On November 9, 2015, the Securities and Exchange Commission (SEC) announced that on November 4, 2015 the Court entered a partial judgment against James Louks and FiberPop Solutions, Inc. (FiberPop). FiberPop and Louks, founder, President, CEO, Director, and Chairman of the Board of FiberPoP, both consented to the entry of the partial judgment, which imposes a permanent injunction against future violations of certain antifraud provisions of the federal securities laws. The Defendants are prohibited from raising investor capital while the SEC’s case is ongoing. They neither admitted nor denied the SEC’s allegations against them.On September 1, 2015 the SEC filed the Complaint charging Louks and FiberPop with fraud. The Complaint claimed that Louks and FiberPop had defrauded nearly 100 investors by convincing them to invest in notes that would theoretically help fund the company’s operations. The SEC alleged that Louks continued to solicit investors while knowing that none of the purported financing opportunities offered by FiberPoP during a 12-year period ever produced funding for the company or returns for investors. Read More

On November 6, 2015, the SEC announced that it charged James Alan Craig (Craig) with a market manipulation scheme. The SEC filed criminal securities fraud charges against Craig, a Scottish trader whose phony tweets caused sharp drops in the stock prices of two companies and triggered a trading halt in one of them. According to the SEC’s complaint, Craig created false accounts that looked just like the accounts of two well-known securities research firms claiming that they were both under investigation. Craig’s first false tweets caused one company’s share price to fall 28% before Nasdaq temporarily halted trading. The next day, Craig’s false tweets about a different company caused a 16% decline in that company’s share price. Both occasions, Craig bought and sold shares of the target companies in a very unsuccessful effort to profit from the sharp price swings. Read More

On November 4, 2015, the Securities and Exchange Commission (SEC) announced it has identified three more individuals to charge in a penny stock manipulation case that the agency filed last year against alleged corrupt brokers and others.

The SEC filed a request to lift the stay in its civil action so that it could file an amended penny stock complaint alleging that two additional brokers, Michael Morris and Ronald Heineman, assisted in the scheme through their brokerage firm while a third man, attorney Darren Ofsink, made illicit gains by selling unregistered shares that had no registration exemption applied.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York announced criminal charges against Morris and Ofsink. Read More

On September 30, 2015 the Court approved final distribution that concluded the receivership in the SEC’s litigation against Provident Capital Indemnity, Ltd. The litigation was ended by the Court’s order and was settled with the last remaining defendant, Minor Vargas Calvo, PCI’s former president, following his conviction in a parallel case. The receiver that was appointed by the Court has distributed about $2.3 million to approximately 2,000 victims of life settlement offerings supposedly bonded by PCI. Any amount that remains after payment of fees and expenses will be paid to the US Marshall for the payment of PCI’s asset forfeiture obligation in the parallel criminal case.

The SEC’s case was initiated on January 19, 2011, when the SEC charged PCI, Vargas, and PCI’s purported outside auditor Jorge Castillo (Castillo) with operating a massive life settlement bonding fraud. The complaint states that PCI provided financial guarantee bonds on life insurance policies, which intermediaries then packaged and sold as bonded life settlement investments across the U.S. and abroad. Read More

The SEC has announced charges against Vlad Spivnak for insider trading in the stock of American Dental Partners, Inc. (ADPI), a dental practice management company. The complaint alleges that Spivnak received the private information from his girlfriend at the time, Shirmila Doddi, who was a financial analyst at a commercial bank. After acquiring the confidential information from Doddi, Spivnak is alleged to have traded in the securities of ADPI, based on the tips provided by Doddi. The SEC claims that Doddi obtained the material, private information throughout her employment regarding an impending acquisition of ADPI by a private equity firm. Read More

The SEC released charges on October 30, 2015 alleging that William Apostelos and his companies, WMA Enterprises, Midwest Green Resources, and OVO Wealth Management conducted a fraudulent investment scheme. The complaint claims that the companies raised at least $66.7 million from about 350 investors since January of 2010.

