Securities Industry Commentator by Bill Singer Esq

The Financial Professionals Coalition, Ltd. Launches "Marketplace"
The Financial Professionals Coalition, Ltd. offers flat-fee 30-day-run advertising for:

Help Wanted (Employer),
Position Wanted (Employee),
Professional Services (Lawyers, CPAs, Consultants), and
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VISIT: https://www.finprocoalition.com/marketplace/

JOSEPH R. BIDEN, PRESIDENT OF THE UNITED STATES, ET AL., PETITIONERS v. NEBRASKA, ET AL. (SCOTUS Opinion)
https://www.supremecourt.gov/opinions/22pdf/22-506_nmip.pdf
The HEROES Act allows the Secretary to “waive or modify” existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, but does not allow the Secretary to rewrite that statute to the extent of canceling $430 billion of
student loan principal.

303 CREATIVE LLC, ET AL., PETITIONERS v. AUBREY ELENIS, ET AL. (SCOTUS Opinion)
https://www.supremecourt.gov/opinions/22pdf/21-476_c185.pdf
The First Amendment prohibits Colorado from forcing a website
designer to create expressive designs speaking messages with which
the designer disagrees.

SEC Charges Five Individuals in Penny Stock Fraud Scheme (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25761.htm
In the United States District Court for the Northern District of Texas, the SEC filed a Complaint
https://www.sec.gov/litigation/complaints/2023/comp25761.pdf charging five individuals with a fraudulent scheme to sell millions of shares of Global Resource Energy, Inc. (OTC: GBEN). As alleged in part in the SEC Release:

[T]homas Collins and Patrick Thomas obtained undisclosed control over the vast majority of GBEN's shares, and then coordinated with Brian Kingsfield, Scott Levine, and Gary Kouletas to fraudulently sell GBEN shares to the investing public. According to the complaint, Collins and Thomas used sham consulting agreements to transfer millions of restricted shares of GBEN stock to a third party to give the appearance that the shares were freely tradeable. Collins and Thomas, with the assistance of Kingsfield and a network of salespeople, induced investors to purchase the GBEN shares. To assist in the fraudulent scheme, Collins enlisted Levine, a market maker, to help match unsuspecting public investors with sellers of shares secretly controlled by Collins and Thomas. In addition, the SEC alleges that Collins and Thomas used another sham consulting agreement to transfer millions of restricted GBEN shares to an entity owned by Kouletas. The Kouletas entity then sold those shares, and split the proceeds with Collins and Thomas.

The SEC's complaint charges all defendants with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5(a) and (c) thereunder and Sections 17(a)(1) and (a)(3) of the Securities Act of 1933 (Securities Act), and Kingsfield with violating Section 15(a) of the Exchange Act for acting as an unregistered broker. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, civil penalties, and penny stock bars against all defendants, along with officer-and-director bars against Collins and Thomas. The defendants have agreed to consent to all the charges and relief, and their settlements are subject to court approval.

Each of the defendants has pleaded guilty in parallel criminal proceedings in the Northern District of Ohio. See United States v. Collins, et al., 1:20-cr-00842-BYP (N.D. Ohio); see also United States v. Levine, 1:23-cr-00262-SL (N.D. Ohio). Collins was sentenced to 41 months imprisonment, Thomas to 18 months imprisonment, Kouletas to 43 months imprisonment, Kingsfield to 37 months imprisonment, and Levine is awaiting sentencing.

In a separate proceeding, Damon Durante, another salesperson Collins and Thomas used to sell GBEN shares, consented to a cease-and-desist order finding that he willfully violated Section 15(a) of the Exchange Act for acting as an unregistered broker. Durante agreed to an order of disgorgement, civil penalty, penny stock bar, and an industry bar. Durante also pleaded guilty in the parallel criminal proceeding and was sentenced to six months imprisonment. See United States v. Collins, et al., 1:20-cr-00842-BYP (N.D. Ohio).

SEC Charges Two Oregon Residents and Their Related Entities with $10 Million Ponzi-Like Scheme (SEC Release)
https://www.sec.gov/news/press-release/2023-125
In the United States District Court for the District of Oregon, the SEC filed a Complaint charging charges Robert D. Christensen and Anthony M. Matic and their four related entities with violating the antifraud and securities registration provisions of the federal securities laws
https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-125.pdf. Without admitting or denying the allegations in the Complaint, Christensen, Matic, and the charged entities agreed to settle with the SEC and to the entry of final judgments imposing requested permanent and conduct-based injunctions as well as $5,374,482 in disgorgement and prejudgment interest; and, further, Christensen and Matic agreed to each pay a $200,000 penalty as well as to the imposition of permanent officer and director bars. As alleged in part in the SEC Release:

[F]rom at least January 2018 through September 2022, Christensen and Matic used four entities that they founded – Foresee Inc., The Commission PDX LLC, The Policy PDX LLC, and Innings 150 LLC – to raise money from retail investors, including several retirees, for the purported purpose of investing in real estate. Christensen and Matic allegedly raised this money through the offer and sale of unregistered promissory notes, which promised high interest rates between nine and 15 percent to be paid to investors, in addition to the return of all principal, within just a few months. In reality, the complaint alleges, Christensen and Matic did not have the ability to pay investors the promised returns within the time periods identified in the notes; instead, they relied on new investor money to pay earlier investors. Additionally, Christensen and Matic allegedly used investor money for unauthorized and undisclosed purposes, including to pay for at least one vacation, gifts, casino trips, massages, personal expenses, a whiskey club membership, and cryotherapy.

SEC Charges Former Pharma Employee with Insider Trading (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25762.htm
Without admitting or denying the allegations in an SEC Complaint filed in the United States District Court for the District of Massachusetts
https://www.sec.gov/litigation/complaints/2023/comp25762.pdf, Juan Roman consented to the entry of a Final Judgment that permanently enjoins him from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder; orders him to pay disgorgement of $97,752, representing his total trading profits, $15,224.22 in prejudgment interest, and a $97,752 civil penalty; and bars him from serving as an officer or director of a public company for five years. As alleged in part in the SEC Release:

[R]oman traded Acceleron securities based upon material nonpublic information that he had learned about the company achieving key milestones concerning two different drug candidates. As alleged in the complaint, on December 6, 2019, Roman traded Acceleron stock and options during a securities trading blackout window and in advance of positive news regarding the company's application to the FDA for approval to market and sell its anemia drug Reblozyl for a particular use and generated profits of $1,637. Just a month later, on January 23 and 24, 2020, Roman allegedly traded Acceleron options in advance of the company's announcement of positive clinical trial results for Sotatercept, a drug being developed to treat pulmonary arterial hypertension. The SEC contends that Roman placed these January 2020 trades during another securities trading blackout window and generated profits of $96,115.

