The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
January 3, 2023
DOJ RELEASES
SEC RELEASES
CFTC RELEASESFINRA RELEASES
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1/3/2023
Removal of FINRA Arbitrator Cited by Schwab and Interactive Brokers in HFT Customer Dispute (BrokeAndBroker.com Blog)
https://www.brokeandbroker.com/6819/finra-arbitration-nondisclosure/
As we start a new year, we are asked, yet again, to consider whether FINRA provides a fair arbitration venue. Yet again, we are asked to consider whether FINRA is competently running its arbitration venue. Yet again, we are asked to consider whether FINRA is making an effort to tackle the growing chorus of complaints by both the industry and public customers about a lack of policing of its roll of arbitrators and a lack of effective, timely intervention to nip problems in the bud. All of which prompts veteran industry reform advocate Bill Singer, Esq. to call upon FINRA's Board of Governors to conduct an inquiry. To do something. To do anything. Yet again, Bill knows that FINRA's lackluster Board will likely punt, if even that.
Former Chief Financial Officer Of Two SPACs Pleads Guilty To Fraud Scheme / Cooper Morgenthau Embezzled More Than $5 Million and Caused False Statements to Be Made to Accountant and Auditor and in SEC Filings (DOJ Release)
https://www.justice.gov/usao-sdny/pr/former-chief-financial-officer-two-spacs-pleads-guilty-fraud-scheme
https://www.justice.gov/usao-sdny/pr/former-chief-financial-officer-two-spacs-pleads-guilty-fraud-scheme
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https://www.sec.gov/news/press-release/2023-1
In the United States District Court for the Southern District of New York, in response to an Information https://www.justice.gov/usao-sdny/press-release/file/1560631/download, Cooper J. Morgenthau (former Chief Financial Officer of two special purpose acquisition company ("SPACs") pled guilty to one count of wire fraud; and he agreed to forfeit $5,111,335 and to pay restitution of $5,111,335. As alleged in part in the DOJ Release:
Between in or about June 2021 and in or about August 2022, MORGENTHAU, who was the CFO of SPAC-1 and SPAC-2, embezzled more than $5 million from the two companies. SPAC-1 had recently had its initial public offering, while SPAC-2 was raising money from private investors in preparation for its anticipated IPO. MORGENTHAU used the embezzled funds to trade equities and options of so-called "meme stocks" and cryptocurrencies, losing almost all of the money that he stole. To conceal and facilitate his embezzlement from SPAC-1, MORGENTHAU fabricated bank statements, which he provided to SPAC-1's accountant and auditor; made and caused to be made material misstatements in SPAC-1's public filings with the Securities and Exchange Commission ("SEC"); and transferred some of SPAC-2's funds to SPAC-1 to cover up the funds he had misappropriated from SPAC-1.
In the United States District Court for the Southern District of New York, a Complaint was filed charging Cooper J. Morgenthau (former Chief Financial Officer of the special purpose acquisition company ("SPAC") African Gold Acquisition Corp) with having violated antifraud provisions of the federal securities laws, lying to African Gold's auditor and accountants in violation of the Securities Exchange Act of 1934, and knowingly falsified African Gold's books and records, and filed false certifications with the SEC. Morgenthau consented to a Judgment enjoining him from further federal securities laws violations and barring him from serving as an officer or director of a publicly traded company, with monetary remedies to be determined at a later date. As alleged in part in the SEC Release:
SEC Obtains Final Judgment Against Individual Behind Bogus Tender Offer (SEC Release)[F]om June 2021 through July 2022, Morgenthau embezzled money from African Gold and stole funds from another SPAC series called Strategic Metals Acquisition Corp. I and II to pay for his personal expenses and to trade in crypto assets and other securities.According to the SEC's complaint, Morgenthau concealed unauthorized withdrawals by falsifying African Gold's bank account statements and then provided those falsified documents to African Gold's auditor and accountants for purposes of preparing African Gold's SEC filings. During the same general time period, Morgenthau raised money from Strategic Metals' investors based on misrepresentations that the money would be used to launch the Strategic Metals SPACs, when in fact Morgenthau misappropriated the money for personal uses, including to conceal his embezzlement of African Gold's funds.
https://www.sec.gov/litigation/litreleases/2023/lr25604.htm
In the United States District Court for the Southern District of New York, the SEC filed a Complaint against Melville Peter ten Cate https://www.sec.gov/litigation/complaints/2023/comp25604.pdf. Without admitting or denying the allegations in the Complaint, Ten Cate consented to entry of a Final Judgment
https://www.sec.gov/litigation/litreleases/2023/judg25604.pdf permanently enjoining him from violations of the antifraud provisions of Sections 10(b) and 14(e) of the Securities Exchange Act; imposing a permanent conduct-based injunction that will prevent him from, among other things, participating in any securities offerings; permanently barring him from acting as an officer or director of a public company; and ordering him to pay a civil penalty of $500,000. As alleged in part in the SEC Release, the SEC had previously charged ten Cate with:
https://www.sec.gov/litigation/litreleases/2023/judg25604.pdf permanently enjoining him from violations of the antifraud provisions of Sections 10(b) and 14(e) of the Securities Exchange Act; imposing a permanent conduct-based injunction that will prevent him from, among other things, participating in any securities offerings; permanently barring him from acting as an officer or director of a public company; and ordering him to pay a civil penalty of $500,000. As alleged in part in the SEC Release, the SEC had previously charged ten Cate with:
fraud for orchestrating a phony offer to purchase a major U.S. aircraft, defense, and industrial company.The SEC's complaint was filed on April 5, 2022. The complaint alleged that ten Cate and his now-defunct private company, Xcalibur Aerospace, Ltd., placed an advertisement in The New York Times announcing a proposed plan to purchase all existing stock of Textron, Inc., at a 56% premium over the stock's previous closing price. The announcement allegedly contained a number of false and misleading statements about Xcalibur's size and financial condition and failed to disclose that ten Cate and entities he controlled had been the subject of multiple bankruptcy and default judgments.