The Securities and Exchange Commission (SEC) announced that, on April 5, 2016, a federal jury in Massachusetts convicted Rosalind Herman of Woburn, Massachusetts of criminal charges of investment adviser fraud, tax fraud, wire fraud and conspiracy for her role in connection with defrauding investors of over $1.3 million.

Herman was indicted in March 2012; additional charges were added by a superseding indictment in March 2013. Read More

On April 7th, 2016, the Securities and Exchange Commission (SEC) announced fraud charges against two men behind a scheme to manipulate the stock of Green Energy Renewable Solutions, Inc., a company that purported to be in the business of developing waste processing and recycling facilities.

The SEC’s complaint, filed in federal court in the District of Massachusetts, charges David Aubel, of Florida, and Robert Raffa, of New Hampshire, for their roles in the alleged scheme. In a parallel case, the U.S. Attorney’s Office for the District of Massachusetts today filed charges against the two men. Read More

On March 31, 2016, the Securities and Exchange Commission (SEC) announced fraud charges against a Cache County, Utah man who solicited investors in a bogus scheme involving investments in “top secret” Iraqi currency and oil contracts.

In a related criminal action, the U.S. Attorney’s Office for the District of Utah announced that John Scott Clark, of Cache County, Utah, pled guilty to felony securities fraud for his participation in the scheme. Clark will pay more than $1.7 million in criminal restitution and serve 36 months in prison.

The SEC charged Clark in 2011 for operating a $47 million Ponzi scheme and he pled guilty in 2009 to bank fraud, money laundering and illegal gambling. Read More

The Securities and Exchange Commission (SEC) announced fraud charges against Massachusetts resident Nathanial Ponn for engaging in a scheme to defraud numerous broker-dealers over more than seven years.

According to the SEC complaint filed in federal court in Boston, Ponn defrauded numerous brokerage firms through bogus bank transfers to newly opened brokerage accounts. These bogus transfers created the false appearance that the brokerage accounts would have cash available upon the settlement of Ponn’s purchases of stocks and mutual fund shares. Ponn used temporary credits from the bogus transfers to purchase stock and mutual fund shares, which he repeatedly attempted to cash out or transfer to other financial institutions before the brokerages discovered that Ponn did not have actual money to fund the bank transfers.

In a parallel action, the U.S. Attorney’s Office for District of Massachusetts today announced criminal charges against Ponn. Read More

The Securities and Exchange Commission (SEC) charged Navistar International Corp. with misleading investors about its development of an advanced technology truck engine that could be certified to meet U.S. emission standards.

Navistar, without admitting or denying the charges, has reached a settlement with the SEC and agreed to pay a $7.5 million penalty. Separately, in a complaint filed in federal court in the Northern District of Illinois, the SEC charged former Navistar CEO Daniel Ustian with misleading investors and with aiding and abetting violations by Lisle, Illinois-based Navistar.

The SEC alleges that Navistar and Ustian failed to fully disclose the company’s difficulties obtaining Environmental Protection Agency (EPA) certification of a truck engine able to meet stricter EPA Clean Air Act standards that took effect in 2010. Navistar and Ustian also are alleged to have repeatedly misled investors about Navistar’s development of the engine, which used exhaust-gas-recirculation (EGR) technology. Navistar later abandoned the effort and adopted the selective catalytic reduction (SCR) technology used by its competitors. Read More

On March 24, 2016, the Securities and Exchange Commission charged two brothers, and a company that they founded purportedly to develop and sell real estate, with engaging in a $2.7 million Ponzi scheme that targeted approximately 30, largely elderly and unsophisticated investors over a six-year period.

