Securities Industry Commentator by Bill Singer Esq

October 9, 2020

Libor Law Is Adrift in Albany and Wall Street Is Getting Nervous (Bloomberg by William Shaw and Keshia Clukey)

Kitsap County guardian sentenced to one year in prison for stealing more than $250,000 from elderly and disabled clients / Defendant was appointed by Kitsap County and Suquamish Tribal Court judges to handle finances -- stole from clients for more than seven years (DOJ Release)

2Cir Reverses SDNY and Reinstates Archer Securities Fraud/Conspiracy Conviction
United States of America, Appellant, v. Devon Archer, Defendant/Appellee; Jason Galanis, Gary Hirst, John Galanis a/k/a "Yanni," Hugh Dunkerley, Michelle Morton and Bevan Cooney, Defendants (2Cir Opinion)

Former CEO Of Houston-Based Seismic Data Acquisition Company Charged In Accounting Fraud Scheme (DOJ Release)

SEC Charges Seismic Data Company, Former Executives With $100 Million Accounting Fraud (SEC Release)

FINRA Fines and Suspends Rep Over Tax Preparation Services
In the Matter of Stephen Leroy Whittaker, Respondent (FINRA AWC)

Attorney General William P. Barr Announces Publication of Cryptocurrency Enforcement Framework (DOJ Release)

[In]Securities Guest Blog: Don't Know Much by Aegis Frumento Esq ( Blog)

NOTICE to Securities Industry Commentator and Readers

Libor Law Is Adrift in Albany and Wall Street Is Getting Nervous (Bloomberg by William Shaw and Keshia Clukey)
With the demise of 2021, we will also witness the end of the London Interbank Offered Rate or LIBOR. Some take comfort in that calendar -- after all, we've still got about 14 or so months left. Others are in full-blown panic mode -- we've got ONLY 14 or so months left. Sure, the so-called Secured Overnight Financing Rate or SOFR is set to fill the vacuum but, you know, that's not a 100% given event and there are many, many thorny issues that remain, as yet, unresolved. Bloomberg's Shaw and Clukey offer a thoughtful, precise, and comprehensive analysis of where we are, how we got here, and, oh my, how the hell are we going to get to where we need to go?  I highly commend this superb article to all serious investors.

Wayne Jerome Houston was the owner/operator of Cross Point Services LLC, a guardianship organization for disabled and vulnerable adults. Houston pled guilting in the United States District Court for the Western District of Washington to Social Security Fraud - Representative Payee Fraud; and he was sentenced to one year and a day in prison and $256,336 in restitution. As alleged in part in the DOJ Release:

According to the plea agreement, HOUSTON and his company were responsible for managing the financial affairs of about two dozen clients a month.  HOUSTON had access to the clients' bank accounts so he could pay rent, utilities, and other bills for them.  Social Security benefits were paid into some of the accounts for at least 13 clients who required a representative payee-HOUSTON-to manage their benefits.  Beginning in 2010, HOUSTON used his position as guardian to write checks from the victim accounts to himself, to Cross Point Services, or to cash, and used ATMs to withdraw money from client accounts and used it for his own expenses.  HOUSTON targeted clients who had significant income or resources so that the theft was less likely to be detected.  In all 21 clients suffered thefts, ranging from a low of $200 to more than $66,000 from one of the clients.

As retired Kitsap County Superior Court Judge Anna Laurie told the Court, ". . .the true victims may never be made whole.  At least two have died since his criminal conduct became visible, and many went months without sufficient resources while their successor guardians struggled to pay bills and maintain care."

The granddaughter of one of the victims told the Court her 90-year-old grandfather "was left with nothing. . .He got ill and we had to fight for his care. . . .It was so hard having to tell him that once again he had been betrayed. . . . That he didn't have any money to pay his bills because Mr. Houston had taken it."

United States of America, Appellant, v. Devon Archer, Defendant/Appellee; Jason Galanis, Gary Hirst, John Galanis a/k/a "Yanni," Hugh Dunkerley, Michelle Morton and Bevan Cooney, Defendants (Opinion, United States Court of Appeals for the Second Circuit ("2Cir"), 18-3727 (October 7, 2020)
In March 2018,, a Superseding Indictment filed in the the United States District Court for the Southern District of New York charged Devon Archer et al. with conspiracy to commit securities fraud and securities fraud. Defendants Jason Galanis, Gary Hirst, Hugh Dunkerley, and Michelle Morton pled guilty prior to trial. Defendants Archer, John Galanis, and Bevin Cooney proceeded to a jury trial and all were convicted on both counts. The three convicted Defendants moved for acquittal under Federal Rule of Criminal Procedure 29, or, in the alternative, moved for a new trial under FRCrP 33. SDNY denied Galanis's and Cooney's motions but granted Archer's Motion for a New Trial.  As set forth in the Syllabus to the 2Cir Opinion:

