SEC Obtains Final Judgments Against Investment Adviser, Goldsky Asset Management
On January 2, 2019, a federal district court entered final consent judgments against an Australia-based investment adviser, Goldsky Asset Management, LLC, and its owner, Kenneth Grace, for making false and misleading statements about its business in filings with the Commission and on its website.
The SEC’s complaint, filed on September 27, 2018 in the Southern District of New York, alleged that Goldsky Asset Management’s Forms ADV for 2016 and 2017, which Grace signed, falsely stated that Goldsky Asset Management’s hedge fund, Goldsky Global Alpha Fund, LP, had an auditor, a prime broker and custodian, and an administrator. The complaint further alleged that, in its Forms ADV and ADV Part 2A, Goldsky Asset Management stated that it managed over $100 million in discretionary assets under management, when it in fact had no assets. According to the complaint, Goldsky Asset Management’s website falsely claimed that Goldsky Global Alpha Fund earned 19.45% compounded annual returns since inception, 70.33% compounded monthly returns since inception, and 25.30% returns for the year ended September 30, 2017. Read More
The Bad Actor Rule of Rule 506(d) – Securities Lawyer 101
According to a recent Securities & Exchange Commission (“SEC”) report, thousands of businesses raise billions of dollars in capital through offerings exempt from registration under Regulation D of the Securities Act of 1933, as amended. Rule 506 is the most commonly used Regulation D exemption. For small issuers, the amount raised is typically less than $2 million.
Rule 506(c) allows for general solicitation of accredited investors. This rule, a product of the JOBS Act, became effective on September 23, 2013 and is the original source of the “Bad Actor Rule.” The Bad Actor Rule prohibits an issuer from relying on the exemption if the issuer or certain other persons are subject to certain “Disqualifying Events” including being convicted of, or being subject to judicial or regulatory sanctions for, certain violations of U.S. based laws.
The Bad Actor Rule Codified
The “Bad Actor” rule is codified in paragraphs (d) and (e) of Rule 506. Rule 506(d)(1) states that the exemptions in Rule 506(b) and Rule 506(c) are not available if a covered person has had certain Disqualifying Events. Read More
SEC Charges Texas Radio Host for Ponzi Scheme Targeting Elderly Investors
The SEC announced on March 12, 2019 that it has charged Texas resident William Neil “Doc” Gallagher-the self-styled “Money Doctor” featured on three Dallas-area radio stations-in an emergency action to shut down a $19.6 million Ponzi scheme targeting elderly investors’ retirement funds. The SEC also charged Gallagher Financial Group, Inc. and W. Neil Gallagher, Ph.D. Agency, Inc., companies that Gallagher used to carry out the scheme.
The SEC’s complaint, which was filed under seal on March 7, 2019, alleged that Gallagher made frequent religious references on his radio shows to establish his standing among a target audience of retired Christian investors. From December 2014 through January 2019, he raised at least $19.6 million from approximately 60 senior citizens. Falsely claiming to be a licensed investment adviser, he offered an investment that he called a Diversified Growth and Income Strategy Account, in which he promised to acquire income-generating assets for his clients in five specified categories. He promised investors that they would receive guaranteed, risk-free returns in their accounts ranging from 5% to 8% per year. In reality, except for one $75,000 annuity purchase, Gallagher purchased no assets in any of the five categories and no other assets to back the promised returns. Instead, he exhausted virtually all investor funds on spending unrelated to the accounts, including misappropriating significant portions for personal and company expenses and to make Ponzi payments to investors. To lull investors and conceal the scheme, Gallagher provided investors phony account statements showing false account balances. Read More
Do State Blue Sky Laws Apply To Rule 506(c) Offerings? Going Public Lawyers
Issuers are often unaware of the state laws that apply to their private placements prior to completion of their going public transactions. Federal securities laws require that the purchase or sale of a security be subject to a registration statement under the Securities Act of 1933 (the “Securities Act”) or exemptfrom registration. Rule 506 of Regulation D under the Securities Act provides an exemption for private placement offerings. The JOBS Act amended Rule 506 by creating Rule 506(c) which allows general solicitation and advertising in private placement offerings so long as sales are made only to accredited investors.