According to the SEC’s complaint, filed in federal court in New Jersey:

• From 2008 through at least 2014, Daniel Rivera, a New York resident who maintains an office in New Jersey, told investors that they would share in the profits of Robbins Lane, a Pennsylvania real estate venture that purportedly bought, redeveloped and sold properties.
• Daniel Rivera provided a brochure to investors that advertised Robbins Lane as “provid[ing] an opportunity for the senior investor to share in the profits from prudent investments in real estate” and “giv[ing] the senior investor a guaranteed monthly income.”
• In fact Robbins Lane had no real estate portfolio, no operations, no employees, and no ability to provide income to investors (much less “guaranteed” income).
• Daniel Rivera also created the content of a publicly available Robbins Lane website that aimed to attract investors and which his brother, Matthew Rivera, a Pennsylvania resident, reviewed. Robbins Lane’s website contained the same misstatements as did the brochure that was provided to investors.
• At times, Daniel Rivera recommended that investors liquidate other holdings, including retirement assets, to invest in Robbins Lane.
• Instead of investing in real estate, hundreds of thousands of dollars of investor funds were used to pay other investors.
• Other funds were used for personal expenses, such as, for example, to purchase tickets for sporting events, to pay for college tuition and sorority dues for Daniel Rivera’s daughter, to pay personal credit card bills, for transfers to relief defendants Rivera & Associates and Daniel Rivera Inc., for transfers to a janitorial business in which Matthew Rivera was a partner, and to purchase a condominium that, at one point, was occupied by a relative of Matthew Rivera.
• After the SEC’s investigation began, Matthew Rivera repaid to Robbins Lane a substantial portion of the funds that he withdrew, which were, in turn, repaid to investors.

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The Securities and Exchange Commission (SEC) charged a New York-based securities professional with defrauding two institutions he solicited to invest in a shell company he controlled whose name was deceptively similar to that of a legitimate private equity fund.

According to the SEC complaint, Andrew Caspersen solicited approximately $95 million from two institutional investors by offering promissory notes issued by Irving Place III SPV, LLC (“Irving Place III”). The complaint alleges that Irving Place III is a shell entity formed and controlled by Caspersen with no legitimate business operations, unlike the similarly named Irving Place Capital Partners III SPV, a legitimate private equity fund not associated in any way with Caspersen. Read More

The Securities and Exchange Commission (SEC) announced that a former market analyst and TV news commentator has agreed to settle charges that he and his company fraudulently promoted a penny stock to investors.

The SEC alleges that Tobin Smith and NBT Group Inc. were paid to prepare and disseminate e-mails, online blogs, articles, and other communications touting the stock of IceWEB Inc., a data storage company. Smith and NBT did not fully disclose their compensation to investors, who did not have the benefit of knowing that part of their pay was tied to a sustained increase in IceWEB’s share price. The promotional material also contained false and misleading statements intended to artificially increase the trading volume and share price of IceWEB’s stock.

Smith and NBT agreed to be barred from involvement in any future penny stock offerings and must pay disgorgement of $165,900 plus $16,893 in interest. Smith also must pay a $75,000 penalty. Read More

The Securities and Exchange Commission announced fraud charges against a Massachusetts-based biotech company and three former executives for misleading investors about the company’s efforts to obtain Food and Drug Administration (FDA) approval for its flagship developmental drug to treat kidney cancer.

The SEC alleges that AVEO Pharmaceuticals Inc. concealed the FDA’s level of concern about Tivozanib in public statements to investors by omitting the critical fact that FDA staff had recommended a second clinical trial to address their concerns about patient death rates during the first clinical trial. When the FDA made public months later that it had recommended an additional clinical trial, the company’s stock price declined 31%. AVEO never conducted an additional trial, and the FDA later refused to approve Tivozanib. Read More

On March 25, 2016, the Honorable Richard W. Story of the United States District Court for the Northern District of Georgia sentenced Stanley Kowalewski to 18 years’ imprisonment for defrauding the investors in his hedge funds and obstructing the SEC’s earlier related investigation. In February 2013, a federal grand jury in Atlanta indicted Kowalewski with wire fraud and obstruction of justice. According to the indictment, beginning in 2009, Kowalewski solicited investment money from pension funds, school endowments, hospitals, non-profit foundations, and other investors which he placed in various hedge funds that he controlled. Read More

On March 25, 2016 the Securities and Exchange Commission (SEC) announced fraud charges and asset freezes obtained in a case filed against a New Jersey-based fund manager and two firms he controls that marketed shares in promising pre-IPO tech companies in the Bay Area. The SEC alleges they stole $5.7 million from investors and diverted millions more to other improper and undisclosed uses.

