A Clearinghouse of Solutions
for 
Financial Professionals

The Financial Professionals Coalition, Ltd. is a diverse resource for over 1.2 million registered representatives, associated persons, traders, bankers, back-office staff, and owners of broker-dealers and registered investment advisors. The Coalition provides courtesy consultations with industry experts. Membership is free.

FTC Sues Amazon for Illegally Maintaining Monopoly Power / Amazon’s ongoing pattern of illegal conduct blocks competition, allowing it to wield monopoly power to inflate prices, degrade quality, and stifle innovation for consumers and businesses (FTC Release)
https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-sues-amazon-illegally-maintaining-monopoly-power
The Federal Trade Commission and the attorneys general of Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin  filed a Complaint https://www.ftc.gov/system/files/ftc_gov/pdf/1910129AmazoneCommerceComplaintPublic.pdf in the United States District Court for the District of Washington alleging that Amazon.com, Inc. is a monopolist that uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power. As alleged in part in the FTC Release:

[A]mazon’s anticompetitive conduct occurs in two markets—the online superstore market that serves shoppers and the market for online marketplace services purchased by sellers. These tactics include:

• • Anti-discounting measures that punish sellers and deter other online retailers from offering prices lower than Amazon, keeping prices higher for products across the internet. For example, if Amazon discovers that a seller is offering lower-priced goods elsewhere, Amazon can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible.
    
  • Conditioning sellers’ ability to obtain “Prime” eligibility for their products—a virtual necessity for doing business on Amazon—on sellers using Amazon’s costly fulfillment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms. This unlawful coercion has in turn limited competitors’ ability to effectively compete against Amazon.

Amazon’s illegal, exclusionary conduct makes it impossible for competitors to gain a foothold. With its amassed power across both the online superstore market and online marketplace services market, Amazon extracts enormous monopoly rents from everyone within its reach. This includes:

• • Degrading the customer experience by replacing relevant, organic search results with paid advertisements—and deliberately increasing junk ads that worsen search quality and frustrate both shoppers seeking products and sellers who are promised a return on their advertising purchase.
    
    
  • Biasing Amazon’s search results to preference Amazon’s own products over ones that Amazon knows are of better quality. 
    
    
  • Charging costly fees on the hundreds of thousands of sellers that currently have no choice but to rely on Amazon to stay in business. These fees range from a monthly fee sellers must pay for each item sold, to advertising fees that have become virtually necessary for sellers to do business. Combined, all of these fees force many sellers to pay close to 50% of their total revenues to Amazon. These fees harm not only sellers but also shoppers, who pay increased prices for thousands of products sold on or off Amazon.  

ANTHONY VIGGIANO was employed at two different, leading global financial institutions located in New York, New York, specifically an investment management firm (“Firm-1”) and an investment bank (“Firm-2,” and together with Firm-1, the “Firms”). VIGGIANO worked as an analyst in Firm-1’s New York, New York, office between in or about April 2021 and in or about October 2021 and then worked at Firm-2 in New York, New York, as an associate in the asset management department.  While working at the Firms, VIGGIANO received confidential internal communications that contained detailed information about non-public potential strategic partnerships involving Firm-1 and acquisitions involving Firm-2. 

VIGGIANO attended college with FORLANO and was a childhood friend of SALAMONE.  In violation of the duties that he owed to each of the Firms, VIGGIANO tipped FORLANO and SALAMONE with material nonpublic information (“MNPI”) relating to the names of potential counterparties for Firm-1’s strategic partnerships and, later, information that VIGGIANO learned during his employment at Firm-2 about companies that were potential acquisition targets. After VIGGIANO started working at Firm-2, he continued tipping FORLANO with MNPI that VIGGIANO obtained through his employer.  In total, VIGGIANO tipped FORLANO and/or SALAMONE with inside information in advance of at least seven different transactions involving publicly traded companies.

FORLANO and SALAMONE each used MNPI provided by VIGGIANO to purchase shares in companies and to trade call options, including short-dated, out-of-the-money call options. VIGGIANO and SALAMONE agreed to split the profits from their illegal trading, which yielded total illegal profits of over approximately $300,000.  FORLANO further provided this MNPI to friends and family through, among other means, a video game console’s audio chat function in order to evade detection by law enforcement.  FORLANO himself illegally profited at least approximately $100,000 from the scheme. 

Also see: SEC Charges Former Financial Industry Analyst and Three Others with Insider Trading (SEC Release)

Former CEO And Former CFO Of Telecommunications Company Charged In Connection With Massive Accounting Fraud Scheme / Victor Bozzo, Former CEO and Former CCO, and Edward O’Donnell, Former CFO, Orchestrated a Scheme to Fraudulently Inflate the Reported Revenue of the Publicly Traded Telecom Company Pareteum Corporation (DOJ Release)
https://www.justice.gov/usao-sdny/pr/former-ceo-and-former-cfo-telecommunications-company-charged-connection-massive
In the United States District Court for the Southern District of New York, an Indictment https://www.justice.gov/d9/2023-09/u.s._v._bozzo_and_odonnell_indictment.pdf was filed that charges Pareteum Corporation's former Chief Executive Officer/ Chief Commercial Officer Victor Bozzo and former Chief Financial Officer Edward O'Donnell each charged with one count of conspiracy to commit securities fraud, make false SEC filings, and improperly influence the conduct of audits; one count of securities fraud; one count of false SEC filings; and one count of improperly influencing the conduct of audits. As alleged in part in the DOJ Release:

The defendants, and other senior executives at the company, engaged in a scheme to improperly and misleadingly recognize revenue at Pareteum, which owned and managed a mobile device network platform.  The defendants and their co-conspirators made the revenue appear to have been earned in its records based on aspirational, non-binding purchase orders that did not impose any obligation on customers to pay Pareteum.  The defendants, and other senior executives at Pareteum, knew that in many cases Pareteum was recognizing revenue before Pareteum had delivered any products or services to its customers.  In order to conceal Pareteum’s fraudulent accounting practices, BOZZO, O’DONNELL, and other senior executives at Pareteum took steps to mislead the independent certified public accountants engaged to audit Pareteum’s financial statements. 

Pareteum’s inflated revenue gave the appearance that Pareteum was meeting aggressive revenue and growth projections, which served the ultimate goal of increasing Pareteum’s share price.  In press releases accompanying Pareteum’s quarterly filings, Pareteum provided guidance on its expected revenue and revenue growth for the year.  During each period, Pareteum touted its quarter-over-quarter revenue and revenue growth.  Pareteum publicly identified revenue as the principal metric demonstrating its growth and touted its consistent record of quarter-over-quarter revenue growth and meeting or exceeding revenue guidance, which itself typically increased quarter-over-quarter.  However, this ostensible pace of revenue growth was only possible because of the fraud orchestrated by the defendants.

In order to carry out the fraud, the defendants and their co-conspirators improperly recognized revenue from customers based on non-binding contracts.  Specifically, Pareteum’s customers were cellular providers that paid to use Pareteum’s platform to monitor, meter, and bill their own individual customers, who were individual cellphone or connected device end users.  Typically, before a customer could use Pareteum’s platform, the customer and Pareteum would sign a Master Services Agreement, which set forth Pareteum’s obligations to provide the customer with SIM cards that provided cellphone users, who obtained cellphone service through Pareteum’s customer, access to Pareteum’s mobile network.  At this stage, the customer did not owe Pareteum any money and no revenue had been earned by Pareteum; instead, Pareteum had first to develop and implement a platform for the customer and ensure that it functioned such that the customer could go “live” on the Pareteum network.  Once the Pareteum customer was live on the network and sold a SIM card to an actual cellphone user, that user could put the SIM card into his or her phone and begin making calls or consuming mobile data.  It was only at that point that Pareteum’s customer would be required to pay Pareteum for the data usage. 

BOZZO and O’DONNELL understood that purchase orders were not sales contracts because, as they and others at Pareteum well knew, and Paretuem’s customers understood, the purchase orders did not reflect binding commitments.  Instead, purchase orders typically reflected anticipated future sales.  Purchase orders typically set forth the customer’s intention to purchase SIM cards from Pareteum and to generate usage fees if and when the customer was able to sell the SIMs to end users who then activated the SIM cards and used Pareteum’s platform.

However, in violation of Generally Accepted Accounting Principles, Pareteum executives, including VICTOR BOZZO and EDWARD O’DONNELL, caused Pareteum at times to recognize revenue at the time a purchase order was signed for the full projected value of the purchase order, even though they were aware that typically the relevant counterparties were obligated to pay that amount only if and when in the future all SIM cards in the purchase order had been shipped, were activated by Pareteum’s customers, and were used for one month on Pareteum’s network.  As BOZZO and O’DONNELL were also aware, in many cases, pervasive technical and operational issues meant that Pareteum was actually incapable of satisfying its performance obligations under the terms of its agreements with customers. 

As a result of this fraudulent revenue recognition practice, from at least in or about 2018 through the first half of 2019, Pareteum improperly recognized and reported to the investing public more than $40 million of revenue that it should not have. 

As to one customer, referred to in the Indictment as Customer-4, Pareteum recognized revenue totaling $4.4 million based on an unsigned, draft purchase order for €6.3 million, which Customer-4 had not accepted.  Instead, Customer-4 had signed a purchase order, which itself did not reflect a binding commitment but merely reflected anticipated future sales, for only €630,000 – in other words, one tenth of the draft €6.3 million purchase order and far less than the revenue Pareteum recognized.  Pareteum nonetheless recognized $4.4 million in revenue for Customer-4 in three tranches, and at the time it recognized each of those tranches, Customer-4’s platform was not yet live and so it could not yet use Pareteum’s services.