Issuers conducting any offer or sale of securities must consider state blue sky laws that may be relevant to their offering. Securities offerings under Rule 506 are deemed to be covered securities under the federal law, which preempts the states from substantively regulating Rule 506 offerings under state securities or blue sky laws. Read More
SEC Settles with Joseph Frank Vacante, Biotech Insider Trader
The SEC charged on February 21, 2019, Joseph Frank Vacante, a former employee of a biotech company with insider trading on confidential information regarding the company’s withdrawal of certain products from consideration by the U.S. FDA.
Joseph Frank Vacante agreed to pay more than $140,000 to settle the SEC’s charges.
According to the SEC’s complaint, on September 29, 2016, Joseph Frank Vacante learned that the FDA had recommended that Trinity withdraw two products which Joseph Frank Vacante believed represented the future of the company. The complaint further alleges that, that same day, Joseph Frank Vacante twice communicated with his broker in efforts to sell Trinity American Depository Receipts (ADRs) which he had received as part of his employment, including lowering the price to ensure the sale occurred. Read More
SEC Obtains Final Judgment Against Joseph Frank Vacante, Former Broker for Defrauding Customers
On March 1, 2019, a federal district court entered a final consent judgment against broker, William Gennity who was charged with defrauding customers by making unsuitable and unauthorized trades and churning customers’ accounts that enriched the broker at the customers’ expense.
The SEC’s complaint, filed in the Southern District of New York, alleges that from July 2012 to August 2014, William Gennity recommended to four customers a pattern of high-cost, in-and-out trading without any reasonable basis to believe that his customers could make a profit. William Gennity’s recommendations resulted in losses for the customers and gains for William Gennity. He allegedly also lied to his customers about the potential for the accounts to profit. The complaint also alleges that William Gennity engaged in unauthorized trading and churning. Read More
SEC Announces Settlement Against Former Investment Adviser, James Polese
On February 22,2019 the SEC announced the entry of a final judgment against James Polese, a former investment adviser at a large financial institution who was charged with misappropriating client funds.
On January 31, 2018, the Commission filed a complaint in the United States District Court for the District of Massachusetts charging James Polese and his former colleague, Cornelius Peterson, with securities fraud for engaging in various schemes to defraud their clients, including fraudulently misappropriating $350,000 of one client’s money, using $100,000 of those funds to make investments in their own names, and directing the remaining $250,000 to James Polese’s personal bank account. The Commission’s complaint also alleged that James Polese and Cornelius Peterson invested $100,000 of another client’s funds into an investment in which Cornelius Peterson and James Polese held a financial interest, without informing the client or disclosing their conflict of interest. Read More
SEC Obtains Final Judgments Against Mathias Francisco Sandoval and Maria Cidre, Former General Cable Corp, CEO and Former CFO of General Cable Corp.
On February 20, 2019, the U.S. District Court for the Southern District of Florida entered final judgments on consent against Mathias Francisco Sandoval Herrera and Maria D. Cidre, the former Chief Executive Officer and former Chief Financial Officer, respectively, of the Rest of World operating segment of General Cable Corp.
The SEC’s complaint, filed on January 24, 2017, alleged that Mathias Francisco Sandoval and Maria Cidre learned in January 2012 of an inventory overstatement and related accounting errors at General Cable’s subsidiary in Brazil. The complaint alleged that, over the course of 2012, the estimated overstatement grew to tens of millions of dollars. Instead of disclosing the overstatement pursuant to General Cable’s policies and system of internal controls, the complaint alleges that Mathias Francisco Sandoval and Maria Cidre concealed the errors by omitting them from required reports and making false certifications to executive management. Read More
Restricted Legends, Removal Requirements, Rule 144 for Shells – Tradability Legal Opinions
The Securities Act of 1933, as amended (the “Securities Act”) does not require that issuers place restricted legend (“Restricted Legends” or “Restrictive Legend“) on certificates representing restricted securities. It has become routine for public companies and private companies seeking to go public to place Restricted Legends on certificates. It is also common practice for an issuer’s transfer agent to require that the issuer place Restricted Legends on stock certificates representing restricted securities. Restricted Legends provide notice to shareholders as well as to third parties that the securities represented by the stock certificate cannot be resold unless registered under the Securities Act or an exemption from registration is available. To remove the restricted legend, the issuer and/or its transfer agent will require a tradability legal opinion.
