The Securities and Exchange Commission (“SEC”) announced charges on September 22, 2016 against Sheren Tsai and Colin Whelehan for insider trading in advance of the acquisition of a home security company based on confidential information tipped to the trader by her live-in boyfriend. Both individuals, who were securities professionals during the relevant period, have agreed to settle the SEC’s charges.

In a complaint filed in the U.S. District Court for the Southern District of New York, the SEC alleges that Tsai, who then worked at an investment advisory firm, traded in the securities of ADT Corp. on the basis of tips of material nonpublic information that she received from her romantic partner, Whelehan. The complaint alleges that Whelehan, who was then a Senior Associate at a different investment advisory firm, provided Tsai with inside information that he obtained in the course of his employment regarding an impending acquisition of ADT by funds managed by affiliates of Apollo Global Management, LLC. Read More

On September 16, 2016, the Honorable William J. Martini of the United States District Court for the District of New Jersey entered a judgment against defendant Lee Vaccaro that imposed permanent injunctions and an officer and director bar.

The SEC’s complaint, filed on May 4, 2016, alleged that Vaccaro and James Trolice pocketed the approximately $6 million they raised from more than 100 investors for limited liability companies they owned and controlled that purportedly held warrants to purchase the common stock of a technology startup company. Vaccaro and Trolice created a false sense of urgency and exclusivity around the offering, claiming that only a limited amount of warrants were available and that they eventually could be exercised at a very profitable price. The complaint alleged that Vaccaro spent at least a quarter-million dollars in investor funds at Las Vegas casinos. Read More

The Securities and Exchange Commission (“SEC”) announced on September 21, 2016 that the Honorable Haywood S. Gilliam of the U.S. District Court for the Northern District of California entered a final judgment against defendants Saleem Khan and Roshanlal Chaganlal ordering the payment of more than $16 million in disgorgement, penalties, and prejudgment interest. The SEC’s action charged Khan and Chaganlal with insider trading in Ross Stores securities based on nonpublic sales information leaked by Chaganlal while he was a Ross employee. Two other defendants who were Khan’s work colleagues settled the SEC’s charges against them in September 2015 without admitting or denying the SEC’s allegations. Read More

A federal court in Boston, Massachusetts, recently entered final judgments by consent against six defendants in an ongoing enforcement action filed by the Securities and Exchange Commission (“SEC”) in February 2015. The SEC charged two Portuguese companies operating under the name Wings Network, along with three company officers and 12 promoters behind an international pyramid scheme targeting Latino communities in the U.S.

The judgments obtained by the SEC were against six promoters of the scheme. Final judgments were entered against Vinicius Romulo Aguiar and Thais Utino Aguiar, formerly of Marlborough, Massachusetts on September 8, 2016; and against Geovani Nascimento Bento and Priscilla Bento of Auburn, Massachusetts, and Dennis Arthur Somaio and Elaine Amaral Somaio of Marlborough, Massachusetts on September 16, 2016. Read More

On September 14, 2016 Steven Metro, a former Simpson Thacher & Bartlett employee, was sentenced to 46 months in federal prison. Metro previously pleaded guilty to criminal charges arising from his role in a long running insider trading scheme that involved trading in advance of more than a dozen pending corporate transactions. As part of this scheme, Metro provided material, nonpublic information relating to these transactions to a friend, Frank Tamayo, via napkins or post-it notes at Grand Central Terminal. Tamayo then passed the information to his stockbroker, Vladimir Eydelman. The illegal trading resulted in approximately $5.6 million in profits. Read More

On September 13, 2016 he Securities and Exchange Commission (“SEC”) announced that self-proclaimed “stock trading whiz kid” Manuel Jesus and his stock newsletter company in Los Angeles have agreed to pay nearly $1.5 million to settle charges that they defrauded subscribers through false statements and misrepresentations.