Also see: SEC Charges Former Pareteum Executives with Accounting and Disclosure Fraud (SEC Release)

Local man charged with orchestrating investment fraud scheme (DOJ Release)
https://www.justice.gov/usao-sdtx/pr/local-man-charged-orchestrating-investment-fraud-scheme
In the United States District Court for the Southern District of Texas, an Indictment was filed charging Carl Spence with one count of wire fraud.  As alleged in part in the DOJ Release:

Spence allegedly ran an investment business called AEI Financial from his residence. According to the charges, Spence lured victims by promising he would invest their funds and obtain 20-30% returns on investment. He also allegedly falsely represented to investors that he was registered with the SEC. 

Spence would divert victims’ money and use it to pay for his own personal expenses or to pay previous investors, according to the charges. In addition, although the victims’ money had been significantly (or nearly completely) depleted, Spence would allegedly produce fraudulent account statements showing that the victims’ accounts had grown.  

Co-Founder Of Global Multimillion-Dollar Cryptocurrency Ponzi Scheme “AirBit Club” Sentenced To 12 Years In Prison (DOJ Release)
https://www.justice.gov/usao-sdny/pr/co-founder-global-multimillion-dollar-cryptocurrency-ponzi-scheme-airbit-club
In the United States District Court for the Southern District of New York
PABLO RENATO RODRIGUEZ pled guilty to charges including wire fraud conspiracy, money laundering conspiracy, and bank fraud conspiracy; and he was sentenced to 12 years in prison. As alleged in part in the DOJ Release:

RODRIGUEZ and DOS SANTOS co-founded AirBit Club in 2015. They coordinated a scheme in which victim-investors (the “Victims”) were induced to invest in AirBit Club based on the false promise of guaranteed profits in exchange for cash investments in club “memberships” (the “AirBit Club Scheme” or the “Scheme”). AirBit Club, through its founders, RODRIGUEZ and DOS SANTOS, as well as its promoters (the “Promoters”), including MILLAN and CHAIREZ, marketed AirBit Club as a multilevel marketing club in the cryptocurrency industry.  Promoters falsely promised Victims that AirBit Club earned returns on cryptocurrency mining and trading and that Victims would earn passive, guaranteed daily returns on any membership purchased.

RODRIGUEZ, DOS SANTOS, HUGHES, MILLAN, and CHAIREZ traveled throughout the United States and around the world to places in Latin America, Asia, and Eastern Europe, where they hosted lavish expos and small community presentations aimed at convincing Victims to purchase AirBit Club memberships.  In furtherance of the AirBit Club Scheme, the Victims were fraudulently induced to buy memberships in cash, including in the Southern District of New York.  Following a Victim’s investment, a Promoter provided the Victim with access to an online AirBit Club portal to view the purported returns on memberships (the “Online Portal”).  While Victims saw “profits” accumulate on their Online Portal, those representations were false; no Bitcoin mining or trading on behalf of Victims in fact took place.  Instead, RODRIGUEZ and his co-conspirators enriched themselves and spent Victim money on cars, jewelry, and luxury homes, and financed more extravagant expos to recruit more Victims. 

In many instances, as early as 2016, Victims who attempted to withdraw money from the AirBit Club Online Portal and complained to a Promoter were met with excuses, delays, and hidden fees amounting to more than 50% of the Victim’s requested withdrawal, if they were able to make any withdrawal at all.  In April 2020, another victim received a notice on the AirBit Club Online Portal that his account was closed – and principal investment lost – due to “execution of financial sustainability Reserve, policy #34 of the AirBit Club Terms and Conditions, due to the economic and financial crisis caused by (COVID-19).”  This excuse regarding the COVID-19 pandemic was false.

RODRIGUEZ, DOS SANTOS, HUGHES, CHAIREZ, and MILLAN sought to conceal the AirBit Club Scheme, as well as their respective control of the proceeds of that Scheme, by requesting that Victims purchase memberships in cash, using third-party cryptocurrency brokers, and by laundering the Scheme’s proceeds through several domestic and foreign bank accounts, including an attorney trust account managed by HUGHES (the “Hughes Trust Account”).  The Hughes Trust Account was ostensibly intended to maintain custody of HUGHES’s law practice’s client funds. Instead, the Hughes Trust Account was used by RODRIGUEZ, DOS SANTOS, HUGHES, CHAIREZ, and MILLAN to conceal the nature and origin of the AirBit Club Scheme’s illicit proceeds. Through that account, HUGHES directed Victim funds to the personal expenses of RODRIGUEZ, DOS SANTOS, CHAIREZ, MILLAN, and himself, and funded promotional events and sponsorships designed to further promote the AirBit Club Scheme. 

Before AirBit Club, RODRIGUEZ and DOS SANTOS were sued by the Securities and Exchange Commission (“SEC”) for perpetrating another pyramid investment scheme known as Vizinova and paid $1.7 million in disgorgement and fines.  HUGHES, an attorney licensed to practice law in California, represented RODRIGUEZ and DOS SANTOS in the Vizinova SEC action.  HUGHES then aided RODRIGUEZ and DOS SANTOS in perpetrating the AirBit Club Scheme by, among other things, helping to remove negative information about AirBit Club and Vizinova from the internet. 

*                *                *

RODRIGUEZ, 40, of Irvine, California, was also sentenced to three years of supervised release.  RODRIGUEZ was further ordered to pay a forfeiture of $65 million and to forfeit various items of property, including: (i) $999,936.22 formerly held in escrow by Insured International Aircraft Title Service LLC for the Gulfstream Jet with Tail Number N370Z and Serial Number 2082; (ii) 1,322.98963846 in BTC seized from various Bitcoin wallets; (iii) $896,483.00 in United States currency seized from RODRIGUEZ’s California residence; (iv) RODRIGUEZ’s residence located at 117 Amber Sky in the City of Irvine, California 92618; (v) various watches and jewelry seized from RODRIGUEZ’s California residence; and (vi) 2,499.997 in BTC seized from various Bitcoin wallets.

DOS SANTOS, 48, of Panama City, Panama, MILLAN, 41, of Greensboro, North Carolina, CHAIREZ, 47, of Modesto, California, and HUGHES, 47, of Newport Beach, California, have pled guilty to charges including wire fraud conspiracy, which carries a maximum potential sentence of 20 years in prison; money laundering conspiracy, which carries a maximum potential sentence of 20 years in prison; and bank fraud conspiracy, which carries a maximum potential sentence of 30 years in prison.  MILLAN, CHAIREZ, and HUGHES are scheduled to be sentenced on October 3, 2023.  DOS SANTOS is scheduled to be sentenced on October 4, 2023.  

SEC

Testimony Before the United States House of Representatives Committee on Financial Services by SEC Chair Gary Gensler
https://www.sec.gov/news/testimony/gensler-testimony-committee-financial-services-092723
In part, SEC Chair testified that:

The SEC is the cop on the beat watching out for your constituents. In the last year, we’ve filed approximately 750 enforcement actions and conducted approximately 3,000 examinations of registrants. We engage with more than 40,000 registrants—asset managers, brokers, dealers, exchanges, fund complexes, public companies, and many more.

The dedicated staff of this agency does extraordinary work with limited resources. In the face of significant growth in registrants, more involvement in our markets from individual investors, and increased complexity, the SEC’s headcount actually shrank from 2016 through last year. The SEC this year is expected to be approximately three percent larger than it was in FY 2016. 

SEC Charges Exelon, its Subsidiary Commonwealth Edison, and Subsidiary’s Former CEO Anne Pramaggiore with Fraud in Connection with Political Corruption Scheme / Exelon to pay $46 million penalty to settle; SEC files suit against former CEO in District Court (SEC Release)
https://www.sec.gov/news/press-release/2023-207

The Securities and Exchange Commission today charged Exelon Corporation, electric utility company Commonwealth Edison Company (ComEd), which is Exelon’s subsidiary, and former ComEd CEO Anne Pramaggiore with fraud in connection with a multi-year scheme to corruptly influence and reward then-Speaker of the Illinois House of Representatives Michael Madigan. Exelon and ComEd agreed to settle the charges, with Exelon paying a civil penalty of $46.2 million. The charges against Pramaggiore will be litigated.

According to the SEC’s order against Exelon and ComEd, from 2011 through 2019, ComEd arranged for various associates of Madigan to obtain jobs, subcontracts, and monetary payments, all with the intent to influence Madigan regarding legislation favorable to ComEd. The order finds that ComEd arranged payments to Madigan’s associates through third-party vendors to conceal the size of the payments and to assist ComEd in denying responsibility for oversight of Madigan’s associates, who in some instances did little to none of the work for which they were hired. The order finds that ComEd made indirect payments totaling more than $1.3 million to Madigan’s associates. In a deferred prosecution agreement entered into with criminal authorities, ComEd acknowledged that Madigan’s support of legislation favoring ComEd resulted in reasonably foreseeable anticipated benefits to ComEd of more than $150 million.

The SEC’s complaint against Pramaggiore alleges that she participated in, and in some instances directed, the bribery scheme. The complaint alleges that Pramaggiore did not disclose the bribery scheme and instead misled investors when she characterized ComEd’s lobbying activities as legitimate. The complaint also alleges that, as part of the scheme, Pramaggiore lied to Exelon’s auditors and filed false certifications.

. . .

Exelon and ComEd consented to the SEC’s cease-and-desist order finding that they violated antifraud and books and records and internal accounting controls provisions of the federal securities laws. Exelon agreed to pay a $46.2 million civil penalty.

The SEC’s complaint alleges that Pramaggiore violated antifraud and books and records and internal accounting controls provisions of the federal securities laws and that she aided and abetted Exelon’s and ComEd’s violations of books and records and internal accounting controls provisions. The SEC seeks permanent injunctive relief, disgorgement plus prejudgment interest, a civil penalty, and an officer and director bar against her.

