The SEC’s complaint alleges that Fei Yan loaded up on stocks and options in advance of two corporate acquisitions late last year based on confidential information obtained from his wife, an associate at a law firm that worked on the deals.
SEC Announces Fraud Charges Against Victory Ho
On July 12, 2017, the Securities and Exchange Commission (“SEC”) announced fraud charges against Victory Ho for insider trading in the securities of The Shaw Group, Inc. (Shaw), a Louisiana-based energy construction company, ahead of a public announcement on July 30, 2012 that Shaw was going to be acquired by Chicago Bridge & Iron Company N.V.
The SEC’s complaint, filed in the U.S. District Court for the Western District of Louisiana, alleges that during July of 2012, Victory Ho obtained confidential non-public information about the impending Shaw merger. Ho then used all of the money in a newly-opened brokerage account – about $8,000 – to purchase 296 Shaw short term call options on Friday, July 27, 2012, the last trading day before the public announcement of the merger. Prior to purchasing these options, Victory Ho had multiple communications with two individuals who had personal relationships with a Shaw employee who had information concerning the merger. The SEC further alleges that Ho sold the options shortly after the announcement of the acquisition for a profit of approximately $295,000. Read More
Charles Banks Charged With Fraud
On July 13, 2017, the Securities and Exchange Commission (“SEC”) announced that it has obtained a judgment and industry bar against Charles Banks, an Atlanta-based investment adviser, charged with defrauding a former professional basketball player.
According to the SEC’s complaint, Charles Banks, IV fraudulently induced the former professional athlete to invest $7.5 million in a sports team apparel and merchandise company based on a series of misrepresentations about the investment and allegedly misappropriated funds from his client. Read More
Fei Yan Faces Insider Trader Charges
On July 12, 2017, the Securities and Exchange Commission (“SEC”) announced insider trading charges against Fei Yan, a research scientist, who allegedly searched the internet for “how sec detect unusual trade” before making a trade that the agency flagged as suspicious through data analysis.
SEC Obtains Final Judgement for Ryan Petersen
On July 5, 2017, the Securities and Exchange Commission (“SEC”) announced that it has obtained a final judgment against Ryan Petersen, the former chief executive officer of OCZ Technology Group Inc. whom the SEC charged with an accounting fraud at the now-bankrupt seller of computer memory storage and power supply devices.
The final judgment, entered by the Honorable Richard Seeborg, U.S. District Judge, U.S. District Court for the Northern District of California on June 30, 2017, permanently enjoins Ryan Petersen from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Exchange Act Rules 10b-5, 13a-14, 13b2-1, and 13b2-2, and aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B), and Exchange Act Rules 12b-20, 13a-1, 13a-11, and 13a-13. The judgment also bars Petersen from acting as an officer or director of a public company, and orders him to pay $121,600 in disgorgement and relief pursuant to Section 304(a) of the Sarbanes-Oxley Act of 2002, prejudgment interest on the disgorgement of $18,400, and a civil penalty in the amount of $100,000. Petersen consented to the final judgment. Read More
SEC Charges K-T 50 Wells With Fraud
On July 7, 2017, the Securities and Exchange Commission (“SEC”) announced charges against K-T 50 Wells, a purported oil well company, its founders, and three salespeople in connection with a $2.4 million offering fraud.
The SEC’s complaint, filed in U.S. District Court for the Central District of California, alleges that from approximately May 2014 to February 2016, Kentucky-Tennessee 50 Wells/400 BBLPD Block, Limited Partnership (K-T 50 Wells) fraudulently offered and sold unregistered securities to investors using a boiler room operation, raising approximately $2.4 million from 41 investors nationwide. The complaint further alleges that Carol Wayland and her son, John Mueller, founded and operated K-T 50 Wells and conducted the offering through two other entities that they owned and controlled, HP Operations, LLC and C.A.R. Leasing, LLC. To solicit investors, Wayland and Mueller allegedly set up a boiler room under the fictitious name of “Sahara Wealth Advisors” where they employed numerous salespeople, including Mitchell Dow, Barry Liss, and Steve Blasko, all of whom allegedly had prior experience working in boiler rooms. Read More
Judgement Entered Against Edwards
On June 9, 2017, the Honorable Esther Salas of the U.S. District Court for the District of New Jersey entered judgments against Dwayne Edwards, several entities Edwards used to orchestrate his alleged fraud, and relief defendant Sharon Nunamaker.