The SEC claims that throughout the scheme, Apostelos knowingly made multiple misrepresentations to recruit prospective investors, including clients of OVO, a state-registered investment adviser.  Apostelos told certain investors that their investment funds would be pooled with funds from other investors and invested in stock, precious metals, real estate, or used to make short-term loans at high interest rates to small businesses and farmers, with returns being generated by the underlying investments.  He told other investors that he would place their funds in a pooled brokerage account and invest them in publicly traded stocks, bonds, and options. Read More

The SEC filed fraud charges against Diverse Financial Corporation, its CEO, Roy Dekel, and its former President David Kendell on October 28, 2015. The complaint claims that the defendants raised about $3.29 million from at least 16 investors through their fraudulent offer and promissory notes that were issued by DF Capital Partners, LLC, which is a bankrupt subsidiary of Diverse Financial. According to the complaint, the defendants lied about their use of the investors funds, saying that their funds would be used only to invest in premium finance lending, where loans are made to borrowers to pay premiums on their life insurance policies, or “short-term cash type investments,” pending such investments. In reality, alleged by the SEC, the company and its CEO diverted the money to pay for the company’s financial operations.  Read More

The Securities and Exchange Commission (SEC) filed a civil action against defendants Ascenergy LLC and its CEO, Joseph Gabaldon for offering fraudulent oil and gas investments. At the request of the SEC, the U.S. District Court for the District of Nevada has entered a temporary restraining order halting the offering, as well as an order for an asset freeze for the defendants and the relief defendants, Alanah Energy, LLC and Pyckl, LLC.

The SEC’s complaint claims that since at least 2014, the defendants have been involved in a scheme on crowdfunding websites and the company’s website to solicit investors to buy overriding royalty interests in undeveloped oil and gas wells. According to the complaint, Ascenergy has accumulated about $5 million from approximately 90 investors. Ascenergy has already spent at least $1.2 million of the offering proceeds, but it seems that only a few thousand dollars of the proceeds have been used for expenses relative to oil and gas. Read More

The Securities and Exchange Commission (SEC) announced that, on October 27, 2015, the United States District Court for the District of Arizona entered a settled final judgment against Rebecca Norton, the remaining defendant in SEC v. Mary Beth Knight and Rebecca Norton, Civ. 2:11-cv-00973 (DGC) (D. Ariz.). Norton agreed to entry of the final judgment, without admitting or denying the SEC’s claims in that action. The SEC’s complaint claimed that in 2006, Norton was involved in insider trading in the securities of Choice Hotels International, Inc. Read More

A settled civil injunctive action was filed by the Securities and Exchange Commission (SEC) against two Pennsylvania investment advisers, Kevin Brown and his father, George Brown, (collectively, the “Browns”), and several entities they managed, for conducting three offering frauds over the last decade. The unregistered offerings were in correlation with securities that were issued by a Nevada-chartered trust company, Summit Trust Company (“STC”), the Rampart Fund LP (“Rampart Fund”), a private fund managed by the Browns, and Trust Counselors Network, Inc. (“TCN”), a non-profit charitable organization.

The SEC alleges that between 2008 and 2014, the Browns accumulated over $33 million from over 150 investors in multiple states through the offering of STC’s preferred stock while insinuating that the proceeds would be used for business expansion and acquisitions. Instead, STC and the Browns allegedly used most of the proceeds to make Ponzi-like payments to existing preferred stock shareholders, to pay for obligations and expenses of the Browns’ other affiliated entities, and for undisclosed speculative investments. Read More

On October 20, 2015, the Securities and Exchange Commission (SEC) charged John Clifford Williams with his involvement in a misappropriation scheme. The complaint alleges that Williams misappropriated and diverted more than $3.1 million illicit funds that he accumulated from an investor in the course of securities offerings. According to the complaint, Williams took advantage of the investor’s trust and repeatedly solicited and gained illicit earnings that were based on the implication that the money would be used only for specific investments.

