SEC Announces Fraud Charges in Cross-Border Scheme to Secretly Control and Manipulate Stock of Chinese Companies After Reverse Mergers

The Securities and Exchange Commission today announced fraud charges against a Wall Street CEO and his company, family members, and business associates accused of secretly obtaining control and manipulating the stock of Chinese companies they were purportedly guiding through the process of raising capital and becoming publicly-traded in the United States.

The SEC alleges that Benjamin Wey and New York Global Group (NYGG) typically structured reverse mergers between clients and publicly-traded shell companies in such a way that he and other family members secretly obtained ownership interests of more than five percent of the newly listed companies. To avoid detection and evade SEC reporting requirements as beneficial owners, they divided their shares among a vast n... Read More

Robert Cohen and Joseph Sansone Named Market Abuse Unit Co-Chiefs

The Securities and Exchange Commission today announced that Robert Cohen and Joseph Sansone have been named co-chiefs of the Division of Enforcement’s Market Abuse Unit, a national specialized unit that focuses on complex insider trading rings and other abusive trading schemes and misconduct.  The two have served as the unit’s acting co-chiefs since the departure last month of Daniel Hawke, its inaugural chief.

Mr. Cohen led the investigation of the New York Stock Exchange’s improper distribution of market data feeds that resulted in the SEC’s first penalty against a stock exchange.  He supervises an ongoing action against a Read More

SEC Halts Scheme by Trio Accused of Stealing Investor Money While Promising “Indestructible Wealth”

The Securities and Exchange Commission today announced fraud charges and an asset freeze obtained to halt an ongoing real estate investment scheme being conducted by a trio of business associates in California accused of stealing investors’ money while promising them “indestructible wealth.”

The SEC alleges that Paul Ricky Mata, David Kayatta, and Mario Pincheira stole investor proceeds for their own use and diverted money to unrelated businesses.  They raised more than $14 million from more than 100 investors in California and several other states for two unregistered funds purporting to invest in real estate.  Online videos posted to Mata’s website and YouTube channel helped attract investors to attend investment seminars with such titles as “Finances God’s Way” or “Inde... Read More

SEC Announces Fraud Charges Against Financial Adviser Accused of Greatly Exaggerating Assets Under Management and Investment Returns on Paid Radio Program

The Securities and Exchange Commission today announced fraud charges against a Maryland-based financial services firm and its founder/CEO accused of grossly inflating the amount of managed assets and exaggerating the investment returns actually obtained for customers.

The SEC Enforcement Division alleges that Dawn J. Bennett frequently touted to customers and more broadly on her paid radio program that highly profitable investment returns generated by Bennett Group Financial Services placed it in the “top 1 percent” of firms worldwide without disclosing that the returns were calculated for a model portfolio and not based on actual investor performance.  The SEC Enforcement Division further alleges that Bennett and her firm claimed to be managing more than $2 billi... Read More

SEC Charges Father and Son and Friend With Insider Trading

The Securities and Exchange Commission today charged a father, son, and friend in Northern California with insider trading in advance of a merger of health care companies based on confidential information the father learned from a close friend working at one of the companies.

The SEC alleges that John McEnery III breached a duty of trust and confidence owed to his friend when he traded and tipped others to trade in the stock of Clarient Inc. upon learning about its impending acquisition by GE Healthcare.  McEnery tipped his son John McEnery IV as well as Michael Rawitser, a longtime friend of McEnery III.  Following the public announcement of the acquisition, Clarient’s stock price rose by 33 percent and the trio profited by a total of more than $50,000.

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SEC Charges BDO and Five Partners in Connection With False and Misleading Audit Opinions

The Securities and Exchange Commission today charged national audit firm BDO USA with dismissing red flags and issuing false and misleading unqualified audit opinions about the financial statements of staffing services company General Employment Enterprises. 

The SEC also charged five of the firm’s partners for their roles in the deficient audits, and filed fraud charges against the client company’s then-chairman of the board and majority shareholder Stephen B. Pence, who is a former U.S. attorney and a former lieutenant governor of Kentucky.