The judgment against Edwards and the entity defendants and relief defendants imposes permanent injunctions against future violations 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, and aiding and abetting violations of 17(a), 10(b), and Rule 10b-5, a permanent injunction from future participation in municipal securities offerings by Edwards, and orders payment of disgorgement, prejudgment interest thereon, and civil money penalties in amounts to be determined at a later date. The entity defendants are Senior Solutions of Social Circle, LLC, Oxton Place of Douglas, LLC, d/b/a Oxton Real Estate of Douglas, LLC, Rome ALF, LLC, Savannah ALF, LLC, Gainesville ALF, LLC, Waterford Place ALF, LLC, Montgomery ALF, LLC, Columbus ALF, LLC, and Opelika ALF, LLC, and the relief defendants are Oxton Senior Living, LLC, and Manor House Senior Living, LLC. The final judgment against Nunamaker orders her to pay disgorgement and prejudgment interest thereon of $7,742.16. Edwards consented to the entry of the judgment, which continues the receivership over the facilities, on behalf of both himself and his entities. Nunamaker also consented to the entry of the final judgment. Read More
SEC Announces Michael Randles Administrative Proceedings
On June 19, 2017, the Securities and Exchange Commission (“Commission”) deemed it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”) against Michael Randles.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, Respondent admits the Commission’s jurisdiction over him and the subject matter of these proceedings, and the findings contained in a paragraph below, and consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (“Order”), as set forth below. Read More
Final Judgement on Former InterMune Director and Friend
On June 30, 2017, the Securities and Exchange Commission (“SEC”) announced that the Honorable Jacqueline Scott Corley, U.S. Magistrate Judge for the Northern District of California, entered a final judgment as to Sasan Sabrdaran, the former director of drug safety risk management at Brisbane, California-based InterMune, Inc., and his long-time friend, Farhang Afsarpour. The final judgment orders payment of disgorgement and prejudgment interest and imposes an officer and director bar following a jury verdict that found both defendants had engaged in insider trading.
As shown at trial, Sabrdaran tipped Afsarpour in 2010 with confidential details while Sabrdaran was involved with shepherding InterMune’s application before a European Union regulatory body to market an InterMune drug called Esbriet to be used for the treatment of patients with a type of fatal lung disease. Afsarpour then acted on that tip by purchasing InterMune common stock on a U.S. stock exchange through his U.S.-based stockbroker and by purchasing spread bets on the future price movement in InterMune common stock or options through a U.K-based spread-betting firm. Afsarpour also tipped friends who gave him money with which he purchased certain of the spread bets through his account or who purchased InterMune common stock, options, or spread bets through their own accounts. Read More
Cheryl Jones Charged By SEC
On July 3, 2017, the Securities and Exchange Commission (“SEC”) announced charges against Cheryl Jones, a Washington, D.C.-based real estate agent and the sister of convicted Ponzi scheme operator Mark Jones, for selling unregistered securities.
The SEC’s complaint, filed in federal court in Boston, alleges that Cheryl Jones recruited many of her friends and associates to invest in unregistered promissory notes and personal guarantees that Mark Jones issued in connection with his Ponzi scheme. Mark Jones allegedly claimed that investors’ money would be pooled to provide short-term “bridge loans” to Jamaican companies that had supposedly been approved for commercial bank loans but needed interim financing until their bank loan funding came through. Mark Jones allegedly told investors that their investments would earn interest of approximately 15% to 24% annually. Instead, as the complaint alleges, Mark Jones deposited the investors’ money in his personal bank account and diverted almost all of it for personal expenses and to make “Ponzi” payments to other investors. The complaint also alleges that Mark Jones agreed to pay Cheryl Jones commissions of approximately 10% of the principal invested by new investors she referred to him. He also allegedly paid her a monthly “legal retainer” for services to him or the Bridge Fund. The complaint further alleges that between 2007 and 2015, Cheryl Jones was wrongfully enriched when she received payments from her brother totaling approximately $515,000 more than her approximately $876,000 investment in the Bridge Fund. Other investors lost substantial portions of their investments. Read More
Pilgrim Petroleum CORP Temporary Trading Suspension
The Securities and Exchange Commission (Commission) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the Exchange Act), of trading in the securities of Pilgrim Petroleum CORP, of Addison, Texas commencing at 9:30 a.m. EDT on June 30, 2017, and terminating at 11:59 p.m. EDT on July 14, 2017.