• SEC Order
• SEC Complaint

SEC Charges Clear Channel Outdoor with FCPA Violations Relating to China Subsidiary (SEC Release)
As alleged in part in the SEC Order https://www.sec.gov/files/litigation/admin/2023/34-98615.pdf

This matter concerns violations of the anti-bribery, recordkeeping, and internal accounting controls provisions of the Foreign Corrupt Practices Act of 1977 (“FCPA”) by Clear Channel Outdoor Holdings, Inc. (“CCOH”), a Texas-headquartered company in the out-of-home advertising industry, in connection with the actions of its agent, CCOH’s former indirect, majority owned Chinese subsidiary, Clear Media Limited (“Clear Media”). From at least 2012 through 2017, Clear Media bribed Chinese government officials, both directly and through third parties, to obtain concession contracts required to sell advertising services to public and private sector clients for display on public bus shelters, street furniture, and billboards. In addition, Clear Media used sham intermediaries and false invoices to generate cash for off-book consultants engaged to win advertising business from government and private customers. From at least 2012 through 2019 (the “relevant period”), CCOH failed to ensure that sufficient internal accounting controls were in place at Clear Media. CCOH received approximately $16.4 million in benefits as a result of Clear Media’s improper payments, which were inaccurately recorded as legitimate business expenses in
CCOH’s consolidated books and records. 

. . .

A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from committing or causing any violations and any future violations of Sections 30A, 13(b)(2)(A), and13(b)(2)(B) of the Exchange Act.

B. Respondent shall pay disgorgement of $16,355,567, prejudgment interest of $3,760,920, and a civil monetary penalty in the amount of $6,000,000 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). Respondent shall pay $13,058,243.50 within 30 days after entry of the Order; and the remaining balance in one-third equal installments under the following schedule: 305 days, 335 days, and 365 days after the entry of the Order until the full amount and interest is paid. . . .

SEC Charges Former Pareteum Executives with Accounting and Disclosure Fraud (SEC Release)
https://www.sec.gov/news/press-release/2023-205
In the United States District Court for the Southern District of New York, the SEC filed a Complaint https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-205-1.pdf that charges former Pareteum Corp. Chief Financial Officer Edward O’Donnell, and former Chief Commercial Officer Victor Bozzo for engaging in fraudulent revenue recognition practices. Also, the SEC announced settled charges against former Controller Stanley Stefanski  https://www.sec.gov/files/litigation/admin/2023/33-11245.pdf for his role in the scheme. Previously, Pareteum previously settled to accounting and disclosure fraud charges filed by the SEC in 2021 and filed for bankruptcy in 2022. As alleged in part in the SEC Release:

[F]rom at least 2018 through mid-2019, Bozzo, O’Donnell, and Stefanski engaged in a fraudulent scheme to recognize revenue from Pareteum customers’ non-binding purchase orders for SIM card services, despite knowing that the customers had not committed to paying for the services unless they were able to sell the services to downstream consumers. The SEC’s complaint also alleges that, because of these executives’ misconduct, Pareteum improperly recognized revenue for the purchase orders before the SIM cards were shipped to the customers. This improper revenue recognition scheme allowed Pareteum to materially overstate its revenue by $12 million – or 60 percent – for fiscal year 2018 and by $27 million – or 91 percent – for the first and second quarters of 2019 combined in its financial statements filed with the SEC.

Also see: Former CEO And Former CFO Of Telecommunications Company Charged In Connection With Massive Accounting Fraud Scheme / Victor Bozzo, Former CEO and Former CCO, and Edward O’Donnell, Former CFO, Orchestrated a Scheme to Fraudulently Inflate the Reported Revenue of the Publicly Traded Telecom Company Pareteum Corporation (DOJ Release)

SEC Charges Former Financial Industry Analyst and Three Others with Insider Trading (SEC Release)
https://www.sec.gov/news/press-release/2023-204
In the United States District Court for the Southern District of New York, the SEC filed a Complaint https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-204-1.pdf that charges Anthony Viggiano, Christopher Salamone, Stephen A. Forlano, and Nathan Bleckley with violating the antifraud provisions of the federal securities laws.A parallel criminal action was filed against Viggiano, Forlano, and Salamone. As alleged in part in the SEC Release:

[I]n connection with his work at two financial institutions, Viggiano learned about impending merger and acquisition transactions and strategic partnerships before they were publicly announced. Viggiano, a resident of Baldwin, New York, allegedly obtained material nonpublic information about eight such transactions and tipped his friend Salamone, who grew up on the same block and whom he has known for approximately 20 years, about at least six of them. Salamone, a resident of Long Beach, New York, allegedly traded in advance of the six transactions, resulting in proceeds of approximately $322,000. Salamone allegedly agreed to share his trading proceeds with Viggiano because Viggiano’s own employer prohibited him from engaging in such trades. The complaint further alleges that Viggiano tipped his close college friend Forlano about at least four transactions and that Forlano made approximately $113,000 in illegal profits trading in advance of three of those transactions. Forlano, a resident of Tampa, Florida, also allegedly tipped other individuals, including his close, college friend Bleckley, a resident of Altus, Oklahoma, who traded in advance of two transactions, resulting in illegal gains of almost $25,000.

Also see: Former CEO And Former CFO Of Telecommunications Company Charged In Connection With Massive Accounting Fraud Scheme / Victor Bozzo, Former CEO and Former CCO, and Edward O’Donnell, Former CFO, Orchestrated a Scheme to Fraudulently Inflate the Reported Revenue of the Publicly Traded Telecom Company Pareteum Corporation (DOJ Release)

SEC Charges Private Real Estate Funds’ Managers and Investment Adviser for Fraudulent and Unregistered Securities Offering (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25856
In the United States District Court for the Northern District of California, the SEC filed a Complaint https://www.sec.gov/files/litigation/complaints/2023/comp25856.pdf that charges Charles Tralka, Thomas Braegelmann, Matthew Sullivan, Jordan Goodman, investment adviser Good Steward Capital Management, Inc. (“Good Steward”) and its owner Robert Barr, and relief defendants Secured Real Estate Income Fund I, LLC (“Income Fund”) and Secured Real Estate Income Strategies, LLC (“Income Strategies”). The Complaint charges Tralka, Braegelmann, Sullivan, and Goodman with violating the registration provisions of Sections 5(a) and (c) of the Securities Act of 1933 (“Securities Act”). Further, the Complaint also charges Tralka, Braegelmann, Sullivan, Good Steward, and Barr with violating the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder.  

Without admitting or denying the allegations in the SEC Complaint, Goodman consented, pre-filing, to the entry of a final judgment permanently enjoining him from violating the registration provisions of Section 5 of the Securities Act; prohibiting him from participating in the issuance, purchase, offer, or sale of any security in an unregistered offering by an issuer  (provided, however, that such injunction would not prevent Goodman from purchasing or selling securities for his own personal account); and ordering him to pay disgorgement with prejudgment interest and civil penalties, with the amounts to be determined by the court upon motion of the SEC.

As alleged in part in the SEC Release:

[T]he funds’ managing members Tralka and Braegelmann selected and managed the real estate investments, managing member Sullivan acted as investor relations, and managing member Goodman, a recidivist, drummed up potential investors through his radio programs.  The complaint also alleges that Good Steward and Barr, though described as the funds’ investment adviser, primarily served in an administrative capacity.  The SEC further alleges that both funds’ offering documents and marketing materials misled investors regarding: (1) the payment of reliable monthly distributions at an 8% annual rate; (2) Tralka and Braegelmann’s purported 50+ years of real estate investing experience; and (3) that SEC-registered investment adviser Good Steward would make the funds’ investment decisions.  In addition, the SEC alleges that, although Income Strategies’ offering circular stated that it would meet its $1 million investment threshold with investments from third parties, it in fact met this threshold through investments from related parties Income Fund and Good Steward and also failed to keep investor funds in escrow.

SEC Charges Los Angeles Man and His Related Entities with Ponzi-Like Scheme (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25858
In  the United States District Court for the Central District of California, the SEC filed a Complaint https://www.sec.gov/files/litigation/complaints/2023/comp25858.pdf that charges Pedram Abraham Mehrian, Strategic Legacy Investment Group, Inc. and SLIG High-Interest Liquid Savings Company with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. As alleged in part in the SEC Release:

[F]rom at least January 2018 through October 2022, Mehrian used two entities he founded, Strategic Legacy Investment Group, Inc. and SLIG High-Interest Liquid Savings Company, to raise money from retail investors, including retirees, for the purported purpose of investing in real estate.  Mehrian and his entities allegedly raised this money through the unregistered offer and sale of promissory notes, which they represented paid "guaranteed interest" above market interest rates offered by banks, often as high as 9%. Mehrian and his entities allegedly represented to investors the notes were "safe" and "secure" because they were "backed" and "collateralized" by Strategic Legacy's "portfolio of assets" and were "recession-proof." In reality, the complaint alleges, Mehrian and his entities treated investor funds as one pool of money, commingled investor funds, and diverted new investor funds to make Ponzi-like payments to existing investors totaling at least $4.2 million. The complaint alleges they made materially false and misleading statements to investors by failing to disclose that Strategic Legacy was not profitable, its assets did not generate enough revenue to pay promised returns, and investors did not have any collateralized interest in real estate. When Mehrian and his entities were unable to pay promised returns, they blamed the economic impact of the COVID-19 pandemic for their failure to pay, but they continued to send investors false account statements showing ever-growing account balances from interest payments that were never made. 

