SEC Charges Microcap Promoter With Illegally Selling Penny Stock Shares

The Securities and Exchange Commission today charged a microcap promoter with illegally selling more than 83 million penny stock shares that he secretly obtained through at least 10 different offshore front companies.

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of New York, Gregg R. Mulholland surreptitiously accumulated at least 84 percent of the issued and outstanding shares of Vision Plasma Systems Inc.  Once he effectively controlled the company through this majority ownership, Mulholland 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.

In a parallel action, the ... Read More

SEC Obtains Asset Freeze Against China-Based Trader for Suspicious Activity Last Week

The Securities and Exchange Commission today obtained an emergency court order to freeze the assets of a trader in China who profited by more than $1 million after trading in a U.S. brokerage account in advance of last week’s public announcement that China-based Qihoo 360 Technology Co. Ltd. had received a buyout offer at a significant premium from its CEO and a consortium of other affiliates. 

The SEC alleges that Haijian Luo of Guangzhou, China, made bets that Qihoo’s stock price would rise in the short term and purchased approximately $700,000 of out-of-the-money call options prior to the buyout announcement.  After Qihoo’s stock price rose sharply, Luo sold all of his options and then requested that his brokerage firm wire transfer more than half of his $1 mil... Read More

SEC Charges Unregistered Brokers in EB-5 Immigrant Investor Program

The Securities and Exchange Commission today charged two firms that illegally brokered more than $79 million of investments by foreigners seeking U.S. residency.  The charges are the first against brokers handling investments in the government’s EB-5 Immigrant Investor Program and follow earlier SEC actions against fraudulent EB-5 offerings.

Ireeco LLC, originally of Boca Raton, Fla., and its successor Ireeco Limited, a Hong Kong-based company operating in the U.S., were charged with acting as unregistered brokers for more than 150 EB-5 investors.  The EB-5 program administered by the U.S. Citizenship and Immigration Services (USCIS) provides a path to legal residency for foreigners who invest directly in a U.S. business or private “regional centers” that promote ... Read More

SEC Charges Microcap Oil Company, CEO, and Stock Promoter With Defrauding Investors

The Securities and Exchange Commission today charged a Texas-based oil company and its CEO with defrauding investors about reserve estimates and drilling plans, and charged the author of a stock-picking newsletter for his role in a fraudulent promotional campaign encouraging readers to buy the oil company’s penny stock shares.

The SEC alleges that shortly after becoming Norstra Energy’s CEO in March 2013, Glen Landry began making false and misleading claims about business prospects on Norstra’s website as well as in press releases and SEC filings.  Landry and Norstra Energy misled investors about the location of the company’s property in order to make the wells appear more promising and twice disclosed an inaccurate date to begin drilling operations to make the potential f... Read More

SEC Charges 36 Firms for Fraudulent Municipal Bond Offerings

The Securities and Exchange Commission today announced enforcement actions against 36 municipal underwriting firms for violations in municipal bond offerings. The cases are the first brought against underwriters under the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, a voluntary self-reporting program targeting material misstatements and omissions in municipal bond offering documents. 

The Enforcement Division initiative announced in March 2014, offered favorable settlement terms to municipal bond underwriters and issuers who self-reported securities law violations. The first issuer charg... Read More

SEC Charges Investment Adviser and Mutual Fund Board Members With Failures in Advisory Contract Approval Process

The Securities and Exchange Commission today charged a mutual fund adviser, its principal, and three mutual fund board members with failing to satisfy their statutory obligations in connection with the evaluation and approval of mutual fund advisory contracts.

Richmond, Va.-based advisory firm Commonwealth Capital Management was charged with violating Section 15(c) of the Investment Company Act of 1940 for providing incomplete or inaccurate information to two mutual fund boards, and the firm’s majority owner John Pasco III was charged with causing the violations.  They and former trustees J. Gordon McKinley III, Robert R. Burke, and Franklin A. Trice III have agreed to settle the SEC’s charges.

