Michael Francis Shillin, of Altoona, Wisconsin, a stockbroker formerly registered with Alliance Global Partners (AGP), has been charged by Securities and Exchange Commission (SEC) with defrauding investors about stock and insurance transactions when he was registered with Alliance Global Partners, Raymond James Financial Services Inc., Raymond James Financial Services Advisors Inc., Shillin Wealth Management LLC, and International Assets Investment Management. Securities and Exchange Commission v. Michael F. Shillin, Civil Action No. 3:21-cv-00601 (September 23, 2021).
According to the Complaint, Shillin deceived hundreds of his investment advisory customers who entrusted him with their retirement savings. The Complaint alleges that investors were falsely told by Shillin that they had IPO shares or pre-IPO shares in major companies, including Zoom Video Communications Inc., Pinterest Inc., and Fitbit Inc. Shillin allegedly lied about investors’ portfolios and gave them fake documents relating to their investments.
According to SEC, several advisory customers were encouraged by Shillin to execute rollovers of existing insurance products into new products. This led customers to liquidate their existing accounts to buy insurance policies. Those policies allegedly did not exist or contained features that were not consistent with what Shillin represented to investors.
SEC alleges that in one case, a customer who Shillin persuaded to buy a life insurance policy was led to believe that the policy contained a long-term benefit. The customer purportedly learned after suffering from stage IV cancer that there was no policy in place or long-term benefit. The regulator contends that another investor was told by Shillin that they had $450,000.00 more in assets than they had, causing the customer to retire. They were led to believe that they earned profits from Shillin’s purchase of stock issued by Space Exploration Technologies Corp. SEC contends that SpaceX stock did not exist.
According to SEC, investors were also directed by Shillin to an online portal involving what appeared to be a portfolio of their investments. The entire portfolio was fake. SEC alleges that Shillin violated Securities Act of 1993 Section 17(a), Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, and Investment Advisers Act of 1940 Section 206(1) and (2).
On January 10, 2022, the U.S. Securities and Exchange Commission announced that on November 18, 2021, the United States District Court for the Western District of Wisconsin entered a partial judgment against defendant Michael F. Shillin in a previously filed civil action that charged Shillin with defrauding at least 100 advisory clients. U.S. Securities and Exchange Commission v. Michael F. Shillin, No. 3:21-cv-00601 (W.D. WI filed September 23, 2021).
According to the Complaint:
Beginning in at least June 2015, Shillin lied to many of his advisory clients about how he had invested their money. He told them they now had certain ownership interests in several high-profile companies that had not yet gone public – including SpaceX; Palantir Technologies Inc.; and 23andMe, Inc.; among others. He also told certain clients that he had bought them stock in the initial public offerings (“IPOs”) of several newly public companies, including Fitbit, Inc.; Zoom Video Communications, Inc.; and
It is important to note according to the SEC Complaint and recent Judgment, that the relevant period of Shillin’s wrongful conduct began as early as 2014 to the present. FINRA shows that from August 21, 2014 through June 11, 2018, Shillin was associated with Raymond James Financial Services, Inc. According to the SEC Complaint, in May 2018, Shillin was terminated from an Raymond Jamaes but that he “falsely told clients that his departure was voluntary.” Raymond James merely states on public dusclosure that he was terminated for the “failure to follow firm directive regarding the payment of client CPA fees.” According to the SEC, “many clients would have fired him had they known the truth, and thus would have refused to continue paying him advisory fees.” Complaint at 36.
In addition to Raymond James civil liability during the course of Shillin’s registration under the common law agency principles, the doctrine of respondeat superior, and as control persons pursuant to Section 20(a) of the Exchange Act of 1934, 15 U.S.C. § 78t, Raymond James could be held liable for Shillin’s subsequent, post June 2018 conduct, for the “failure to warn” Shillin’s customers (generally in an effort to insulate itself from liability.
The “failure to warn” is a breach of fiduciary duty, and under such circumstances, brokerage firms have been routinely found liable to customers for failing to warn even former customers of a broker’s prior misconduct. See, e.g., Twiss v. Kury, 25 F.3d 1551 (C.A.11 (Fla.) 1994)(Under the common law, a person has no duty to control the conduct of another or to warn those placed in danger by such conduct unless a special relationship exists between the defendant and the persons whose behavior needs to be controlled or the foreseeable victim of such conduct); SII Investments, Inc. v. Jenks, 370 F.Supp.2d 1213 (M.D. Fla., 2005)(duty to warn customers of adverse actions against former broker); Glaziers and Glassworkers Union Local No. 252 Annuity Fund v. Newbridge Securities, Inc., 93 F.3d 1171 (3rd Cir. 1996)(Janney has a “fundamental” duty to warn, when “silence might be harmful.” quoting, Globe Woolen Co. v. Utica Gas and Electric Co., 224 N.Y. 483, 121 N.E. 378, 380 (1918) (“A beneficiary, about to plunge into a ruinous course of dealing, may be betrayed by silence as well as by the spoken word.”)(Cardozo, J.); See also, S. Silver and S. Adkins, Brokerage Firms’ Liability When They Fail to Warn About Bad Brokers (Practicing Law Institute, Aug. 12, 2009).
FINRA Public Disclosure shows that Shillin has been identified in 37 customer initiated investment related disputes regarding allegations of his wrongdoing when he was registered with securities broker dealers, including AGP and Raymond James Financial Services. On May 10, 2021, a customer filed an investment related FINRA securities arbitration claim where they sought $1,000,000.00 in damages supported by accusations of misrepresentation by Shillin relating to securities transactions. FINRA Arbitration No. 21-01220. According to the claim, customers were falsely told that they could withdrawal from IRAs without incurring penalties. The claim also alleges that false documents were prepared for customers by the stockbroker.
On May 14, 2021, a different customer filed an investment related FINRA securities arbitration claim concerning Shillin’s activities. They requested compensatory damages based on allegations of Shillin misrepresenting Enterprise Zone and making false statements about pre-IPO shares in Palantir and SpaceX. FINRA Arbitration No. 21-01220. Shillin is also referenced in a customer initiated investment related FINRA securities arbitration claim on May 24, 2021. The customer sought $18,466.00 in damages founded on accusations of misrepresentation and unsuitable investment advice relating to their purchase of a life insurance policy while Shillin was registered with AGP. FINRA Arbitration No. 21-01240.
On July 31, 2021, an additional customer initiated investment related civil action involving Shillin’s conduct was settled for $38,000.00 in damages based upon allegations of Shillin misrepresenting the terms of a life insurance policy. According to the complaint, the stockbroker falsely stated that the customer’s ACH deposits came from a life insurance policy. The customer was also lied to by Shillin regarding their investment in pre-IPO shares of SpaceX. Shillin allegedly provided a fake 1099 form to the customer regarding SpaceX shares.
Shillin was registered with Alliance Global Partners between May 23, 2018, and October 5, 2020.
On November 29, 2021, immediately following the SEC Judgment on November 18, 2021, Shilling filed for Bankruptcy.
In the normal course of events, based upon, among other things, the outrageous allegations (now findings of fact) against Shillin, it is not unreasonable to expect more activity by the United States Department of Justice regarding Mr. Shillin.
It is important for investors to note that Shillin was terminated from Raymond James in June 11, 2018, and that any claims against Raymond James based upon Shillin’s conduct are subject to certain time constraints or statutes of limitation both under federal and state law, to file these claims.
Investors suffering damages as a result of Shillin’s conduct are urged to consult with qualified counsel.
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