Finra bars broker whose client ran Ponzi scheme Broker denied involvement in scheme, but Axa Advisors fired him after a $3.1 million judgment was entered against him
A broker who was fired in the wake of a $3.1 million civil judgment against him was barred by the Financial Industry Regulatory Authority Inc. this week.
The broker, Herbert Weinstein, was fired by AXA Advisors in June because it was “uncomfortable supervising” him after the judgment, which stemmed from a civil lawsuit related to a Ponzi scheme, according to a Finra letter of acceptance, waiver and consent.
The judgment was entered against Mr. Weinstein and the certified public accounting firm for which he served as a partner, according to the Finra letter.
Finra, however, did not bar Mr. Weinstein for the judgment; rather, Finra barred him because he refused to appear for testimony, according to the AWC letter. Finra routinely looks into why brokers are terminated.
Mr. Weinstein has no disciplinary history with the Securities and Exchange Commission, Finra or any state securities regulator, the Finra action noted.
Mr. Weinstein could not be reached for comment. His attorney, John Hanamirian, said that Mr. Weinstein had no involvement in the Ponzi scheme that was run by a client, Ira Pressman, who in 2012 was sentenced to eight years in prison for defrauding 20 investors out of $6 million.
Mr. Pressman filed for bankruptcy and the trustees subsequently sued Mr. Weinstein and his CPA firm, which had worked with Mr. Pressman prior to and during the time he was running the Ponzi scheme.
“Mr. Weinstein had a long-term, ongoing professional relationship during the time Mr. Pressman was engaged in legitimate business,” Mr. Hanamirian said.
Mr. Pressman, without Mr. Weinstein's knowledge, began the Ponzi scheme about 10 years ago, Mr. Hanamirian said. “The scheme began to unfold and Ira came to Herb's office in 2011 and said he was in a Ponzi scheme.”
Starting in 2006, Mr. Pressman ran a company called PJI Distribution Corp. that purported to purchase and sell closeout and overstock merchandise, according to the U.S. Attorney's office.
Mr. Pressman solicited individuals to invest in these closeout deals, promising investors no risk returns of up to 100% annually.
Unbeknownst to the investors, however, most of these closeout merchandise deals were fictitious, according to the U.S. attorney's office. Instead, Mr. Pressman used new investors' money to pay returns to the old investors.
“In his narrative, Ira said Herb didn't have anything to do with it,” Mr. Hanamirian said. “When Ira filed for bankruptcy, the trustees pursued the claim against Herb. Mr. Weinstein was an unblemished professional and never had a claim of any sort against him.”