The Securities and Exchange Commission (SEC) obtained a summary judgment against former Enron president, COO, and CEO Jeffrey Skilling to conclude its civil case that was stayed by the court starting in 2004 until the outcome of criminal proceedings and appeals.

The Honorable Judge Melinda Harmon of the United States District Court for the Southern District of Texas issued an order finding that as a result of the collateral estoppel effect of Skilling’s criminal convictions and statement of non-opposition to the SEC’s motion for summary judgment, Skilling committed and was liable for each claim alleged against him in the SEC’s complaint filed in July 2004. Read More

It’s that time of year again when companies filing reports with the Securities and Exchange Commission (“SEC”) that have a December 31st year end, must file their annual report on Form 10-K. Recent enforcement actions against SEC filers and insiders for failure to comply with their SEC reporting obligations. It has become routine for the SEC to suspend issuers who become inactive and miss their annual 10-K or quarterly 10-Q filing deadlines. This is especially true for new SEC late filers who are unfamiliar with SEC reporting after their going public transactions.

The obligation to file Form 10-K annually and Form 10-Q quarterly reports originates from Section 13 or 15(d) of the Securities Exchange Act, and Rule 13a-1 and Rule 13a-13 promulgated there under. Late SEC filers receive only one automatic extension per filing so it is important that the late reports be filed within the required extension period. In the absence of extraordinary circumstances, as determined in the SEC’s sole discretion, no additional extensions are available to issuers.  The SEC has the ability to enforce periodic filing requirements by instituting enforcement actions against a delinquent SEC filer and/or its officers and directors seeking monetary or other penalties, including revoking the filer’s registration pursuant to Section 12(j) of the Exchange Act.  In the absence of egregious and/or repeated violations, or inferences of fraud, however, the SEC will not likely take action.

If you are a SEC reporting issuer missing a SEC filing deadline for a periodic report, these are some of the important issues that you should consider: Read More

The Securities and Exchange Commission (SEC) won a case involving a Ponzi scheme. According to the SEC Wayne Palmer and his company National Note of Utah. The SEC filed fraud charges against them in June 2012 in connection with the Ponzi Scheme. The Court found that Palmer promised more than 600 investors a guaranteed 12% annual return and assured them their money was completely secured and being used to make hard money loans, purchase notes, and acquire real estate. In reality, Palmer deposited investor funds in one bank account titled “investor trust account,” wired the funds to a second bank account titled “investor interest account,” and then used the funds to pay returns to other investors. Read More

In February 2015, Felix Sater proudly announced the debut of a new website.  As he puts it, it “showcases [his] accomplishments, contributions, musings, and availability.”  Though Sater describes himself as a veteran of the commercial real estate industry, there’s more to his story, much of it unsavory.  While the site is promoted as a “hub for all things relating to Felix Sater,” it says nothing at all about his two criminal convictions, mob ties or the sealed docket that prevents the public from learning the details of his prior criminal conduct.

According to the website, one of Sater’s passions is politics.  It seems only fitting that in recent days a number of articles have appeared in the mainstream press examining his business association with Republican presidential candidate Donald Trump.

Sater was born in the Soviet Union in 1966, but his family moved to Brighton Beach in New York City when he was a child.  At 20, he became a stock broker.  His career came to an abrupt end in 1991, when he viciously attacked a colleague in a barroom brawl, breaking the man’s jaw and slashing his face with a broken margarita glass.  Sater was sent to prison for first degree assault.  Oddly, the National Association of Securities Dealers, as FINRA was then called, did not ban him from the industry until February 2000, though Broker Check indicates that its report on Sater contains “very limited information.” Read More

The Securities and Exchange Commission (SEC) announced that the Court entered a final judgment against Defendant Chad Smanjak on November 23, 2015 in SEC v. Ruettiger, et al., Civil Action No. 1:11-CV-02011, a penny stock manipulation case the SEC filed on December 16, 2011. The SEC’s complaint alleged that Smanjak engaged in a market manipulation scheme involving the stock of Rudy Nutrition, which generated more than $11 million in illicit profits.