The Commission temporarily suspended trading in the securities of Pilgrim Petroleum CORP due to a lack of current and accurate information about the company because of questions that have been raised about the accuracy and adequacy of publicly disseminated information concerning, among other things. This order was entered pursuant to Section 12(k) of the Exchange Act. Read More
Renwick Haddow Charged with Fraud
On June 30, 2017, the Securities and Exchange Commission (“SEC”) filed fraud charges against Renwick Haddow, the clandestine founder of a purported Bitcoin platform and a chain of co-working spaces located in former bars and restaurants, alleging that he bilked investors in both companies while hiding his connection given his checkered past with regulators in the U.K.
The SEC alleges that Renwick Haddow, a U.K. citizen living in New York, created a broker-dealer and did not register the firm with the SEC as required under the federal securities laws. Renwick Haddow allegedly used sales representatives to cold call potential investors and sell securities in Bitcoin Store Inc. and Bar Works Inc.
SEC Charges Quadrant 4 System Corp
On June 30, 2017, the Securities and Exchange Commission (“SEC”) has charged Chicago-area information technology company Quadrant 4 System Corp. (QFOR) and two former top executives in an accounting fraud scheme that misled investors and allowed the former executives to siphon millions from the firm for their personal benefit.
The SEC’s complaint, filed yesterday in the U.S. District Court for the Northern District of Illinois, alleges that former chief executive officer Nandu Thondavadi and former chief financial officer Dhru Desai stole more than $4 million from Schaumburg, Illinois-based Quadrant 4 System Corp over a nearly five-year period. The former executives also are alleged to have caused Quadrant 4 System Corp to understate its liabilities and inflate its revenues and assets, evading scrutiny by lying to the company’s auditors and providing them with forged and doctored documents.
SEC Charged Penn West with Accounting Fraud
On June 28, 2017, the Securities and Exchange Commission (“SEC”) charged Penn West Petroleum Ltd., a Canadian-based oil and gas company, and three of its former top finance executives for their roles in an extensive, multi-year accounting fraud.
The SEC’s complaint alleges that Penn West Petroleum Ltd., which has since been renamed Obsidian Energy Ltd., fraudulently moved hundreds of millions of dollars in expenses from operating expense accounts to capital expenditure accounts. This alleged fraudulent movement caused Penn West to artificially reduce its operating costs by as much as 20 percent in certain periods, which falsely improved reported metrics for oil extraction efficiency and profitability. Penn West was one of Canada’s largest oil producers at the time.
Ibex Trading Temporarily Suspended
On June 26, 2017, the Securities and Exchange Commission (“Commission”) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Ibex Advanced Mortgage Technology, Inc. (“IBXM”), of Sarasota, Florida at 9:30 a.m. on June 27, 2017, and terminating at 11:59 p.m. on July 11, 2017.
The Commission temporarily suspended trading in the securities of Ibex, IBXM, due to a lack of current and accurate information about the company because it has not filed certain periodic reports with the Commission. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act). Read More
Former Ariad Employees Charged with Insider Trading
One June 27, 2017, the Securities and Exchange Commission (“SEC”) announced insider trading charges against two former senior employees and the spouse of a former employee of Ariad Pharmaceuticals, Inc., a company based in Cambridge, Massachusetts engaged in the business of developing and marketing drugs to treat cancer.
According to the SEC’s complaints, filed in federal court in Boston, Massachusetts, the defendants traded in Ariad’s stock in advance of announcements about U.S. Food and Drug Administration (FDA) decisions that impacted the sales and marketing of the company’s main product. Additionally, the SEC’s complaints allege that: Read More
SEC Announces Additional Charges Against Anthony Portelli
On June 22, 2017, the Securities and Exchange Commission (“SEC”) announced additional charges in an enforcement investigation involving Anthony Portelli, a Wall Street firm’s securities lending desk, and the improper handling of American Depositary Receipts (ADRs).