The government appeals from an order of the United States District Court for the Southern District of New York (Ronnie Abrams, J.) granting Defendant Devon Archer's motion for a new trial pursuant to Federal Rule of Criminal Procedure 33, following Archer's conviction for conspiracy to commit securities fraud, in violation of 18 U.S.C. § 371, and securities fraud, in violation of 15 U.S.C §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2. Because the weight of the evidence presented at trial did not preponderate heavily against the jury's verdict, we find that the district court abused its discretion in vacating the judgment and granting a new trial. Accordingly, the decision of the district court is REVERSED, and the jury verdict is reinstated. The case is REMANDED to the district court for sentencing.

In granting the new trial, SDNY apparently expressed the following rationale:

With respect to Archer's Rule 29 motion, the district court recognized that, "drawing every inference in the government's favor, as the [c]ourt is required to do under Rule 29, [it] [could not] conclude that no reasonable jury could have convicted [Archer], particularly because the primary issue was intent and the government presented a substantial amount of circumstantial evidence to that effect." Id. at 492. Nevertheless, in addressing Archer's motion for a new trial pursuant to Rule 33, the district court concluded that while "[t]he government's reliance on circumstantial evidence is of course perfectly appropriate" and "the government's case against Archer is not without appeal at first blush[,] . . . when each piece of evidence in this indisputably complex case is examined with scrutiny and in the context of all the facts presented, the government's case against Archer loses much of its force." Id. 

Concerned that Galanis deceived many of those around him, including those knowingly involved in his schemes, the district court determined, as a factfinder would do, "that Galanis viewed Archer as a pawn to be used in furtherance of his various criminal schemes." Id. The district court was further troubled "by the government's inability throughout trial to articulate a compelling motive for Archer to engage in this fraud," noting that "Archer never received money from the purported annuity provider, nor did he profit directly from the misappropriation of the bond proceeds." Id. And while the district court acknowledged that the government's theory regarding Archer's motive - his "admitted interest in the roll up being successful" - could not be "dismiss[ed] . . . entirely," it nevertheless concluded that this motive was not "compelling" and was "mitigated" by the fact that Archer ultimately lost a significant portion of the funds that he himself had invested into the scheme. Id. at 492-93. 

The district court stated that, because the evidence was subject to multiple interpretations, it "remain[ed] unconvinced that Archer knew that Jason Galanis was perpetrating a massive fraud." Id. 493. It emphasized "the unique considerations pertaining to [Archer's] relationship with Jason Galanis" - namely, what it saw as Galanis's efforts to keep Archer in the dark while simultaneously touting Archer's political and business connections - as well as "potential juror confusion over a government summary chart admitted as an exhibit." Id. at 505. The district court announced that, "when viewing the entire body of evidence, particularly in light of the alternative inferences that may legitimately be drawn from each piece of circumstantial evidence, . . . [it] harbor[ed] a real concern" that Archer did not have the requisite intent and was instead "innocent of the crimes charged." Id. at 507. The district court therefore granted Archer's Rule 33 motion and ordered a new trial. Id. The government timely appealed.

at Pages 10 - 12 of the 2Cir Opinion

In its appeal, the Government argued that SDNY abused its discretion when granting the Rule 33 motion because the evidence did not "preponderate heavily against the verdict;" and, further, SDNY "inappropriately disregarded the jury's resolution of conflicting evidence and failed to consider the weight of the evidence in its entirety." at Page 13 of the 2Cir Opinion. In reversing SDNY's granting of a new trial to Archer, and reinstating the conviction and remanding for sentencing to SDNY, 2Cir summarizes its rationale:

In sum, the preponderates heavily standard requires that the district court determine whether all the evidence at trial, taken as a whole, preponderated heavily against the verdict. It does not, however, permit the district court to elect its own theory of the case and view the evidence through that lens. Having now clarified the standard to be applied by a district court in assessing a Rule 33 motion, we find that the evidence here did not preponderate heavily against the verdict. Because we conclude that there is only one result available upon proper application of the preponderates heavily standard - reinstatement of the jury verdict - there is no need to remand for further consideration of this issue by the district court.

at Page 42 of the 2Cir Opinion

For more details, read: Jason Galanis Sentenced In Manhattan Federal Court For Multiple Securities Fraud Schemes (DOJ Release)

