SEC Awards $875,000 to Two Whistleblowers Who Aided Agency Investigation

The Securities and Exchange Commission today announced a whistleblower award of more than $875,000 to be split evenly between two individuals who provided tips and assistance to help the agency bring an enforcement action.

The SEC’s whistleblower program authorized by the Dodd-Frank Act rewards high-quality, original information that results in an SEC enforcement action with sanctions exceeding $1 million.  Whistleblower awards can range from 10 percent to 30 percent of the money collected in a case.

By law, the SEC must protect the confidentiality of whistleblowers and cannot disclose any information that might directly or indirectly reveal a whistleblower’s identity.

“These whistleblowers provided origin... Read More

SEC Charges Albany, N.Y.-Based Investment Adviser With Defrauding Clients

The Securities and Exchange Commission today filed an emergency enforcement action to halt an ongoing fraud by an investment adviser based in Albany, N.Y., who is charged with lying to clients about the success of their investments while stealing their money for his personal use.

The SEC alleges that Scott Valente and his firm The ELIV Group LLC have fraudulently raised more than $8.8 million from approximately 80 clients by falsely claiming they achieve consistent and outsized positive returns among other misrepresentations about the safety of the investments.  ELIV Group has in fact earned no positive results at all, instead sustaining consistent investment losses for the past three years. Meanwhile, Valente has been making substantial cash withdrawals of c... Read More

SEC Charges Bitcoin Entrepreneur With Offering Unregistered Securities

The Securities and Exchange Commission today charged the co-owner of two Bitcoin-related websites for publicly offering shares in the two ventures without registering them. An SEC investigation found that Erik T. Voorhees published prospectuses on the Internet and actively solicited investors to buy shares in SatoshiDICE and FeedZeBirds.  But he failed to register the offerings with the SEC as required under the federal securities laws.  Investors paid for their shares using Bitcoin, a virtual currency that can be used to purchase real-world goods and services and exchanged for fiat currencies on certain online exchanges.  The profits ultimately earned by Voorhees through the unregistered offerings totaled more than $15,000. Voorhees agreed to settle the SEC’s charges by paying fu... Read More

SEC Charges Charter School Operator in Chicago With Defrauding Bond Investors

The Securities and Exchange Commission today charged a charter school operator in Chicago with defrauding investors in a $37.5 million bond offering for school construction by making materially misleading statements about transactions that presented a conflict of interest.

The SEC alleges that UNO Charter School Network Inc. and United Neighborhood Organization of Chicago not only failed to disclose a multi-million-dollar contract with a windows company owned by the brother of one of its senior officers, but investors also weren’t informed about the potential financial impact the conflicted transaction had on its ability to repay the bonds.

UNO is settling the SEC’s charges by agreeing to undertakings to improve its internal procedure... Read More

SEC Names Stephanie Avakian as Deputy Director of Enforcement

The Securities and Exchange Commission today announced that Stephanie Avakian has been named deputy director of its Division of Enforcement.

Ms. Avakian comes to the SEC from the law firm of Wilmer Cutler Pickering Hale and Dorr LLP, where she is a partner in the New York office and a vice chair of the firm’s securities practice.  Ms. Avakian previously worked in the SEC Enforcement Division as a branch chief in the New York Regional Office, and later served as a counsel to SEC Commissioner Paul Carey.

“Stephanie is widely respected because of her intelligence, her pragmatic approach, and her excellent judgment,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement.  “I am delighted that s... Read More

SEC Charges Chicago-Based Investment Fund Manager With Stealing Investor Money and Conducting Ponzi Scheme

The Securities and Exchange Commission today announced fraud charges and an asset freeze against a Chicago-based investment fund manager accused of stealing money he raised from investors to pay personal and business expenses.

The SEC alleges that Neal V. Goyal told investors that the private funds he managed would invest in securities following a “long-short” trading strategy.  However, Goyal actually did little trading and simply operated a Ponzi scheme that used new investor funds to pay redemptions to existing investors and fund his own lavish lifestyle.  Goyal concealed the poor results of the few investments he did make by sending investors phony account statements that grossly overstated the performance of the funds.