According to the SEC’s complaint, Jesus and his newsletter company Wealthpire Inc. used advertising materials and websites touting him as “the untutored prodigy of stock investing” under the alias Manny Backus. A self-purported “math whiz” who boasted a “skyscraping” IQ and training as a professional chess player, Backus claimed to be actively trading in the stock market with “real money” by age 19. The SEC’s complaint also states that Wealthpire materials claimed that Backus made millions of dollars before “deciding to help other investors” by starting an alert service that let traders copy his every trading move. Read More

On September 23, 2016, the Securities and Exchange Commission (“SEC”) charged Manu Kumaran in connection with Medient Studios and later Moon River Studios. According to the SEC, Kumaran defrauded investors in a purported project to construct the largest movie studio in North America at a suburban location outside Savannah, Georgia.

On September 12, 2016, the Honorable Alvin W. Thompson, a federal judge in the U.S. District Court for the District of Connecticut, entered a preliminary injunction and continued asset freeze by consent against Thomas Connerton and his company, Safety Technologies LLC.

The preliminary injunction restrains Connerton and Safety Technologies from violating certain antifraud provisions of the federal securities laws and orders the defendants’ assets to remain frozen until further notice. The preliminary injunction order continues the relief originally obtained on June 9, 2016, in response to the SEC’s emergency civil injunctive action. Read More

The Securities and Exchange Commission  (“SEC”) charged Tycoon Energy, Inc. and its president, Matthew Dee Nerbonne, with orchestrating an oil and gas fraud.

The SEC’s complaint, filed on September 9, 2016, in the U.S. District Court for the Eastern District of Texas, alleges that, from 2010 through 2013, Tycoon, a Texas oil and gas company, raised more than $5.6 million from approximately 232 investors nationwide in four unregistered offerings of joint-venture securities in oil and gas projects. Nerbonne drafted and disseminated materially false and misleading offering documents and investment brochures containing baseless projections that four oil-well prospects would produce up to 400 barrels of oil per day. Read More

The Securities and Exchange Commission (“SEC”) announced on September 12, 2016 that it has charged Atlanta-based investment adviser Charles Augustus Banks, IV with defrauding a former professional basketball player by inducing him to invest in a sports team apparel and merchandise company based on a series of misrepresentations about the investment.

The SEC alleges that Banks persuaded his client to invest $7.5 million in Gameday Entertainment LLC and falsely told him that another investor was investing the same amount. The SEC further alleges that Banks told the client that $5 million of the purported $15 million offering would be used for Gameday’s ongoing operations, the remaining balance would pay off existing bank debt, and the client would then have a first lien position on Gameday’s assets. But Banks allegedly knew there was no other investor, the full $15 million would not be raised, and the bank debt would not be paid off, leaving the client without the first lien position he was promised. Read More

On September 6, 2016, the Securities and Exchange Commission (“SEC”) obtained a final judgment against Mark Evan Bloom and his advisory firm, North Hills Management, LLC, for securities fraud in a civil enforcement action filed on February 25, 2009. The judgment orders more than $30 million in disgorgement, which is deemed satisfied by an order to pay restitution of the same amount in a parallel criminal action, in which Bloom was sentenced to three years of imprisonment.

The SEC’s complaint alleges that Bloom, through North Hills, raised approximately $30 million from 40 to 50 investors between 2001 and 2007, telling them he would invest their money in North Hills, L.P. (the Fund), the assets of which would be allocated across multiple funds and fund managers to ensure diversification and moderate risk. Instead, Bloom misappropriated more than $13.2 million of investor funds to furnish a lavish lifestyle for himself and his wife that included the purchase of luxury homes, cars and boats. The remaining investor funds were invested, contrary to the Fund’s stated investment strategy, in a single fund known as the Philadelphia Alternative Asset Fund (PAAF). Bloom received undisclosed commissions from PAAF in excess of $355,000 over a 16-month period. PAAF itself was uncovered as a fraudulent scheme in June 2005. Read More

On September 9, 2016 the Securities and Exchange Commission (“SEC”) charged Ohio-based chemical company RPM International Inc. and its General Counsel, Edward Moore, with failing to disclose a material loss contingency, or record an accrual for, a government investigation when required to do so under governing accounting principles and securities laws.