Commonwealth Capital Management acted as the investm... Read More

China-Based Company and CEO To Pay $55.6 Million for Inaccurate Disclosures

The Securities and Exchange Commission today announced a $55.6 million settlement with Focus Media Holding Limited and CEO Jason Jiang to resolve charges of inaccurate disclosures about the China-based advertising company’s partial sale of a subsidiary to insiders, including Jiang.  The sale, which occurred before a third party purchased the subsidiary at a significantly higher price, yielded enormous profits to Jiang and other insiders. 

As part of the settlement, Jiang agreed to disgorge $9.69 million of allegedly ill-gotten gains plus prejudgment interest of $1.6 million, and pay a $9.69 million penalty.  Focus Media agreed to pay a $34.6 million penalty and the Commission has ordered the creation of a Fair Fund to return money to injured investors.    

Accordi... Read More

SEC Announces Enforcement Action for Illegal Offering of Security-Based Swaps

The Securities and Exchange Commission today announced an enforcement action against a company that illegally offered complex derivatives products to retail investors.

The Dodd-Frank Act implemented two key requirements for any security-based swaps offering to a retail investor who doesn’t meet the high standard of an “eligible contract participant” defined in the law.  A registration statement must be effective for the offering, and the contracts must be sold on a national securities exchange.  These requirements are intended to make financial information and other significant details about the offering fully transparent to retail investors, and limit the transactions to platforms subject to the highest level of regulation.

An SEC investigation ... Read More

SEC Charges Investment Adviser With Fraudulently Funneling Client Assets to Companies in Owner’s Interest

The Securities and Exchange Commission today announced fraud charges against a Massachusetts-based investment advisory firm and its owner for funneling more than $17 million in client assets into four financially troubled Canadian penny stock companies in which the owner has undisclosed business and financial interests.

The SEC alleges that clients at Interinvest Corporation may have lost as much as $12 million of their $17 million investment based on the recent trading history of shares in the penny stock companies, some of which are purportedly in the business of exploring for gold or other minerals.  Interinvest’s owner and president Hans Peter Black has served on the board of directors of these companies, which have collectively paid an entity he controls appr... Read More

SEC Announces Charges Against Retirement Plan Custodian in Connection With Ponzi Scheme

The Securities and Exchange Commission today announced charges against an Ohio-based self-directed IRA provider accused of ignoring red flags for accounts with investments that turned out to be fraudulent.

The SEC Enforcement Division alleges that Equity Trust Company took an active role in marketing investments offered by Ephren Taylor, who targeted churchgoers while running a Ponzi scheme, and Randy Poulson, who has been indicted in federal district court for an alleged offering fraud targeting investors in New Jersey.  The Enforcement Division alleges that Taylor and Poulson defrauded more than 100 investors out of $5 million invested through accounts at Equity Trust, and that ... Read More

Investment Advisory Firm’s Former President Charged With Stealing Client Funds

The Securities and Exchange Commission today announced fraud charges against a Washington D.C.-based investment advisory firm’s former president accused of stealing client funds.  The firm and its chief compliance officer separately agreed to settle charges that they were responsible for compliance failures and other violations.

SFX Financial Advisory Management Enterprises is wholly-owned by Live Nation Entertainment and specializes in providing advisory and financial management services to current and former professional athletes.  The SEC Enforcement Division alleges that SFX’s former president Brian J. Ourand misused his discretionary authority and control over the accounts of several clients to steal approximately $670,000 over a five-year period by writing c... Read More

Swiss Trader to Pay $2.8 Million to Settle Insider Trading Charges

The Securities and Exchange Commission today announced that a Swiss trader has agreed to pay more than $2.8 million to settle charges that he traded on nonpublic information ahead of a Florida-based biometrics company’s acquisition by Apple Inc.

A SEC investigation found that Helmut Anscheringer purchased stock and call options in AuthenTec Inc. upon learning from a longtime friend related to an AuthenTec executive that Apple proposed to buy the company, which provided fingerprint sensors and software for use in electronic devices.  The call options accounted for nearly all of the series volume on the days he purchased them.  Just days later, AuthenTec publicly announced that it had agreed to become a wholly-owned subsidiary of Apple for $355 million in cash.  The... Read More