... Read More

SEC Obtains Asset Freeze to Halt Fraud at Illinois-Based Transfer Agent

The Securities and Exchange Commission today announced fraud charges and an emergency asset freeze against an Illinois-based transfer agent and its owner whose misappropriation scheme was exposed during an SEC examination of the firm.

Transfer agents are typically used by publicly traded companies or other issuers to keep track of individuals and entities owning their stocks and bonds.  Transfer agents can record changes of ownership of securities, maintain issuers’ security holder records, cancel and issue securities certificates, and distribute dividends. 

In a complaint unsealed today in the U.S. District Court for the Northern District of Illinois, the SEC alleges that IST Shareholder Services and Robert G. Pearson were misusi... Read More

SEC Charges Former CFO of Dallas-Based Jewelry and Collectibles Company With Accounting Fraud

The Securities and Exchange Commission today filed accounting fraud charges against a Dallas-based company and its former chief financial officer for manipulating its inventory accounts.

The SEC alleges that I. John Benson made repeated false accounting entries that materially inflated the value of inventory on the balance sheets at DGSE Companies Inc., which buys and sells jewelry, diamonds, fine watches, rare coins, precious metals and other collectibles.  Benson’s entries made it appear that DGSE owned certain inventory that actually still belonged to customers in consignment arrangements where DGSE held the goods on the owner’s behalf until they were sold.  Benson then misled the company’s independent auditors about the journal entr... Read More

SEC Announces Latest Charges in Joint Law Enforcement Effort Uncovering Penny Stock Schemes

The Securities and Exchange Commission today announced the latest in a series of cases against microcap companies, officers, and promoters arising out of a joint law enforcement investigation to unearth penny stock schemes with roots in South Florida.

In complaints filed in federal court in Miami, the SEC charged five penny stock promoters with conducting various manipulation schemes involving undisclosed payments to induce purchases of a microcap stock to generate the false appearance of market interest.  The SEC also charged a Massachusetts-based microcap company and the CEO with orchestrating a pair of illicit kickback schemes and an insider trading scheme involving the company’s stock.  A stock promoter in Texas is charged for his role in the i... Read More

SEC Charges Vitamin Company’s Former Board Member and Brothers With Insider Trading

The Securities and Exchange Commission today charged a former director of a Long Island-based vitamin company and others in his family circle with insider trading ahead of the company’s sale to a private equity firm.

The SEC alleges that board member Glenn Cohen learned that NBTY Inc. was negotiating a sale to The Carlyle Group and tipped his three brothers and a brother’s girlfriend with the confidential information.  Craig Cohen, Marc Cohen, Steven Cohen, and Laurie Topal all traded on the inside information that Glenn Cohen provided and reaped illicit profits totaling $175,000.

The four Cohens and Topal agreed to settle the SEC’s charges by paying a total of more than $500,000.

“As a board member ... Read More

SEC Charges Sarasota-Based Private Fund Manager With Stealing Investor Money and Conducting Ponzi Scheme

The Securities and Exchange Commission today charged a Sarasota, Fla.-based private fund manager with defrauding investors in a Ponzi scheme that ensued after he squandered their money on bad investments and personal expenses.

The SEC alleges that Gaeton “Guy” S. Della Penna raised $3.8 million from investors in three private investment funds that he operated.  Investors were told their funds would be used to trade securities or invest in small companies.  Despite depicting himself as a distinguished trader and profit-maker, Della Penna lost nearly all of their money by making unsuccessful investments and diverting more than a million dollars to himself for mortgage payments and money for his girlfriend.  In an effort to cover up his fra... Read More

SEC Charges Former Deloitte Chief Risk Officer for Violations of Auditor Independence Rules

The Securities and Exchange Commission today charged the former chief risk officer at Deloitte LLP for causing violations of the auditor independence rules that ensure audit firms maintain their objectivity and impartiality with respect to their clients.

An SEC order finds that certified public accountant James T. Adams repeatedly accepted tens of thousands of dollars in casino markers while he was the advisory partner on subsidiary Deloitte & Touche’s audit of a casino gaming corporation.  A marker is an instrument utilized by a casino customer to receive gaming chips drawn against the customer’s line of credit at the casino.  Adams opened a line of credit with a casino run by the gaming corporation client and used the casino markers to ... Read More