Securities Industry Commentator by Bill Singer Esq

February 5, 2018

Responding to recent and widespread consumer abuses and other compliance breakdowns by Wells Fargo, the Federal Reserve Board on Friday announced that it would restrict the growth of the firm until it sufficiently improves its governance and controls. Concurrently with the Board's action, Wells Fargo will replace three current board members by April and a fourth board member by the end of the year.

In addition to the growth restriction, the Board's consent cease and desist order with Wells Fargo requires the firm to improve its governance and risk management processes, including strengthening the effectiveness of oversight by its board of directors. Until the firm makes sufficient improvements, it will be restricted from growing any larger than its total asset size as of the end of 2017. The Board required each current director to sign the cease and desist order. . .

In the Matter of Wells Fargo & Company (Federal Reserve Docket No. 18-007-B-HC):

SEC Halts Ongoing Fraud by Purported Hedge Fund Manager (SEC Press Release 2018-11) The SEC filed a Complaint in the United States District Court for the Southern District of New charging Nicholas Joseph Genovese and his hedge fund Willow Creek Investments LP with engaging in an ongoing fraud that has allegedly raised over $5.3 million from at least six investors. READ the FULL TEXT SEC COMPLAINT. The SEC seeks a temporary restraining order to freeze the defendants' assets and prohibit them from committing further violations; and an order of disgorgement plus financial penalties. As set forth in pertinent part in the SEC Press Release:

[G]enovese: falsely stated that he managed $4 billion of the Genovese Drug Store family's assets; falsely stated that his hedge fund's investment adviser had $30-39 billion of assets under management, when, in reality, it appears to have had less than $10 million in assets under management; falsely stated that his advisory firm had between 42 and 60 employees, when, in reality, it had less than 10 employees; and falsely stated that his hedge fund had investment gains of 30-40 percent per year, when, in reality, it sustained losses. In addition, in furtherance of his scheme, Genovese lied about his education and prior work experience, and concealed his criminal past from investors.

Alleged Operator of Kelihos Botnet Extradited From Spain (DOJ Press Release 18-130)
Russian national 
Peter Yuryevich Levashov a/k/a Petr Levashov, Peter Severa, Petr Severa and Sergey Astakhov, of St. Petersburg, Russia, has been extradited to the United States from Spain  and will be arraigned on charges stemming from his alleged operation of the Kelihos botnet. READ the FULL TEXT INDICTMENT.
As set forth in pertinent part in the DOJ Press Release:

As alleged in an eight count-indictment, a "botnet" is a network of computers infected with a malicious software that allows a third party to control the entire computer network without the knowledge or consent of the computer owners. Levashov allegedly controlled and operated the Kelihos botnet to, among other things, harvest personal information and means of identification (including email addresses, usernames and logins, and passwords) from infected computers. To further the scheme, Levashov allegedly disseminated spam and distributed other malware - such as banking Trojans and ransomware, and advertised the Kelihos botnet spam and malware services to others for purchase in order to enrich himself.

The indictment further alleges that during any 24-hour period, the Kelihos botnet was used to generate and distribute more than 2,500 unsolicited spam e-mails that advertised various criminal schemes, including deceptively promoting stocks in order to fraudulently increase their price (so-called "pump-and-dump" stock fraud schemes).

On April 10, 2017, the Justice Department announced that it had taken action to dismantle the Kelihos botnet.

On April 20, 2017, a grand jury in Bridgeport returned an indictment charging Levashov with one count of causing intentional damage to a protected computer, one count of conspiracy, one count of accessing protected computers in furtherance of fraud, one count of wire fraud, one count of threatening to damage a protected computer, two counts of fraud in connection with email and one count of aggravated identity theft.

Former Virginia Attorney Sentenced to 7 Years in Prison for Laundering and Attempting to Launder Over $2 Million (DOJ Press Release 18-129) 
Raymond Juiwen Ho pled guilty to one count of conspiracy to commit money laundering and one count of money laundering, surrendered his bar licenses from Georgia and the District of Columbia, and was sentenced to 84 in prison. As set forth in pertinent part in the DOJ Press Release:

[F]rom at least March 2013 to February 2017, Ho engaged in a large-scale money laundering scheme that resulted in millions of dollars being moved through bank accounts (some of which were attorney trust accounts) that Ho or his co-conspirators controlled.  Specifically, between July and November 2014, Ho participated in a conspiracy in which co-conspirators sent emails from compromised or imitation accounts that duped victims into transferring money to accounts controlled by Ho and others.  Ho then laundered these stolen funds, moving them through and to accounts located in the United States and abroad.  Ho, who recruited others to aid his laundering activities, laundered over $2 million in unlawfully obtained funds. 

Ho engaged in his money laundering business despite multiple instances of banks closing his accounts due to fraud and inquires by law enforcement.  Eventually, in November 2015, HSI initiated an operation in which undercover HSI agents sought Ho's assistance in moving the proceeds of human smuggling and firearms trafficking between bank accounts located in the United States and overseas.  Ho engaged in four such transactions between December 2015 and June 2016, involving over $175,000 that he believed were the proceeds of the illegal smuggling and firearms trafficking activity.