SEC Charges Three Southern California Siblings with Insider Trading (SEC Release)
https://www.sec.gov/news/press-release/2023-203
In the United States District Court for the Central District of California, the filed a Complaint https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-203.pdf that charges Marco A. Perez (a/k/a Marc), Pedro Perez, Jr. (a/k/a Peter), and Olivia P. Durbint with violating the antifraud provisions of the federal securities laws. Without denying the allegations in the SEC Complaint, Marco Perez consented to a partial judgment, subject to court approval, permanently enjoining him from violating the antifraud provisions of the federal securities laws, ordering that he pay disgorgement with prejudgment interest and a civil penalty in amounts to be determined, and imposing a five-year officer and director bar. Without admitting or denying the allegations of the SEC Complaint, Pedro Perez consented to a judgment, subject to court approval, permanently enjoining him from violating the antifraud provisions of the federal securities laws, ordering him to pay disgorgement with prejudgment interest of $141,251.79 and a civil penalty of $127,142.32, and imposing a five-year officer and director bar. Without admitting or denying the allegations of the SEC Complaint, Durbin consented to a judgment permanently enjoining her from securities fraud and ordering her to pay disgorgement with prejudgment interest of $38,638.28 and a civil penalty of $34,867.17. A parallel criminal action alleging securities fraud was fled against Marco Perez. As alleged in part in the SEC Release:

[M]arco Perez, formerly a General Finance accounting manager, learned in late February 2021 of United Rentals’ interest in acquiring General Finance. As alleged, Marco Perez then began purchasing General Finance shares and continued to do so as he learned about progress on the acquisition. According to the complaint, Marco Perez tipped Pedro Perez and Durbin and encouraged them to buy General Finance shares, including by telling Pedro Perez that he was “all in.” As alleged, Pedro Perez and Durbin then bought General Finance shares as well. When United Rentals announced the acquisition, General Finance’s share price increased from $12.17 to $18.95 and trading volume soared 19,000 percent. As alleged in the complaint, the defendants sold or tendered their shares and realized combined profits of $650,000.

SEC Settles Actions Against Executives of Two Reg A Issuers for Involvement in Scheme To Fraudulently Promote Securities Offerings (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25857
Without admitting or denying the allegations in an SEC Complaint https://www.sec.gov/files/litigation/complaints/2023/comp25857-levin.pdf filed in the United States District Court for the Central District of California that charges him with violations of Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 5 and 17(a) of the Securities Act of 1933, Hightimes Holding Corp. Executive Chairman Adam Levin agreed to the entry of a final judgment imposing a permanent injunction, a penalty of $111,614, and a 3-year bar from serving as an officer and director.charges him with 

Without admitting or denying the allegations in an SEC Complaint https://www.sec.gov/files/litigation/complaints/2023/comp25857-bentley.pdf filed in the United States District Court for the Central District of California that charges him with violations of Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 5 and 17(a) of the Securities Act of 1933, Cloudastructure, Inc. Chief Executive Officer Rick Bentley agreed to the entry of a final judgment imposing a permanent injunction, a penalty of $111,614, and a 5-year bar from serving as an officer and director. 

As alleged in part in the SEC Release:

[L]evin and Bentley participated in the fraudulent promotions of their companies' securities by concealing payments to Jonathan William Mikula through middlemen acting on his behalf, and lavishly entertaining Mikula, in exchange for promotion by Mikula through Palm Beach Venture, a newsletter for which he served as an author and chief analyst. The complaint against Levin alleges that he participated in the fraudulent promotion of Hightimes' securities between at least April 2020 and August 2021. A separate complaint against Bentley alleges that he participated in the fraudulent promotion of Cloudastructure's securities between at least September 2020 and mid-2021. The charging documents further allege that Levin and Bentley made material misrepresentations and omissions to investors in connection with their offerings. According to the complaint filed against Levin, he also engaged in an offering of Hightimes' securities that was unregistered and not covered by a valid registration exemption between June 2020 and December 2022.

This is the second set of actions that the SEC has filed in connection with this fraudulent promotional scheme. In September 2022, the SEC filed a complaint against Mikula, a recidivist securities law violator, alleging that he promoted the securities of Reg A issuers, including Hightimes and Cloudastructure, without disclosing his receipt of compensation for the promotions. As alleged, Mikula promoted the securities through Palm Beach Venture and presented the recommendations as unbiased and not paid for, while he was secretly compensated in the form of cash and lavish entertainment expenses. The SEC litigation is continuing against Mikula, as well as his associate Christian Fernandez, who allegedly acted as a middleman for the promotional scheme.

SEC Charges Corporate Insiders for Failing to Timely Report Transactions and Holdings / Several issuers charged as well in connection with their insiders’ reporting failures (SEC Release)
https://www.sec.gov/news/press-release/2023-201
Without admitting or denying the findings in SEC Orders the individuals/companies below agreed to cease and desist from violating the respective charged provisions and to pay the civil penalties set forth below:

• Nicole M. Fernandez-McGovern, CFO of AgEagle Aerial Systems Inc., $125,000;
• Matthias L. Heilmann, former President and Chief Executive Officer of Digital Solutions within Baker Hughes Co., $143,000;
• Joseph Theodore Lukens, Jr., a beneficial owner of Workhorse Group Inc., $120,000;
• Avery More, a director of SolarEdge Technologies, Inc., $66,000;
• Lawrence I. Rosen, a beneficial owner of JAKKS Pacific, Inc., Meet Group Inc., FTE Networks, Inc., FuelCell Energy Inc., and Remark Holdings Inc., $150,000; and
• Peixin Xu, a director and beneficial owner of Cineverse Corporation, $150,000.
  

• AgEagle Aerial Systems Inc., $190,000;
• Cumberland Pharmaceuticals Inc., $200,000;
• eXp World Holdings, Inc., $115,000;
• Lattice Semiconductor Corporation, $185,000; and
• SolarEdge Technologies, Inc., $125,000.

As alleged in part in the SEC Release:

The charges stem from an SEC enforcement initiative focused on Form 4 and Schedules 13D and 13G reports that company insiders are required to file regarding their holdings of company stock. Form 4 is a report that corporate officers, directors, and certain beneficial owners of more than 10 percent of a registered class of a company’s stock must use to report their transactions in company stock within two business days. Schedules 13D and 13G are reports that beneficial owners of more than 5 percent of a registered class of a company’s stock must use to report their holdings and intentions with respect to the company. These ownership reports give investors and other market participants the opportunity to evaluate whether the holdings and transactions of company insiders could be indicative of the company’s future prospects. SEC enforcement staff used data analytics to identify the charged insiders as repeatedly filing these reports late. Some filings were delayed by weeks, months, or even years. The reporting requirements apply irrespective of whether the trades were profitable and regardless of a person’s reasons for the transactions.

READ the SEC Orders:

• AgEagle Aerial Systems Inc.
• Cumberland Pharmaceuticals Inc.
• eXp World Holdings, Inc.
• Nicole M. Fernandez-McGovern
• Matthias L. Heilmann
• Lattice Semiconductor Corporation
• Joseph Theodore Lukens, Jr.
• Avery More
• Lawrence I. Rosen
• SolarEdge Technologies, Inc.
• Peixin Xu

SEC Charges Hydrogen Vehicle Co. Hyzon Motors and Two Former Executives for Misleading Investors (SEC Release)
https://www.sec.gov/news/press-release/2023-200
Without admitting or denying the allegations in an SEC Complaint https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-200-01.pdf filed in the United States District Court for the Western District of New York that they violated the antifraud and other provisions of the federal securities law, Hyzon Motors Inc., former Chief Executive Officer Craig M. Knight, and former managing director of Hyzon's European subsidiary Max C.B. Holthausen each consented to permanent injunctions and to pay $25 million, $100,000, and $200,000, respectively, in civil penalties. Also, Knight and Holthausen agreed to prohibitions from serving as officers or directors of a publicly traded company for a period of five and ten years, respectively. Further, Knight and former Chief Financial Officer Mark Gordon (not charged in the Complaint), Hyzon’s each reimbursed Hyzon $252,000 and $122,500, respectively, for bonuses they received during the twelve-month period after Hyzon misstated its financial statement; and, as a result, the SEC did not pursue a clawback action per Section 304 of the Sarbanes-Oxley Act of 2002. As alleged in part in the SEC Release:

[H]yzon misrepresented the status of its business dealings with potential customers and suppliers to create the false appearance that significant sales transactions were imminent. The complaint alleges that Hyzon also falsely stated that it had delivered its first FCEV in July 2021, even going as far as posting a misleading video of the vehicle purportedly running on hydrogen, when the vehicle was not equipped to operate on hydrogen power. The complaint further alleges that Hyzon later falsely reported that it sold 87 FCEVs in 2021, when in fact it had not sold any vehicles that year. Knight allegedly was responsible for the false statements about Hyzon’s customer and supplier relationships. Holthausen allegedly was responsible for Hyzon’s false statements about delivery of its first FCEV and for Hyzon’s false reporting of certain FCEV sales.

[F]rom at least September 2016 to January 2021, AssetMark failed to provide full and fair disclosure of conflicts of interest arising from its affiliate’s cash sweep program, which transferred, or “swept,” clients’ uninvested cash into interest-earning bank accounts. AssetMark did not advise clients that it helped set the fee that its affiliate custodian received for operating the cash sweep program. The fee reduced amounts of interest paid to those clients. Additionally, the order finds that, from at least January 2016 through August 2019, AssetMark received custodial support payments from some third-party custodians based on assets held in certain no-transaction-fee mutual funds, but it failed to disclose to clients that, in some cases, there were lower-fee share classes with lower expense ratios available to clients which, if used by clients, would not have resulted in payments to AssetMark.