SEC Denies Whistleblower Award to Claimant
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-97826; Whistleblower Award Proc. File No. 2023-71)
https://www.sec.gov/rules/other/2023/34-97826.pdf
The Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant. The Commission ordered that CRS's recommendations be approved. The Order asserts in part that:

Finally, we consider Claimant’s argument that he/she should receive an award even if the investigative team never received his/her information or had any communications with him/her, and that his/her tips should have triggered an investigation. As we have stated, “the standard for award eligibility is not what the staff would have, or could have done in hypothetical circumstances but, rather, what impact the whistleblower’s information actually had on the
investigation.”

June 29, 2023

GERALD E. GROFF, PETITIONER v. LOUIS DEJOY, POSTMASTER GENERAL (SCOTUS Opinion)
https://www.supremecourt.gov/opinions/22pdf/22-174_k536.pdf
Title VII requires an employer that denies a religious accommodation to show that the burden of granting an accommodation would result in substantial increased costs in relation to the conduct of its particular business.

STUDENTS FOR FAIR ADMISSIONS, INC., PETITIONER v. PRESIDENT AND FELLOWS OF HARVARD COLLEGE (SCOTUS Opinion)
-and-
STUDENTS FOR FAIR ADMISSIONS, INC., PETITIONER v. UNIVERSITY OF NORTH CAROLINA, ET AL. (SCOTUS Opinion)
https://www.supremecourt.gov/opinions/22pdf/20-1199_hgdj.pdf
Harvard’s and UNC’s admissions programs violate the Equal Protection Clause of the Fourteenth Amendment.

U.S. Attorney Announces Charges In Four Separate Insider Trading Cases Against 10 Individuals, Including Drug Company Employees, Investment Firm Executive Director, And SPAC Investors (DOJ Release)
https://www.justice.gov/usao-sdny/pr/us-attorney-announces-charges-four-separate-insider-trading-cases-against-10

Pfizer Employee and Associate Charged with Insider Trading Based on Non-Public Drug Trial Results for COVID-19 Treatment
Investment Firm Executive Director Charged with Insider Trading Based on Information Stolen from a Major Investment Bank
SPAC Investors Charged with Insider Trading by Exploiting Their Privileged Access to Information to Engage in Illegal Open Market Trades
Network of Individuals, Including Police Chief, Charged with Insider Trading Based on Inside Information About an Impending Merger

U.S. v. Dagar and Bhiwapurkar Indictment

U.S. v. Meadow Indictment

U.S. v. Shvartsman et al Indictment

U.S. v. Dupont et al Indictment

As alleged in part in the DOJ Release:

United States v. Amit Dagar and Atul Bhiwapurkar

In or about November 2021, AMIT DAGAR and ATUL BHIWAPURKAR participated in an insider trading scheme to reap illicit profits from options trading based on inside information about the results of clinical trials of Paxlovid, a medicine used to treat COVID-19. DAGAR was an employee of Pfizer Inc. (“Pfizer”) and assisted in managing the data analysis in certain clinical drug trials.

On or about November 4, 2021, DAGAR learned that a Pfizer trial of the drug Paxlovid, a medicine designed to treat mild to severe COVID‑19 infection, had produced positive results. The results were confidential and meant to remain so until Pfizer publicized them on or about November 5, 2021.

Later that same day, and while those results remained confidential, DAGAR purchased short-dated, out-of-the-money call options in Pfizer stock. DAGAR also tipped his close friend, ATUL BHIWAPURKAR, about the coming drug results and BHIWAPURKAR also purchased short-dated, out-of-the-money Pfizer call options that expired approximately two weeks later. BHIWAPURKAR also tipped another friend (“Individual-1”), who similarly purchased short-dated, out-of-the-money Pfizer call options that expired approximately three weeks later.

The next day, on or about November 5, 2021, and before the market opened, Pfizer publicly released results of its Paxlovid study. That same day, following the publication of the positive results, Pfizer’s stock price increased substantially, opening — and eventually closing — more than 10% higher than the prior day’s closing price. In the coming weeks, DAGAR, BHIWAPURKAR, and Individual-1 sold their Pfizer call options at significant profits, totaling approximately more than $350,000.

DAGAR, 44, of Hillsborough, New Jersey, who was arrested this morning, has been charged with four counts of securities fraud, each of which carries a maximum sentence of 20 years in prison, and one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison.

BHIWAPURKAR, 45, of Milpitas, California, who was arrested this morning, has been charged with two counts of securities fraud, each of which carries a maximum sentence of 20 years in prison, and one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison.

United States v. Jordan Meadow

From at least in or about March 2021 through in or about May 2022, JORDAN MEADOW, a registered broker at a brokerage firm based in New York, New York, used inside information stolen from a major investment bank in New York City (“the Investment Bank”) to make millions of dollars in illegal profits trading stock on behalf of himself and his clients. In or about late 2020, MEADOW offered and agreed to provide items of value, such as Rolex watches, to a friend, Steven Teixeira, in exchange MNPI that Teixeira obtained by secretly accessing confidential work documents on a personal laptop computer (the “Laptop”) belonging to Teixeira’s then-girlfriend, an executive assistant at the Investment Bank. The documents on the Laptop contained MNPI about planned corporate acquisitions in which the Investment Bank served as an advisor.

In or around late July 2021, Teixeira secretly accessed confidential work information on the Laptop and learned that in less than a week, Penn National Gaming, Inc. (“Penn National”), was going to acquire Score Media and Gaming Inc. (“Score”), a Canadian digital media company, for approximately $2.2 billion. Teixeira shared this MNPI with a friend, who in turn shared it with MEADOW. MEADOW then purchased more than 769 call option contracts in Score between August 2, 2021, and August 3, 2021, based on the MNPI and also advised a colleague at the brokerage firm where he worked, their clients, and a friend to purchase Score securities. After Penn National’s acquisition of Score was announced publicly on August 5, 2021, MEADOW, his colleague, their clients at the brokerage firm, and MEADOW’s friend sold their holdings in Score for a combined profit exceeding $5 million.

