Spartan Capital Securities LLC Lawsuit: Churning and Fraud Claims

The Spartan Capital Securities lawsuit landscape is not a single case but a stack of overlapping FINRA enforcement actions against the New York broker-dealer, its founder and former CEO John D. Lowry, chief administrative officer Kim M. Monchik, and several of its brokers. The allegations include widespread churning of customer accounts, fraud in the sale of pre-IPO shares, systematic failures to disclose customer arbitrations and complaints, and repeated refusals to respond to regulators. Some proceedings have already produced fines, suspensions, and consent orders; the biggest ones are still pending.¹

The Churning Complaint: Nearly $10 Million in Trading Costs

The most sweeping case against the firm was filed by FINRA on December 15, 2025 (Case No. 2018056490335). It names Spartan itself, Monchik, branch manager Frederick Joseph Cammarano III, and brokers James Pecoraro, John Stapleton, and Michael Darvish.²

According to the complaint, between January 2018 and April 2022, 39 Spartan representatives excessively traded 114 customer accounts, and 35 of those accounts were specifically churned. Fifty-three of the affected accounts belonged to senior investors. In total, customers paid nearly $10 million in trading costs and lost nearly $8 million on their investments.³

Cost-to-equity ratios in the flagged accounts ranged from roughly 16% to 491%. At the high end, a portfolio would have needed to nearly quintuple in value simply to break even after commissions.⁴ FINRA also alleges that after Regulation Best Interest took effect in June 2020, Spartan continued excessively trading 92 retail accounts, generating nearly $6 million in losses in that period alone. Roughly two-thirds of the firm’s trading revenue — over $46 million — came from accounts whose cost-to-equity ratio exceeded 20%.⁵

FINRA alleges willful violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, along with FINRA Rules 2020, 2010, and 2111 (suitability) for conduct before June 2020 and Regulation Best Interest for conduct after. Monchik and Cammarano face separate supervision charges under FINRA Rules 3110 and 2010.²

The Brokers Named

James Pecoraro (CRD No. 2440231) joined Spartan in November 2019 already carrying two prior FINRA sanctions for excessive trading. The most recent, from August 2022, involved 325 trades across three customer accounts with cost-to-equity ratios up to 175%, $166,018 in realized customer losses, and $184,053 in trading costs; he consented to a nine-month suspension, a $10,000 fine, and $68,886 in restitution.⁶ The December 2025 complaint alleges Spartan let him continue excessively trading afterward, including in the account of a 72-year-old California resident.⁵

John Stapleton (CRD No. 2791194) joined Spartan in 2015 after nearly three decades in the industry. In 2005 he had consented to a $10,000 fine, $104,073 in restitution, and a 60-business-day suspension to resolve prior churning and unsuitability allegations, without admitting or denying wrongdoing. He denies the current allegations and has said he intends to defend vigorously.⁷

Michael Darvish (CRD No. 3243141) was registered with Spartan from November 2017 to October 2024. The complaint alleges he recommended excessive and unsuitable trading in three customer accounts in violation of Regulation Best Interest. He denies the allegations and says he acted in his clients’ best interest. He is no longer registered with any firm.⁸

The Branch Manager Settlement

Cammarano (CRD No. 2277307), Spartan’s New York City branch manager and later a regional branch manager, became the first respondent to settle the churning case. On April 21, 2026, without admitting or denying the findings, he consented to an 18-month suspension from acting in any principal capacity and a $15,000 fine. FINRA said he ignored warning signs including large trading volumes, high customer losses, cost-to-equity ratios above 20%, frequent in-and-out trading, heavy margin use, and prior FINRA notifications about unreasonable supervision at the firm.⁹ The complaint remains pending against Spartan, Monchik, Pecoraro, Stapleton, and Darvish.

Pre-IPO and Private Placement Fraud Allegations

On November 24, 2025, FINRA filed a separate complaint (Case No. 2021069218305) accusing Spartan, Lowry, and Monchik of defrauding investors in private fund offerings. According to the complaint, Lowry controlled a set of investment vehicles known as the Atlas Funds and directed them to charge investors $3.25 million in undisclosed markups on the purchase of pre-IPO shares. Offering documents allegedly told investors the funds would not profit from markups and misrepresented the pricing of the pre-IPO acquisitions.¹⁰

Monchik allegedly managed the Atlas Funds while also serving as the person responsible for conducting due diligence on those same offerings for the brokerage. FINRA says the firm had no written procedures for identifying or mitigating such conflicts and failed to conduct reasonable due diligence on 16 private placements totaling over $24 million.¹⁰

A related allegation, reported by Law360, concerns customers who held restricted pre-IPO shares of the pharmaceutical company Alzamend Neuro between April and July 2021. Lowry and Monchik allegedly liquidated their own personal pre-IPO holdings first, selling at higher prices and more quickly than their customers could.¹¹

The Disclosure Case Now Before the SEC

The first Spartan matter to reach a decision concerned the Forms U4 and U5 that securities professionals must file and keep current with FINRA. Between January 2015 and December 2020, FINRA found, Spartan failed to update those forms on 220 separate occasions. The undisclosed items included 159 arbitration-related events involving 49 customer arbitrations against 65 representatives, 10 written customer complaints, and 51 financial events such as tax liens, judgments, and a bankruptcy.¹²

