On March 27, 2018, long-time Wedbush broker, Timary Delorme, was permanently barred from associating with brokerage firms or participating in penny stock sales or offerings. These sanctions were doled out by the Securities Exchange Commission (SEC) and Financial Industry Regulatory Authority, Inc. (FINRA) for her alleged role in an illegal penny stock pump-and-dump scheme.
Delorme (formerly known as Timary Koller) became registered as a General Securities Representative with Wedbush in 1981. She worked for Wedbush as a broker for over 40 years.
The SEC’s order barring Delorme states she was involved in a manipulative penny stock trading scheme with Izak Zirk Engelbrecht (a/k/a Zirk De Maison) between July 2008 through early 2014. According to FBI records, the scheme involved companies controlled by Engelbrecht that were mere shell companies with no valid business purposes.
The SEC said Delorme purchased penny stocks in Engelbrecht’s companies using her customer’s accounts or encouraged her customers to purchase them. Delorme also purportedly engaged in matched (i.e., coordinated) trading of the penny stocks with Engelbrecht. She thereby inflated trading volume in the stocks, driving up their prices, the SEC said.
Delorme also allegedly aided Engelbrecht’s insider trading by selling his personal shares at the inflated prices and wiring him the proceeds. Delorme collected commissions on the sales of Engelbrecht’s stocks. Engelbrecht reportedly rewarded Delorme by paying her and her husband kickbacks.
Stockholders in Engelbrecht’s purported sham companies allegedly suffered tens of millions in losses due to the pump-and-dump scheme.
In 2014, Engelbrecht and seven of his coconspirators were indicted on charges of securities fraud, conspiracy to commit securities fraud, and wire fraud. Engelbrecht pled guilty in the Northern District of Ohio, and in January 2017, he was sentenced to 151 months in prison. His co-conspirators have also pled guilty and are serving prison sentences.
In 2014, the FBI interviewed Delorme for her role in the fraud. Wedbush was aware of her FBI contact. According to the SEC, despite the FBI interview and several other red flags warning Wedbush that Delorme was involved in the fraud, Wedbush kept her on as a broker.
Wedbush did not fire Delorme until March 28, 2018. That followed the SEC and FINRA announcing on March 27 that they permanently barred Delorme from associating with brokerage firms.
The SEC separately announced charges against Wedbush on March 27 for its failure to supervise Delorme and prevent her alleged fraud (as separately reported by Marquardt Law Office LLC). In its press release, the SEC recognized Wedbush as a repeat offender, labeling it a “recidivist” brokerage.
Investor Recovery Options for Losses Caused by a Firm’s Failure to Prevent Fraud
Security rules and laws prohibit brokers, like Timary Delorme, from recommending any investments to their customers unless they perform their due diligence to ensure the investments are suitable to the customers. Customers have the right to pursue arbitration and litigation claims against brokers and their firms when brokers recommend unsuitable investments. Several anti-fraud laws also allow investors to pursue claims against their brokers and brokerages for losses caused by fraud.
Moreover, brokerage firms, like Wedbush, owe their customers a duty to closely supervise their brokers to ensure they do not commit violations. FBI interviews aside, brokerage firms should be on heightened alert when their brokers recommend penny stocks to their customers. “Penny stocks,” receiving their name years ago, are stocks that trade for $5 per share or less. They carry significant risks and pump and dump schemes typically involve penny stocks.
If you believe Timary Delorme or another Wedbush broker may have caused you investment losses due to either fraud or negligence, contact Marquardt Law Office LLC to speak with a securities attorney and receive a free case evaluation.
Marquardt Law Office LLC is a securities law firm located in Chicago, IL that represents clients nationwide who have suffered losses due to misconduct such as fraud and negligence.