The SEC’s order finds supervisory failures by Anthony Portelli, a former managing director and head of operations at broker-dealer ITG Inc. Anthony Portelli supervised ITG’s securities lending operations and was responsible for the firm’s compliance with “pre-release agreements” for ADR transactions. ADRs are U.S. securities that represent foreign shares of a foreign company. Before obtaining a “pre-released ADR” to lend to a customer, brokers like ITG must own, or determine that a customer owns, the number of foreign shares that corresponds to the number of shares the ADR represents. Under Portelli’s watch, personnel on ITG’s securities lending desk failed to take reasonable steps to determine whether the proper amounts of foreign shares were owned and held by ITG’s customers. This failure opened up the possibility that the ADRs could be used improperly for short selling or dividend arbitrage.
Pazoo, Inc. Used in Artificial Inflation Scheme
On June 21, 2017, the Securities and Exchange Commission (“SEC”) charged a New Jersey-based group of stock promoters with fraud involving the manipulation and artificial inflation of the share price of a microcap company, Pazoo, Inc. The scheme grossed over $1 million.
The SEC alleges that James Farinella, and his purported consulting firm Integrated Capital Partners, Inc. (ICP), controlled virtually the entire public float of stock in microcap issuer Pazoo, Inc. Farinella paid Equity Awareness Group (EAG) to promote Pazoo and to engage in matched trading to create the appearance of an active market for Pazoo stock and boost the stock price. The SEC further alleges that Anthony Amado, an owner of EAG, and Carlo Palomino, an EAG employee, carried out the scheme, enabling Farinella to dump Pazoo shares for over $1 million. Read More
Seyed Taher Kameli Charged for Defrauding Investors
On June 22, 2017, the Securities and Exchange Commission (“SEC”) charged Seyed Taher Kameli, a Chicago-based immigration attorney, with defrauding investors participating in the EB-5 immigrant investor program by improperly commingling and misusing a portion of the approximately $88.7 million raised.
The SEC alleges that Seyed Taher Kameli and his companies, Chicagoland Foreign Investment Group, LLC and American Enterprise Pioneers, Inc., falsely claimed to at least 226 foreign investors that each of their $500,000 investments would be used to help construct a specific senior living project in the Chicago area or Florida and create at least 10 permanent full-time jobs within that project. This would qualify each investor for a potential path to permanent U.S. residency through the EB-5 program. Read More
SEC Charges Arista’s CEO and Attorney
On June 20, 2017, the Securities and Exchange Commission (“SEC”) announced charges involving a scheme to disguise the nature of Arista, a public company’s financing amid financial difficulties, and a corresponding manipulation of the price of the company’s stock perpetrated by an individual previously barred from serving as an officer or director.
According to the SEC’s complaint, filed in federal court in Manhattan, beginning in 2012, Arista began to experience difficulty raising long-term capital for its operations. On the recommendation of William Schmitz, Arista’s CEO, Michael T. Hughes, Arista counsel, and Peter Kolokouris, an Arista “consultant” who settled fraud charges with the Commission in the 1990s, Arista raised approximately $1 million through private sales of Arista stock owned by Kolokouris’ family. According to the SEC, in 2012, Schmitz and Hughes helped the Kolokouris family sell their stock to private investors, with the proceeds then used to provide desperately needed financing for the company, but in the guise of a fictitious loan from a purportedly independent third party, which was in fact controlled by Kolokouris. In order to effectuate the stock sales, the complaint alleges that Kolokouris manipulated Arista stock, which inflated the public market price and thereby misled the private investors to believe that they were acquiring the Kolokouris’ family stock at a discount. The complaint further alleges that Arista falsely and misleadingly stated in numerous public filings with the Commission – beginning with a September 10, 2012 Form 8-K – that the financing came from a line of credit with a third-party lender. Kolokouris, Schmitz and Hughes created internal Arista documentation designed to give the false appearance that Arista’s disclosures were consistent with internal corporate records. Lastly, the SEC alleges that Kolokouris and various Kolokouris family members violated Regulation M by purchasing shares while engaged in a distribution of Arista stock. Read More
Mark Northrop Barred by the SEC
On June 19, 2017, the Securities and Exchange Commission (“Commission”) deemed it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 203(f) of the Investment Advisers Act of 1940 (“Advisers Act”) against Mark Northrop (“Respondent”).
In anticipation of the institution of these proceedings, Mark Northrop has submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over him and the subject matter of these proceedings and the findings contained in paragraph III.2 below, which are admitted, Respondent consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions (“Order”), as set forth below. Read More
SEC Takes Action Against Ann Hiskey
On June 19, 2017, the Securities and Exchange Commission (“Commission”) deemed it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”) against Ann Hiskey (“Respondent”).