Rule 163B and Testing the Waters
On February 19, 2019, the SEC posted a new proposed rule intended to make it possible for all issuers to “test the waters” when contemplating a public offering of securities. Until now, only issuers considered emerging growth companies (EGCs) under the JOBS Act of 2012 qualified to solicit investor interest prior to a registered public offering. An EGC is defined as an issuer with “total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year and, as of December 8, 2011, had not sold common equity securities under a registration statement”. A company continues to be an emerging growth company for the first five years after it completes an Initial Public Offering (“IPO”). Its status will change only if its gross revenues exceed the $1.07 billion threshold, if it has issued more than $1 billion in non-convertible debt, or it becomes a large accelerated filer.
In addition being allowed to test the waters—with the object of gauging investor interest in an initial public offering (IPO)—the JOBS Act conferred other advantages on EGCs, most of them having to do with less stringent SEC Reporting Requirements in quarterly and annual reports. Another benefit enjoyed by these fledgling companies was the ability to file draft registration statements with the SEC confidentially. When an EGC files a confidential initial registration statement, the filing itself is not made available to the public, and the review process is between the company and the SEC’s Division of Corporation Finance. The original submission and subsequent amendments need not be made public until 15 days prior to the start of the company’s road show. Read More
SEC Files Charges against Joshua Sason in Elaborate Microcap Stock Fraud
On February 15, 2019 the SEC announced charges against four individuals and related businesses for their roles in two microcap frauds and unlawful securities offerings. In sum, the alleged illegal transactions resulted in proceeds of more than $25 million.
According to the SEC’s complaint, from approximately December 2012 to June 2013, microcap stock financier Magna Group, which was founded and owned by Joshua Sason, engaged in a scheme to acquire fake convertible promissory notes supposedly issued by penny stock issuer Lustros Inc. and then to convert those notes into shares of Lustros common stock. The defendants then sold the shares to unsuspecting retail investors, who did not know that the shares were fraudulently acquired and were being sold illegally. The defendants’ sales of the Lustros shares also had the effect of destroying the value of the Lustros shares held by the public. The complaint alleges that Marc Manuel, Magna Group’s former head of research and due diligence, personally negotiated and executed the sham transactions. Read More
SEC Charges Cognizant and Two Former Executives With FCPA Violations
On February 15, 2019, Cognizant Technology Solutions Corporation has agreed to pay $25 million to settle charges that it violated the Foreign Corrupt Practices Act, and two of the company’s former executives were charged for their roles in facilitating the payment of millions of dollars in a bribe to an Indian government official.
The SEC’s complaint alleges that in 2014, a senior government official of the Indian state of Tamil Nadu demanded a $2 million bribe from the construction firm responsible for building Cognizant’s 2.7 million square foot campus in Chennai, India. As alleged in the complaint, Gordon Coburn, Cognizant’s President, and Steven E. Schwartz, the company’s Chief Legal Officer, authorized the contractor to pay the bribe, and directed their subordinates to conceal the bribe by doctoring the contractor’s change orders. The Commission also alleges that Cognizant authorized the construction firm to make two additional bribes totaling more than $1.6 million. Cognizant allegedly used sham change order requests to conceal the payments it made to reimburse the firm. Read More
Can Finders Raise Money Q & A – Going Public Lawyers
Posted By Brenda Hamilton, Securities Lawyer
It is not unusual for a private or public company to be approached by a person (“Finder”) who offers to locate investors in exchange for a success fee. Most finders are not registered as broker-dealers with the Securities and Exchange Commission (“SEC”) or Financial Industry Regulatory Authority (“FINRA”). The possibility of receiving capital, even through the efforts of a Finder creates a tempting opportunity for issuers going public in need of capital. Matching companies with investors can be a lucrative proposition for the Finder. While it may seem harmless, the SEC does not think so and in fact, the SEC frequently brings cases against unregistered Finders and those who aid and abet them. This Q & A addresses common questions we receive from our clients about Finders. Read More
SEC Charges Former Executives of Lucent Polymers, a Plastics Manufacturer with Fraud
On February 12, 2019, the SEC charged two former high-ranking executives, of an Indiana-based plastics manufacturer with concealing from potential buyers of the manufacturer the fact that the company’s core business model was a sham.