The court entered a consent final judgment against Smanjak that permanently enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder; bars him from participating in any offering of a penny stock; and orders disgorgement of $2,010,286 and prejudgment interest of $454,963, which was satisfied by Smanjak’s consent to forfeiture in related criminal proceedings. In those proceedings, Smanjak has pleaded guilty to conspiracy to commit securities fraud and is awaiting sentencing. See U.S. v. Smanjak, SA CR No. 10-215 (C.D. Cal.). Read More

The Securities and Exchange Commission (SEC) announced on November 19, 2015 that it has obtained a court order freezing the assets of a South Florida woman and her company accused of purchasing a boat and luxury cars with money she raised from investors seeking U.S. residency through the EB-5 Immigrant Investor Pilot Program.

Under the EB-5 program, foreign citizens may qualify for U.S. residency if they make a qualified investment of at least $500,000 in a specified project that creates or preserves at least 10 jobs for U.S. workers. The SEC claims that Lin Zhong and her company EB5 Asset Manager LLC raised at least $8.5 million for use by U.S. EB-5 Investments LLC in job-creating real estate development projects, but they diverted nearly $1 million to purchase a boat, a BMW, and a Mercedes among other improper personal uses of investor funds. Read More

On December 1, 2015 the Securities and Exchange Commission (SEC) announced the entry of a Consent Order (“Order”) halting an alleged ongoing investment fraud by James Torchia and various related entities involving the sale of promissory notes and life settlement contracts.

On November 10, 2015 the SEC filed an emergency halt against Torchia and the following entities that he operates and controls: (i) Credit Nation Capital, LLC (formerly known as Credit Nation Lending, LLC) (“CN Capital”), a Georgia limited liability company in Woodstock Georgia; (ii) Credit Nation Acceptance, LLC (“CN Acceptance”), a Texas limited liability company in Midland, Texas; (iii) Credit Nation Auto Sales, LLC, a Georgia limited liability company in Woodstock, Georgia; (iv) American Motor Credit, LLC, a Georgia limited liability company in Woodstock, Georgia; and (v) Spaghetti Junction, LLC, a Nevada limited liability company. Read More

The Securities and Exchange Commission (SEC) announced that on September 29, 2015, a final judgment was entered against Efstratios “Elias” Argyropoulos of Santa Barbara, California, and his solely owned company, Prima Capital Group, Inc. In addition to the permanent injunction to which the defendants had previously consented, the Court granted the SEC’s motion for monetary relief, finding the defendants jointly and severally liable for disgorgement of $1,495,657, together with prejudgment interest of $84,239.59 totaling $1,579,896.59, and also ordering Argyropoulos to pay a civil penalty of $1,495,697.

On December 23, 2014, the SEC filed the action, claiming that the defendants illegally raised nearly $3.5 million from investors, supposedly to purchase Facebook and Twitter shares before the companies’ initial public offerings (IPOs). Read More

On December 1, 2015 the Securities and Exchange Commission (SEC) charged two Bitcoin mining companies and their founder with conducting a Ponzi scheme that used the lure of quick riches from virtual currency to defraud their investors.

The complaint alleges that “mining” for Bitcoin or other virtual currencies means applying computer power to try to solve complex equations that verify a group of transactions in that virtual currency. The first computer or collection of computers to solve an equation is awarded new units of that virtual currency.

The SEC claims that Homero Joshua Garza perpetrated the Ponzi scheme through his two companies GAW Miners and ZenMiner by purporting to offer shares of a digital Bitcoin mining operation. In reality, GAW Miners and ZenMiner did not own enough computing power for the mining it promised to conduct, so most investors paid for a share of computing power that never existed. Returns paid to some investors came from proceeds generated from sales to other investors. Read More

On November 12, 2015, a federal court in Boston, Massachusetts, entered a final judgment against Tropikgadget FZE and Tropikgadget Unipessoal LDA (collectively, “Tropikgadget”) of Portugal, defendants in a previously-filed enforcement action. In February 2015, the SEC charged Tropikgadget operating under the name Wings Network, plus three company officers and 12 promoters, with operating an international pyramid scheme targeting Latino communities in the U.S.