Later, in or around early March 2022, Teixeira secretly accessed confidential work information on his then-girlfriend’s laptop and learned about a planned corporate acquisition of VMWare, an enterprise software company, for approximately $65 billion. Teixeira shared this MNPI with his friend, who in turn shared it with MEADOW. MEADOW purchased over 5,000 shares of VMWare stock, as well as call options contracts in VMWare, between May 9, 2022, and May 18, 2022, and advised his colleague at the brokerage firm to purchase VMWare securities. After there was public reporting that Broadcom was in talks to acquire VMWare, the VMWare holdings of MEADOW and his colleague increased significantly, and they began to sell their VMWare holdings for a combined profit exceeding $100,000.

MEADOW, 34, of Warren, New Jersey, who was arrested this morning, has been charged with six counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison.

Also unsealed today were charges against Steven Teixeira, who has pled guilty pursuant to a cooperation agreement.

United States v. Michael Shvartsman, Gerald Shvartsman, and Bruce Garelick

In October 2021, MICHAEL SHVARTSMAN, GERALD SHVARTSMAN, and BRUCE GARELICK together made more than $22 million dollars in illegal profits by trading in securities of Digital World Acquisition Corporation (“DWAC”) based on MNPI about DWAC’s planned but not yet public business combination with a media company founded by former President Donald J. Trump.

As sophisticated investors, MICHAEL SHVARTSMAN, GERALD SHVARTSMAN, and BRUCE GARELICK were invited to invest in DWAC and another special purpose acquisition company (“SPAC”), and after signing non-disclosure agreements, they were provided confidential information about the SPACs, including that a potential target of the SPACs was Trump Media & Technology Group (“Trump Media”). As a condition of receiving this information, the defendants were prohibited by the non-disclosure agreements from disclosing the confidential information they learned or using it to buy and sell securities on the open market. After making initial investments into DWAC through the initial public offering process, GARELICK was given a seat on DWAC’s board of directors, which gave him access to valuable MNPI about DWAC’s plans to merge with Trump Media. After learning MNPI through his role on DWAC’s board, GARELICK provided updates to his alleged co-conspirators — which he called “intelligence” — about the status of the merger negotiations and the timing of a public merger announcement.

In violation of the non-disclosure agreements that they had signed, and in contravention of GARELICK’s duties and responsibilities as a board member, the defendants bought millions of dollars of DWAC securities on the open market before the news of the Trump Media business combination was public. In addition to their own purchases, the defendants also passed DWAC’s confidential information to their friends on a trip to Las Vegas, to MICHAEL SHVARTSMAN’s neighbors, and to GERALD SHVARTSMAN’s employees at a furniture supply store. After DWAC’s merger with Trump Media was announced publicly, the stock and warrant holdings of MICHAEL SHVARTSMAN, GERALD SHVARTSMAN, and BRUCE GARELICK, and those they tipped, significantly increased in value. The defendants and the individuals they tipped then sold their DWAC securities for a significant profit.

MICHAEL SHVARTSMAN, 52, of Sunny Isles Beach, Florida, who was arrested this morning, has been charged with five counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison.

GERALD SHVARTSMAN, 45, of Aventura, Florida, who was arrested this morning, has been charged with three counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison.

BRUCE GARELICK, 53, of Fort Lauderdale, Florida, who was arrested this morning, has been charged with five counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy, which carries a maximum sentence of five years in prison.

United States v. Joseph Dupont, Shawn Cronin, Slava Kaplan, and Paul Feldman

In 2020, JOSEPH DUPONT, SHAWN CRONIN, SLAVA KAPLAN, a/k/a “Stanley Kaplan,” and PAUL FELDMAN engaged in an insider trading scheme surrounding the announcement of one pharmaceutical company’s acquisition of another. CRONIN, KAPLAN, and FELDMAN collectively made more than $2.2 million dollars in illegal profits by trading in stocks and options based on MNPI that DUPONT misappropriated from his employer.

DUPONT was a vice president at Alexion Pharmaceuticals, Inc. (“Alexion”) and, on January 31, 2020, was informed of Alexion’s upcoming acquisition of Portola Pharmaceuticals, Inc. (“Portola”). Before that acquisition was publicly announced, in April 2020, DUPONT provided MNPI about the acquisition to his childhood friend, CRONIN. Not only were CRONIN and DUPONT childhood friends, but also CRONIN — who, at the time, was a sergeant in the police department of Dighton, Massachusetts, and later served as the chief of police — supervised DUPONT in DUPONT’s capacity as a reserve officer in that police department. Based on the MNPI that DUPONT provided CRONIN, CRONIN purchased shares of Portola stock as well as out-of-the-money call options for Portola stock.

In turn, CRONIN shared MNPI about Portola’s pending acquisition with Jarett Mendoza, another childhood friend of both CRONIN’s and DUPONT’s. CRONIN also assisted Mendoza in purchasing Portola stock in the days before the acquisition was publicly announced.

CRONIN shared MNPI about Portola’s pending acquisition not only with Mendoza, but also with KAPLAN, a friend of CRONIN’s, who was also known to DUPONT. CRONIN shared the MNPI with KAPLAN both so that KAPLAN could trade in advance of the acquisition and so that KAPLAN would assist CRONIN in formulating trading strategies to maximize CRONIN’s own insider trading profits. Based on the MNPI that CRONIN gave to KAPLAN, KAPLAN bought Portola shares and options.

KAPLAN, in turn, shared MNPI about the upcoming acquisition with, among others, FELDMAN, a friend and colleague of KAPLAN’s. Based on the MNPI that KAPLAN gave FELDMAN, FELDMAN aggressively bought Portola call options.

FELDMAN, for his part, shared MNPI about the Portola acquisition with others, including a work colleague.

Alexion’s acquisition of Portola was publicly announced on the morning of May 5, 2020. Portola’s stock increased significantly in value. CRONIN, KAPLAN, FELDMAN, and their tippees sold their shares of Portola and call options for Portola stock, reaping millions of dollars of illegally obtained trading profits.

DUPONT, 44, of Rehoboth, Massachusetts, who surrendered to authorities today, has been charged with one count of Title 15 securities fraud and one count of tender offer fraud, each of which carries a maximum sentence of 20 years in prison, and one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison.

CRONIN, 43, of Dighton, Massachusetts, who surrendered to authorities today, has been charged with three counts of securities fraud under Title 15 and three counts of tender offer fraud, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy to commit securities fraud and tender offer fraud, which carries a maximum sentence of five years in prison;.

KAPLAN, 45, of Hopewell Junction, New York, who was arrested today, has been charged with three counts of securities fraud under Title 15 and three counts of tender offer fraud, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy to commit securities fraud and tender offer fraud, which carries a maximum sentence of five years in prison.