According to the SEC’s complaint, Lucent Polymers, Inc. premised its business model on its ability to transform “garbage to gold” – that is, to use low-grade, non-prime feedstock to develop high-quality plastics. The company’s near-magic “garbage to gold” process, the SEC alleges, was a huge commercial success. However, the complaint alleges that Lucent’s business model was a fraud. The complaint alleges that the company routinely lied to its customers and falsified its certifications of test data to show that its products complied with customer specifications, including on important aspects such as fire-retardant measures, when in fact the products did not meet customer specifications. Read More
Court Imposes Lifetime Officer-And-Director Bars On Michael J. Kipp, Swisher’s former CFO, and Joanne K. Viard
A federal district court has permanently barred two former corporate officers of a North Carolina-based hygiene and sanitation company from serving as officers or directors of public companies.
The SEC charged the two officers of Swisher Hygiene, Inc., Michael J. Kipp, Swisher’s former CFO, and Joanne K. Viard, Swisher’s former Director of External Reporting, in 2016 with fraud for participating in an earnings management scheme.
The SEC’s complaint alleged that, during the second through fourth quarters of 2011, Michael Kipp took advantage of Swisher’s ineffective internal controls and directed his accounting group to change various acquisition-related reserves and expenses to increase earnings to predetermined targets. The complaint alleged that Joanne Viard identified potential acquisition-related entries that could be reclassified to meet earnings targets, and made various adjusting entries in Swisher’s accounting records without adequate justification or support. In a parallel action, Michael Kipp and Joanne Viard were charged criminally and were sentenced to 54 and 24 months imprisonment, respectively. Read More
SEC Obtains Final Judgment Against Niket Shah in Ponzi Scheme Targeting Retail Investors
The SEC obtained a final judgment on February 8, 2018, against Niket Shah, a New Jersey resident who was charged last year by the agency with stealing more than $250,000 in a Ponzi scheme in which his friends and coworkers invested.
The court’s final judgment follows the court’s grant of summary judgment in the agency’s favor. In granting summary judgment, the court found that Niket Shah and his company, Spark Trading Group LLC, falsely claimed that Spark Trading was registered with the SEC; that their investments were profitable; that investors’ funds were guaranteed; and that defendants received $250,000 in start-up capital, including $200,000 that Shah deposited into a binary options trading account. Read More
The Cato Institute Files Action Challenging SEC Gag Orders
On January 9, the Cato Institute filed suit against the Securities & Exchange Commission (the “SEC”), its chairman Jay Clayton, and its secretary Brent J. Fields. For decades, questions have been raised, and criticisms offered, of the SEC’s longstanding practice of requiring (or allowing, depending on one’s point of view) settling defendants in enforcement actions to sign consent decrees in which they “neither admit nor deny” the charges lodged against them. Thanks to a standard clause in their decrees, for the rest of their lives, the defendants will be prevented from explaining what really happened, if their views don’t coincide with the agency’s. These strictures apply to corporate as well as individual defendants.
