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Florida Panel Awards Former U.S. Congressman $852,000 For Losses In Alleged Ponzi Scheme

After 42 days of hearings spanning the period from January 2011 to March 2012, a Financial Industry Regulatory Authority (“FINRA”) arbitration panel has awarded former U.S. Congressman Alan Grayson (“Grayson”) $852,000 for losses sustained in an alleged Ponzi scheme. The Award against Wachovia Securities, Inc., now known as Wells Fargo Advisors (“Wachovia”), was for far less than Grayson requested. The Statement of Claim alleged damages of over $30 million relating to an alleged “stock loan” Ponzi scheme involving Derivium Capital LLC and Derivium Capital (USA), Inc. (collectively “Derivium”).
Grayson, a Congressman from Orlando, Florida from 2008 to 2010, claimed that hundreds of investors lost hundreds of millions of dollars in the alleged Derivium scheme. According to Grayson, Derivium touted an investment strategy that allowed people to offer stock as collateral on loans, receiving up to 90 percent of the value of the stock, with the option to reclaim the stock later. Grayson alleged that Derivium quickly sold the stock through Wachovia even though the clients were not in default, then utilized the proceeds from the Wachovia stock sales to fund additional loans and pay earlier investors, in typical Ponzi fashion.

Now-defunct Derivium Capital filed for bankruptcy in 2005. Grayson has won judgments against Derivium but has been unable to collect on them. Grayson filed a FINRA claim against Wachovia in 2007 alleging that Wachovia played a role in Derivium’s scheme. According to the FINRA Award, the arbitrators found Wachovia liable for “aiding and abetting [Derivium’s] breach of fiduciary duty.”

The Florida securities lawyers at McCabe Rabin, P.A. represent investors nationwide in FINRA arbitration matters. Investors nationwide who have incurred recoverable investment losses due to specific failures by stockbrokers and brokerage firms, or as a result of a Ponzi scheme, may contact the Florida securities lawyers at McCabe Rabin, P.A. for a free and confidential consultation by calling toll free at 877.915.4040 or by e-mail to kelly@mccaberabin.com.