Twenty-nine of the arbitrations named one or more firm officers. Spartan argued the officers were sued only because of their titles, so nothing needed to be disclosed. FINRA rejected that reading, noting it had told the firm as early as 2015 that its interpretation was wrong and that its Disclosure Review Group had sent Spartan more than 75 letters on the issue.¹³

Lowry was personally named in 27 arbitrations during the period; he never disclosed 22 of them and was late on four others. He testified that he skimmed arbitration filings briefly and left reporting decisions to whichever compliance officer was in place at the time.¹⁴ Monchik, who served as interim chief compliance officer three separate times, was named in 12 arbitrations and failed to disclose or timely disclose 15 required amendments on her own Form U4. Spartan cycled through six chief compliance officers during this period, none lasting more than 18 months.¹³

A FINRA Extended Hearing Panel found the violations willful on March 28, 2023. Spartan was censured and fined $600,000. Lowry was fined $40,000 and suspended for two years; Monchik was fined $30,000 and suspended for two years. The firm was ordered to retain an independent consultant to overhaul its disclosure procedures.¹² FINRA’s National Adjudicatory Council affirmed on October 9, 2024.¹³

The respondents appealed to the SEC on November 4, 2024. The case is now Administrative Proceeding File No. 3-22285.¹⁵ The respondents have moved to introduce recent FINRA expungement awards, arguing that several of the underlying customer claims were meritless or had been filed without the customers’ knowledge.¹⁶ On April 16, 2026, the SEC extended its deadline to issue a decision to July 15, 2026. The sanctions are stayed during review.¹⁷

Failures to Cooperate With Regulators

FINRA has also sanctioned the firm for not responding to its investigative demands. Under Rule 8210, FINRA can compel firms and their associated persons to produce documents and testify. In November 2024, Spartan consented to sanctions for failing to timely respond to three Rule 8210 requests, complying only after FINRA sent four follow-up requests and opened three expedited enforcement proceedings. The firm was censured, fined $115,000, and required to retain an independent consultant to review its Rule 8210 compliance.¹⁸

A separate proceeding (No. 2022075597101) charges Lowry and Monchik individually with failing to timely respond to Rule 8210 requests tied to FINRA’s investigation into Spartan’s sale of interests in unregistered private funds. As of September 2025 the case was in a pre-hearing stage; a hearing officer denied Monchik’s motion for summary disposition, finding genuine factual disputes.¹⁹

Restricted Firm Status and Current Leadership

As of mid-2026, FINRA’s BrokerCheck lists 16 disclosures for Spartan and designates it a Restricted Firm under FINRA Rule 4111. The firm is appealing that classification. Robert George McBey is the current CEO, having succeeded Lowry.¹

What Customers Who Believe They Were Harmed Can Do

The customer claims underlying these enforcement cases have followed a consistent pattern: churning, unsuitable recommendations (particularly involving options), unauthorized trading, fraud and misrepresentation, and failure to supervise. Some filings described “boiler room sales tactics,” and many named firm officers on a supervisory-liability theory.¹²

Investors who believe they were harmed by a FINRA member firm generally pursue recovery through FINRA arbitration, where a panel of one or three arbitrators issues a binding award. Firms are required to disclose arbitration filings and outcomes, along with written customer complaints alleging sales practice violations and damages of at least $5,000, on their brokers’ registration forms. That information is what feeds BrokerCheck, and it is the same reporting obligation Spartan was found to have violated 220 times.

1
FINRA BrokerCheck. Spartan Capital Securities, LLC Firm Summary
2
FX News Group. FINRA Files Complaint Against Spartan Capital Securities
3
AdvisorHub. New York Broker-Dealer’s Business Model Hinged on Churning Client Accounts
4
ThinkAdvisor. Branch Manager Suspended at Firm Accused of Widespread Churning
5
Wealthmanagement.com. FINRA: New York Firm Missed Glaring Red Flags of Reps Churning Accounts
6
FINRA BrokerCheck. BrokerCheck Report, James Robert Pecoraro (CRD 2440231)
7
FINRA BrokerCheck. BrokerCheck Summary, John Joseph Stapleton
8
FINRA BrokerCheck. BrokerCheck Report, Michael A. Darvish (CRD 3243141)
9
FX News Group. FINRA Suspends, Fines Former Spartan Capital Securities Branch Manager
10
Rosenberger Law. FINRA Files Complaint Against John Dennis Lowry of Spartan Capital Securities Alleging $3.25 Million in Undisclosed Markups on Private Placements
11
Law360. FINRA Says Compliance Chief Took Part in Pre-IPO Fraud
12
FINRA. Extended Hearing Panel Decision, Disciplinary Proceeding No. 2019061528001
13
FINRA. NAC Decision, Disciplinary Proceeding No. 2019061528001
14
SEC. Application for Review of Disciplinary Action, Admin. Proc. File No. 3-22285
15
SEC. Administrative Proceeding File No. 3-22285
16
SEC. Second Motion for Leave to Adduce Additional Evidence, Admin. Proc. File No. 3-22285
17
SEC. Order Extending Time to Issue Decision, Release No. 34-105253
18
FINRA. FINRA Disciplinary Actions, January 2025
19
FINRA. OHO Order 25-06, Disciplinary Proceeding No. 2022075597101