Former CEO Of Houston-Based Seismic Data Acquisition Company Charged In Accounting Fraud Scheme (DOJ Release)
SEC Charges Seismic Data Company, Former Executives With $100 Million Accounting Fraud (SEC Release)

In an Indictment filed in the United States District Court for the Southern District of New York, SAExploration Holdings, Inc. ("SAEX") former Chief Executive Officer/Chairman Jeffrey Hastings was charged with one count each of conspiracy to commit securities fraud and make false statements in annual and quarterly SEC reports; conspiracy to commit wire fraud; and securities fraud. As alleged in part in the DOJ Release:

At all times relevant to the Indictment until August 2016, HASTINGS was the executive chairman of the board of directors of SAEX.  After August 2016, HASTINGS served as both the chairman of the board of directors and the chief executive officer ("CEO") of SAEX until he separated from the company in August 2019.  SAEX was a publicly traded seismic data acquisition company headquartered in Houston, Texas, that traded under the symbol "SAEX" on the NASDAQ.  SAEX provided land- and marine-based seismic acquisition services, including program design, planning, and permitting, camp services, survey, drilling, recording, and processing.  Seismic data is used by oil and gas companies to identify and analyze drilling prospects and maximize successful drilling.

From at least in or about October 2015 through at least in or about May 2019, HASTINGS, together with the then chief financial officer and general counsel of SAEX ("CC-1"), the founder, and at various times the president, CEO, and chief operating officer of SAEX ("CC-2"), and the then executive vice president of operations at SAEX ("CC-3"), devised and carried out a scheme to defraud SAEX and the investing public by artificially and materially inflating SAEX's reported revenue by making it appear that Alaskan Seismic Ventures, LLC ("ASV") was an independent and reliable source of tens of millions of dollars of revenue. 

In February 2015, HASTINGS and CC-1 discussed finding a way for SAEX to take advantage of certain tax credits offered by the State of Alaska to seismic data library companies, to offset the costs of exploring for oil and gas in Alaska (the "Alaska Tax Credits").  The board of SAEX was opposed to operating its own data library company because of concerns about the ability to ensure payment to SAEX for seismic data, including through the monetization of Alaska Tax Credits, among other reasons.  To avoid the appearance that SAEX was operating a data library company that licensed data to third parties, HASTINGS and CC-1 set up ASV, to purport to operate as an independent customer purchasing seismic data from SAEX and licensing it to third parties.  HASTINGS recruited an acquaintance to serve as the owner and sole employee of ASV.  In truth and in fact, and as hidden from investors, ASV was not independent and could not pay SAEX for its seismic data. 

After setting up ASV, HASTINGS and CC-1 created and caused to be created a number of shell companies (the "Shell Companies") for the purpose of secretly transferring funds from SAEX into ASV.  One of the Shell Companies, Global Equipment Solutions ("Global Equipment"), was purportedly an equipment rental company from which SAEX rented seismic acquisition equipment.  In truth and in fact, and as HASTINGS and his co-conspirators well knew, SAEX did not rent any equipment from Global Equipment and did not owe Global Equipment any money.  The co-conspirators took steps to make the payments from SAEX to Global Equipment appear legitimate to others at SAEX; for example, CC-1 drafted a lease agreement between SAEX and Global Equipment, and CC-3 caused fake purchase orders to be created that purported to show expenses incurred by SAEX as a result of renting equipment from Global Equipment.

By the end of 2015, SAEX had recorded on its books approximately $12 million in payables to Global Equipment.  HASTINGS and his co-conspirators ultimately routed approximately $5.8 million of SAEX's funds through Global Equipment, and the other Shell Companies, to ASV.  That money then went from ASV back to SAEX to pay outstanding receivables.  The fact that these funds originated with SAEX was not disclosed to investors.  HASTINGS and his co-conspirators referred to this portion of the scheme as "round-tripping."     In addition, HASTINGS and CC-1 took more than $5 million of the funds that SAEX transferred to Global Equipment for their own use, including making payments to CC-2 and CC-3, among others.   

In a Complaint filed in the United States District Court for the Southern District of New York, the SEC charged 
Hastings, former SAEX Chief Financial Officer/General Counsel Brent Whitelely, former Chief Executive Officer/Chief Operating Officer Brian Beatty, and former Vice President of Operations Michael Scott with violating the antifraud, books and records, and internal accounting controls provisions of the federal securities laws. Also, the SEC Complaint charges SAE with violating the reporting provisions of the federal securities laws and the four executives with aiding and abetting those violations. Hastings's and Whiteley's spouses, Lori Hastings and Thomas O'Neill, are named as Relief Defendants. As alleged in part in the SEC Release, staring in 2015, SAE at the direction of the four Defendants: 

