On April 4, 2017,  a final judgment was entered against Safety Technologies LLC (“Safety Technologies”) and Thomas Connerton for defrauding investors by misleading them to invest in a purported glove manufacturing company and then diverting their money for Connerton’s personal use. Connerton’s victims include several women he met through an online dating website and their friends and family.

The SEC’s complaint against Thomas Connerton and Safety Technologies, filed on June 8, 2016, alleged that Connerton told investors that his company was developing a material to make surgical gloves better resistant to cuts or punctures. Connerton claimed that several major glove manufacturers wanted the technology and Safety Technologies was on the brink of imminent deals that would result in large payouts for investors in his company. But, the SEC alleged, no deals were ever anywhere close to materializing, and Connerton emptied the company’s bank account by writing a series of checks to himself and using investor funds for his own expenses. According to court documents filed by the SEC, among Connerton’s improper spending of investor funds was $20,000 for an engagement ring for his latest online date turned investor. On June 9, 2016, the SEC obtained an asset freeze against Thomas Connerton and, on September 12, 2016, the court issued an order continuing the asset freeze and imposing a preliminary injunction. Read More

On March 22, 2017, the Securities and Exchange Commission (“SEC”) adopted the T+2  amendment which shortens the standard settlement cycle for most broker-dealer securities transactions.  Currently, the standard settlement cycle for these transactions is three business days, known as T+3.  The SEC’s amended rule shortens the settlement cycle to two business days, T+2.

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On March 13, 2017, the Securities and Exchange Commission charged Jerry Miller in connection with Petrotech Oil and Gas, Inc.. According to the SEC allegations, Miller is the principal of a Florida-based consulting firm to several microcap issuers. Miller has been charged with fraud for falsely claiming that  one of his microcap issuer clients, had obtained a marijuana license in connection with its purported marijuana business.

The SEC’s complaint, filed in federal court in Miami, Florida, alleges that on February 26, 2014, Petrotech falsely announced in a press release that it had secured a medical and recreational marijuana license from Colorado in conjunction with Petrotech’s newly-founded marijuana business. The release also included marijuana production capacity projections based, in part, on Petrotech purportedly having secured the license. In reality, as alleged in the SEC’s complaint, Petrotech had not received a license to conduct a marijuana business in Colorado. Miller allegedly wrote the press release and was responsible for publishing it. Read More

The Depository Trust Company (“DTC”) offers a service to transfer agents known as the Direct Registration System (“DRS”).  DRS allows transfer agents to provide shareholders with the ability to hold their shares in book-entry form with the transfer agent instead of a physical stock certificate. A DRS Statement evidences ownership of the security and replaces the physical stock certificate.  DRS shares are represented by a DRS Statement in the name of the shareholder. The shareholder has full ownership of the shares and has all rights and privileges of share ownership. The Direct Registration Statement serves as evidence of ownership of the shares as opposed to a physical certificate.

Shares held in DRS are transferred between the issuer’s Transfer Agent and holder’s broker-dealer electronically. Read More

On March 10, 2013, the Securities and Exchange Commission (“SEC”) announced fraud charges against Lek Securities and Avalon FA, a Ukraine-based trading firm in connection with a layering scheme. According to the SEC, Avalon FA, Fayyer and Pustelnik manipulated the U.S. markets hundreds of thousands of times in the scheme.

The SEC’s complaint alleges that Avalon FA Ltd touted itself to traders as a destination to engage in layering, a scheme in which orders are placed but later canceled after tricking others into buying or selling stocks at artificial prices, resulting in illicit profits.  Avalon allegedly made more than $21 million in the layering scheme involving U.S. stocks during a five-year period.  According to the SEC’s complaint, Avalon also made more than $7 million in illicit profits through a cross-market manipulation scheme in which the firm bought and sold U.S. stocks at a loss in order to manipulate the prices of the stock and its corresponding options so that it could then profitably trade at artificial prices.  Avalon allegedly used traders in Eastern Europe and Asia to conduct its trading, and the firm kept a portion of the profits and collected commissions from the traders. Read More

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Anyone who thinks that the Securities and Exchange Commission (the “SEC”) is behind the times should check out the SEC’s latest action against Mexico-based home building company Desarrolladora Homex S.A.B. de C.V.  The SEC used satellite imagery to help uncover the accounting scheme and illustrate its allegation that Homex had not even broken ground on many of the homes for which it reported revenues. According to the SEC, Desarrolladora Homex agreed to settle charges that it reported fake sales of more than 100,000 homes to boost revenues in its financial statements during a three-year period.  Read More

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The Securities and Exchange Commission (SEC) on February 14, 2017 announced that James P. Toner Jr, a purported real estate investment manager has agreed to pay more than a half-million dollars to settle charges that he pocketed investor money in an investment scheme.