The Cato Institute believes these SEC Gag Orders are wrong. Cato is a libertarian think tank located in Washington, D.C. It was founded in 1974 in Wichita, Kansas, as the Charles Koch Foundation, and was at first wholly funded by Koch. It’s by now considered one of the most influential think tanks in the world. Cato is not a public company, and is not regulated by the SEC. Ordinarily, it would have lacked standing to sue the agency, but thanks to special circumstances, it was able to file a complaint for declaratory and injunctive relief. Read More
SEC Charges Robert Alexander, Founder of Online Gaming Company for Defrauding Investors
On February 7,2019, the SEC charged Robert Alexander with fraudulently raising approximately $9 million from more than 50 individuals by selling investments in Kizzang LLC, a purported online gaming business.
According to the SEC’s complaint, among other misrepresentations, Robert Alexander told investors that they would make a minimum of ten times their investment, Robert Alexander had personally invested millions of dollars in Kizzang, Robert Alexander had made a $50 million charitable donation, and that he had led the creation of a prominent video game. Rather than using investor funds for Kizzang’s business, Robert Alexander stole at least $1.3 million, including spending more than $450,000 on gambling sprees. Robert Alexander also used investor funds to finance his daily living and other personal expenses, including credit card bills, shopping and entertainment, and expenses for his daughter, including culinary school tuition and luxury car payments. Read More
Form F-1 Foreign Private Issuers and Going Public
A foreign private issuer going public can register an offering of securities under the Securities Act of 1933 (Securities Act) or may register a class of equity securities under the Securities Exchange Act of 1934 (Exchange Act), or both. In either case, the issuer must file a registration statement containing information required by the Security and Exchange Commission (SEC), and must become effective. Under the Securities Act, a registration statement contains a prospectus, along with other information required by the SEC’s regulations.
The SEC has adopted a series of forms available to foreign private issuers consisting of the “F” series registration statements and Forms 20-F and 6-K disclosure forms for annual and current reports. The disclosure forms available to foreign private issuers have been designed with reference to international disclosure standards, both in scope and timing requirements for filing. Most foreign private issuers opt to file under those forms instead of the forms available to domestic issuers. Read More
When is a Form S-1 Confidential? Going Public Securities Lawyers
Form S-1 is a common part of the going public process. In some circumstances Form S-1 filings can remain confidential prior to effectiveness. This Q&A discusses common questions we receive about confidential submissions on Form S-1.
Q. When does an emerging growth company have to file its Form S-1 registration statement if it wants the submission to be confidential?
A. The JOBS Act requires that emerging growth companies file the initial confidential submission of its Form S-1 Registration Statements and all amendments with the SEC within 21 days prior to the anticipated effectiveness of the registration statement or road shows. These prior confidential submissions should be included as exhibits to the company’s later publicly filed registration statement, if any. This applies to both public companies and companies involved in going public transactions. Read More
Scottsdale and John Hurry Push Back to Stop FINRA Investigation
On December 17, 2018, John Hurry broker dealer, Scottsdale Capital Advisers Corporation sued the Financial Industry Regulatory Authority (“FINRA”), for breach of contract in the U.S. District Court for the District of Columbia. Scottsdale and its sister company, Alpine Securities, Inc., are broker-dealers controlled by John Hurry and his wife Justine Hurry. Both companies are FINRA members. Both John and Justine Hurry are registered brokers regulated by FINRA.
The complaint alleges that FINRA has breached its agreement with and obligations to member firms by its “increasing and current failure to provide fair and meaningful representation” to them, and by taking “affirmative acts that have the effect if not the purpose of burdening competition, harming not only member firms but also issuers and customers.” Broadly, Scottsdale is saying that rather than help small securities firms, it’s unfairly attacking and damaging them:
Through… improper enforcement efforts, FINRA has… engaged in “unfair discrimination” against certain of its members in violation of its governing statute and By-Laws. It has aggressively targeted and sought to punish or even eliminate specific segments of the securities market. Through its coercive actions against smaller member firms who are engaged in the microcap and low-priced securities business, FINRA has gotten to the point that it is gutting the ability of firms, issuers and investors to participate in that market. Read More
Form F-1 Registration Statement Requirements, Filling, Effectiveness, Going Public
Typically, foreign companies seeking to raise capital attempt to obtain public company status. Foreign companies that go public in the U.S. can register shares with the Securities and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”) or register a class of securities pursuant to the Securities Exchange Act of 1934 (the “Exchange Act”).