FELDMAN, 48, of Poughquag, New York, who was arrested today, has been charged with six counts of securities fraud under Title 15 and six counts of tender offer fraud, each of which carries a maximum sentence of 20 years in prison; one count of securities fraud under Title 18, which carries a maximum sentence of 25 years in prison; and one count of conspiracy to commit securities fraud and tender offer fraud, which carries a maximum sentence of five years in prison.

Also unsealed today were charges against Jarett Mendoza, who has pled guilty pursuant to a cooperation agreement.

SEC Charges Stockbroker and Friend with Insider Trading / Trading was based on nonpublic information stolen from girlfriend’s laptop and shared with friends (SEC Release)
https://www.sec.gov/news/press-release/2023-124
In the United States District Court for the Southern District of New York, the SEC filed a Complaint
https://www.sec.gov/litigation/complaints/2023/comp-pr2023-124.pdf charging Jordan Meadow and Steven Teixeira with violating the antifraud provisions of the federal securities laws. Parallel criminal charges were filed. As alleged in part in the SEC Release:

[T]eixeira accessed nonpublic information on possible upcoming mergers and acquisitions of public companies from the laptop of his girlfriend, who was employed at a prominent New York-based investment bank. As alleged, Teixeira then used the information to purchase call options on several issuers ahead of the announcement of the deals and tipped the information to his friends, including Meadow, so that they could trade as well. The scheme allegedly generated illicit profits of approximately $28,600 for Teixeira, while Meadow made more than $730,000. Additionally, according to the complaint, Meadow recommended trades to his brokerage customers based on the material nonpublic information from Teixeira, resulting in millions of dollars in profits for them and hundreds of thousands of dollars in commissions for Meadow.

SEC Charges Former Pfizer Statistician with Insider Trading Ahead of COVID-19 Announcement / Employee and friend traded ahead of Pfizer’s “game-changer” announcement on the success of its Paxlovid trial (SEC Release)
https://www.sec.gov/news/press-release/2023-123
In the United States District Court for the Southern District of New York, the SEC filed a Complaint
https://www.sec.gov/litigation/complaints/2023/comp-pr2023-123.pdf charging former Pfizer employee Amit Dagar and his friend/business partner Atul Bhiwapurkar with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act and Exchange Act Rule 10b-5 thereunder. Parallel criminal charges were filed. As alleged in part in the SEC Release:

[D]agar was a senior statistical program lead for the Paxlovid drug trial, which began in July 2021 as part of the company’s efforts to address the global health pandemic. On the day before the Paxlovid announcement, the complaint alleges, Dagar learned material, nonpublic information about the success of the trial. Specifically, the SEC alleges that Dagar’s supervisor informed him via chat that “we got the outcome,” there was a “lot of work lined up,” and that there would be a “press release tomorrow,” to which Dagar responded with “oh really” and “kind of exciting.” Several hours after that exchange, Dagar allegedly purchased short term, out-of-the-money Pfizer call options, including options that expired the very next day, and then tipped Bhiwapurkar, who also purchased similar call options in Pfizer. The complaint alleges that Dagar’s and Bhiwapurkar’s trading generated approximately $214,395 and $60,300 respectively in illicit profits, which amounted to one-day investment returns of 2,458 percent and 791 percent.

SEC Charges Police Chief, Four Others in Connection with Insider Trading Before Pharmaceutical Merger (SEC Release)
https://www.sec.gov/news/press-release/2023-122
In the United States District Court for Southern District of New York, the SEC filed a Complaint
https://www.sec.gov/litigation/complaints/2023/comp-pr2023-122.pdf charging:

Joseph Dupont (vice president and part of the acquisition team at Alexion Pharmaceuticals Inc.),
Shawn Cronin (Dighton, Massachusetts police chief)
Jarett Mendoza,
Stanley Kaplan, and
Paul Feldman.

with violating the antifraud and tender offer provisions of the federal securities laws. Parallel criminal charges were filed. The SEC’s complaint charges all five defendants and seeks permanent injunctive relief, disgorgement with prejudgment interest, and civil penalties. The complaint also seeks officer and director bars against each defendant. As alleged in part in the SEC Release [Ed: Portola Pharmaceuticals, Inc.]:

[J]oseph Dupont was a vice president and part of the acquisition team at Alexion when he knowingly or recklessly tipped confidential information about the acquisition to his close friend Shawn Cronin, the police chief. Cronin allegedly then provided the information to Jarett Mendoza, another close friend, and to family friend Stanley Kaplan, who provided advice to Cronin on trading strategies. In turn, Kaplan allegedly provided the information to his friend and colleague, Paul Feldman. The SEC’s complaint alleges that Cronin, Mendoza, Kaplan, and Feldman purchased Portola stock and/or out-of-the money call options prior to the announcement, on the basis of the material, nonpublic information they received. The complaint further alleges that Kaplan and Feldman passed the information on to other family members and friends, who profitably traded. On the day of the acquisition announcement, Portola’s stock price increased more than 130 percent.

According to the SEC’s complaint, filed in U.S. District Court for the Southern District of New York, the defendants’ approximate ill-gotten gains were as follows: Cronin - $72,000; Mendoza - $39,000, Kaplan - $472,000; and Feldman - $1.73 million. The other traders who allegedly received nonpublic information from either Kaplan or Feldman saw profits of an additional $1.7 million. After realizing their profits, Kaplan texted Feldman in Russian, “Let’s hope our golden goose will continue laying golden eggs!”

SEC Charges Former DWAC Board Member and Others for Insider Trading in DWAC Securities / Defendants made tens of millions of dollars from illegally trading on nonpublic knowledge of DWAC’s plan to acquire Trump Media & Technology Group Corp.(SEC Release)
https://www.sec.gov/news/press-release/2023-121
In the United States District Court for the Southern District of New York, the SEC filed a Complaint
https://www.sec.gov/litigation/complaints/2023/comp-pr2023-121.pdf charging former Digital World Acquisition Corporation (DWAC) Board member Bruce Garelick, Michael Shvartsman, Rocket One Capital LLC; and Gerald Shvartsman with violating the antifraud provisions of the federal securities laws; and also charging Garelick with violating the reporting obligations of Section 16 of the Exchange Act. Parallel criminal charges were filed against Garelick and the Shvartsmans. As alleged in part in the SEC Release [Ed; Trump Media & Technology Group Corp ("TMTG")]:

[A]fter DWAC appointed Garelick as a member of its board of directors in September 2021, Garelick learned about, and voted on, material nonpublic actions and updates regarding the negotiations between DWAC and its merger target, TMTG. Garelick, who was separately employed as the chief strategy officer at Rocket One Capital, then allegedly shared those updates with his boss, Michael Shvartsman, who in turn shared them with his brother, Gerald Shvartsman. Each then allegedly purchased DWAC securities on the open market based on the material nonpublic information they learned about DWAC. Michael Shvartsman placed his trades through an account in the name of Rocket One Capital. The defendants then sold their positions shortly after DWAC announced it had signed a merger agreement with TMTG and collectively realized illicit profits of more than $22.9 million from those trades. The complaint further alleges that, despite being a DWAC director and thus having certain reporting obligations, Garelick failed to file SEC Forms 4 and 5 related to his transactions in DWAC securities.