The judgment enjoins Tropikgadget from future violations of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b 5 thereunder. The Court also ordered Tropikgadget to pay disgorgement of $25,213,990, representing profits gained as a result of the operation of the pyramid scheme, plus prejudgment interest of $961,742, and a third-tier civil penalty of $725,000. Read More

On November 17, 2015 the Securities and Exchange Commission charged Steven Watson with insider trading fraud, claiming he illegally profited from news of a proposed acquisition of Cooper Tire and Rubber Company by Apollo Tyres Ltd.

Earlier this year, the SEC charged two long-time friends, Amit Kanodia and Iftikar Ahmed, with insider trading fraud and alleged that another close friend of Kanodia also profited by trading on the confidential information provided by Kanodia. In a separate complaint filed November 12, 2015, the SEC filed fraud charges against Watson, another close friend of Kanodia. Read More

The Securities and Exchange Commission (SEC) announced that it has obtained final judgments against a former Los Angeles-based immigration attorney, his wife, his former law firm partner and five entities he controlled for conducting an investment scheme to defraud foreign investors seeking to come to the U.S. through the EB-5 Immigrant Investor Program.

On October 29, 2015, the United States District Court for the Central District of California entered a final judgment against Defendant Justin Moongyu Lee, formerly an immigration attorney with an office in Los Angeles, and five entity defendants he controlled, after granting the SEC’s motion for entry of a final judgment by default. In addition to permanently enjoining the defendants from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, the judgment orders that the defendants are jointly and severally liable for disgorgement of $7,210,000, together with interest of $1,052,403.73, for a total of $8,262,403.73, and further orders Justin Lee to pay a civil penalty of $150,000. Read More

The Securities and Exchange Commission (SEC) announced that on November 5, 2015 an emergency enforcement action was filed in federal district court against Earl Miller (Miller) and two private investment vehicles that he controlled, 5 Star Commercial, LLC (5 Star Commercial) and 5 Star Capital Fund, LLC (5 Star Capital), alleging that he made material misrepresentations to investors and perpetrated a fraudulent scheme in raising investor funds for the 5 Star entities.

On November 6, 2015 the court issued a temporary restraining order (TRO) freezing the assets of Miller and the 5 Star entities, and prohibiting each of the defendants from soliciting, accepting or depositing any monies from actual or prospective investors while the TRO is in effect. The SEC’s complaint alleges that starting in 2008, Miller recruited investors for a number of private investment entities that he created. Miller recruited investors for 5 Star Commercial, 5 Star Capital and his other real estate entities from a network of predominantly novice investors, including members of the local Amish community. From July 29, 2014 to the present, he raised at least $3.9 million from more than 70 investors for his 5 Star Commercial and 5 Star Capital entities. Read More

On December 7, 2015 the Securities and Exchange Commission (SEC) announced a series of enforcement actions against lawyers across the country charged with offering EB-5 investments while not registered to act as brokers. In one case, a lawyer and his firm were charged with defrauding foreign investors in the government’s EB-5 Immigrant Investor Program, through which they seek a path to U.S. residency by investing in a specific project that creates or preserves at least 10 jobs for U.S. workers.

“Individuals and entities performing certain services and receiving commissions must be registered to legally operate as securities brokers if they’re raising money for EB-5 projects,” said Andrew Ceresney, Director of the SEC Enforcement Division. “The lawyers in these cases allegedly received commissions for selling, recommending, and facilitating EB-5 investments, and they are being held accountable for disregarding the relevant securities laws and regulations.” Read More

On November 10, 2015 the Securities and Exchange Commission (SEC) announced insider trading charges and an emergency asset freeze against cousins Zhichen Zhou and Yannan Liu. The SEC alleged that the Defendants traded in advance of the acquisition of two healthcare companies, MedAssets, Inc. and Chindex International Inc. The SEC also alleges that Zhou used funds provided by his cousin to trade illegally, resulting in profits of approximately $300,000. The SEC claimed that Liu, who was formerly employed by a private equity firm that was a bidder in both the MedAssets and Chindex International acquisitions, provided Zhou with the non-public information about the acquisitions. On November 2, 2015 when the acquisition of MedAssets was announced, the stock rose more than 30%. Similarly, Chindex International’s stock rose more than 13% on February 17, 2014, the date of the announcement. Read More

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