SEC Institutes Administrative Proceedings Against Unregistered Brokers Conducting a Fraudulent and Unregistered Offering of Crypto Asset Securities (SEC Release)
https://www.sec.gov/enforce/34-98526-s
The SEC filed an administrative Orderhttps://www.sec.gov/files/litigation/admin/2023/34-98526.pdf that charges Brian Bartlett Amoah (former owner of Chicago Crypto Capital LLC) and a former salesman, Elbert “Al” Elliott with violating the registration provisions of Section 5 of the Securities Act and Section 15(a) of the Securities Exchange Act, and the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Previously, a  district court entered a final judgment ordering permanent injunctive relief, monetary penalties, and disgorgement was previously entered on the basis of default against Amoah and Elliott for the same conduct. As alleged in part in the SEC Release:

[F]rom approximately August 2018 through November 2019, Amoah and Elliott conducted an unregistered offering of BXY. The Division alleges that the BXY offering was not registered with the Commission and did not satisfy any exemption from registration, and that neither of the Respondents were registered with the Commission as brokers even though they acted as brokers. In addition, the Division alleges that Amoah and Elliott made materially false and misleading statements in the offer and sale of, and in connection with the purchase and sale of, BXY, including about the markup charged, their personal investments in BXY, and the financial and management problems occurring at BXY’s issuer in late 2019. According to the allegations, Amoah also failed to deliver prepurchased BXY to certain investors. The Division further alleges that Amoah and Elliott raised at least $1.5 million in proceeds through the unregistered and fraudulent offers and sales of these securities to approximately 100 individuals, many of whom had no experience investing in crypto assets. 

SEC Charges Dallas Area Cybersecurity Company with Fraud (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25854
Without admitting or denying the allegations of a Complaint https://www.sec.gov/files/litigation/complaints/2023/comp25854.pdf filed by the SEC in the United States District Court for the Eastern District of Texas that charges the company with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act, and the current reporting and disclosure controls and procedures provisions of Section 13(a) of the Exchange Act and Rules 13a-11 and 13a-15(a) thereunder, Intrusion Inc. agreed to settle the matter by consenting to the entry of a final judgment that addresses all charges and relief sought by the SEC. As alleged in part in the SEC Release:

[F]rom May 2020 through May 2021, Intrusion made materially false and misleading statements in press releases, earnings calls, interviews, and other public statements. As alleged in the complaint, Intrusion overstated its success in marketing Intrusion Shield, a new cybersecurity product, by falsely representing that most or nearly all beta-testing participants had converted to paying customers, when in fact less than half of such participants became paying customers. In addition, the SEC alleges that Intrusion misled investors about three customer relationships by omitting material information about the economic terms of one contract, prematurely claiming that a second contract had been executed, and falsely claiming that a third customer had signed a contract when it had not. Finally, the complaint alleges that Intrusion made misleading statements about the qualifications, experience, and accomplishments of its former CEO.

SEC Charges Advisory Firm Bruderman Asset Management and its Principal for Failing to Disclose Misuse of Investment Funds (SEC Release)
https://www.sec.gov/news/press-release/2023-197
Without admitting or denying the findings in an SEC Order
https://www.sec.gov/litigation/admin/2023/ia-6435.pdf, Bruderman Asset Management LLC ("BAM") and its principal, Matthew J. Bruderman each consented to an order requiring them to cease and desist from committing or causing violations of various provisions of the Investment Advisers Act of 1940, imposing a censure, and ordering them to pay, jointly and severally, a civil penalty of $250,000. As alleged in part in the SEC Release:

[F]rom at least February 2017 through August 2021, BAM and Bruderman advised at least 13 clients to invest at least $6.1 million in three companies in which Bruderman had decision-making authority and significant ownership interests. The SEC’s order finds that BAM and Bruderman failed to disclose to the clients that their investments would be temporarily used for other purposes, such as to fund BAM’s payroll and to repay loans owed to Bruderman or to the other companies with which he was affiliated. According to the SEC’s order, BAM, through Bruderman, also failed to implement reasonably designed written policies and procedures concerning the disclosure of conflicts of interest.

SEC Charges Five Defendants in Penny Stock Fraud Scheme (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25853
In the United States District Court for the Northern District of Texas, the SEC filed a Complaint https://www.sec.gov/files/litigation/complaints/2023/comp25853.pdf that charges:

• Philip Verges with violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder;
• Blue Citi LLC, Robert F. Malin, Linda Malin, Esq., and James D. Tilton, Jr. with violating, directly or indirectly, the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder.  

The Complaint name as Relief Defendants: SMEA2Z LLC, 143 Partners LLC, West Cucharras, LLC, and JDT Trading LLC.  As alleged in part in the SEC Release:

[B]etween at least June 2017 and June 2022, Verges orchestrated the scheme so that Blue Citi (owned by Robert and Linda Malin), JDT Trading, and others received at least 5.2 billion shares of stock in the PSCs at a significant discount. According to the complaint, Verges artificially inflated trading volume in the PSC stocks by publishing more than 1,400 press releases, some of which were false and misleading, in an effort to ensure that the fraud participants and Verges’s other nominees sustained a market in which to sell their stock.The complaint alleges that the inflated trading volume allowed Verges’s nominees to dump their discounted stock into the market for proceeds of more than $52 million.Those nominees then kicked back a portion of their trading proceeds to Verges and his companies. According to the complaint, over the course of the fraud, the Verges and his companies received more than $19 million from the stock sales, while Blue Citi and JDT received more than $35 million and $16 million, respectively.The complaint alleges that Robert and Linda Malin knowingly participated in the fraud, directed Blue Citi’s sales of stock, and paid kickbacks to Verges-owned companies. The complaint further alleges that Tilton participated in the fraud by preparing, at Verges’s direction, false and misleading public disclosures about the PSCs and directing JDT’s payment of kickbacks to Verges-owned companies. 

SEC Charges Florida Company and its Principal with Operating a Fraudulent Securities Offering Involving Natural Fancy Color Diamonds (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25852
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/comp25852.pdf that charges The Diamond Desk Corporation and its sole owner/principal Adam J. Lowe with violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and, further, charges Lowe with control person liability under Section 20(a) of the Exchange Act. As alleged in part in the SEC Release:

[F]rom at least February 2018 to February 2019, Lowe, on behalf of Diamond Desk, offered and sold securities in the form of investment contracts in Diamond Desk, and falsely told investors that Diamond Desk would use investor money to acquire parcels of natural fancy color diamonds to be resold at a profit and resulting in investment returns of up to 27% plus the full return of investors’ principal within 3 to 12 months. As alleged, Lowe did not use investor funds solely to purchase natural fancy color diamonds for resale as promised and, instead, misappropriated at least $924,000 of investor funds for his personal expenses and benefit, including to fund his gambling at casinos. 

SEC Charges Cash Flow King Podcast Host with Perpetrating $11 Million Ponzi Scheme (SEC Release)
https://www.sec.gov/news/press-release/2023-196
In the United States District Court for the Northern District of Ohio, the SEC filed a Complaint https://www.sec.gov/litigation/complaints/2023/comp-pr2023-196.pdf that charges Matthew Motil (host of "The Cash Flow King" podcast) with violating the registration and antifraud provisions of the Securities Act and the antifraud provisions of the Securities Exchange Act. As alleged in part in the SEC Release:

[M]otil, of North Olmsted, Ohio, defrauded investors with promises of low-risk, high-return promissory notes purportedly collateralized by first mortgages on homes located throughout Ohio. The SEC’s complaint alleges that Motil promoted the investments on his website, inviting potential investors to “be a real estate investing badass!,” and on his podcast, where he assured investors that the investments he offered were safe and backed by a “first lien position” on the underlying real estate assets. According to the SEC’s complaint, Motil told investors that he would pay the investors returns on their investments from profits from renovating, reselling, refinancing, and renting the properties. As the complaint alleges, however, Motil did not in fact secure first lien positions for the investors as promised and regularly sold multiple promissory notes he claimed were secured by the same property to multiple investors. In one instance, Motil allegedly sold more than $1 million of promissory notes to 20 investors, each note supposedly collateralized by the same property he had acquired for $47,000. Rather than renovate the properties, Motil allegedly used investor money to make Ponzi payments to previous investors and for his own extravagant personal expenses, including to rent a lakeside mansion, purchase courtside season tickets to NBA games, and make $400,000 in credit card payments for his wife, Amy Motil, who is named as a relief defendant.

SEC Charges Municipal Advisor and Its Principal with Breach of Duty of Care (SEC Release)
https://www.sec.gov/enforce/34-98510-s
Without admitting or denying the charges in an SEC Order https://www.sec.gov/files/litigation/admin/2023/34-98510.pdf alleging breach of its duty of care,  Fieldman Rolapp & Associates, Inc. (“FRA”) and one of its principals, Anna Sarabian, entered into a settlement with the SEC. As alleged in part in the SEC Release:

[B]etween October 2018 and July 2019, FRA and Sarabian made a series of presentations to a California city (the “City”) regarding cost analyses of funding options for a community project.  The presentations contained comparisons of several alternatives for funding the project, including funding it entirely with available cash, entirely with new debt with various maturity dates, and several hybrid options consisting of both cash and new debt with various maturity dates.  According to the order, FRA’s model for calculating the net present value costs of the different financing options contained flawed assumptions that made it appear the 100% debt option with the longest maturity was the least expensive option for financing when, in fact, other options would have been less expensive on a net present value basis.  The City ultimately decided to finance the project entirely with new debt.  