FINRA Fines and Suspends Rep for Excessive/Unsuitable Trading
In the Matter of Douglas Blake Solinsky, Respondent (FINRA AWC 2019064511203)
https://www.finra.org/sites/default/files/fda_documents/2019064511203
%20Douglas%20Blake%20Solinsky%20CRD%204715268
%20AWC%20%20vr.pdf
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, Douglas Blake Solinsky submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Douglas Blake Solinsky was first registered in 2003 and from November 2008 through February 2019, he was registered with Newbridge Securities Corporation. In accordance with the terms of the AWC, FINRA imposed upon Solinsky a $10,000 fine, $27,622 in restitution, and a four-month suspension from associating with any FINRA member in all capacities. As alleged in part in the "Overview" portion of the AWC "Between January 2017 and February 2019, Solinsky excessively and unsuitably traded two customer accounts in violation of FINRA Rules 2111 and 2010."

June 28, 2023

SEC Charges Convicted Fraudster in Real Estate Ponzi Scheme (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25759.htm
In the United States District Court for the Southern District of New York, the SEC filed a Complaint charing Wilson Baston with violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities and Exchange Act, and Rule 10b-5 thereunder
https://www.sec.gov/litigation/complaints/2023/comp25759.pdf. The SEC Release alleges in part that:

In 2008, Baston pleaded guilty to deceiving hundreds of investors in a Ponzi scheme. According to the SEC's complaint, soon after his release from prison in 2017, Baston began using aliases, including Chanon Gordon, and presented himself to investors as having expertise in the real estate industry. The complaint alleges that Baston solicited investors to invest with Gordon Management Group LLC, a purported real estate company, by telling them that their money would be used for the purpose of funding specific real estate transactions. In exchange, Baston allegedly gave the investors short-term promissory notes, stating that the money would be returned to them within days or weeks along with a substantial fee, equal to as much as 25 percent of the investment. In some cases, Baston also promised investors a percentage of profits from a transaction. The complaint alleges that, instead of using investor money solely to fund the real estate transactions he promised, Baston used the money to pay earlier investors and for his own personal expenses and benefit.

Federal Court Orders Ohio Man to Pay Over $50 Million for Fraudulent Digital Asset Trading Scheme (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8732-23
The United States District Court for the Southern District of New York issued a Default Judgment
https://www.cftc.gov/media/8811/enfmichaelackermanfinaljudgment062723/download granting a permanent injunction against Michael Ackerman; banning Ackerman from trading in any CFTC-regulated markets and registering with the CFTC; and, further, requiring him to pay $27 million in restitution to defrauded victims and a $27 million civil monetary penalty in connection with a fraudulent digital asset trading scheme. As alleged in part in the CFTC Release:

The order stems from a CFTC complaint filed on February 11, 2020. The complaint alleged that from August 2017 through December 2019, Ackerman operated a fraudulent scheme that solicited and misappropriated funds to purportedly trade digital commodity assets. The complaint further alleged that based on Ackerman’s fraudulent misrepresentations, more than 150 individuals and entities deposited at least $33 million with him. However, less than $10 million was used to trade digital commodity assets and the remaining funds were misappropriated for personal use or to prolong the fraudulent trading scheme.

The complaint also alleged that to entice potential customers to invest in his scheme, Ackerman knowingly and falsely represented that he was profitably trading digital commodity assets and earning monthly returns of approximately 15%. However, Ackerman was not a successful trader, and to conceal the fraud he provided customers with false accounting statements, newsletters containing false trading returns, and fictitious screenshots of the amount of money under management.

Parallel Criminal Action

On February 15, 2022, Ackerman was sentenced, in a related criminal case in the U.S. District Court for the Southern District of New York, to five years of probation with a year of home confinement. On August 22, 2022, Ackerman was ordered to pay $31 million in restitution. [See United States v. Ackerman, No. 1:20-cr-00093]

CFTC Orders Australian Company to Pay Penalty for Both Federal and Exchange Platinum Futures Position Limits Violations (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8735-23
The CFTC issued an Order settling charges against Challenger Life Company LImited for exceeding federal and exchange spot month speculative position limits for Platinum futures; and imposing a $150,000 civil monetary penalty..
https://www.cftc.gov/media/8831/enfchallengerlifeorder062923/download As alleged in part in the CFTC Release:

The spot month for the April 2022 NYMEX Platinum futures contract was from March 30, 2022 through April 27, 2022.

The order finds that as of the close of business on March 30, 2022, Challenger Life held a net long futures position of 874 contracts in the NYMEX April 2022 Platinum futures contract. This position exceeded the federal spot month speculative position limit of 500 contracts.

The order also finds that as of March 31, 2022 and May 9, 2022, Challenger Life exceeded the exchange’s 500-contract delivery limit for the April 2022 and May 2022 Platinum futures contracts, respectively.

Wells Fargo Advisors Financial Network Accused of Civil Theft in FINRA Arbitration
In the Matter of the Arbitration Between Brian Bennett Demere, Claimant, v. Wells Fargo Advisors Financial Network, Respondent (FINRA Arbitration Award 23-00249)
https://www.finra.org/sites/default/files/aao_documents/23-00249.pdf
In a FINRA Arbitration Statement of Claim filed in January 2023 by pro se public customer Claimant Demere, he alleged civil theft and sought $2,027.42 in compensatory damages plus punitive damages. Respondent Wells Fargo generally denied the allegations and asserted affirmative defenses. The FINRA Arbitration Award asserts in part that the "cause of action relates to Respondent’s retention of funds from Claimant’s trade settlement check for full services rendered on Claimant’s account and that Claimant alleges he never knew about or
agreed to." Without providing any explanation or rationale, the sole FINRA Arbitrator found Respondent Wells Fargo liable and ordered it to pay to claimant Demere $2,027.42 in compensatory damages plus a $75 filing fee reimbursement.

