More than forty-five public investors filed a $5.8 million dollar securities arbitration claim against Securities America in connection with a Ponzi scheme effected by one of its registered representatives, conducting business and registered under the name of Allen Lee Hengst.
The securities arbitration panel, then back in 2001 known as the NASD, or National Association of Securities Dealers, now FINRA, or the Financial Industry Regulatory Authority, Office of Dispute Resolution entered an arbitration award against Securities America, together with First Union Securities, (now Wells Fargo Advisors) for approximately $924,000 plus interest and attorneys’ fees. NASD Arbitration No. 01-04223.
The Panel awarded treble damages, under Florida’s Investor Protection Statute, Section 517, against Allen Lee Hengst, and of course, Mr. Hengst did not appear at the hearing, and thereafter was barred by securities regulators for the failure to pay the arbitration award.
Interestingly enough, Mr. Hengst. was not Mr. Hengst.
Mr. Hengst was really Scott J. Wolas, a former lawyer, and fugitive from justice who assumed multiple fake identities over two decades, posing as stockbroker, a real estate agent, a bartender and even a retired paleontologist.
Hengst and Wolas were roommates at Georgetown University, and Wolas assumed his identity.
Before he began to impersonate Hengst, Wolas was indicted by the Manhattan District Attorney’s Office, in a 119 count indictment with among other things, charged Wolas with fraud and grand larceny in connection with a liquor-exporting scheme amounting.
Wolas fled to Florida, but his arrest warrant in New York was still active for 20 years.
In 2009, Wolas returned to Massachusetts, under the name Drew Prescott, and then posed as a bartender under the name Frank Amolsch.
He later opened a real estate business under the name “Increasing Fortune,” and obtained a real estate license as a Eugene Gratwohl. In Massachusetts, Wolas scamed more than $1.7 million from at least 20 investors in connection with a supposed waterfront development deal in Quincy Massachusetts and thereafter vanished.
In 2017, Wolas was eventually found in a condominium in Delray Beach, Florida, with his ex-wife living under her brother’s name and pretending to be a retired paleontologist.
However, in connection with his registration with FINRA or the NASD, SEC Rule 17f-2, requires all associated persons to be fingerprinted, and for those fingerprints be submitted for identification, and the existence of prior submissions, to the National Criminal Information Center of NCIC. Had Securities America submitted Wolas’ fingerprints, or even did a modest background check they would have discovered it was not Allen Lee Hengst but fugitive Scott Wolas. Arguably, Securities America was negligent, or certainly did not follow securities rules and established protocol when it registered the fake Allen Lee Hengst.
However, with respect to his victims and the securities arbitration case against Securities America, the Arbitration Panel wrote that:
With respect to the Ponzi Scheme claims, there were approximately thirteen Claimants who profited on the schemes by amounts totaling approximately $2,500,000.00. There were ten Claimants who alleged losses on the schemes totaling approximately $1,600,000.00. Those Claimants who presented losses sought recission and interest on the amount of their loss.
The Panel finds that all Claimants understood that the money provided directly to Respondent Hengst was for his personal use in exploiting deals owned personally by Hengst in a foreign country; that Claimants knew these were “special deals” outside of Claimants’ investments with the broker-dealers; that Claimants knew it was not an investment in the ordinary course of broker-dealer business, but they were “special deals” not to be discussed with anybody other than Hengst; that none of the Claimants made any inquiry about it to any broker-dealer or expected to fmd any record of it with the broker-dealers; and that all the monies within the scheme were paid to and from personal accounts of Hengst.
The Panel finds that Respondents First Union, SAl and SAA are not liable with respect to the Ponzi Schemes, and that the negligence was not the proximate cause of the Ponzi losses. The Panel was appalled that Claimants profiting in the schemes and holding hundreds of thousands of dollars in stolen funds joined with Claimants from whom funds were stolen in the schemes. The Panel finds that it does not have jurisdiction to order the return of stolen funds or otherwise provide a mechanism for restitution from profiting Claimants.
Securities America later brought an arbitration claim of its own against “Scott Jonathan McKay Wolas a/k/a Allen Lee Hengst,” who again failed to appear at the arbitration hearing and entered an Arbitration Award against him for $16.4 million. NASD Arbitration Award 04-03105. In connection with the $16.4 million arbitration award, however, Securities America was assessed one hundred percent (100%) of the filing fees and hearing costs.The information contained herein has been obtained from reliable sources however may not be accurate and is not guaranteed by us. Readers are encouraged to undertake their own independent investigation and evaluation of the relevant facts. All claims and allegations are subject to adjudication, decisions may be subject to appeal, and no inference is intended, nor should any inference be made from any information contained herein from any source.
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