Whitepapers
SEC Halts EB-5 Scheme Stealing Investments in Cancer Center
The Securities and Exchange Commission today announced fraud charges and an asset freeze against a husband and wife accused of misusing two-thirds of the money they raised from investors for the purpose of building and operating a new cancer treatment center that would use proton beam radiation to help oncology patients in Southern California.
According to the SEC’s complaint unsealed today in federal court in Los Angeles, Charles C. Liu and Xin “Lisa” Wang raised $27 million for the proton therapy cancer treatment center from 50 investors in China through the EB-5 immigrant investor program. They touted in promotional materials that the project would create more than 4,500 new jobs and have a substantial impact on the local economy while giving foreign i... Read More
SEC: Adviser Steered Investor Money to His Own Companies
The Securities and Exchange Commission today charged a North Carolina-based investment adviser with defrauding investors by secretly steering portions of real estate-related investments into deals with companies that he owned or operated himself.
The SEC alleges that Richard W. Davis Jr. breached his fiduciary duty and took no steps to disclose or ameliorate the conflicts of interest involved with using investor money to enter into transactions with entities he beneficially owned or controlled. The SEC further alleges that Davis made false or misleading statements to investors before and after they made their investments, failed to inform investors of their losses as his companies failed to pay the loans, and improperly received at least $1.5 million from... Read More
SEC Names Christopher Hetner as Senior Advisor to the Chair for Cybersecurity Policy
The Securities and Exchange Commission today announced that Christopher R. Hetner has been named Senior Advisor to the Chair for Cybersecurity Policy. In this role, Mr. Hetner will serve as a senior advisor to Chair Mary Jo White on all cybersecurity policy matters.
In his new role, Mr. Hetner will be responsible for coordinating efforts across the agency to address cybersecurity policy, engaging with external stakeholders, and further enhancing the SEC’s mechanisms for assessing broad-based market risk.
Mr. Hetner is the current Cybersecurity Lead for the Technology Control Program within the SEC’s Office of Compliance Inspections and Examinations (OCIE). He joined the SEC in January 2015. In his current role, Mr. Hetner coordinates... Read More
Brokerage Firm Charged With Anti-Money Laundering Failures
The Securities and Exchange Commission today charged a Wall Street-based brokerage firm with failing to sufficiently evaluate or monitor customers’ trading for suspicious activity as required under the federal securities laws.
An SEC investigation found that Albert Fried & Company failed to file Suspicious Activity Reports (SARs) with bank regulators for more than five years despite red flags tied to its customers’ high-volume liquidations of low-priced securities. On more than one occasion, an AF&Co customer’s trading in a security on a given day exceeded 80 percent of the overall market volume. In other instances, customers were trading in stocks issued by companies that were delinquent in their regulatory filings or involved in questionable p... Read More
SEC Adopts Amendment to Form 10-K Implementing FAST Act Provision
The Securities and Exchange Commission today announced it has approved an interim final rule that allows Form 10-K filers to provide a summary of business and financial information contained in the annual report. The rule implements a provision of the Fixing America’s Surface Transportation (FAST) Act.
The interim final rule provides filers with flexibility in preparing the summary and those opting to provide it must include hyperlinks to the related, more detailed disclosure in the Form 10-K. It also requests comment on whether the rule should include specific requirements or guidance for the form and content of the summary and whether the rules should be expanded to include other annual reporting forms.
The Commission recently adopted rule... Read More
SEC: Private Equity Fund Adviser Acted As Unregistered Broker
The Securities and Exchange Commission today announced that a Maryland-based private equity fund advisory firm and its owner have agreed to pay more than $3.1 million to settle charges that they engaged in brokerage activity and charged fees without registering as a broker-dealer and committed other securities law violations.
An SEC investigation found that Blackstreet Capital Management and Murry N. Gunty performed in-house brokerage services rather than using investment banks or broker-dealers to handle the acquisition and disposition of portfolio companies for a pair of private equity funds they advise. Blackstreet fully disclosed to its funds and their investors that it would provide brokerage services in exchange for a fee, yet the firm failed to co... Read More
SEC Halts Ponzi Scheme Aimed at Middle Class
The Securities and Exchange Commission has charged two California men and their investment firm with operating a Ponzi scheme as they purported to specialize in serving middle-class investors and securing exorbitant returns by investing in hot pre-IPO stocks. The agency also obtained a court-ordered asset freeze against them.