June 27, 2023

SEC Settles Case Against Two Former Lawyers for Scheme to Create False Opinion Letters (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25756.htm
The United States District Court for the Southern District of New York entered Final Judgments against former attorneys Richard J. Rubin and Thomas J. Craft. As alleged in part in the SEC Release:

[F]rom December 2015 to July 2018, Rubin, who was disbarred in 1995, continued to fraudulently practice securities law by submitting at least 128 attorney opinion letters that allowed microcap stock issuers' securities to be purchased by and sold to the investing public. The complaint alleged that Rubin signed certain letters, falsely claiming to be an attorney, and that he drafted other letters for Craft's signature. The complaint alleged that Craft signed or permitted the use of his name and signature on at least 30 letters that falsely stated he had performed substantive work to formulate the opinions in those letters. The SEC's complaint charged Rubin and Craft with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

Rubin and Craft were charged criminally by the United States Attorney's Office for the Southern District of New York, and each pleaded guilty to one count of securities fraud. Rubin was sentenced on November 2, 2021, and received one-year probation, forfeited $117,068.15, and was ordered to pay a $1,000 monetary penalty and perform 200 hours of community service. Craft was sentenced on October 27, 2022 to four months of home confinement and one-year probation, forfeited $55,000, and was ordered to perform 200 hours community service. He also agreed to the surrender of his law license.

Rubin and Craft consented to the entry of separate final judgments in the SEC action, permanently enjoining each of them from violating the Securities Act and Exchange Act antifraud provisions and ordering penny stock bars.

SEC Charges Former MusclePharm Executives with Accounting and Disclosure Fraud (SEC Release)
https://www.sec.gov/news/press-release/2023-120
Without admitting or denying the allegations in an SEC Complaint filed in the United States District Court for the Central District of California
https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-120-casutto.pdf, MusclePharm Corp.’s former Executive Vice President of Sales and Operations, Brian H. Casutto; former Vice President of Sales, Matthew J. Zucco; and former contract Chief Financial Officer, Kevin R. Harris consented to the entry of judgments permanently enjoining them from violating the antifraud provisions and other provisions of the federal securities laws; requiring Casutto and Zucco to pay disgorgement with prejudgment interest of $79,760.01 and $15,033.06, respectively; requiring Casutto and Harris to pay a civil penalty of $207,183 and $50,000, respectively, and reserving the issue of Zucco’s civil penalty for further determination by the court; and barring Casutto from serving as an officer or director of a public company for five years. In a separate Complaint, the SEC charged former Chief Executive Officer Ryan C. Drexler
https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-120-drexler.pdfwith violating and/or aiding and abetting violations of the antifraud provisions and other provisions of the federal securities laws. As alleged in part in the SEC Release:

[C]asutto, with the assistance of Zucco, engaged in a fraudulent scheme to prematurely recognize revenue for orders that remained in MusclePharm’s control. The complaint further alleges that Harris should have known that MusclePharm prematurely recognized certain revenue and that MusclePharm overstated other revenue by misclassifying customer credits as advertising expenses rather than as reductions to revenue. The defendants’ misconduct allegedly inflated the company’s publicly reported quarterly revenues by as much as 25 percent and gross profits by as much as 49 percent.

The SEC’s complaint against Drexler alleges that, while CEO, he misled investors about the catastrophic impact of the company’s default with institutional noteholders and that he falsely certified that he evaluated the company’s internal controls.

SEC Awards Over $1 Million To Whistleblower Claimant and Over $1 Million to Whistleblower Joint Claimants
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-97805; Whistleblower Award Proc. File No. 2023-70)
https://www.sec.gov/rules/other/2023/34-97805.pdf
The Claims Review Staff ("CRS") issued a Preliminary Determination recommending the that Claimant 1 receive a Whistleblower Award of over $1 million. The Commission ordered that CRS's recommendations be approved. The Order asserts in part that:

We find the award allocation is appropriate. Claimant 1’s arguments in his/her reconsideration request for a higher award percentage are largely based on speculation and do not support a higher award percentage allocation to Claimant 1.

First, as to the timing of the submissions, Claimant 1 provided information before Claimant 2, but staff opened the Other investigation based on Claimant 1’s tip. While staff planned to look into the culpability of the Company, staff did not open the Covered Action investigation until after it received Clamant 2’s detailed information. The record is clear that staff opened the Covered Action investigation based both on information developed from the Other investigation and Claimant 2’s tip, and that both Claimants 1 and 2 provided information that caused, in part, staff to open the Covered Action investigation. . . .

SEC Denies Whistleblower Award to Two Claimants
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-97804; Whistleblower Award Proc. File No. 2023-69)
https://www.sec.gov/rules/other/2023/34-97804.pdf
The Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant 1 and Claimant 2. The Commission ordered that CRS's recommendations be approved. The Order asserts in part that:

To start, Claimant 1 has represented to the Commission on multiple occasions that the information contained in the Claimant 1 TCR was based on publicly available sources. In the Claimant 1 TCR, dated REDACTED Claimant 1 was asked: “What is the source of your information?” In response, Claimant 1 stated that the source of his/her information was only “[p]ublicly available information.” Claimant 1’s whistleblower award application, dated REDACTED (“Claimant 1 WB-APP”), suggests that the Claimant 1 TCR information was based on “obvious information” and “website evidence.” . . .

. . .

As the Preliminary Determination correctly stated, Claimant 2 did not provide any information that led to the successful enforcement of the Covered Action within the meaning of Section 21F(b)(1) of the Exchange Act and Rules 21F-3(a)(3) and 21F-4(c) thereunder. The CRS noted that Claimant 2 submitted the Anonymous Tip on behalf of Claimant 2’s client; the Anonymous Tip was closed with a designation of “no further action” after the Commission was unable to substantiate the allegations contained therein. Moreover, the Declaration confirmed under penalty of perjury that the Anonymous Tip did not play a role in the opening of the investigation. The Declaration noted that Staff did not communicate with Claimant 2 or his/her anonymous client. Neither Claimant 2 nor his/her client provided any information other than the Anonymous Tip to Staff during the course of the Investigation. Further, the Declaration stated that none of the information contained in the Anonymous Tip helped advance the Investigation, and none of the information contained in the Anonymous Tip was used in, nor had any impact on, the charges brought by the Commission in the Covered Action. Additionally, there is no support for Claimant 2’s allegation that the record that formed the basis of the Preliminary Determination was insufficient. . . .