The SEC’s order finds that FRA and Sarabian willfully violated Section 15B(c)(1) of the Securities Exchange Act of 1934, and Rules G-17 and G-42(a)(ii) of the Municipal Securities Rulemaking Board.  Without admitting or denying the findings in the order, FRA and Sarabian agreed to settle the charges and cease-and-desist from future violations of those provisions.  FRA agreed to pay a civil penalty of $60,000, disgorgement of $56,548.50, and prejudgment interest of $11,368.77, and Sarabian agreed to pay a civil penalty of $30,000.

SEC Sues Texas-based Oil-and-Gas Promoter for Multi-Million Dollar Fraud (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25851
In the United States District Court for the Northern District of Texas, the SEC filed a Complaint https://www.sec.gov/files/litigation/complaints/2023/comp25851.pdf that charges Stephen L. Bailey, Sapphire Exploration LLC, and Harris Exploration, Inc. with violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act, and Rule 10b-5 thereunder. As alleged in part in the SEC Release:

[F]rom approximately November 2017 through May 2023, the defendants raised money from investors for various oil-and-gas projects and properties through the sale of promissory notes, limited-partnership interests, common stock, and working interests in oil-and-gas wells. The SEC’s complaint alleges that the relevant offering documents stated that investor funds would be used for specific oil-and-gas investments, acquisitions, or related expenses. However, according to the SEC’s complaint, Bailey misappropriated and misused $5 million of the $7.8 million raised from investors, including $4.1 million to pay for personal expenses and nearly $670,000 to make Ponzi-like payments to investors. The SEC’s complaint also alleges that Bailey furthered the fraudulent scheme by falsely touting Sapphire’s management team and misrepresenting Harris’s purported acquisition of an oil-and-gas company in Oklahoma.

SEC Charges Two Utah Fund Managers and Their Principals with Securities Fraud (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25850
In the United States District Court for the District of Utah, the SEC filed a Complaint that charges Defendants with violations of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. As alleged in part in the SEC Release:.

According to the SEC's complaint, Michael McLaughlin, a securities law recidivist, and Derek McLaughlin created an investment fund called POD Solutions, LLC, managed by their entity, Phoenix Outsourced Development. Louis Peter Goff, Brian Hubbard, Eric Fairbourn, and Nicholas Deluca created a separate, but similar investment fund, Edger Solutions, LLC, managed by their entity, Edger Management Solutions. The SEC alleges the two fund managers and their principals failed to disclose to investors that their investments would be combined into a Forex trading account that was operated by a convicted felon and a securities fraud recidivist. The SEC's complaint also alleges that the defendants made numerous material misrepresentations to investors concerning fees, profit and loss calculations, and the historical performance of the funds. The SEC further alleges that the defendants fabricated monthly account statements and that Michael and Derek McLaughlin misappropriated investor funds.

The SEC's complaint, filed in U.S. District Court for the District of Utah, charges all defendants with violations 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. Without admitting or denying the allegations, each defendant consented to a permanent injunction from future violations of these antifraud provisions. Each individual defendant also consented to a conduct-based injunction prohibiting him from participating, directly or indirectly, including but not limited to, through any entity owned and controlled by him, in the issuance, purchase, offer, or sale of any security, provided, however, that such injunction shall not prevent him from purchasing or selling securities for his own personal account, and agreed to pay disgorgement with prejudgment interest and civil penalties in the following amounts:

• • Michael Mclaughlin: disgorgement of $116,940 plus prejudgment interest of $11,503, and a civil penalty of $207,182.
  • Derek McLaughlin: disgorgement of $108,433 plus prejudgment interest of $10,667, and a civil penalty of $75,000.
  • Louis Peter Goff: a civil penalty of $60,000.
  • Brian Hubbard, Eric Fairbourn, and Nicholas Deluca: civil penalties of $50,000 each.

SEC Charges Investment Adviser and His Investment Advisory Firm with Multi-Year Cherry Picking Fraud (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25849
Douglas MacWright and Highlander Capital Management, LLC ("HCM") agreed to pay nearly two million dollars to settle the charges in an SEC Complaint filed in the United States District Court for the District of New Jersey. In part, the SEC Release alleges that:

[F]rom April 22, 2015 through June 30, 2022, MacWright, through HCM, used an omnibus or average price account to disproportionately allocate trades that had increased in value during the day they were executed to a preferred account. The complaint also alleges that MacWright disproportionately allocated trades that had decreased in value during the day they were executed to accounts held by other persons and entities.

Without admitting or denying the SEC's allegations, MacWright and HCM have consented to the entry of final judgments that would: permanently enjoin them from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder, Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act"), and permanently enjoin HCM from violating, and MacWright from aiding and abetting violations of, Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder; order MacWright to pay $1,118,718 in disgorgement, $253,903 in prejudgment interest, and a civil penalty of $400,000; and order HCM to pay a civil penalty of $150,000. The settlements are subject to court approval.

SEC Charges Adviser and Its CEO with Making Material Misrepresentations in Form ADV Filings (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25848
In the United States District Court for the Southern District of New York, the SEC filed a Complaint charging Vista Financial Advisors LLC ("Vista") and Co-Owner/Chief Executive Officer/Chief Compliance Officer Ruben Cedrick Williams with making material misrepresentations in Vista's 2022 and 2023 Form ADV filings regarding Vista's regulatory assets under management ("RAUM") and owners.As alleged in part in the SEC Release:

[V]ista and Williams falsely claimed in Vista's 2022 Form ADV filing that Vista had $10 billion in RAUM. According to the complaint, Vista and Williams ignored repeated requests from Commission staff to substantiate, correct and/or withdraw the claims regarding Vista's RAUM. The complaint further alleges that, rather than undertaking any corrective measures in response to the Commission's inquiries, Vista compounded the misrepresentation by filing an updated Form ADV for 2023 that stated its RAUM had grown to nearly $11.5 trillion. As alleged in the complaint, to the extent that Vista had any RAUM, these assets did not remotely approach the amounts represented in Vista's 2022 and 2023 Forms ADV.

Additionally, the complaint alleges that the 2022 Form ADV failed to disclose the identity of one of Vista's owners, and misstated how Vista's ownership interest was divided up among its remaining owners. Williams signed and certified both Form ADV filings.

The SEC's complaint charges Vista with violations of Sections 203A and 207 of the Investment Advisers Act of 1940, and Williams with violations of Section 207 of the Advisers Act and aiding and abetting Vista's violations of Section 203A of the Advisers Act. The complaint seeks permanent injunctive relief and civil penalties.

SEC Charges GTT Communications for Disclosure Failures / Declines to impose civil penalty because of company’s prompt self-report, extensive remediation, and substantial cooperation (SEC Release)
https://www.sec.gov/news/press-release/2023-195
Without admitting or denying the findings in an SEC Order https://www.sec.gov/files/litigation/admin/2023/33-11241.pdf that it violated antifraud provisions of the Securities Act of 1933 as well as certain reporting, record-keeping, and internal control provisions of the federal securities laws, GTT communications, Inc. agreed to cease and desist from further violations of the securities laws.The SEC Order credits GTT with promptly self-reporting, undertaking affirmative remedial measures, and providing substantial cooperation to the SEC, and does not order a civil penalty against GTT. As alleged in part in the SEC Release:

[A]fter experiencing rapid growth through a series of acquisitions beginning in 2017, GTT struggled to reconcile data that was being generated by two of the company’s key operational systems. Over time, the two systems began to show a persistent discrepancy between actual expenses, as reflected in invoices received from vendors, and the company’s expected expenses. GTT was unable to reconcile these two systems and knew that it lacked sufficient information necessary to accurately record and report certain expenses. The SEC’s order finds that GTT nonetheless made unsupported adjustments of more than $35 million that lowered its reported cost-of-revenue, thereby increasing its reported operating income, but failed to disclose material facts about these adjustments.

In December 2020, GTT disclosed that certain previously issued consolidated financial statements should no longer be relied upon and that it had commenced an internal investigation. After discovering the issues concerning costs, GTT attempted to remediate its accounting and financial reporting issues and promptly self-reported to the SEC the matters that were subject to its ongoing internal investigation. It also cooperated extensively with the SEC staff during its investigation.

Deutsche Bank Subsidiary DWS to Pay $25 Million for Anti-Money Laundering Violations and Misstatements Regarding ESG Investments (SEC Release)
https://www.sec.gov/news/press-release/2023-194
The SEC filed two Order charging registered investment adviser DWS Investment Management Americas Inc. ("DIMA or DWS" -- a subsidiary of Deutsche Bank AG)w with a failure to develop a mutual fund Anti-Money Laundering (AML) program
https://www.sec.gov/files/litigation/admin/2023/ia-6431.pdf; and with misstatements regarding its Environmental, Social, and Governance (ESG) investment process https://www.sec.gov/files/litigation/admin/2023/ia-6432.pdf. In settling the charges, DIMA agreed to pay a total of $25 million in penalties. As alleged in part in the SEC Release:

In the AML action, the SEC’s order finds that DIMA caused mutual funds it advised to fail to develop and implement a reasonably designed AML program to comply with the Bank Secrecy Act and applicable Financial Crimes Enforcement Network regulations. The order also finds that DIMA caused such mutual funds’ failure to adopt and implement policies and procedures reasonably designed to detect activities indicative of money laundering and to conduct AML training specific to the mutual funds’ business.

. . .

In the second enforcement action, the SEC’s order finds that DIMA made materially misleading statements about its controls for incorporating ESG factors into research and investment recommendations for ESG integrated products, including certain actively managed mutual funds and separately managed accounts. The order finds that DIMA marketed itself as a leader in ESG that adhered to specific policies for integrating ESG considerations into its investments; however, from August 2018 until late 2021, DIMA failed to adequately implement certain provisions of its global ESG integration policy as it had led clients and investors to believe it would. The order finds that DIMA also failed to adopt and implement policies and procedures reasonably designed to ensure that its public statements about the ESG integrated products were accurate.