The SEC’s allegation states that between February 2009 and May 2014, Williams raised more than $8.1 million from the investor, including at least $2.6 million for Energy Operations Trust (“Energy Operations”), which Williams established to offer revenues derived from gold and manganese mines located in Central America, and $5.5 million for American Hydraulic Power, LLC (“AHP”), which Williams founded to develop and commercialize an energy efficient technology licensed from the U.S. Environmental Protection Agency. Read More

The Securities and Exchange Commission (SEC) announced on October 26, 2015 that on October 23, 2015, the United States District Court for the Eastern District of New York entered a final judgment against two fraudsters, Joseph Catapano and Michael Piervinanzi, for their involvement in a broker bribery scheme that was constructed to manipulate the market for the common stock of Euro Solar Parks, Inc.

The SEC’s complaint claims that Catapano and Piervinanzi conducted an undisclosed kickback arrangement with someone who claimed to represent a group of registered representatives with trading discretion over the accounts of wealthy customers.  Catapano and Piervinanzi promised to pay a 30% kickback in exchange for buying up to $3 million of Euro Solar stock through the customers’ accounts. Read More

On October 23, 2015 the Securities and Exchange Commission (SEC) announced a settlement with a stockbroker who was previously charged with insider trading in advance of over a dozen pending corporate transactions. These charges found Vladimir Eydelman guilty of insider trading and claims that he passed illegal tips using napkins and post-it notes at Grand Central Terminal.

Last year, the SEC charged Eydelman, a former stockbroker employed by Oppenheimer & Co. and later by Morgan Stanley, in a scheme involving insider trading of nonpublic information acquired by Steven Metro, a law firm employee, regarding pending corporate transactions involving clients of the firm. Metro supposedly passed the information to Eydelman through a mutual friend, Frank Tamayo, who settled a separate complaint. The SEC claimed that after getting the tips from Metro, Tamayo usually met Eydelman near the clock at the information booth at Grand Central Terminal and chewed up or ate post-it notes or napkins after using them to show Eydelman the ticker symbol of the company that would be acquired. Read More

On October 21, 2015 the Securities and Exchange Commission (SEC) announced that on October 9, 2015, the United States District Court for the Southern District of New York entered default judgments against Premiere Power, LLC and its Chairman, Jerry Jankovic for the violation of the anti-fraud provisions of the federal securities laws, due to his failure to notify investors that they were using over half of the money they raised to defend a lawsuit that was unrelated, and by making other untrue and deceitful disclosures in the offering materials given to investors. The SEC’s request was granted by the Court for permanent injunctions against Premiere and Jerry Jankovic, holding them jointly and individually liable for repayment of illicit earnings with prejudgment interest, and ordering them to pay civil penalties.

The SEC’s offering fraud complaint claims that soon after establishing Premiere, a company supposedly pursuing projects relative to energy on Native American land, Jerry Jankovic and his son, CEO John Jankovic, agreed to use about half of the money they raised from investors in Premiere to cover the costs of an unrelated lawsuit pending against Jerry Jankovic and a business associate, Sandra Dyche. As a result of this agreement, the Jankovics and Dyche purportedly diverted $1 million out of a total of $1.95 million raised for Premiere. The SEC alleged that not only did they mislead Premiere investors about how their funds would be used, but Premiere also gave false accounts to investors about its affiliates, board membership, its auditor, and about Jerry Jankovic’s “proven track record” of creating “successful” energy companies. Read More

Common Questions About Schedule 13D and 13G Filing Requirements For Public Companies

In going public transactions, a company can register a class of securities and thereby become subject to the SEC’s reporting requirements by filing a Form 10 Registration Statement or Form 8-A registration statement under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Shareholders of issuers with a class of securities registered under the Exchange Act are subject to insider reporting requirements. Sections 13(d) and 13(g) (15 USCS § 78m) of the Exchange Act require beneficial owners of more than 5 percent of a class of equity securities of a Securities & Exchange Commission (SEC) reporting issuer to disclose information relating to their beneficial ownership by filing a Schedule 13D or Schedule 13G with the SEC. This blog post addresses the most common questions we receive about Schedules 13D and Schedule 13G beneficial ownership reporting. Read More