Specifically, the SEC alleges that John Bivona used money raised through Saddle River Advisors and SRA Management Associates to pay off earlier investors, prop up other funds, and pay family-related expenses. He secretly steered the lion’s share of misappropriated funds to his nephew Frank Mazzola, who was barred from the securities industry in a prior SEC enforcement action and is charged along with Bivona and his firms in the complaint filed Monday in federal district court in California. Read More

The Securities and Exchange Commission (SEC) announced that the Honorable Patrick J. Schiltz of the United States District Court for the District of Minnesota has entered an order holding defendants James Louks and FiberPoP Solutions, Inc. in civil contempt.

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 defrauded nearly 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.” Read More

The Securities and Exchange Commission (SEC) announced that on March 23, 2016, Gilbert Lundstrom, the former chairman of the board and CEO of TierOne Bank, based in Nebraska, was sentenced to 11 years in federal prison and ordered to pay a $1.2 million criminal fine.

Lundstrom, along with TierOne’s former chief operating officer James Laphen and former chief credit officer Don Langford, was criminally charged for orchestrating a scheme to defraud TierOne’s shareholders and misleading regulators by concealing more than $100 million in losses on loans and declining real estate. Laphen and Langford both pled guilty and agreed to cooperate in the criminal case against Lundstrom. At Lundstrom’s trial, the government presented evidence that Lundstrom was the architect of an aggressive strategy to expand the bank’s portfolio beyond traditional lending in Nebraska to riskier areas like commercial real estate in Las Vegas. Read More

The Securities and Exchange Commission (SEC) announced on March 24, 2016 that it had entered into settlement agreements, subject to court approval, with defendants David Amaryan, Copperstone Alpha Fund, Copperstone Capital, Intertrade Pacific SA, Ocean Prime Inc., Guibor S.A., and Omega 26 Investments Ltd. in a case alleging a scheme to trade on hacked news releases. In August 2015, the SEC filed a civil action and an amended complaint in federal court in New Jersey, and the court entered an asset freeze and other emergency relief against these defendants, among others. Read More

On March 23, 2016, the Securities and Exchange Commission (SEC) announced that the federal court in Boston, Massachusetts entered judgments by consent against Andrew Affa, Michael Affa, Mitchell Brown, Christopher Putnam, and Christopher Nix in a fraud action that was filed in July 2014. The fraud involved an attempt to manipulate shares of Boston, Massachusetts-based Amogear Inc. formerly Kitcher Resources Inc., a custodianship shell controlled by the FBI.

All five defendants were permanently enjoined from violating the securities antifraud statutes and barred from participating in offerings of penny stock.

The SEC’s complaint alleged that defendants knew that Amogear was a shell company without any real operations, but schemed from at least August 2012 to February 2014 to boost the price of its securities and profit by selling their own shares. The planned scheme involved artificially inflating the price of Amogear stock by, among other things:

•  issuing news releases and/or promotional materials containing false or exaggerated information,
• generating mass emails containing false or exaggerated information; and
• engaging in undisclosed coordinated trading of the stock, all designed to generate the appearance of demand for the stock and to increase the price of the stock.

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The Securities and Exchange Commission (SEC) announced on March 23, 2016 that a federal court has ordered a nearly $2 million judgment from an attorney who admitted to defrauding investors in two fraudulent schemes. The Honorable John McBryde, District Judge of the United States District Court for the Northern District of Texas, entered a final judgment on March 22, 2016 against Southlake, Texas attorney Gregory Jones. The final judgment orders Jones to disgorge $1,125,000, plus prejudgment interest of $51,534, and to pay a civil penalty of $600,000.