The SEC alleges that James P. Toner Jr. of Scottsdale, Ariz., siphoned $51,000 from investors who were falsely told that he would personally manage some of the real estate projects in which they were purchasing interests.  The stated purpose of each investor offering was to purchase a residential property in the Phoenix area, renovate that property, and then sell it for a profit.                Read More

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On February 14, 2017, the SEC announced that Morgan Stanley Smith Barney has agreed to pay an $8 million penalty and admit wrongdoing to settle charges related to single inverse ETF investments it recommended to advisory clients.

The SEC’s order finds that Morgan Stanley did not adequately implement its policies and procedures to ensure that clients understood the risks involved with purchasing inverse ETFs.  Among the order’s findings, Morgan Stanley failed to obtain from several hundred clients a signed client disclosure notice, which stated that single inverse ETFs were typically unsuitable for investors planning to hold them longer than one trading session unless used as part of a trading or hedging strategy.  Morgan Stanley solicited clients to purchase single inverse ETFs in retirement and other accounts, the securities were held long-term, and many of the clients experienced losses.

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On February 17, 2017 the Securities and Exchange Commission (the “SEC”) the North American Securities Administrators Association (“NASAA”) signed a crowding funding agreement. The agreement sets forth the rules to facilitate intrastate crowdfunding offerings and regional offerings take effect. The agreement signed by the SEC and NASAA is intended to facilitate the sharing of information to ensure that the new exemptions are serving their intended purpose of facilitating access to capital for small businesses. Under the memorandum of understanding (MOU), federal and state securities regulators will be better able to monitor the effects of the new rules and also guard against fraud.

The MOU was signed by SEC Acting Chairman Michael S. Piwowar and Mike Rothman, Minnesota Commissioner of Commerce and President of NASAA, which represents state securities administrators.

“The agreement not only builds on an already productive relationship between the SEC and state regulators, it also offers additional insights and protections as we help companies grow and create jobs while providing new opportunities to investors,” said Acting Chairman Piwowar. Read More

On February 14, 2017 the Securities and Exchange Commission (the “SEC) charged Terminus Energy, Inc and four corporate officers with securities fraud. According to the SEC, Terminus Energy and its four officers misleading investors about the research, development, and profitability of their purported business to manufacture power generation products such as fuel cells.

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On December 23, 2016, the United States District Court for the District of Massachusetts entered final judgments against Graduate Leverage, LLC, GL Capital Partners, LLC, GL Investment Services, LLC, Taft Financial Services, LLC, and GL Advisor Solutions, Inc. These entities were controlled and manipulated by Daniel Thibeault, the individual defendant in this SEC enforcement action filed in January 2015, who misappropriated money from an investment fund that he was managing. The entities have all stopped their former business operations. The final judgments against these companies impose permanent injunctions against future violations of certain antifraud provisions of the federal securities laws and order all but one of them to pay disgorgement and interest, jointly and severally, of approximately $17.1 million. Read More

On January 11, 2017, the U.S. District Court for the Eastern District of New York entered a final judgment against defendant Gregg R. Mulholland, a penny stock promoter charged in an SEC action with illegally selling more than 83 million penny stock shares that he allegedly held in the names of at least 10 different offshore entities.

The SEC’s complaint, filed on June 23, 2015, alleged that Mulholland surreptitiously accumulated, through at least ten offshore front companies, at least 84% of the issued and outstanding shares of Vision Plasma Systems Inc. Once Mulholland effectively controlled the company through this majority ownership, he liquidated his shares for proceeds of at least $21 million. No registration statement was filed or in effect covering Mulholland’s sales and no exemption from registration was available. Read More

On January 13, 2017, the U.S. District Court for the District of Minnesota entered a final judgment against Minnesota resident James M. Louks and his company, FiberPoP Solutions, Inc. Louks and FiberPoP are defendants in an SEC civil enforcement action who were charged with raising money from investors under false pretenses while failing to produce the promised returns until the SEC’s emergency action stopped them from doing so.