The SEC alleges that, from 2011 through 2013, RPM and one of its subsidiaries were under investigation by the U.S. Department of Justice (DOJ) for overcharging the government on certain contracts. Moore, RPM’s General Counsel and Chief Compliance Officer, oversaw RPM’s response to the DOJ investigation. According to the SEC’s complaint, however, Moore did not inform RPM’s CEO, CFO, Audit Committee, and independent auditors, of material facts about the investigation. For example, Moore knew but failed to inform them that: RPM sent DOJ estimates showing RPM’s subsidiary overcharged the government on the contracts under investigation by a material amount; RPM agreed to submit a settlement offer by a specific date to resolve the DOJ investigation; and, prior to submitting the settlement offer to DOJ, RPM’s overcharge estimates increased substantially to at least $28 million. Read More

The Securities and Exchange Commission (“SEC”) charged Gordon Jenkins, Theodore Sweeten, Francis Kreais and Craig Parkinson with orchestrating an offering fraud involving the sale of interests in a purported mining company, Arco Hills Silica Company.

The SEC’s complaint, filed in federal court in Idaho, alleges that, beginning in January 2011, and continuing through August 2014, Jenkins, Sweeten and Kreais offered and sold $504,436.26 in promissory notes to approximately 12 investors located throughout the country. Investors were allegedly told their money would only be used to acquire financing for Jenkins’ mining company, Arco Hills, and were guaranteed a return on their investment ranging from 53% to 120% within 30 to 90 days of purchasing their notes. Instead, Jenkins, Sweeten and Kreais used approximately $422,536.58 of investor money to pay for their daily expenses, entertainment, house payments, legal expenses and medical bills. Additionally, old investors received $25,394.68 from new investors. Read More

On August 26, 2016, Judge Susan Richard Nelson of the District of Minnesota issued an order requiring Anthony Buzaneli to surrender his passports and prohibiting him from leaving the United States until further order of the Court. The order also freezes his assets, requires Buzaneli to provide an accounting, and requires Buzaneli to repatriate all of his assets to the United States.

The Court issued this order as a result of papers filed under seal by the Securities and Exchange Commission (“SEC”) seeking emergency relief against Buzaneli and naming him as an additional defendant in the SEC’s previously filed action against Providence Financial Investments, Inc. (“Providence Financial”), Providence Fixed Income Fund, LLC (“Providence Fund”) and others. The order and the SEC’s papers were unsealed by the court on August 30, 2016.

In the Amended Complaint, the SEC alleges that Buzaneli engaged in a scheme that defrauded investors in Providence Financial and the Providence Fund. The Amended Complaint also alleges that Buzaneli is liable for the violations of Providence Financial and the Providence Fund as a control person for those entities and that he is liable for aiding and abetting violations committed by Providence Financial and the Providence Fund. The original complaint was filed on June 7, 2016. Read More

On August 26, 2016, the U.S. District Court for the Central District of California entered a final judgment against Jilbert Tahmazian, an attorney licensed in California, ordering him to pay $196,524 to settle an antifraud action filed by the SEC.

The SEC’s complaint alleged that, from at least mid-2009 through at least December 2010, Tahmazian and two of his clients engaged in a fraudulent, “prime bank” scheme and obtained approximately $6 million from four investors who invested in fictitious investment contracts. According to the complaint, investors were promised that they would receive a return of 15% to 30% per week from their investment and that if the funds were not invested within 15 to 30 days, they would receive a refund of their investment plus a 2% penalty. To the contrary, investors’ funds were neither invested nor returned as promised. Instead, after keeping a 2% fee for himself, Tahmazian transferred the money to his clients and others, who in turn spent it at Las Vegas casinos and high-end retail stores. Read More

The Securities and Exchange Commission (“SEC”) charged Alabama attorney Donald Watkins and companies he controls with defrauding professional athletes and other investors out of millions of dollars, much of which he spent on his girlfriend and to cover personal expenses like alimony, past due taxes and credit card bills.