SEC Denies Whistleblower Award to Two Claimants
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-97803; Whistleblower Award Proc. File No. 2023-68)
https://www.sec.gov/rules/other/2023/34-97803.pdf
The Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant 2 and Claimant 3. The Commission ordered that CRS's recommendations be approved. The Order asserts in part that:

Claimants do not qualify for a whistleblower award in this matter because their information did not cause the staff to open the Investigation, nor did their information cause the staff to inquire into different conduct in or significantly contribute to the ongoing Investigation. First, the record demonstrates that the Investigation was opened based upon information developed by Commission staff in an earlier investigation approximately two years before Claimants submitted their TCR.

FINRA Censures and Fines Open to the BGC Financial, L.P. for Reg SHO Violations
In the Matter of BGC Financial, L.P. , Respondent (FINRA AWC 2018060678201)
https://www.finra.org/sites/default/files/fda_documents/2018060678201
%20BGC%20Financial%20L.P.%20CRD%2019801%20AWC%20lp.pdf
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, BGC Financial, L.P. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that BGC Financial, L.P. has been a FINRA member firm since 1987 with about 270 registered representatives at 12 branches. In accordance with the terms of the AWC, FINRA imposed upon BGC Financial, L.P. a Censure and $50,000 fine. As alleged in part in the "Overview" portion of the AWC [Ed: footnote omitted]:

From September 2010 to February 2019, the firm failed to include two proprietary accounts in calculations of the firm’s overall net position in equity securities (e.g., “short” or “long”) being sold, which ultimately caused certain orders to be mismarked under Regulation SHO Rule 200(g). This occurred because the firm aggregated the accounts into independent trading units, even though the firm did not create a written plan of organization that identified the aggregation units, specified their trading objectives, and supported their independent identities, pursuant to Regulation SHO Rule 200(f)(1).

The firm also failed to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with Rule 200(f) and (g), in violation of FINRA Rules 3110 and 2010, and NASD Rule 3010.

FINRA Censures and Fines Open to the Public Investing, Inc. for Market Access Risk Management
In the Matter of Open to the Public Investing, Inc., Respondent (FINRA AWC 2020065340901)
https://www.finra.org/sites/default/files/fda_documents/2020065340901
%20Open%20to%20the%20Public%20Investing%2C%20Inc
.%20CRD%20127818%20AWC%20lp.pdf
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, Open to the Public Investing, Inc submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Open to the Public Investing, Inc. has been a FINRA member firm since 2004 with about 35 registered representatives. In accordance with the terms of the AWC, FINRA imposed upon Open to the Public Investing, Inc. a Censure and $500,000 fine. As alleged in part in the "Overview" portion of the AWC:

From January 2019 through February 2021, Public Investing did not conduct reasonable reviews of the execution quality of its customers' orders. During this period, Public Investing's reviews of its customers' execution quality were limited to reviewing its clearing firm's quarterly reports prepared pursuant to Rule 606 under the Securities Exchange Act of 1934. These reports did not provide any data specific to Public In vesting's execution quality or the quality of the executions it could have obtained from competing markets. As a result, Public Investing violated FINRA Rules 531 0(a), 5310.09(a) and (b), and 2010.

During the same period, Public Investing failed to establish and maintain a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with its best execution obligations. The firm's supervisory reviews were not reasonably designed to evaluate whether the firm was meeting its best execution obligations, and its WSPs did not provide any procedures for conducting execution quality reviews. As a result, Public Investing violated FINRA Rules 3110 and 2010.

From January 2019 to December 2020, Public Investing also failed to disclose in writing at account opening or annually thereafter that the firm received payment for order flow through its routing arrangements, in violation Rule 607(a) under the Securities Exchange Act of 1934 and FINRA Rule 2010.

Additionally, from January 2019 to October 2021, Public Investing violated FINRA Rules 2210(d)(1)(A) and (B) and 2010 by disseminating six retail communications that contained misleading statements.

Preventing Financial Exploitation: Steps for Safeguarding Senior Investors (FINRA Unscripted Podcast)
https://www.finra.org/media-center/finra-unscripted/senior-investor-protection-update
FINRA Associate General Counsel Alicia Goldin and Vice President and Associate General Counsel Jim Wrona discuss safeguarding seniors investors.

June 26, 2023

Central Valley Man Sentenced to over 6 Years in Prison for $9 Million Cow Manure Ponzi Scheme (DOJ Release)
https://www.justice.gov/usao-edca/pr/central-valley-man-sentenced-over-6-years-prison-9-million-cow-manure-ponzi-scheme
Yeah . . . I know . . . as if far too many Wall Street deals aren't full of shit to begin with. Be that as it may --

In the United States District Court for the Eastern District of California, Ray Brewer, 66, pled guilty to wire fraud, money laundering, and identity theft' and he was was sentenced to six years and nine months in prison for running a multimillion-dollar fraud scheme where he purported to turn cow manure into green energy.

Yeah . . . I know . . . again . . . as if far too many Wall Street deals don't turn good ol' greenbacks into cow turds. Be that as it may, again, the DOJ Release asserts in part that:

[F]rom March 2014 through December 2019, Brewer stole $8,750,000 from investors by claiming to build anaerobic digesters on dairies in Fresno, Kern, Kings, and Tulare Counties, as well as other counties in California and Idaho. Anaerobic digesters are large machines that use microorganisms to break down biodegradable material and turn it into methane. The methane can then be sold on the open market as green energy. The methane also produces Renewable Energy Credits (REC), which represent the property right to the reduction in greenhouse gas emissions achieved through green energy creation. RECs are commonly purchased by companies to meet green energy regulatory, contractual, and initiative requirements or commitments. Brewer’s investors were supposed to receive 66% of all net profits as well as tax incentives.

Brewer made various misrepresentations to his investors. Brewer took investors on tours of dairies where he said that he was going to build the digesters and sent them forged lease agreements with the dairy owners. He also sent the investors altered agreements with banks that made it appear as though he had obtained millions of dollars in loans to build the digesters. Moreover, he sent the investors forged contracts with multinational companies that made it appear as though he had secured revenue streams. Finally, he sent the investors fake pictures of the digesters under construction. None of this was true.

