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Evidence global bank UBS scammed clients in fictitious trades to US markets
By Lucy Komisar | August 10, 2024
On the left, Irina and Yuri Starostenko in the Bahamas, stock trading clients of global bank UBS. On the right, UBS CEO Sergio Ermotti in Zurich. My story today in Inside Paradeplatz, a daily financial publication run from Zurich by Lukas Hässig (twice voted Swiss business journalist of the year) tells how UBS scammed the Starostenkos by taking their money and making fake trades into U.S. markets. See the story below, with nearly 50 links to evidence. UBS declined to comment or refute anything in a draft of the article sent them.
Evidence shows that International Bank UBS/ Bahamas took clients' money and made fictitious stock trades to U.S. markets. Documents from a Bahamas lawsuit show that UBS refused to send clients SEC-required confirmations of trades made into the U.S. market. The clients believe the trades were not executed, that UBS created internal trading records and stole their money. Could this have occurred to other clients? Top UBS officials refuse to comment on any of the claims or evidence this reporter sent them, or to discuss the matter at all, saying only, "We believe these allegations have no merit."
Yuri and Irina Starostenko, Italian citizens living in the Bahamas, allege that UBS Bahamas defrauded them by promising to execute trades on their behalf in U.S. markets and taking their money but never actually making the trades.
• UBS is the largest private bank in the world. In 2012, UBS Bahamas offered them a loan deal to provide cash for investments.
• From June-September 2013, the couple placed 252 trade orders into U.S. markets, but UBS failed to provide confirmations required by the U.S. Securities and Exchange Commission (SEC) that the trades were executed.
• In 2018-2019, after litigation, UBS provided internal documents purporting to show the trades, but they did not include required confirmations from U.S. brokers proving the trades occurred.
• An affidavit from a UBS official in 2019 admitted it had no other trade records.
• The couple alleges over $200,000 in losses from what they term fake trades.
• UBS has won 10 years of delays in the Bahamas case to avoid a judgment on the merits. The dispute continues in the Bahamas courts where judges' delays were condemned by a chief justice. In the latest, June 19th, the judge cancelled a hearing that should have granted the Starostenkos a trial date.
• The Starostenkos also sued UBS in U.S. court for securities fraud. UBS got the suit in the U.S. dismissed on jurisdictional grounds, but the couple filed an appeal to the U.S. Supreme Court.
• The story raises the question of why UBS would pay millions of dollars over a decade to a well-connected law firm (a partner sits on the stock market regulator board) for a minor case brought by a day-trading couple unless evidence brought to court would show a pattern of executing fake trades globally, harming massive numbers of investors and markets.
• Top UBS officials declined to comment on evidence that backs up these claims.
• Financial regulators and prosecutors in the Bahamas, Switzerland and the U.S. have the authority to investigate whether fictitious trades were made by UBS Bahamas and if they exist elsewhere in the UBS system. So far, none has done anything.
THE STORY
Under the swaying palms of Lyford Cay is evidence of an illicit world of fake stock trades and fleeced investors. This exclusive Bahamian gated community, home to titans like the Mellons and Bacardis, welcomed Yuri Starostenko and Irina Tsareva, born Russian, now citizens of Italy. Lured by promises of easy wealth, their American Dream curdled into a decade-long nightmare.
The Starostenkos' story begins with a wartime saga. Irina Tsareva's Jewish mother survived WWII Odessa, her identity hidden by a grandmother's fictitious marriage. Yuri's family fled Siberian repression.
The families in the West might be called middle class. Irina says, "My grandpa Valdimir Isaakovicth Litvak taught in the ship engineering department of Odessa National Maritime University and lectured all around the USSR." She says her grandfather fought in the Russian army against the Nazis and that her mother survived the German occupation of Odessa, because her grandmother bought fake documents and made a fictitious marriage to a Polish man who claimed her mother was his daughter and hid her for two years in a village house, because the three-year-old had Jewish looks. Her family name is Tsareva.
Irina Tsareva says, "Yuri's family were on his mother's side Jewish merchants from the Urals and on his father's side Belarusian kulaks (farmers). Both sides of the family went to Siberia escaping famine and repression. The kulaks lost their lands in the 1920s, and his grandfather was sent to prison in Siberia. He wife followed to be near him. His father taught at a coal institute and worked in mines; his mother was a head of a police department of their city."
After the Soviet empire collapsed, the couple left Russia in the 1990s, drifted west, became citizens of Italy, and found their footing in Belgium, where in the years of stock boom they did well in the Russian securities market. In 2007, they moved to the Bahamas to raise their five sons, ages one to nine; the next year, a sixth son was born. Lyford Cay is an enclave whose prominent residents have included Henry Ford II, Aga Khan IV, Prince Rainier III of Monaco, Huntington Hartford II, Babe Paley, the Bacardis, and the Mellons, who have a family estate with 200 feet of white sand beach. In 1962, when President Kennedy was in Nassau for private meetings with British Prime Minister Harold Macmillan, he stayed at the home of Canadian brewery tycoon E.P. Taylor, and Macmillan was next door.
Lyford Cay, with yachts bobbing in the marina and ice clinking in the clubhouse, felt like paradise. Built in the late 1950s by Taylor, it has about 450 luxury villas, restaurants, a marina, a golf course and beaches. The Starostenkos bought a 2-story, 5-bedroom house with a guest cottage, swimming pool and garden for $2.4 million. They yearned for security, but this was a paradise with serpents.
The couple had no papers to work locally, but they could trade. They became clients of Credit Suisse AG, Nassau Branch in 2008. Four years later they switched to UBS Bahamas Ltd. lured by the promise of easy profits through trading U.S. stocks. UBS offered a $1.4 million loan, their home as collateral, half deposited into a trading account. However, behind the sleek wealth management, danger lurked.