entered into a series of seismic data acquisition contracts totaling approximately $140 million with a purportedly unrelated Alaska-based company that was in fact controlled by Hastings and Whiteley. The complaint alleges that, of the amount SAE recorded in revenue, approximately $100 million was improperly recorded in light of the Alaskan company's inability to pay and the SAE executives' control of the company. As alleged in the complaint, to create the false impression that the Alaskan company was actually paying SAE for seismic data, Hastings, Whiteley, Beatty, and Scott misappropriated nearly $6 million from SAE and used the funds for a series of round trip transactions that caused the money to be sent back to SAE. The complaint alleges that, in addition, the executives also stole a total of approximately $6 million for themselves. The complaint further alleges that Whiteley separately misappropriated an additional $4 million through a fictitious invoice scheme.

For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Stephen Leroy Whittaker submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Stephen Leroy Whittaker was first registered in 20030 with First Financial Equity Corporation ("FFEC"). The AWC alleges that Stephen Leroy Whittaker "does not have any relevant disciplinary history." In accordance with the terms of the AWC, FINRA found that Whittaker had violated FINRA Rules 3270 and 2010; and the self regulator imposed upon him an $5,000 fine and a three-month suspension in any capacity. As alleged in part in the AWC:

From March 2018 through March 2019, Whittaker was engaged in business activities outside the scope of his relationship with FFEC when he accepted compensation for tax preparation services from three FFEC clients. 

FFEC's written supervisory procedures during the relevant period required registered representatives to provide prior written notice to the firm and receive approval before engaging in an outside business activity. Whittaker failed to provide prior written notice to FFEC to provide tax preparation services. Additionally, Whittaker did not disclose the activity as an outside business activity on his 2018 annual compliance attestation to FFEC.
Attorney General William P. Barr announced today the release of "Cryptocurrency: An Enforcement Framework," (by the AG's Cyber-Digital Task Force)  As set forth in part in the DOJ Release:

[I]n Part I, the Framework provides a detailed threat overview, cataloging the three categories into which most illicit uses of cryptocurrency typically fall: (1) financial transactions associated with the commission of crimes; (2) money laundering and the shielding of legitimate activity from tax, reporting, or other legal requirements; and (3) crimes, such as theft, directly implicating the cryptocurrency marketplace itself. 

Part II explores the various legal and regulatory tools at the government's disposal to confront the threats posed by cryptocurrency's illicit uses, and highlights the strong and growing partnership between the Department of Justice and the Securities and Exchange Commission, the Commodity Futures Commission, and agencies within the Department of the Treasury, among others, to enforce federal law in the cryptocurrency space.

Finally, the Enforcement Framework concludes in Part III with a discussion of the ongoing challenges the government faces in cryptocurrency enforcement-particularly with respect to business models (employed by certain cryptocurrency exchanges, platforms, kiosks, and casinos), and to activity (like "mixing" and "tumbling," "chain hopping," and certain instances of jurisdictional arbitrage) that may facilitate criminal activity.
These days, everyone's on edge. We've all about had it. What with working from home with questionable bandwidth and crappy connectivity, trying to reach lots of other folks who are all suffering the same online issues, and then, when you finally get the other party, the screen freezes, the connection sputters and fails, and, damn, good luck trying to reconnect. Which likely explains Aegis Frumento's frustration with President Trump and Covid and Biden and the upcoming election and who's sick and who's smart. 

On or about Sunday, September 13, 2020, we migrated some 22 years of online content from one website host to another.  Everything went great. Until it didn't. But then, we debugged a few issues and most of you didn't notice anything. Except when we didn't quite spot everything but after we did, we just pretended like everything had gone great from the start. 

In recent days a few of you (largely malcontents and assorted miscreants) have notified our beloved publisher, Bill Singer, that you were not receiving his daily email with links to the newest blog and online content. In order to get that daily email, you had to first enter your email address in our SUBSCRIBE menu at For reasons that are too complicated to explain and involve a lot of arcane coding stuff that always sounds like it makes sense but is likely nonsense, about a handful of subscribers have reported that they are not getting their daily emails. 

If you tried to game our subscriber/unsubscribe feature by unsubscribing and then re-subscribing, that won't defeat the non-receipt-of-daily-subscribed-email problem. So . . . just send an email to and just write out something short like "Not getting my wonderful, free daily email from that handsome devil Bill Singer" and also include the email address by which you subscribed. Our overpaid yet ever-brilliant website team at RRBDlaw, Securities Industry Commentator, and will re-code your subscription data and hopefully that will solve the problem. If not, we're going to Plan B, which is to blame you and point out that the subscription is free.