. . .

In the AML action, the SEC’s order finds that DIMA caused the mutual funds it advised to violate Rule 38a-1 under the Investment Company Act. In the ESG misstatements action, the SEC’s order finds that DIMA violated Sections 206(2) and 206(4) of the Investment Advisers Act and Rules 206(4)-7 and 206(4)-8 thereunder. Without admitting or denying the SEC’s findings, DIMA agreed to a cease-and-desist order and a $6 million penalty in the AML action; and to a cease-and-desist order, censure, and a $19 million penalty in the ESG misstatements action. 

SEC Charges Connecticut Resident with Fraudulent Statements in Press Releases (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25847
In the United States District Court for the District of Connecticut, the SEC filed a Complaint that charges Michael Caridi (a former director and officer of Tree of Knowledge International Corp. ("TOKI")) with violating Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and, in the alternative, with aiding and abetting violations of Exchange Action Section 10(b) and Rule 10b-5(b) thereunder. As alleged in part in the SEC Release:

[C]aridi acting as Chairman of TOKI's board of directors, assisted TOKI, which had not previously been in the business of supplying Personal Protective Equipment ("PPE"), in issuing two press releases touting TOKI's successful pivot into being a PPE provider. However, the SEC's complaint alleges, the press releases did not inform the public that Caridi and TOKI had previously failed to deliver 3 million medical grade NIOSH certified N-95 masks to a Canadian hospital pursuant to a contract with that hospital. In addition, as alleged in the complaint, TOKI had an $11 million liability to the hospital, and Caridi had misappropriated over $1 million from the unperformed contract, which included amounts taken after he had already promised the hospital a refund that TOKI did not have the resources to pay. Within months after the press releases, the hospital sued TOKI and put the company's U.S. subsidiary into a receivership in Canada.

SEC Charges Wellesley Asset Management, Inc. for Material Misstatements and Omissions in Marketing Materials Concerning Index Performance (SEC Release)
https://www.sec.gov/enforce/ia-6433-s
Without admitting or denying the findings in an SEC Order that it willfully violated the antifraud provisions of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 206(4)-1(a)(5) thereunder and the policies and procedures provisions of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, Wellesley Asset Management, Inc.("WAM") consented to a cease-and-desist order and censure, and agreed to pay a civil penalty of $1 million. As alleged in part in the SEC Release:

[F]rom February 2015 to March 2022, WAM’s written disclosures for advertisements concerning an index that WAM created to depict the performance of its convertible bond investment strategy from January 2000 forward failed to fully and fairly disclose the methodologies that WAM used to construct the index. Among other things, the order finds that WAM at times failed to adequately disclose that the index included hypothetical performance. The order also finds that WAM presented the index’s performance during at least three client webinars and misstated that the index represented composite returns from its convertible bond strategy.

SEC Suspends New York Public Accountant for Improper Professional Conduct (SEC Release)
https://www.sec.gov/enforce/34-98499-s
Without admitting or denying the findings in an SEC Order that he engaged in improper professional conduct within the meaning of Section 4C(a)(2) of the Securities Exchange Act of 1934 and Rule 102(e) of the SEC's Rules of Practice, and that he willfully aided and abetted and caused Marcum's violations of Rule 2-02(b)(1) of Regulation S-X., Michael D. Messina (former engagement quality review partner at Marcum LLP) consented to cease and desist from committing or causing any violations and any future violations of Rule 2-02(b) of Regulation S-X and to pay a civil penalty of $30,000; and, further agreed to be suspended from appearing and practicing before the Commission as an accountant with the right to apply for reinstatement after two years.As alleged in part in the SEC Release:

[M]essina failed to comply with PCAOB standards in connection with the audits of AAI's financial statements for its fiscal years ended December 31, 2017-2020. Specifically, the SEC's order finds that Messina did not perform an adequate engagement quality review in compliance with the standards of the PCAOB when conducting audits of AAI because he did not: (1) evaluate the significant judgments related to engagement planning and to the engagement team's assessment of, and audit responses to, significant risks identified by the engagement team; (2) evaluate whether the engagement documentation indicated that the engagement team responded appropriately to significant risks and supported the conclusions reached by the engagement team; (3) perform his review with due professional care; and (4) document his review appropriately. These failings led to substantive audit issues going unaddressed in the areas of goodwill and intangibles, crypto miner property and equipment, and related party transactions in the AAI audits for fiscal years 2017-2020 and inadequate documentation of audit work in every year for which he was AAI's EQR partner, 2016-2020.

SEC Suspends Georgia Accountant for Improper Professional Conduct (SEC Release)
https://www.sec.gov/enforce/34-98492-s
Without admitting or denying the findings in an SEC Order https://www.sec.gov/files/litigation/admin/2023/34-98492.pdf formerly certified public accountant David C. Powell consented to the SEC’s order finding that he lacks character and integrity and engaged in improper and unethical professional conduct within the meaning of Section 4C(a)(2) of the Securities Exchange Act of 1934 and Rule 102(e) of the SEC’s Rules of Practice.  Powell agreed to be suspended from appearing or practicing before the SEC as an accountant.  The SEC’s order does not provide Powell an express right to apply for reinstatement. As alleged in part in the SEC Release:.

[B]etween 2005 and 2020, Powell, as an employee in the Atlanta office of a public accounting firm, was required to hold a CPA license in the state of Georgia.  The order finds that Powell annually represented to his firm that he did hold a Georgia CPA license, but contrary to these representations, he was never actively licensed in Georgia and on at least one occasion provided a falsified license to his firm.  The order further finds that Powell conducted audits that were not authorized by the accounting firm for at least five private companies and represented the audits were performed in accordance with GAAS.  The order finds, however, that for these unauthorized audits, Powell failed to comply with GAAS requirements by failing to obtain annual engagement letters, prepare audit documentation, and ensure proper review sign-off on workpapers and other final reports. 

The Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the Eastern District of Michigan against Darren Robinson, a former resident of Miami, Florida, and his firm The QYU Holdings Inc. (QYUHI), a Wyoming corporation with a purported principal place of business in Dallas, Texas.

The complaint charges Robinson and QYUHI with fraud, registration, and books and records violations relating to a multimillion-dollar fraudulent scheme which Robinson, individually and as the agent of QYUHI, solicited and both defendants accepted not less than $7.1 million from customers in the U.S., mainly located in the suburbs of Detroit, Michigan.

In its continuing litigation against Robinson and QYUHI, the CFTC seeks full restitution to defrauded participants, disgorgement of ill-gotten gains, and civil monetary penalties.

The CFTC and California Department of Financial Protection & Innovation Charge Los Angeles Area Precious Metals Dealer in $21 Million Fraudulent Scheme / Majority of the funds stolen came from victims’ tax-deferred retirement accounts (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8791-23

The Commodity Futures Trading Commission and the California Department of Financial Protection & Innovation (DFPI) today announced a joint civil enforcement action in the U.S. District Court for the Central District of California against precious metals dealer Regal Assets LLC, its owner and CEO Tyler G. Gallagher, and its former President Leah Donoso, charging them with misappropriating more than $21 million in a nationwide fraudulent scheme.

The complaint charges the defendants with misappropriating customer funds to purchase precious metals from Regal Assets. The majority of the funds came from the customers’ tax-deferred retirement accounts. Regal Assets was a California limited liability company with its principal office in Beverly Hills, California and a second office in Waco, Texas.  Gallagher’s last known residence was in the Los Angeles area, and Donoso currently resides in Texas. 

In the continuing litigation, the CFTC and the DFPI seek disgorgement of ill-gotten gains, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA), CFTC regulations, as well as various provisions of state law.

Miami Federal Court Enters Preliminary Injunction Order Against Certified Public Accountant in Connection with $58 Million Foreign Currency Fraud and Misappropriation Scheme (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8790-23

The Commodity Futures Trading Commission today announced the Honorable Darrin P. Gayles of the U.S. District Court for the Southern District of Florida entered a preliminary injunction order against Timothy F. Stubbs on September 22. The court’s decision stems from the CFTC’s January 27, 2022 complaint charging Stubbs, together with four other individuals and five companies, with fraud, misappropriation, and registration violations in connection with a fraudulent foreign currency (forex) scheme. [See CFTC Press Release No. 8486-22]

CFTC Charges Mosaic Exchange Limited and Sean Michael with a Fraudulent Solicitation and Digital Asset Commodities Trading Scheme (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8789-23

The Commodity Futures Trading Commission today announced it filed a civil enforcement action in the U.S. District Court for the Southern District of Florida against Mosaic Exchange Limited, a Pennsylvania limited liability company, and its owner and Chief Executive Officer Sean Michael, presently or formerly of Boca Raton, Florida, for running a fraudulent digital asset commodity scheme.

The complaint alleges the defendants fraudulently solicited and induced at least 17 people in the U.S. and other countries to give them hundreds of thousands of dollars’ worth of bitcoin or other funds for the defendants to trade bitcoin and other digital asset commodities on the customers’ behalves, and misappropriated customer funds.

CFTC Awards Whistleblower More Than $300,000 (CFTC Release) 
https://www.cftc.gov/PressRoom/PressReleases/8788-23

Federal Court Orders Chinese National to Pay More than $350,000 for Fraudulent Scheme to Trade Against Employer (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8787-23

The Commodity Futures Trading Commission today announced the U.S. District Court for the Northern District of Illinois entered a consent order on September 26 imposing a permanent injunction, disgorgement, and civil monetary penalty against Dichao Xie, a resident of China.