The SEC’s complaint, filed in federal district court in Atlanta, alleges that Watkins and his companies, Watkins Pencor LLC and Masada Resource Group LLC falsely told investors that their funds would be used to support waste-to-energy ventures.

The complaint further alleges that the defendants falsely claimed that Waste Management Inc., a large, international waste treatment company, was seriously considering acquiring Watkins Pencor, Masada, and its affiliated companies in a multi-billion-dollar transaction. Read More

On August 31, 2016, a federal court in Boston, Massachusetts, entered final judgments by default against five defendants in an ongoing enforcement action filed by the Securities and Exchange Commission (“SEC”) in February 2015. The SEC charged two Portuguese companies operating under the name Wings Network, along with three company officers and 12 promoters behind an international pyramid scheme targeting Latino communities in the U.S.

The judgments obtained by the SEC on August 31, 2016 were against the three company officers and two of the promoters of the scheme. Final judgments were entered against Sergio Henrique Tanaka, Carlos Luis da Silveira Barbosa, Claudio de Oliveira Pereira Campos, Viviane Amaral Rodrigues, and Wesley Brandao Rodrigues. Read More

On February 5, 2016, the SEC filed a complaint charging Dennis Wayne Hamilton with insider trading in the company’s stock and making more than $130,000 in illegal profits by trading on nonpublic information he learned on the job in advance of Harman’s release of its fiscal year 2014 first quarter earnings. Read More

On August 26, 2016 the Securities and Exchange Commission (“SEC”) charged Enviro Board Corporation and two of its executives with using baseless financial projections and other misleading statements to defraud investors in a venture to manufacture environmentally-friendly building materials.

The SEC alleges that Enviro Board and its co-chairmen/CEOs Glenn Camp and William Peiffer raised approximately $6 million from investors during a two-year period by using documents predicting company earnings ranging from $18 million to $95 million per year. They allegedly lacked any reasonable basis for such estimates amid persistent manufacturing problems plaguing the company since its inception. Enviro Board claimed its green materials had already been used in residential and commercial construction projects, yet the company has never developed a commercially viable mill to manufacture its products. Read More

The Securities and Exchange Commission (“SEC”) filed fraud charges against Secured Income Reserve, Inc. and three of its former officers alleging that Income Reserve, Ilona Mandelbaum of Palm Beach Gardens, Fla., David Zimmerman of Boca Raton, Fla., and Matthew Sage of West Palm Beach, Fla. defrauded investors when they raised $1.45 million in offerings of Income Reserve shares.

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, alleges that Income Reserve and Mandelbaum, Income Reserve’s former President and CEO, made material misrepresentations and omitted material facts in Income Reserve’s Private Placement Memorandum (PPM) concerning the use of investor proceeds, the SEC-related disciplinary histories of the former officers, and Zimmerman’s retention and compensation. Mandelbaum, Zimmerman and Sage each previously consented to judgments in SEC cases charging them with securities laws violations. The complaint alleges that Sage, Income Reserve’s former Secretary, Treasurer and COO, aided and abetted Income Reserve’s and Mandelbaum’s misrepresentations and omissions concerning the officers’ backgrounds by drafting that portion of the PPM. The complaint also alleges that Income Reserve and Mandelbaum engaged in a scheme to defraud investors through the misuse of Income Reserve investor proceeds, including by funneling $131,000 of investor proceeds to Mandelbaum’s daughter, Jennifer Austin of Palm Beach Gardens, FL, towards the purchase of a home. Read More

The Securities and Exchange Commission (“SEC”) obtained a default judgment against a former high-ranking executive at Madrid-based Banco Santander, S.A. (“Santander”) for trading based on material, nonpublic information about a proposed acquisition for which the Spanish investment bank was acting as an advisor and underwriter.