UBS, the world's largest private bank, operates in over 50 other countries, in all major financial centers. It has a checkered past. In 2008, U.S. Senate investigators reported how it used code names and encrypted computers to help hundreds of rich Americans evade multi-millions on taxes. Just a year later, UBS agreed to pay $1.56 billion to the U.S. for failing to report about 14,000 foreigners' trades of U.S. registered securities and paying the required withholding tax. Since then, UBS must report all trades in U.S. securities to the IRS. In 2012, the U.S. fined UBS $1.5 billion for manipulating Libor and other benchmark interest rates.
But there may be another illicit and unknown practice committed by at least one division of UBS and maybe more: the fictitious trades scam. Here's how that works.
From 2013 to 2014, Yuri Starostenko feverishly placed over 200 stock orders on U.S. markets. Under U.S. Securities and Exchange Commission (SEC) rules, records should have contained trade confirmations from U.S. brokers, proof the trades were executed as ordered on NYSE or Nasdaq. It should have come from UBS Financial Services, which handled the Bahamas orders. Instead, that never happened. "We never received a single confirmation," Irina Tsareva said, "despite endless requests." (Irina is the talkative one, speaks at court hearings. Yuri does the legal research and writes the filings for their pro se legal actions. They can't afford a lawyer.)
Please go to The Komisar Scoop to continue reading.
THE STORY
Under the swaying palms of Lyford Cay is evidence of an illicit world of fake stock trades and fleeced investors. This exclusive Bahamian gated community, home to titans like the Mellons and Bacardis, welcomed Yuri Starostenko and Irina Tsareva, born Russian, now citizens of Italy. Lured by promises of easy wealth, their American Dream curdled into a decade-long nightmare.
The Starostenkos' story begins with a wartime saga. Irina Tsareva's Jewish mother survived WWII Odessa, her identity hidden by a grandmother's fictitious marriage. Yuri's family fled Siberian repression.
The families in the West might be called middle class. Irina says, "My grandpa Valdimir Isaakovicth Litvak taught in the ship engineering department of Odessa National Maritime University and lectured all around the USSR." She says her grandfather fought in the Russian army against the Nazis and that her mother survived the German occupation of Odessa, because her grandmother bought fake documents and made a fictitious marriage to a Polish man who claimed her mother was his daughter and hid her for two years in a village house, because the three-year-old had Jewish looks. Her family name is Tsareva.
Irina Tsareva says, "Yuri's family were on his mother's side Jewish merchants from the Urals and on his father's side Belarusian kulaks (farmers). Both sides of the family went to Siberia escaping famine and repression. The kulaks lost their lands in the 1920s, and his grandfather was sent to prison in Siberia. He wife followed to be near him. His father taught at a coal institute and worked in mines; his mother was a head of a police department of their city."
After the Soviet empire collapsed, the couple left Russia in the 1990s, drifted west, became citizens of Italy, and found their footing in Belgium, where in the years of stock boom they did well in the Russian securities market. In 2007, they moved to the Bahamas to raise their five sons, ages one to nine; the next year, a sixth son was born. Lyford Cay is an enclave whose prominent residents have included Henry Ford II, Aga Khan IV, Prince Rainier III of Monaco, Huntington Hartford II, Babe Paley, the Bacardis, and the Mellons, who have a family estate with 200 feet of white sand beach. In 1962, when President Kennedy was in Nassau for private meetings with British Prime Minister Harold Macmillan, he stayed at the home of Canadian brewery tycoon E.P. Taylor, and Macmillan was next door.
Lyford Cay, with yachts bobbing in the marina and ice clinking in the clubhouse, felt like paradise. Built in the late 1950s by Taylor, it has about 450 luxury villas, restaurants, a marina, a golf course and beaches. The Starostenkos bought a 2-story, 5-bedroom house with a guest cottage, swimming pool and garden for $2.4 million. They yearned for security, but this was a paradise with serpents.
The couple had no papers to work locally, but they could trade. They became clients of Credit Suisse AG, Nassau Branch in 2008. Four years later they switched to UBS Bahamas Ltd. lured by the promise of easy profits through trading U.S. stocks. UBS offered a $1.4 million loan, their home as collateral, half deposited into a trading account. However, behind the sleek wealth management, danger lurked.
UBS, the world's largest private bank, operates in over 50 other countries, in all major financial centers. It has a checkered past. In 2008, U.S. Senate investigators reported how it used code names and encrypted computers to help hundreds of rich Americans evade multi-millions on taxes. Just a year later, UBS agreed to pay $1.56 billion to the U.S. for failing to report about 14,000 foreigners' trades of U.S. registered securities and paying the required withholding tax. Since then, UBS must report all trades in U.S. securities to the IRS. In 2012, the U.S. fined UBS $1.5 billion for manipulating Libor and other benchmark interest rates.
But there may be another illicit and unknown practice committed by at least one division of UBS and maybe more: the fictitious trades scam. Here's how that works.
From 2013 to 2014, Yuri Starostenko feverishly placed over 200 stock orders on U.S. markets. Under U.S. Securities and Exchange Commission (SEC) rules, records should have contained trade confirmations from U.S. brokers, proof the trades were executed as ordered on NYSE or Nasdaq. It should have come from UBS Financial Services, which handled the Bahamas orders. Instead, that never happened. "We never received a single confirmation," Irina Tsareva said, "despite endless requests." (Irina is the talkative one, speaks at court hearings. Yuri does the legal research and writes the filings for their pro se legal actions. They can't afford a lawyer.)
Please go to The Komisar Scoop to continue reading.
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