BDO agreed to admit wrongdoing, pay disgorgement of its audit fees and interest totaling approximately $600,000, and pay a $1.5 million penalty in addition to complying with undertakings rel... Read More

SEC Charges Video Management Company Executives With Accounting Fraud

The Securities and Exchange Commission today announced accounting fraud charges against two former top executives of a now-bankrupt online video management company, accusing them of falsifying financial statements to make the company appear more profitable than it was in reality.

The SEC alleges that then-CEO Kaleil Isaza-Tuzman and then-CFO Robin Smyth employed a variety of schemes to manipulate KIT Digital’s books and mislead investors, including an off-the-books slush fund used to generate payments back to the company and create the false appearance that KIT Digital was being paid for its products. 

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Isaza-Tuzman and S... Read More

Smeeta Ramarathnam Named Deputy Director in the Office of Credit Ratings

The Securities and Exchange Commission today announced that Smeeta Ramarathnam has been named Deputy Director in the Office of Credit Ratings.  She begins her new role later this month.

In this new position for the office, Ms. Ramarathnam will provide leadership and direction for various office activities including examinations and monitoring of nationally recognized statistical rating organizations (NRSROs), rulemaking, and related initiatives.  Ms. Ramarathnam joins the office after serving for the past seven years as Chief of Staff for Commissioner Luis Aguilar.

“Smeeta brings considerable securities and regulatory experience that will serve the office well,” said Thomas Butler, Director of the Office of Credit Ratings.  “I am confident that the office will ben... Read More

SEC Charges Three RMBS Traders With Defrauding Investors

The Securities and Exchange Commission today announced fraud charges against three traders accused of repeatedly lying to customers relying on them for honest and accurate pricing information about residential mortgage-backed securities (RMBS).

The SEC alleges that Ross Shapiro, Michael Gramins, and Tyler Peters defrauded customers to illicitly generate millions of dollars in additional revenue for Nomura Securities International, the New York-based brokerage firm where they worked.  They misrepresented the bids and offers being provided to Nomura for RMBS as well as the prices at which Nomura bought and sold RMBS and the spreads the firm earned intermediating RMBS trades.  They also trained, coached, and directed junior traders at the firm to engage in the same m... Read More

SEC Charges Bankrate and Former Executives With Accounting Fraud

The Securities and Exchange Commission today announced that Bankrate Inc. has agreed to pay $15 million to settle accounting fraud charges.  Three former executives also are charged in the case that involves fraudulent manipulation of the company’s financial results to meet analyst expectations.

The SEC alleges that Bankrate’s then-CFO Edward DiMaria, then-director of accounting Matthew Gamsey, and then-vice president of finance Hyunjin Lerner engaged in a scheme to fabricate revenues and avoid booking certain expenses to meet analyst estimates for a key financial metric: adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).  Bankrate consequently overstated its second quarter 2012 net income.  Bankrate’s stock rose when the company an... Read More

SEC Charges Sports Nutrition Company With Failing to Properly Disclose Perks for Executives

The Securities and Exchange Commission today charged a sports supplements and nutrition company with committing a series of accounting and disclosure violations, including the failure to properly report perks provided to its executives as compensation.

Denver-based MusclePharm Corporation agreed to settle the charges along with three current or former executives and the company’s former audit committee chair who were found to have been involved in various aspects of the company’s misconduct.

An SEC investigation found that MusclePharm omitted or understated nearly a half-million dollars’ worth of perks bestowed upon its executives, including approximately $244,000 paid to CEO Brad Pyatt related to automobiles, apparel, meals, golf club membership... Read More

SEC Charges Seattle-Area Hedge Fund Adviser With Taking Unearned Management Fees

The Securities and Exchange Commission today charged a Bellevue, Wash.-based investment advisory firm and its CEO with fraudulently inflating the values of investments in the portfolio of a private fund they advised so they could attain unearned management fees.  The SEC also charged the fund’s outside auditors with performing a deficient audit that enabled the firm to send misleading financial statements to investors.

Chris Yoo and his firm Summit Asset Strategies Investment Management agreed to settle the fraud charges arising from Summit Stable Value Fund.  Yoo and another of his advisory firms Summit Asset Strategies Wealth Management agreed to settle fraud charges related to his failure to inform clients that Summit Asset Strategies Wealth Management received... Read More