In September 2015, the SEC announced fraud charges and an emergency order to halt Louks and FiberPop from continuing to raise money from investors. In its complaint, the SEC alleged that Louks and FiberPoP, since 2003, defrauded approximately 100 investors by promising them massive returns, while actually spending the investors’ funds on various schemes, which the SEC alleged typically bore the hallmarks of “prime bank schemes.” Prime bank schemes lure investors to participate in a sham international investing opportunity with phony promises of exclusivity and enormous profits. Read More

On December 27, 2016, the Securities and Exchange Commission charged three Chinese traders with fraudulently trading on hacked nonpublic market-moving information stolen from two prominent New York-based law firms, racking up almost $3 million in illegal profits.  The SEC also is seeking an asset freeze that prevents the traders from cashing in on their illicit gains.  The enforcement action marks the first time the SEC has charged hacking into a law firm’s computer network.

The SEC’s complaint alleges that Iat Hong, Bo Zheng, and Hung Chin executed a deceptive scheme to hack into the networks of two law firms and steal confidential information pertaining to firm clients that were considering mergers or acquisitions.  Read More

Posted by Brenda Hamilton

One December 29, 2016, the Securities and Exchange Commission announced that Kentucky-based General Cable Corporation agreed to pay more than $75 million to resolve parallel SEC and U.S. Department of Justice investigations related to its violations of the Foreign Corrupt Practices Act (FCPA). The company agreed to pay an additional $6.5 million penalty to the SEC to settle separate accounting-related violations.

According to the SEC’s orders instituting settled administrative proceedings, General Cable’s overseas subsidiaries made improper payments to foreign government officials for a dozen years to obtain or retain business in Angola, Bangladesh, China, Egypt, Indonesia, and Thailand. General Cable’s weak internal controls also failed to detect improper inventory accounting at its Brazilian subsidiary, causing the company to materially misstate its financial statements from 2008 to the second quarter of 2012. Read More

On November 28, 2016, the Securities and Exchange Commission (“SEC”) obtained a temporary restraining order and an emergency asset freeze in a $3 million offering fraud and Ponzi scheme orchestrated by Andrew Kelley, Paul Shumway and their company Blackbird Capital Partners, LLC, a former Commodity Trading Advisor located in Draper, Utah.

The SEC’s complaint, filed in federal court in Utah, alleges that since at least September 2014, Kelley and Shumway solicited several investors to invest at least $3.1 million with Blackbird, or through a separate “friends and family” account, which Kelley claimed he managed as a proprietary trading fund. Read More

On November 23, 2016, the Securities and Exchange Commission (“SEC”) filed a civil action charging brothers Matthew Griffin and William Griffin with fraudulently offering interests in two Texas partnerships.

The SEC alleges that, between November 2013 and July 2014, the Griffins, through their company, Payson Petroleum, Inc., conducted a fraudulent two-phase offering of interests in two Texas partnerships, raising $23 million from approximately 150 investors for the purpose of developing three oil and gas wells. The SEC further alleges that the Griffins misled investors about Payson’s promised participation in the program and about Payson’s compensation as the program’s sponsor and operator. Read More

On November 21, 2016, the Securities and Exchange Commission (“SEC”) charged Jason William Kumpf, the former CEO and president of microcap issuer Warrior Girl Corp. and a resident of San Francisco, California, with fraud based on his involvement in the issuance of false and misleading public statements concerning Warrior Girl.

According to the SEC’s complaint, filed on November 21, 2016 in the U.S. District Court for the Southern District of New York, Kumpf, along with two individuals that were previously charged by the SEC, drafted a press release that Warrior Girl issued on or about July 1, 2010. Read More

On November 14, 2016 and November 21, 2016, William Allen and Susan Daub pled guilty in federal court to criminal wire fraud and other charges in connection with an investment scheme involving fraudulent loans to professional athletes. The criminal charges arise from the same conduct alleged in a related SEC civil enforcement action.

Allen and Daub both pled guilty to two counts of wire fraud, one count of conspiracy to commit wire fraud, and one count of charging a money transaction in proceeds of a specified unlawful activity. Allen and Daub were arrested on these charges in June 2015. As part of the fraud, Allen and Daub collected funds from investors for certain fictitious or oversubscribed loans and created the false impression that athletes were repaying certain fictitious or oversubscribed loans on schedule by making scheduled monthly payments to investors from new investor funds. Read More

On November 18, 2016, Stanley Jonathan Fortenberry (a/k/a S.J., John, or Johnny Fortenberry) of San Angelo, Texas, pleaded guilty to an indictment charging him with obstruction of justice and other charges in connection with two investment companies he ran that defrauded investors out of approximately $900,000 over a four-year period.

On April 28, 2014, the SEC instituted public administrative and cease-and-desist proceedings against Fortenberry. The Division of Enforcement alleged that Fortenberry ran an investment company called Premier Investment Fund (Premier), which raised funds from investors for social media projects run by another company with ties to the country music industry. Read More