The order resolves a CFTC action filed on March 28, 2023. [See CFTC Press Release No. 8682-23.] The order finds, among other things, that Xie defrauded his former employer by misappropriating its confidential information to enter noncompetitive trades against it.

The order requires Xie to disgorge his ill-gotten gains, amounting to $175,772.40, and to pay a civil monetary penalty in the same amount. The order also permanently prohibits Xie from engaging in further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged, and imposes five-year trading and registration bans.

CFTC Charges Florida Man with Forex and Binary Options Fraud and Misappropriation (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8786-23
In the United States District Court for the Middle District of Florida, the CFTC filed a Complaint https://www.cftc.gov/media/9336/enfpatrickwonseycomplaint092623/download charging Patrick Wonsey with fraud and misappropriation related to a trading scheme involving, among other things, leveraged or margined retail foreign currency (forex) and binary options traded on and off CFTC-regulated exchanges. As alleged in part in the CFTC Release:

[F]rom approximately January 2017 through September 2022, Wonsey solicited and pooled over $3.4 million from at least 50 pool participants for the purported purpose of trading retail forex, binary options, metals and digital assets. To induce pool participants to send him money, Wonsey made fraudulent and material misrepresentations and omissions regarding his past trading success, chances of future profitability, frequency of payouts, and the lack of risk involved with trading through him. Wonsey only traded retail forex and binary options.

Instead of trading pool participant funds as promised, Wonsey misappropriated the funds for his personal benefit and to pay other pool participants in the manner of a Ponzi scheme. When pool participants requested their funds, Wonsey failed to pay them. He either ignored the requests, provided fraudulent excuses, or engaged in conduct designed to delay payouts for as long as possible.

Additionally, Wonsey was not registered as a commodity pool operator, did not set up the pool as required, and commingled pool participant funds with his own.

CFTC Charges Dallas and Los Angeles Area Precious Metals Dealers in Ongoing Fraud Scheme Garnering Over $7 Million from Retirement Accounts / Court Issues Restraining Order to Protect Assets and Documents (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8784-23
In the United States District Court for the Northern District of Texas, the CFTC filed a Complaint https://www.cftc.gov/media/9286/enfmorancomplaint091823/download against Damien Moran, Crown Bullion, Inc., and Bright Future Financial LLC (also d/b/a Oakhurst Metals) for fraudulently soliciting customers to purchase precious metals in self-directed individual retirement accounts, and misappropriating customer funds and assets. As alleged in part in the CFTC Release:

[B]eginning in March 2018, the defendants targeted elderly and retirement-aged persons, soliciting them to purchase precious metals from Bright Future, Oakhurst Metals, or Crown Bullion through self-directed IRA accounts. In their scheme, the defendants lured victims into contact with a telephone sales representative through false or deceptive advertisements touting the safety and security of precious metals investments; the benefits of investing in precious metals through a self-directed IRA; and the experience and expertise of the defendants in guiding customers in precious metals investments. After customers deposited funds with IRA custodians, hand-picked by the defendants, the defendants issued fraudulent invoices to the custodian, causing the transfer of funds or assets from the custodian to the defendants. The defendants then misappropriated most of the funds they received, purchasing metals for only a fraction of their total transactions and often at vastly inflated prices. 

As alleged in the complaint, more than a hundred victims have transferred more than $7 million in funds or assets to the defendants, mostly from their self-directed IRAs, and the defendants misappropriated most of those funds.   

FINRA

FINRA Bars and Fines Rep Over $7.86 Million in Unsuitable REITs Recommendations
FINRA Department of Enforcement, Complainant, v. Megurditch Patatian, Respondent (Decision, Office of Hearing Officers Extended Hearing Panel, Discip. Proc. No. 2018057235801 / June 10, 2022)
https://www.finra.org/sites/default/files/fda_documents/2018057235801
%20Megurditch%20Patatian%20CRD%204047060
%20OHO%20Decision%20jlg.pdf
-and-
FINRA Department of Enforcement, Complainant, v. Megurditch Patatian, Respondent (Decision, National Adjudicatory Council, Discip. Proc. No. 2018057235801 / September 27, 2023)
https://www.finra.org/sites/default/files/fda_documents/2018057235801
%20Megurditch%20Patatian%20CRD%204047060
%20NAC%20Decision%20jlg.pdf
As set forth in the "Introduction" portion of the FINRA OHO Decision [Ed: footnotes omitted]:

Respondent Megurditch Patatian recommended that 59 of his customers invest $7.86 million in non-traded real estate investments trusts ("REITs"). FINRA's Department of Enforcement alleges that Patatian committed several FINRA Rule violations in making those recommendations. Enforcement also alleges that Patatian made unsuitable recommendations for variable annuity surrenders and exchanges and impersonated a customer.

The Complaint contains five causes of action. First, Enforcement contends that Patatian's recommendations to his customers to purchase non-traded REITs were unsuitable, violating FINRA Rules 2111 and 2010. Second, Enforcement asserts that Patatian made five unsuitable recommendations to customers to surrender their variable annuities to invest in non-traded REITs, in violation of FINRA Rules 2111 and 2010. Third, Enforcement contends that Patatian made six unsuitable recommendations to customers to exchange their variable annuities, violating FINRA Rules 2330(b) and 2010. Fourth, Enforcement alleges that Patatian impersonated a customer in a telephone call with an insurance company, violating FINRA Rule 2010. Fifth, Enforcement asserts that Patatian created inaccurate forms to facilitate his sale of non-traded REITs, causing his firm to create and maintain inaccurate books and records, in violation of FINRA Rules 4511 and 2010. 

After a seven-day hearing, we find that Enforcement proved each cause of action. Because Patatian's actions were egregious, we impose a bar. We order Patatian to provide restitution of $262,958.73 plus interest to his 20 customers who sold their REITs at a loss, and to offer rescission to the customers who still hold their REITs. We also order that Patatian disgorge $458,418.07 in commissions he earned from his unsuitable non-traded REIT recommendations. 

Following Patatian's pro se appeal, the 37-page FINRA NAC Decision states in its "Conclusion" [Ed: footnotes omitted]:

Patatian violated FINRA Rules 2111 and 2010 by recommending unsuitable non-traded REITs to his customers. In order to facilitate these unsuitable investments, Patatian recommended unsuitable variable annuity surrenders, in violation of FINRA Rules 2111 and 2010, and caused his firm to maintain inaccurate books and records, in violation of FINRA Rules 4511 and 2010. Patatian also impersonated a customer in violation of FINRA Rule 2010. For these violations, Patatian is barred from associating with a FINRA member in any and all capacities. For the violations related to unsuitable REIT recommendations, Patatian is also ordered to disgorge $458,418.07 in commissions he earned from the relevant transactions, plus prejudgment interest calculated from the dates he earned the commissions until the date disgorgement is paid.

Patatian also recommended unsuitable variable annuity exchanges, in violation of FINRA Rules 2330 and 2010. For these violations, we impose on Patatian a second bar in all capacities.

We also affirm the Hearing Panel’s order that Patatian pay $19,083.33 in hearing costs, and order that he pay $1,582.30 in appeal costs. 

FINRA Censures and Fines  Citigroup Global Markets Inc. for Over Tendering Shares and Supervisory System
In the Matter of Citigroup Global Markets Inc., Respondent (FINRA AWC 2020066141101)
https://www.finra.org/sites/default/files/fda_documents/2020066141101
%20Citigroup%20Global%20Markets%20Inc.%20CRD%207059%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, Citigroup Global Markets Inc. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Citigroup Global Markets Inc. has been a member firm since 1936 with about 8,000 registered representatives at about 700 branches. In accordance with the terms of the AWC, FINRA imposed upon Citigroup Global Markets Inc. a Censure, $2.5 million fine ($833,334 payable to FINRA), and $5,771,489 in disgorgement ($1,923,829 payable to FINRA). As alleged in part in the AWC's "Overview":

Between November 2017 and August 2022, CGMI violated Securities Exchange Act of 1934 Rule l 4e•4, commonly referred to as the "Short Tender Rule," and FINRA Rule 2010, by over-tendering shares in 13 partial tender offers (PTOs), and received ill-gotten gains of approximately $5.7 million. Also, from November 2017 through December 2020, CGMI violated FINRA Rules 3110 and 2010 by failing to have a supervisory system reasonably designed to achieve compliance with Exchange Act Rule 14e-4. 

FINRA Fines and Suspends Rep for Outside Business Activity
In the Matter of Adam Bruce Anderson, Respondent (FINRA AWC 2022074181501)
https://www.finra.org/sites/default/files/fda_documents/2022074181501
%20Adam%20Bruce%20Anderson%20CRD%205157882%20AWC%20gg.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, Adam Bruce Anderson submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Adam Bruce Anderson was first registered in 2006 and since May 2018, he was registered with Ameriprise Financial Services, LLC. In accordance with the terms of the AWC, FINRA imposed upon Adam Bruce Anderson a $5,000 fine and a one-month suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC:

Between August and September 2021, Anderson engaged in an outside business activity by assisting in the creation of a reinsurance company and entering into a contract as the President of that company to provide reinsurance coverage on enterprise risk management insurance policies that Anderson’s separate limited liability company purchased from an insurance company. In December 2021, the insurance company paid Anderson’s reinsurance company $197,500 in premiums. This was a tax savings arrangement for Anderson under Internal Revenue Code section 831(b).

Anderson did not provide prior written notice to Ameriprise before engaging in the above-described outside business activity. In January 2022, he falsely stated on his Ameriprise annual attestation that he had disclosed all current outside business activities. Anderson did not provide written notice to Ameriprise of his outside business activity until July 2023. Ameriprise evaluated and did not approve Anderson’s outside business activity.

Therefore, Respondent violated FINRA Rules 3270 and 2010.