Fake digester picture sent to investors

After Brewer received the investors’ money, he transferred the funds to multiple other bank accounts that he opened in the names of different entities, his family members, and an alias. He used false descriptions for the transfers. He did so to conceal the location, source, ownership, and control of the money before using it for personal expenditures. These expenditures included two plots of land that were 10 or more acres each, a 3,700 square foot custom home, and new Dodge Ram pickup trucks.

Brewer subsequently told his investors that the digesters were progressing when that was not the case. He did so by sending them fake documents: construction schedules, invoices for project-related costs, power generation reports, RECs, and pictures.

In some instances, Brewer purported to refund investors all or some of their money. The refunds, however, came from newly received money from other investors who had not authorized Brewer to use their money in this way. When Brewer’s investors realized the fraud and obtained civil judgments against him, he moved to Montana and assumed a new identity.

Upon his arrest, Brewer told officers that they had the wrong man. He also claimed to have been in the Navy and recalled how he once saved several soldiers during a fire by blocking the flames with his body so that they could escape. Brewer has since admitted that these were both lies meant to curry favor with law enforcement.

Investment Firm Operator Charged with Running $100 Million Ponzi Scheme (DOJ Release)
https://www.justice.gov/usao-edmi/pr/investment-firm-operator-charged-running-100-million-ponzi-scheme-0
In the United States District Court for the Eastern District of Michigan, a Complaint was filed charging D arren Anthony Robinson with wire fraud.
https://www.justice.gov/d9/2023-06/robinson_complaint.pdf As alleged in part in the DOJ Release:

[R]obinson operated a supposed trading firm known as “QYU,” which was located in Panama and the Cayman Islands. QYU represented to investors that it was consistently generating stellar investment results. For example, in one QYU document, the firm claimed that a $100,000 investment into its fund in 2014 would have grown to over $2 million by 2021. That same document claimed the fund did not have a single losing month over that same period. QYU investors were promised guaranteed returns and told the firm was only paid on trading profits, not investor principal.

The complaint alleges that QYU was simply a Ponzi scheme. Investor funds were largely not used for trading activity. Instead, new investor funds were used to pay other investor distributions, cover QYU business expenses, compensate QYU employees, and fund Robinson’s lifestyle. QYU investors were provided with false account statements and fictious trading data. The complaint indicates that QYU obtained an estimated $100 million from investors.

SEC Charges Florida Resident for Operating $112 Million Ponzi Scheme that Targeted Haitian-American Community / Court granted SEC’s request for emergency relief and asset freezes (SEC Release)
https://www.sec.gov/news/press-release/2023-118
In the United States District Court for the Southern District of Florida, the SEC filed a Complaint
https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-118.pdf charging Sanjay Singh and Royal Bengal Logistics Inc. with violating the registration and anti-fraud provisions of the federal securities laws; and further names as Relief Defendants Sheetal Singh, the spouse of Sanjay Singh, and Constantina Celicourt, the spouse of Royal Bengal Logistics’s Vice President of Business Development. The District Court granted the SEC’s request for emergency relief, including preliminary injunctive relief, asset freezes, the appointment of a Receiver, and an order prohibiting the destruction of documents. As alleged in part in the SEC Release:

[F]rom at least 2019 through 2023, Singh, through Royal Bengal Logistics Inc., offered and sold investors high-yield investment programs that purportedly generated 12.5 to 325 percent in guaranteed returns. As alleged, Singh and Royal Bengal promised investors the company would use their money to expand operations and increase its fleet of semi-trucks and trailers. According to the SEC’s complaint, defendants assured investors that these investment programs were safe, and that Royal Bengal generated up to $1 million in revenue per month. In reality, the SEC alleges, Royal Bengal has operated at a loss and used approximately $70 million of new investor funds to make Ponzi-like payments to other investors.

As alleged in the complaint, Singh misappropriated at least $14 million of investor funds for himself and others, who did not provide any legitimate services in exchange for those investor funds. Singh also allegedly diverted more than $19 million of investor funds to two brokerage accounts he controlled, engaged in highly speculative equities trading on margin in those accounts, and, as a result, lost more than $1 million of investor money.

SEC Obtains Final Judgment Against Vuuzle Media Corp. and Affiliated Individuals and Entities in Connection with Over $25 Million Offering Fraud (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25754.htm
The United States District Court for the District of New Jersey entered a Final Judgment against Vuuzle Media Corp. ("Vuuzle US"), Vuuzle Media Corp Limited ("Vuuzle UAE," and with Vuuzle US, "Vuuzle"),Ronald Shane Flynn, and Richard Marchitto.
https://www.sec.gov/litigation/litreleases/2023/judg25754.pdfThe SEC Release asserted that:

[B]etween 2016 and 2022, Vuuzle and Flynn raised more than $25 million from investors using a boiler room of salespeople based primarily in the Philippines and employing high-pressure tactics. According to the amended complaint, Vuuzle and Flynn promised investors that Vuuzle was a legitimate and growing company and a "pre-IPO" investment opportunity, when in fact Vuuzle had never made a profit and had never made a public offering on any stock exchange. As alleged, only a small fraction of investor funds went towards the online streaming business, with the remainder misappropriated to sustain the boiler room, to pay commissions to Flynn and others, and to pay Flynn and Marchitto's personal and business expenses. The amended complaint alleged that Flynn and Vuuzle continued their fraud after the commencement of the SEC's lawsuit by, among other things, offering a "VUCO security token" and falsely promising the tokens would substantially increase in value if investors exchanged their Vuuzle shares for tokens. The amended complaint alleged that Marchitto facilitated the fraudulent scheme by maintaining a U.S. bank account, corporate credit cards, and a New York office address for Vuuzle, and that he opened new accounts after the SEC's lawsuit commenced.

The judgments, entered on the basis of default, permanently enjoin Flynn, Vuuzle US, Vuuzle UAE, and Marchitto from violating the anti-fraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgments also permanently enjoin Vuuzle US, Vuuzle UAE, and Flynn from violating the registration provisions of Section 5 of the Securities Act; Marchitto from aiding and abetting violations of these sections; and Flynn from violating the broker/dealer registration provisions of Section 15 of the Exchange Act. Flynn, Vuuzle US, and Vuuzle UAE were jointly and severally ordered to pay disgorgement of $25,807,490.73 and pre-judgment interest of $720,354.08. Marchitto was ordered to pay disgorgement of $464,819 and pre-judgment interest of $12,974.31. The Court further imposed the following civil monetary penalties: $25,807,490.73 (Flynn); $31,080 (Marchitto); and $1,035,909 each (Vuuzle US and Vuuzle UAE).

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Securities Industry Commentator by Bill Singer Esq

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