The SEC alleges that instead of using the firm’s purported proprietary trading models and investing in pre-IPO shares of well-known tech companies like Uber, Alibaba, and Airbnb as promised to investors, Jaswant “Jason” Gill and Javier Rios personally pocketed at least $2.8 million in investor funds, using some of that money to pay for excursions to high-end restaurants and luxury retail stores as well as jaunts to Las Vegas ca... Read More
SEC: Nashville Firm Schemed to Collect Extra Fees From Hedge Funds
The Securities and Exchange Commission today charged a Nashville, Tenn.-based investment advisory firm and its owner with scheming to collect extra monthly fees from a pair of hedge funds they managed.
Examiners in the SEC’s Atlanta office detected the misconduct during an examination of Hope Advisers Inc., which is owned by Karen Bruton. The SEC alleges that in order to circumvent the funds’ fee structure under which the firm is entitled to fees only if the funds’ profits that month exceed past losses, Hope Advisers and Bruton have been orchestrating certain trades that enable the funds to realize a large gain near the end of the current month while basically guaranteeing a large loss to be realized early the following month. Without the fraudulent trades, Ho... Read More
Mortgage Company and Executives Settle Fraud Charges
The Securities and Exchange Commission today announced that a California-based mortgage company and six senior executives agreed to pay $12.7 million to settle charges that they orchestrated a scheme to defraud investors in the sale of residential mortgage-backed securities guaranteed by the Government National Mortgage Association (Ginnie Mae).
First Mortgage Corporation (FMC) is a mortgage lender that issued Ginnie Mae RMBS backed by loans it originated. The SEC alleges that from March 2011 to March 2015, FMC and its senior-most executives pulled current, performing loans out of Ginnie Mae RMBS by falsely claiming they were delinquent in order to sell them at a profit into newly-issued RMBS. FMC caused its Ginnie Mae RMBS prospectuses to be false and ... Read More
Investment Banker and Plumber Charged With Insider Trading
The Securities and Exchange Commission today announced insider trading charges against an investment banker and his close friend, a plumber who allegedly helped remodel his bathroom and put cash in his gym bag in return for illicit tips about upcoming mergers and acquisitions.
The SEC alleges that Steven McClatchey had regular access to highly confidential nonpublic information about impending transactions being pursued for investment bank clients. The Analysis and Detection Center within the SEC Enforcement Division’s Market Abuse Unit detected an illicit pattern of trading by Gary Pusey, who McClatchey allegedly tipped with nonpublic information on 10 different occasions ahead of public merger announcements.
“We will continue e... Read More
SEC Prevents Trader’s Profits From False Filing
The Securities and Exchange Commission has obtained a court order to freeze the profits of a trader who allegedly manipulated a technology stock through a false regulatory filing traced to a computer in Pakistan.
The asset freeze issued today in federal court in Manhattan ensures that Nauman A. Aly of Pakistan cannot withdraw from his U.S.-based account the $425,000 in options trading profits made in less than 30 minutes last month after the false filing. The filing stated that Aly and six Chinese investors had collectively acquired 5.1 percent of Silicon Valley-based Integrated Device Technology (IDT). According to the SEC’s complaint, his false statements caused the company’s stock to spike more than 25 percent within minutes.
“We allege ... Read More
Two Individuals Share Whistleblower Award of More Than $450,000
The Securities and Exchange Commission today announced it will jointly award more than $450,000 to two individuals for a tip that led the agency to open a corporate accounting investigation and for their assistance once the investigation was underway.
The whistleblower award is the third announced by the SEC in the past week, bringing the past week’s payouts to $10 million.
“The recent flurry of awards reflects the high-quality nature of the tips the SEC is receiving as public awareness of the whistleblower program grows,” said Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower. “These two individuals not only submitted valuable tips to help open our investigation but also provided valuable assistance as we proceeded, showing that o... Read More