Foreign private issuers going public should consider Form S-1 filing requirements when contemplating their securities offering. Private companies seeking to raise capital often file a registration statement on SEC Form F-1 to meet certain requirements of the Financial Industry Regulatory Authority when going public. Upon filing, a Form S-1 is reviewed by the Securities and Exchange Commission, who may render SEC Comments. Once a Form S-F is declared effective by the SEC, the company becomes subject to scaled down SEC reporting requirements. Unlike a Form 10 registration statement which registers a class of securities, Form F-1 registers specific securities offerings or transactions and it does not become effective until all SEC comments have been resolved. Private companies going public should be aware of the expansive disclosure required in registration statements filed with the SEC prior to making the decision to go public.
Like domestic issuers, foreign companies have access to several means of raising capital during the going public process. A direct public offering (“Direct Public Offering”) allows an issuer to raise capital by selling securities directly to investors without the use of an underwriter. The Direct Public Offering for a foreign company involves registering a securities offering with the SEC, typically on a Form F-1 registration statement. Read More
What is a SEC Registration Statement? Going Public Lawyer
The Securities Act of 1933 (the “Securities Act”) is referred to as the “truth in securities” act. The Securities Act has two stated goals. These are to require that issuers provide investors with financial and other significant information concerning securities being offered for public sale, and to prohibit deceit, misrepresentations, and other fraud in the sale of securities. The primary way companies provide investors with financial and other significant information when going public is by filing a registration statement with the Securities and Exchange Commission (the “SEC”). This provides transparency to investors and protects the issuer from liability. Read More
Due Diligence in Accredited Crowdfunding Offerings – Securities Lawyer 101
The Anti-Fraud Provisions That Apply to Accredited Crowdfunding
Even though Accredited Crowdfunding Offerings are exempt under Rule 506(c) and no specific disclosure requirements apply, under most circumstances, the anti-fraud provisions mandate disclosure of certain information to investors. Section 10(b) of the Securities Exchange Act of 1934, (the “Exchange Act”) prohibits the use of any manipulative or deceptive device in contravention of the Securities & Exchange Commission’s rules and regulations. Rule 10b-5, was adopted pursuant to Section 10(b), and prohibits fraudulent devices and schemes, material misstatements and omissions of any material facts, and acts and practices that operate as a fraud or deceit on any person in connection with the purchase or sale of a security. Read More
SEC Files Subpoena in Possible Market Manipulation Scheme
The SEC filed a subpoena enforcement action against three penny-stock companies and their CEO – Cherubim Interests, Inc., PDX Partners, Inc., Victura Construction Group, Inc., and Patrick Jevon Johnson – seeking an order directing them to comply with investigative subpoenas for documents.
According to the SEC’s application, filed on December 21, 2018 in U.S. District Court for the Central District of California, the SEC is investigating whether certain individuals or entities engaged in a potential pump-and-dump scheme in the stock of Cherubim Interests, PDX Partners, Inc, and Victura Construction Group, Inc. Because the SEC was concerned about the accuracy of the companies’ disclosures, the SEC suspended trading in their securities on February 15, 2018 for ten business days. Based on its ongoing investigation, the SEC has reason to believe that each company issued false public statements in January 2018 to “pump” their stock price, claiming that it had acquired hundreds of millions of dollars of “AAA-rated” assets, even though each company appeared to have little to no assets. After the stock price and trading volume for each company increased as a result of the news, an entity associated with the companies may have “dumped” their overvalued shares for significant profits. Read More
SEC Charges Taiwan-Based Insurance, China United with Fraudulent Market Manipulation Scheme
A Taiwan-based insurance company, China United Insurance Service, Inc. and one of its former managers have agreed to settle fraud charges brought by the SEC relating to a scheme to manipulate the company’s trading volume.