Securities Lawyer 101 Blog

Between January of 2000 and present, the Securities and Exchange Commission (the “SEC”) has suspended or halted thousands of publicly traded companies.  Many were dormant penny stock issuers suspended to prevent corporate hijackings by fraudsters setting up receivership or custodianship shells.  Others were penny stock issuers engaged in massive pump and dump schemes.  Some of the suspended companies had been dormant for almost a decade.  How did all of these dormant companies manage to continue trading, albeit infrequently, for so long? Recent cases reflect that many of these shells are under the control of  jammed up government informants (including lawyers) with sealed dockets.  Could there be any other explanation for why the SEC and FBI have taken no action against these participants for their obvious violations of the securities laws? Nevada state court judges have expressed outrage at the practice of creating shells using fraudulent custodianship proceedings and made referrals to the Justice Department. Read More

On October 16, 2015, the Securities and Exchange Commission (SEC) filed fraud and other charges against Donald Lester and his private equity firm, Rubicon Alliance, LLC (“Rubicon”). According to the SEC’s fraud complaint, from about January 2010 through December 2014, Lester and Rubicon accumulated over $10 million by the selling unregistered securities for two investment funds that were managed by them, CFI Fund, LLC (“CFI”) and NuPower, LLC (“NuPower”). The complaint also alleges that prior to the recent offense, Lester was involved in selling unregistered securities for a group of investment funds known as Equity Edge, which was having trouble repaying investors. Among other things, the SEC’s complaint claims that Rubicon had guaranteed Equity Edge’s performance, and that Lester conducted a fraudulent and undisclosed scheme to use $2.8 million of CFI investor funds to repay Rubicon’s obligations to the Equity Edge investors.

The SEC also claims that the CFI and NuPower offerings breached several registration provisions of the federal securities laws. According to the fraud complaint, both the CFI and NuPower offerings were unregistered and not subject to any applicable immunity, CFI and NuPower acted as investment companies without registering with the SEC, and Rubicon and Lester halted transactions in securities without registering with the SEC as a broker or associating with a registered broker. Read More

On October 13, 2015, the Securities and Exchange Commission (SEC) charged a hedge fund manager from Charlotte, Lonny Bernath, with defrauding investors in three hedge funds over several years.

The SEC filed a complaint stating that between at least 2007 and 2011, Bernath instructed three funds that were managed by his investment advisory firm to make loans to and investments in illiquid real estate and business ventures which he also oversaw and had personally invested in. The complaint also states that Bernath gave a false account to the Funds’ investors regarding these investment activities and did not disclose them until 2013. Also included in the SEC’s complaint is that from 2008 to 2011, Bernath regularly kept record of the value of these investments and loans, to the detriment of the Funds’ investors.

Bernath has agreed to partially settle the case against him, without admitting or denying the allegations. Read More

The Securities and Exchange Commission (SEC) announced on October 9, 2015, that on October 7, 2015, it secured a summary judgment on all of its claims against Andrew Farmer in a market manipulation case involving the securities of Chimera Energy Corp.  The SEC suspended trading in Chimera Energy stock in 2012.

In its memorandum and order, the Honorable Keith I. Ellison of the United States District Court for the Southern District of Texas found that: Read More

The Securities and Exchange Commission (SEC) announced on October 9, 2015 that it has charged Nicolas Zanen, Vice President of Trading at a subsidiary of Cheniere Energy, Inc., and his college friend, Francis van Steenberge, with insider trading in Cheniere options ahead of announcements about Cheniere’s entry into contracts with certain counterparties and Cheniere’s public stock offering.