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, Respondent admits the Commission’s jurisdiction over her and the subject matter of these proceedings, and the findings contained in paragraph III.2 below, and consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (“Order”), as set forth below. Read More
SEC Charges CannaVEST Corp. with Fraud
On June 16, 2017, the Securities and Exchange Commission (“SEC”) filed fraud charges against CannaVEST Corp., a Las Vegas-based hemp oil company, and its CEO for inflating the company’s assets on its balance sheet.
The SEC complaint filed in federal court in Nevada alleges that CannaVEST Corp. (now known as CV Sciences, Inc.) and CEO Michael Mona Jr. materially overstated the company’s total assets in quarterly reports for the first and second quarters of 2013. According to the complaint, CannaVEST reported purchasing a company called PhytoSphere Systems LLC, including its existing rights under contracts with hemp production and processing facilities, for $35 million, even though Mona knew that the purported purchase price was substantially inflated. The complaint alleges that CannaVEST agreed to the purported purchase price only because CannaVEST could pay for the acquisition primarily with CannaVEST shares which Mona believed had little value at the time. Read More
Antonio Katz Pleads Guilty to Criminal Charges
On June 1, 2017, Antonio Katz, a defendant in ongoing SEC litigation, pled guilty to criminal charges filed by the U.S. Attorney for the District of Massachusetts. Antonio Katz was charged with one count of conspiracy and one count of securities fraud in connection with a pump-and-dump scheme that defrauded investors in Greenway Technology, a Las Vegas based company purporting to operate resorts catering to gay and lesbian travelers. The court accepted Antonio Katz’s plea and his sentencing currently is scheduled to occur on February 16, 2018.
The SEC previously charged Antonio Katz and Jehu Hand on December 10, 2015. According to the SEC’s complaint, the defendants and their co-schemers secretly planned and orchestrated the sale of Greenway stock to the public without proper securities registration statements and at prices artificially inflated by news releases, promotional materials, or blast e-mails containing false, exaggerated or misleading information, and by engaging in undisclosed coordinated trading of the stock. These efforts were designed to generate the appearance of demand for the stock and to increase its price even though Greenway had no operations or assets at the time. Between August 2012 and January 2013, after the stock price had been pumped, the participants in the scheme sold more than 12 million net shares of Greenway stock, causing losses to the investing public of more than $850,000. Read More
SEC Adopts JOBS Act Amendments
On April 5, 2017, the Securities and Exchange Commission (“SEC”) announced that it has adopted JOBS Act amendments to increase the amount of money companies can raise through crowdfunding to adjust for inflation. It also approved amendments that adjust for inflation a threshold used to determine eligibility for benefits offered to “emerging growth companies” (EGCs) under the Jumpstart Our Business Startups (JOBS) Act.
“Regular updates to the JOBS Act, as prescribed by Congress, ensure that the entrepreneurs and investors who benefit from crowdfunding will continue to do so,” said SEC Acting Chairman Michael S. Piwowar. “Under these amendments, the JOBS Act can continue to create jobs and investment opportunities for the general public.”
Can-Cal & SkyStar Temporarily Suspended
The U.S. Securities and Exchange Commission (“Commission”) announced the temporary suspension of trading in the securities of the following issuers, commencing at 9:30 a.m. EDT on June 9, 2017 and terminating at 11:59 p.m. EDT on June 22, 2017: Can-Cal Resources Ltd. (CCRE) and SkyStar Bio-Pharmaceutical Co. (SKBI). Read More
David Fuselier Charged for Fraudulent Scheme
On June 6, 2017, the Securities and Exchange Commission (“SEC”) charged David Fuselier, a chief executive officer, with perpetrating a fraudulent scheme to create the false appearance of improvement in the financial statements of two publicly traded companies by removing significant liabilities.