The complaint alleges that, from approximately December 2013 through March 2018, China United Insurance Service, Inc. and Cheng-Hsiung Huang schemed to deceive the investing public and Nasdaq, for the purpose of obtaining a listing on Nasdaq, that the trading volume in the company’s stock was derived from bona fide market activity. Cheng-Hsiung Huang, acting on the company’s behalf, used multiple brokerage accounts to engage in numerous transactions in the company’s stock. When Cheng-Hsiung Huang’s trading was flagged by a U.S.-based brokerage firm for high volume and possible prearranged trading and several of the accounts were frozen, Cheng-Hsiung Huang and two colleagues contacted the brokerage firm and lied about their identities, their relation to China United, and their reasons for trading. Read More
SEC Obtains Judgment Against Former CEO John Place
On November 9, 2018, the SEC obtained a judgment against John Place, a former CEO of a brokerage consulting business who was charged by the SEC in August for his role in a multimillion dollar transition management fraud.
The SEC previously charged a brokerage consulting business known as GTS along with three of its former officers, including former CEO John Place, for misleading current and prospective customers about the fees the business charged in connection with securities transactions. According to the SEC’s complaint, John Place and other GTS officers told many of their customers that GTS would receive only clearly disclosed commissions charged on customers’ trades. In reality, GTS also received additional revenue from mark-ups and mark-downs charged by other brokers. Read More
SEC Obtains Asset Freeze Against Former Thomas Laws CEO Charged with Misappropriating Investor Funds
The SEC announced on December 14, 2018 charges against Thomas Laws, the former CEO of Santa Fe Gold Corporation, for the misappropriation of investor funds. The SEC also obtained an asset freeze against Thomas Laws.
The SEC’s complaint, unsealed on December 6, 2018, alleges that, from at least August 2016 through February 2018, Santa Fe Gold, a public mining company based in Albuquerque, New Mexico, transferred approximately $1.1 million in investor funds to Thomas Laws and THL Financial Services Corporation, an entity controlled by Thomas Laws, for various corporate purposes, including the purchase of a silver mine and mining equipment and for third party services. According to the complaint, Thomas Laws misappropriated the funds and attempted to hide his theft from the company and its independent auditor by fabricating documents, including vendor invoices, agreements, bank records, and communications. Read More
SEC Sues Orange County Investment Adviser, Craig Arsenault for Defrauding Clients
On December 14, 2018 the SEC charged Craig Arsenault, a California investment adviser with misappropriating client funds and misleading his clients about how their money was invested and how their investments were performing. The SEC is seeking an asset freeze and the appointment of a receiver to prevent any ongoing misappropriation or dissipation of assets.
The SEC’s complaint alleges that Craig Arsenault defrauded clients of his advisory firm, Atlas Capital Management, Inc., who had invested $5.7 million in a company he controlled, ACT Global Investments. According to the complaint, Craig Arsenault solicited investments in Atlas Capital Management, telling his advisory clients that their funds would be used to make secured loans to doctors for the purpose of acquiring medical equipment. The complaint alleges that Craig Arsenault and ACT used client funds instead to make unsecured loans to, for example, a used car dealership, and to acquire undeveloped real estate. As alleged in to the complaint, Craig Arsenault then provided clients with deceptive account statements that made it appear as if these investments were generating substantial income when they were not. The SEC also alleges that he misappropriated and misused over $1 million of the client money invested in Atlas Capital Management. Read More
SEC Obtains Final Judgment Against Gregory Webb, a Chicago Tech Executive
The SEC has obtained a final judgment against Gregory Webb, the former Chairman and CEO of a company purportedly in the homeland security business.
In October 2011, the SEC charged Gregory E. Webb, the Chairman and CEO of InfrAegis, Inc., and InfrAegis, with conducting a fraudulent, unregistered offering that raised over $20 million from at least 395 investors nationwide. According to the SEC’s complaint, Gregory Webb and InfrAegis made false and misleading claims about the company’s commercial success and the existence of contracts for the installation of InfrAegis’ products. Read More
