For many investors, promissory notes tend to conjure memories of recent deals gone bad, especially those associated with Medical Capital Holdings or Provident Royalties. Both entities were charged with fraud by the Securities and Exchange Commission (SEC) and cost investors millions of dollars in financial losses.
Promissory notes are again back in the news. This time a broker who worked for a firm – Success Trade Securities – that is alleged to have sold more than $18 million in fraudulent promissory notes to 58 investors has been barred by the Financial Industry Regulatory Authority (FINRA).
The broker, Jinesh “Hodge” Brahmbhattm, worked for Success Trade Securities from 2009 until April. He was barred by FINRA last week.
Many of the individuals who invested in the fraudulent notes are current and former NFL and NBA players. As reported Nov. 20 by Investment News, one athlete, Jared Odrick of the Miami Dolphins, has filed an arbitration complaint with FINRA against Brahmbhatt, Success Trade and the company’s top executive, Fuad Ahmed.
The letter of acceptance, waiver and consent from FINRA doesn’t mention Brahmbhatt’s work with Success Trade as the reason he was barred from FINRA. Rather, it cites Brahmbhatt’s failure to appear and testify in August at a disciplinary hearing regarding Success Trade and Ahmed.
Earlier this spring, FINRA filed a cease-and-desist order against Success Trade and Ahmed. The order specifically instructed the two “to halt further fraudulent activities” and cited “the misuse of investors’ funds and assets.”
FINRA also filed a complaint against Ahmed and Success Trade, alleging “fraud in the sale of promissory notes issued by the firm’s parent company, Success Trade Inc.”
According to a Nov. 18 story by Yahoo Sports, Brahmbhatt had once been registered in a financial advisers program created by the NFL Players Association. He dropped his FINRA license in April, and told Yahoo Sports at the time that he had more than 30 clients who had purchased some $12 million of the allegedly fraudulent promissory notes from Success Trade.
Meanwhile, Odrick, the NFL player, filed his arbitration complaint with FINRA in April. He says in the complaint that he invested $625,000 in Success Trade notes and one other series of promissory notes beginning in 2011. Among other things, Odrick alleges that he was promised returns of 10% to 12.5%. The Success Trade note “was part of a large Ponzi scheme orchestrated by Success Trade, Ahmed and Brahmbhatt,” the complaint states.