The SEC’s complaint, filed in federal court in New York, N.Y. on June 6, 2017, alleges that beginning in 2012, David Fuselier, then-chairman, chief executive officer, and principal financial and accounting officer of Integrated Freight Corporation and New Leaf Brands, Inc., arranged for both companies purportedly to sell non-performing subsidiaries each with liabilities greater than assets. According to the complaint, David Fuselier convinced a long-time friend and business associate, Roy W. Erwin, to be in charge of the purchaser, a new company formed and controlled by David Fuselier that had no assets. David Fuselier hid the true nature of the transactions from the companies’ auditors and, from July 2012 to April 2015, reviewed, approved, and signed SEC filings containing false and misleading information about the related-party nature of the sales and the issuers’ financial condition. As a result, Integrated Freight and New Leaf filed with the SEC materially false and misleading reports. Read More
Marc Broidy & Broidy Wealth Advisors Receive Final Judgement
On May 30, 2017, the Honorable Eric N. Vitaliano of the United States District Court for the Eastern District of New York entered a final consent judgment against defendants Marc Broidy and Broidy Wealth Advisors, LLC (“BWA”), enjoining them from violating antifraud provisions of the federal securities law and ordering them, jointly and severally, to pay $1,719,464 in disgorgement representing profits gained as a result of the conduct alleged in the complaint. The disgorgement was partially satisfied by Broidy’s payment of $25,000 directly to a former client, and the balance deemed satisfied by the entry of an order of restitution in the parallel criminal matter, United States v. Marc Broidy, 17-cr-64 (ENV). Additionally, on June 1, 2017, the SEC issued an administrative order barring Marc Marc Broidy from the securities industry. Marc Broidy consented to the issuance of a final judgment and administrative order.
The SEC charged Broidy and BWA with fraudulently overbilling clients and stealing assets from their trusts to pay such personal expenses as his home mortgage, overseas trips, and leases on two Mercedes-Benz vehicles. The SEC alleged that Marc Broidy billed clients approximately $643,000 in excess fees and covered it up by altering the amount of management fees recorded on forms issued by brokerage firms before sending the forms to his clients. The SEC further alleged that Broidy fraudulently obtained additional funds to pay his personal expenses by misappropriating approximately $865,000 in assets from clients’ trusts for which he was trustee, and that Marc Broidy also defrauded advisory clients about some investments they made in privately-held companies when he did not inform them he was affiliated with those companies. The SEC’s complaint, filed on October 27, 2016 charged Broidy and BWA with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 as well as Sections 206(1) and (2) of the Investment Advisers Act of 1940. Read More
Final Judgement Against GAW Miners and ZenMiner
On June 2, 2017, the U.S. District Court for the District of Connecticut entered a final default judgment against two Connecticut-based companies, GAW Miners, LLC and ZenMiner, LLC, in a case alleging that these companies and their principal conducted a Ponzi scheme that used the lure of quick riches from virtual currency to defraud investors. The judgment followed the court’s May 29, 2017 order finding that the SEC established liability as to both defendants and adequately supported its requests for injunctive relief, disgorgement, and civil penalties.
The SEC’s complaint, filed on December 1, 2015, alleged that GAW Miners and ZenMiner, along with their principal, Homero Joshua Garza, purported to offer shares to investors in their digital bitcoin mining operation. 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. According to the SEC’s complaint, GAW Miners and ZenMiner did not own enough computing power for the mining they promised to conduct, so most investors paid for a share of computing power that never existed. Returns allegedly paid to some investors came from proceeds generated from sales to other investors. Read More
SEC Charges iPayment Executives with Fraud
On March 10, 2017, the Securities and Exchange Commission (“SEC”) charged two former iPayment executives, a credit card processing company, with masterminding a fraudulent scheme to steal millions of dollars through phony expense reimbursements, inflated invoices, and other improper accounting tactics.
The SEC’s complaint alleges that iPayment’s then-senior vice president of sales and marketing Nasir Shakouri and then-executive vice president and chief operating officer Robert Torino routinely reimbursed themselves for payments that were never actually made to third-party vendors using their personal credit cards. They also allegedly conspired with vendors to inflate invoices and receive kickbacks from the overpayments, and claimed improper commissions and bonuses related to other corporate funds they improperly diverted in various ways.
Nima Hedayati Charged With Insider Trading
On March 14, 2017, the Securities and Exchange Commission (“SEC”) announced that Nima Hedayati, an auditor based in the Silicon Valley, has agreed to settle charges that he traded on inside information about a client on the verge of a merger.
The SEC’s order finds that through his work at an independent audit firm, Nima Hedayati learned that Fremont, California-based Lam Research Corporation was making preparations to acquire Milpitas, California-based KLA-Tencor Corporation. The two companies manufacture equipment used in the creation of semiconductors.
