud provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and various registration provisions, including Section 5(e) of the Securities Act, and Sections 6(l) and 15(a) of the Exchange Act. The SEC also charged Plaut with liability for Worldwide Markets' violations based on his role as a control person; and alleged that Worldwide Markets' violations of the registration provisions were aided and abetted by TAB Networks, Inc., a New Jersey-based company controlled by Plaut that performed nearly all of Worldwide Markets' operations. The SEC is seeking permanent injunctions, disgorgement plus interest, and penalties.
The SEC's continuing investigation is being conducted by Matt Reilly, Emily Shea, and Jeffrey Anderson, with assistance from Jason Litow and Yuri B. Zelinsky, and supervised by Kevin Guerrero, Peter Rosario, and Antonia Chion. The SEC's litigation will be led by Daniel Maher with assistance from Mr. Reilly and Ms. Shea, and will be supervised by Bridget Fitzpatrick. The SEC appreciates the assistance of the Commodity Futures Trading Commission.
The SEC encourages investors to check the background of anyone selling or offering them an investment using the free and simple search tool on Investor.gov.