The SEC’s complaint regarding Zanen’s insider trading states that Zanen and van Steenberge entered into an arrangement in 2011 to share material, private information regarding Cheniere. Under their supposed arrangement, Zanen would share material, non-public information about Cheniere with van Steenberge, who then would trade, including in out of the money options, on the basis of that information in his personal brokerage account as directed by Zanen. The SEC’s insider trading complaint claims that in 2011 and 2012, van Steenberge traded ahead of least four announcements based on private information that Zanen gave him, resulting in nearly $800,000, which the two intended to share as part of their arrangement. The insider trading complaint also claims that by giving private information about Cheniere to van Steenberge for a personal benefit, Zanen breached a duty he owed to Cheniere. Read More

On October 30, 2015, the U.S. Securities and Exchange Commission (“SEC”) announced the temporary suspension of trading in the securities of American Power Corp. (AMPW) and Locan, Inc. (LOCN).  The SEC trading suspension commenced at 9:30 a.m. EDT on October 30, 2015 and terminates at at 11:59 p.m. EST on November 12, 2015.

The SEC issued the trading suspension of AMPW and LOCN due to a lack of current and accurate information about the companies because they had not filed certain periodic reports with the SEC. This SEC order suspending trading was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act). The SEC cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by AMPW and LOCN. Read More

The Securities and Exchange Commission (SEC) announced on October 8, 2015 that Judge Paul Barbadoro of the United States District Court for the District of New Hampshire entered summary judgment in favor of the SEC on its claims against Allen Smith, a Florida lawyer, for his role in an advance fee investment scheme involving prime bank transactions and overseas debt instruments.

On July 2, 2015, the Court discovered that Allen Smith violated the antifraud and securities registration provisions of the federal securities laws. The Court granted the SEC’s request for permanent injunctions and disgorgement against Smith, but refused at that time to impose a civil penalty against him. On October 1, 2015, the Court granted the SEC’s renewed motion for a civil penalty, ordering Smith to pay a penalty equal to the earnings he made through the investment scheme. Read More

The Securities and Exchange Commission (SEC) announced on October 8, 2015 that the United States District Court for the District of Nevada entered default judgments against Las Vegas-based James Erwin and his corporate entity, Las Vegas-based Joint Venture Solutions, Inc., for violating the securities offering and broker-dealer registration provisions of the federal securities laws when they promoted a fictitious prime bank investment scheme. The Court granted the SEC’s request for permanent injunctions against Erwin and Joint Venture Solutions, held them jointly and individually responsible for disgorgement of illicit earnings and ordered them to pay civil penalties.

The SEC’s complaint alleged that Erwin and Joint Venture Solutions violated the securities offering and broker-dealer registration provisions of the federal securities laws by promoting investments in Malom Group AG, a Switzerland based a company named with an acronym for “Make A Lot Of Money.” The SEC claimed that Malom and its principals, who were separately charged in a related action, were behind a pair of advance fee schemes guaranteeing astronomical returns to investors in purported prime bank transactions and overseas debt instruments. Read More

On October 8, 2015, the Securities and Exchange Commission (SEC) announced that the Court entered final judgments on September 28, 2015, against Garfield Taylor, Jeffrey King, Garfield Taylor, Inc. (“GTI”), Gibraltar Asset Management Group, LLC (“Gibraltar”) and The King Group, LLC (“TKG”), for their involvement with a multi-million dollar Ponzi scheme in the Washington area.

The SEC filed a complaint on November 18, 2011, claiming that Gibraltar’s and GTI’s former Chief Executive Officer, Garfield Taylor, conducted a Ponzi scheme that he designed to target investors in the Washington, D.C. metropolitan area. The complaint stated that the scheme, directed by Taylor with the help of King and others, defrauded more than $27 million from about 130 investors from 2005 to 2010, before eventually collapsing in 2010.

On September 17, 2012, the Court granted the SEC’s motion for default judgment as to GTI, Gibraltar, King and TKG, and on December 13, 2012, the Court granted the SEC’s motion for summary judgment on all of the charges toward Taylor that were imposed by the SEC regarding the Ponzi scheme. On March 28, 2013, before deciding the appropriate relief against Taylor and the defaulting defendants, the Court granted Taylor’s motion to hold the case in abeyance because of the pending federal criminal charges against him at the time.

Taylor pleaded guilty in March 2014 to securities fraud.  In May 2015, he was sentenced to 13 years in prison and was ordered to pay over $28.6 million in restitution for the funds he received during his involvement with the Ponzi scheme.  Read More