Jones admitted in 2015 to raising approximately $645,000 by selling securities issued by Aquaphex Total Water Solutions, LLC, a company he controlled that purported to recycle fracking water through a filtration process. Jones provided investors with fraudulent offering documents stating that Aquaphex’s principals had invested $2 million in the company when they had not put any cash into the company. Jones’s offering documents also misrepresented that Aquaphex was expected “to be acquired by an oil services company within five years at a projected value of $21B,” that projected investment returns would exceed 115 percent per year, and that investors were guaranteed to at least double their investment within five years. Read More

The Securities and Exchange Commission (SEC) announced on March 21, 2016 that on March 15, 2016, the Honorable Leigh Martin May of the United States District Court for the Northern District of Georgia entered a final judgment against defendant Bruce Strebinger. The final judgment imposes on Strebinger a permanent injunction against future violations of certain antifraud and reporting provisions of the federal securities laws, imposes a penny stock bar and orders that he pay disgorgement in the amount of $1,515,640.

In its Complaint, the SEC alleged that after Strebinger facilitated a reverse merger between shell company Americas Energy Company and a private start-up company in Knoxville, Tennessee, he and Brent Chapman each acquired substantial positions of over 5% of the common stock without publicly disclosing their beneficial ownership stake as required under the federal securities laws. Read More

The Securities and Exchange Commission (SEC) announced on March 18, 2016 that former Microsoft Corporation senior manager, John Hardy III has agreed to pay nearly $380,000 to settle charges that he traded on material nonpublic information about Microsoft’s acquisition of Nokia Corporation’s mobile phone business and Microsoft’s year-end 2013 earnings release.

In its insider trading complaint filed in federal district court in Seattle, the SEC alleges that Hardy, who worked in Microsoft’s corporate financial planning and analysis group, purchased Microsoft put options after learning from highly confidential internal Microsoft documents, including a draft presentation to Microsoft’s board of directors, that the company’s fiscal-year 2013 financial results would not meet Wall Street analysts’ expectations. Read More

On March 16, 2016, the Court for the Southern District of New York entered a final judgment against defendant Yue Han, based on insider trading charges filed by the Securities and Exchange Commission (SEC) against Han on November 24, 2015.

The SEC’s Complaint alleges that Han, who worked as an associate in Goldman Sachs’ compliance department, traded on confidential information contained in e-mails sent and received by Goldman Sachs’ employees who advised investment banking clients on impending merger and acquisition transactions. According to the SEC’s Complaint, Han gained access to the e-mails as part of his work developing surveillance software to monitor other employees for potential misconduct, including insider trading, and used this access to generate over $460,000 in illicit earnings. Read More

On March 15, 2016, the Securities and Exchange Commission (SEC) charged former Boston resident Mark Jones with operating a $10 million Ponzi scheme that claimed to generate profits from “bridge loans” to businesses in Jamaica.

The SEC complaint charges Jones, who now lives in Miami and has a second home in Jamaica. Jones was arrested by the FBI and the U.S. Attorney for the District of Massachusetts filed related criminal charges against him. Read More

The Securities and Exchange Commission (SEC) charged a microcap company CEO for falsely claiming to have a lucrative relationship with the United Nations and billions of dollars in clean energy contracts with foreign governments.

The SEC alleges that RVPlus Inc. CEO Cary Lee Peterson made bogus claims in the company’s public filings and in statements to private investors, and that he and RVPlus participated in an unlawful distribution of RVPlus’s stock. The SEC temporarily suspended trading in RVPlus securities in July 2013, citing “material deficiencies” in the company’s financial statements. Read More

On March 14, 2016 the Securities and Exchange Commission (SEC) announced that on March 3, 2016, Daniel Thibeault, the President/CEO of a group of Massachusetts-based investment advisory companies, pled guilty to criminal charges in connection with the misappropriation of more than $15 million from an investment fund. The criminal charges against Thibeault arose out of the same fraudulent conduct alleged by the SEC in a civil securities fraud action filed against Thibeault and others in January 2015. Thibeault plead guilty to charges of securities fraud for the scheme to use fund money to issue fictitious loans, and obstruction of justice for Thibeault’s numerous false statements to SEC staff during the SEC’s investigation of this fraud. Read More

On March 11, 2016 the Securities and Exchange Commission (SEC) announced fraud charges against California businessman Daniel Nase, accusing him of stealing investor assets and then trying to cover it up once the SEC caught onto his scheme.