On August 20, 2016, the SEC obtained a final judgment against Cedric Cañas Maillard (“Cañas”), a Spanish citizen and former executive advisor to Santander’s CEO. The SEC’s complaint alleges that Cañas learned confidentially that the investment bank had been asked by one of the world’s largest mining companies, BHP Billiton (“BHP”), to advise and help underwrite its proposed acquisition of Potash Corporation of Saskatchewan (“Potash”), one of the world’s largest producers of fertilizer minerals. Read More

On August 18, 2016, the federal district court in Massachusetts entered a final judgment against a senior vice president at Eastern Bank Corporation, Patrick O’Neill,  to settle allegations that he engaged in insider trading in the stock of Wainwright Bank & Trust Company.

On August 18, 2014, the SEC filed a complaint alleging that O’Neill learned through his job responsibilities that his employer was planning to acquire Wainwright, and he then tipped Watertown, Massachusetts real-estate developer Robert Bray, his friend and fellow golfer with whom he socialized at a local country club. Read More

On August 17, 2016, a jury in federal court in Manhattan returned a guilty verdict on all nine counts against former investment banker Sean Stewart in a criminal trial prosecuted by the U.S. Attorney’s Office for the Southern District of New York. The jury convicted Sean Stewart of insider trading and related charges. He is presently scheduled to be sentenced on February 17, 2017.

On May 14, 2015, the SEC charged Sean Stewart with insider trading, and the criminal case is based on similar conduct underlying the SEC’s action. The SEC’s complaint alleges that, in a scheme spanning at least four years, Stewart illegally tipped his father, Robert Stewart, about future mergers and acquisitions involving clients of two investment banks where Sean worked. Read More

On August 11, 2016 the Securities and Exchange Commission (“SEC”) charged stockbroker Paul Rampoldi and his friend with participating in an insider trading scheme to profit in advance of two major announcements out of a pharmaceutical company.

The SEC alleges that Rampoldi coordinated the insider trading with two other brokers at his firm as well as a then-IT executive at Ardea Biosciences. The Ardea employee tipped one of the brokers ahead of the company’s announcement of an agreement to license a cancer drug and later tipped him in advance of its acquisition by AstraZeneca PLC. The SEC charged the other two brokers and the Ardea employee last year. Read More

On August 12, 2016 the Securities and Exchange Commission (“SEC”) charged West Palm Beach-based Global Digital Solutions, former chairman and CEO Richard Sullivan, and former CFO David Loppert with defrauding investors by issuing false and misleading press releases purporting that the company was a budding leader in cyber arms manufacturing and security technology solutions.

According to the SEC’s complaint, Sullivan and Loppert were behind the press releases and corporate filings that falsified Global Digital’s operations and revenue projections when in reality it had no customers, never manufactured any cyber arms, and never provided any security technology services or solutions.

The SEC’s complaint alleges:

• Global Digital publicly announced in several press releases in October 2013 that one of its merger targets had become the exclusive original manufacturer of sophisticated grenade launchers for a major international client under a private label agreement with a first stage value of approximately $95 million.
• In November 2013, Global Digital issued a press release projecting future annual revenue of $60 million to $75 million during the first quarter of calendar year 2014.
• In March 2014, Global Digital announced in filings and press releases that it had made an unsolicited letter of intent to acquire one of the country’s largest arms manufacturers for $1.082 billion.

Read More

On August 9, 2016, a federal court in Texas entered contempt orders against Sameer Sethi, Praveen Sethi, and John Weber after they violated the court’s May 26, 2015 preliminary injunction restraining Sameer Sethi and Sethi Petroleum, LLC from participating in oil and gas securities offerings. The Honorable Amos L. Mazzant, U.S. District Judge for the Eastern District of Texas, entered the order after finding that the defendants had created Cambrian Resources, LLC in order to evade the Court’s injunction and continue to raise investor funds.

The SEC’s complaint against Sameer Sethi and Sethi Petroleum, filed in May 2015, alleged that they raised approximately $4 million through the fraudulent offer and sale of securities in the Sethi-North Dakota Drilling Fund-LVIII Joint Venture beginning in approximately January 2014. According to the complaint, the offering materials represented that 70 percent of investor funds would be used to acquire working interests in, to drill, and to complete 20 oil and gas wells in the Bakken Shale formation in North Dakota. Read More