Canadian crypto exchange QuadrigaCX says it cannot repay most of $190 million in client holdings after its 30-year-old founder Gerald Cotten, the only person who knew the passwords to its "cold storage," unexpectedly died in India in December 2018, Coindesk reported on Friday.
In a letter dated December 17, 2018, Respondent Rosalind Herman requested a two month extension to file her opposition to the Division of Enforcement's motion for summary disposition, citing a health condition, a lack of stamps, a broken copy machine, religious restrictions, and that she expects her submission to be lengthy.
A five-week lapse in appropriations and the decision of the Securities and Exchange Commission to stay all administrative proceedings from January 16 until January 30, 2019, prevented me from earlier ruling on Herman's motion. See Pending Admin. Proc., Securities Act of 1933 Release No. 10602, 2019 SEC LEXIS 5 (Jan. 16, 2019); Pending Admin. Proc., Securities Act Release No. 10603, 2019 SEC LEXIS 37 (Jan. 30, 2019). For good cause shown, I now GRANT the extension. 17 C.F.R. § 201.161(a). Herman's opposition was previously due December 19, 2018, and it will now be due February 19, 2019. The Division may file a reply by March 5, 2019. Given that Herman is benefitting from a two-month extension, absent extraordinary circumstances, no further extensions will be granted.
Herman also claims that she requires additional discovery. In particular, Herman requests material "on the law firm Sadis and Goldberg [she] hired to do the hedge fund in the FBI investigation." Given that she previously confirmed that she received the investigative file from the Division, Prehr'g Tr. 17-18 (Nov. 1, 2018), Herman's cursory and unexplained request provides no basis to order any relief. Nevertheless, if the Division possesses previously undisclosed evidence relevant to Herman's request that it is required to make available under Rule of Practice 230, it must promptly do so. 17 C.F.R. § 201.230. 2Finally, Herman requests an additional prehearing conference. In her letter, Herman says, "I am still waiting for a telephone conference call. I asked over a month ago." Attached to her letter is a handwritten note in which Herman appears to request a call on an "unrecorded line." If the basis for Herman's request is to have a private conversation with Division counsel and me, she is informed that Commission proceedings are presumptively open to the public. See 17 C.F.R. § 201.301. Herman's request for an additional prehearing conference is denied without prejudice, meaning, she may resubmit it with an explanation of the reason for her request.
Bearing in mind that I am required to accept the facts described in the OIP as established, Peraza is correct that the Division has not met its burden to explain how the figures in Perez's spreadsheet are consistent with the OIP. The Division takes the initial disgorgement figure of $1,521,705.87 from Perez's spreadsheet. The spreadsheet identifies gross commission revenue from Angel Oak's trades from 2010 through 2014 as $11,506,034.28. It identifies the net commissions paid to the Atlanta branch-gross minus Peraza's 15% share, clearing fees, and other expenses- as $9,984,328.41. And $1,521,705.87 is, according to Perez, Peraza's "gross share" of commissions.
The OIP, however, states that Angel Oak's commissions totaled only $3,054,288. It is not completely clear how to reconcile the spreadsheet's $9,984,328.41 paid in commissions to the Atlanta branch with the OIP's lower figure of commissions paid to Angel Oak. The Division does not directly address this confusion in its reply. When addressing a different aspect of Peraza's argument, it asserts that the $6.9 million discrepancy between Perez's $9.9 million calculation and the $3 million figure in the OIP results from the fact that "Angel Oak paid the clearing fees and all other marginal costs" as well as "the share of the commissions that went to [its] individual brokers." But the Division does not explain the basis for this assertion or claim that these employee commission payments plus clearing fees and marginal costs add up to $6.9 million.
There is another discrepancy between the spreadsheet and the OIP. The OIP states that Peraza "retained 15% of all commission revenue generated by" Angel Oak's trading activity except for commission revenue from approximately April 2011 to July 2012, when Peraza received 10%, and from approximately September to October 2011, when Peraza received 20%. Although I have to accept these figures, they are inconsistent with the spreadsheet, which puts Peraza's share at anywhere between 8% and 16% from 2010 through 2014.The $1,521,705.87 figure from the spreadsheet, on which the Division bases its disgorgement request, is therefore dependent on figures that are at odds with the percentages in the OIP which, again, I must accept as true.
Comparing the OIP and the Division's evidence raises questions of material fact. To the extent the Division seeks summary disposition on the question of disgorgement, the motion is denied. . .
In late 2014 and early 2015, while registered with FINRA through Securities America, Davenport placed two securities transactions for a registered representative of another firm and split the commissions generated from the transactions with that representative, without the knowledge or consent of either firm, and without reflecting the commission sharing on Securities America's books and records, in violation of FINRA Rules 4511 and 2010.Furthermore, from October 2016 through October 2017, while registered through Liberty Partners, Davenport permitted his assistant to use a personal email address to communicate with securities customers concerning business-related matters, causing the firm to fail to retain the emails among its books and records, in violation of FINRA Rules 4511 and 2010.