The SEC alleges that Nase, through his real estate company BIC Real Estate Development Corporation, stole money from investors in an unregistered offering of BIC common stock, using funds for such personal expenses as student loans, clothes, and vacations. Read More

The U.S. Securities and Exchange Commission (SEC) announced on March 11, 2016 that a federal grand jury in Manhattan has indicted Bulgarian resident Nedko Nedev for fraud relating to the stocks of Avon Products, Inc., Tower Group International, Ltd., and Rocky Mountain Chocolate Factory, Inc. Nedev was arrested yesterday in Bulgaria in connection with the criminal charges.

According to the SEC’s complaint, Nedev devised and carried out a scheme to manipulate the public market for the stocks of Avon and Rocky Mountain Chocolate Factory, to enrich himself, and to mitigate trading losses. The indictment also alleges that Nedev carried out a fraudulent scheme to profit from trading in Tower Group stock. Read More

On March 11, 2016 the Securities and Exchange Commission (SEC) charged an Oregon-based investment group and three top executives with hiding the rapidly deteriorating financial condition of its enterprise while raising more than $350 million from investors. Aequitas Management LLC and four affiliates allegedly defrauded more than 1,500 investors nationwide into believing they were making health care, education, and transportation-related investments when their money was really being used in a last-ditch effort to save the firm. Some money from new investors was allegedly used to pay earlier investors in Ponzi-like fashion.

The SEC’s complaint, filed in federal district court in Oregon, alleges that CEO Robert Jesenik and executive vice president Brian Oliver were well aware of Aequitas’s calamitous financial condition yet continued to solicit millions of dollars from investors to pay the firm’s ever-increasing expenses and attempt to stave off the impending collapse. Former CFO and chief operating officer Scott Gillis allegedly concealed the firm’s insolvency from investors and was aware that Jesenik and Oliver continued soliciting investors so that Aequitas could pay operating expenses and repay earlier investors with money from new investors. Read More

Issuers are sometimes unaware of the state laws that apply to offerings that are exempt under the federal securities laws. The purchase or sale of a security be subject to a registration statement under the Securities Act of 1933 (the “Securities Act”) or exempt from registration. An exemption at the federal level does not eliminate the obligation to comply with state blue sky laws in all circumstances. Federal preemption depends upon the exemption relied upon.

The most common exemptions from registration under the Securities Act are found in Regulation D which provides three separate exemptions: Rules 504, 505, and 506. The exemption relied upon by an issuer will depend on several factors including the amount of capital the issuer wishes to raise and whether it can raise from accredited investors, which is defined in Rule 501 of Regulation D. Generally, an accredited investor is an investor with a net worth of at least $1 million, not including their primary residence, or an investor with income of at least $200,000 in annual income for the two prior years or $300,000 with their spouse.  Securities sold pursuant to Regulation D are restricted and thus cannot be resold by the investor without registration or a resale exemption from registration such as the “safe harbor” of Rule 144.  Read More

The Securities and Exchange Commission (SEC) announced that Uni-Pixel Inc., developer of technologies for touchscreen devices, has agreed to pay $750,000 to settle charges that it misled investors about the production status and sales agreements for a key product.

Two former company executives face related charges in an SEC complaint filed today in U.S. District Court for the Southern District of Texas. The SEC entered into a deferred prosecution agreement with the company’s former chairman of the board, who has agreed to cooperate and be barred from serving as an officer and director for five years.

The SEC alleges that Uni-Pixel began publicly touting sales of a touchscreen sensor product supposedly in speedy high-volume commercial production when in fact only a few samples had been manually completed. Read More