Jefferies Wrongfully Charges IsZo Capital

Jefferies

ISZO CAPITAL, a client of Jefferies LLC, sought to close and transfer its Account in June 2021. According to Jefferies, all of the account positions were transferred except for seven legacy short positions with a market value of ($ 200). There was no mechanism to “close out” or cancel these non-existent positions.

Sometime around July 23, 2021, Mr. Christopher A. Bianchi of Jefferies advised that it would be seizing over $5 million from the IsZo Capital Account as purported “Minimum Net Equity”, notwithstanding that it is a closed account with worthless, non-existent positions, and approximately $485,000 of purported collateral (collectively and as it fluctuated, the “Retained Amount”) in connection with the seven legacy short positions in the Account.

According to Christopher Bianchi, “delisted and illiquid short positions” are “not eligible to be transferred and will remain open.”

Mr. Bianchi knew there were no “shorts,” the positions were worthless, the Account had been closed, and the seizure could last indefinitely. Therefore, this purported explanation by Mr. Christopher A. Bianchi was and is entirely fraudulent, and he was well aware of that.

After that, Mr. Stephen Augustin, a Jefferies Senior Vice President, highlighted that a $5,000,000 Minimum Net Equity is supposedly required for a Portfolio Margin Account as per the Prime Brokerage Customer Agreement.

However, again Mr. Stephen Augustin’s purported explanation was entirely fraudulent. The Account had been closed, with transactions restricted to liquidating the seven legacy short positions that could not be liquidated, the purchase of securities was prohibited, and additional credit was not allowed.

Mr. Barsam Lakani also knew that the purported explanations being provided were fraudulent and that seizing over $5 million of IsZo Capital’s funds for worthless positions in a closed account was objectively baseless and fraudulent.

In truth, Jefferies took the untenable position that it must seize millions of dollars from IsZo Capital to “secure” indefinitely positions having no market value.

Jefferies charged IsZo Capital money on the seized positions that do not exist, and it purports to be able to borrow such funds for almost nothing.

As a result of the above acts and omissions, Jefferies and its officers jointly and severally are liable for compensatory damages, consequential damages, disgorgement of ill-gotten gains, punitive damages, legal fees, expert fees, interest, and costs. IsZo is seeking to win the return of its $2.5 million from a FINRA arbitration panel. Additionally, IsZo is seeking to recover millions of dollars in fees and interest paid to Jefferies in the five years it maintained its Account with the firm.

For more information on this fraud, refer to the ebook Jefferies LLC – The Big Bad Wolf.

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