Chief Technology Officer Of Blockchain Company Charged With Scheme To Defraud The Company Of Over $1 Million And Cryptocurrency (DOJ Release)California Executive Compensation Consultant Sentenced To Prison For Committing Insider Trading (DOJ Release)Chief Financial Officer Of Global Public Relations Firm Sentenced To 52 Months In Prison For Fraud And Falsification Of Corporate Records / Frank Okunak Embezzled Over $16 Million and Caused Publicly Traded Corporation to Keep False Book and Records (DOJ Release)
Nigerian National Sentenced To More Than Six Years In Federal Prison For International Tax Fraud Scheme (DOJ Release)ABB Agrees to Pay Over $315 Million to Resolve Coordinated Global Foreign Bribery Case/ ABB Subsidiaries in Switzerland and South Africa plead guilty to bribery conspiracy (DOJ Release)
Statement on Reopening of Comment Period for Share Repurchase Disclosure Modernizationby SEC Commissioner Mark T. UyedaSEC Charges Seven Parties in a Combination Pump-And-Dump and Securities Offering Scheme (SEC Release)AT&T Settles SEC Charge of Selectively Disclosing Material Information to Wall St. Analysts / Company Agrees to Pay a Record Penalty in Regulation FD Cases of $6.25 Million (SEC Release)
RIKESH THAPA co-founded and was the Chief Technology Officer ("CTO") of the Victim Company, which during the relevant period was involved in using blockchain and other technology to provide a ticketing platform for live events. Between December 2017 and September 2019, THAPA used his position to carry out a scheme to defraud the Victim Company.In 2018, the Victim Company sought to diversify its banking because of its understanding that certain financial institutions were reluctant to maintain relationships with companies, such as the Victim Company, involved in cryptocurrency transactions. In furtherance of that effort, THAPA agreed to receive and hold $1 million of the Victim Company's money in his personal bank account (the "THAPA Account") while the Victim Company explored banking options. Soon after receiving the $1 million, however, THAPA began using the funds on personal expenses. Nevertheless, THAPA repeatedly acknowledged what was supposed to be the temporary nature of his possession of the funds, representing to a colleague, in substance and in part, that the money was "a stationary 1mil in my account" that was held "for safe keeping." THAPA then falsified records to conceal his theft, providing the Victim Company with a forged bank statement, which falsely represented that THAPA held over $21 million, approximately $1 million of which was held in a particular savings account (the "Purported Account"). In fact, THAPA did not have the Purported Account and held much less than $21 million at the relevant bank. In 2019, THAPA refused to return the $1 million, which he spent on, among other things, nightclubs, travel, and clothing.In addition, between December 2017 and September 2019, THAPA used his control over the Victim Company's cryptocurrency holdings to embezzle at least 10 Bitcoin from the Victim Company. For example, in August 2018, THAPA diverted at least one of the Victim Company's Bitcoin for his own benefit, selling the Bitcoin for approximately $6,500 and depositing the proceeds into the THAPA Account (the "August 2018 Bitcoin Transaction"). To avoid detection, THAPA falsified trading records and deleted emails. In July 2019, THAPA sent the Victim Company's CEO a fraudulent transaction report that misrepresented the August 2018 Bitcoin Transaction. After the CEO, copying THAPA, thereafter requested and received a transaction report directly from the Victim Company's cryptocurrency brokerage, THAPA disabled the CEO's email account at the Victim Company (the "CEO Email Account"), deleted the cryptocurrency brokerage's email from the CEO Email Account, and then deleted the entire CEO Email Account.In yet another facet of the scheme, THAPA stole the Victim Company's utility tokens. Such tokens are a type of cryptocurrency that can be used to access particular services, products, or features. In July 2019, unbeknownst to the Victim Company's CEO, THAPA set up a meeting in Italy between THAPA and individuals who claimed to be interested in purchasing the Victim Company's utility tokens. Before the meeting, THAPA provided account information for the THAPA Account so that the purported investors could wire him funds. During the meeting, however, THAPA agreed to receive cash in exchange for utility tokens. After the meeting, THAPA transferred, without authorization, approximately 174,285 of the Victim's utility tokens to the purported investors. THAPA later determined that the cash he had received from the purported investors was counterfeit.
Today, the Commission reopened the comment period for the proposed rulemaking on Share Repurchase Disclosure Modernization. The comment period was reopened to add a memorandum prepared by the Division of Economic and Risk Analysis ("DERA") to the public comment file, and to seek public feedback on the memorandum. The memorandum analyzes the impact of section 4501 of the Internal Revenue Code of 1986 (the "Internal Revenue Code")  on the potential economic effects of the proposed rulemaking. Section 4501, which was added to the Internal Revenue Code by the Inflation Reduction Act of 2022 (the "Inflation Reduction Act"), imposes upon a covered corporation a non-deductible excise tax equal to 1% of the fair market value of any stock repurchased by the corporation, subject to certain exceptions.When the Commission initially proposed the Share Repurchase Disclosure Modernization rulemaking on December 15, 2021, the Inflation Reduction Act had not become law. Accordingly, the proposing release's discussion of the rulemaking's costs and benefits did not consider the impact that the excise tax would have on the incidence and level of share repurchases. A potential implication of the excise tax is that it might cause companies to decrease their share repurchase activity and to possibly favor dividends (including special dividends) as the preferred method of returning capital to shareholders. Any such decrease in share repurchase activity could, in turn, affect the costs and benefits analysis in the proposing release. To satisfy its statutory rulemaking obligations, the Commission must understand, to the furthest extent possible, the qualitative and quantitative impacts that the excise tax will have on share repurchase activity and the proposed rulemaking's costs and benefits.I appreciate the efforts by the DERA staff to address these issues in its memorandum and by the staff of the Divisions of Corporation Finance and Investment Management to prepare the reopening release. While I support the addition of the DERA memorandum to the public comment file and the reopening of the comment period generally, I disagree with the 30-day comment period for the public to provide feedback. This 30-day period is especially problematic when it commences shortly before, and will overlap with, major holidays later this month.One might ask: what is the purpose of the comment period? Is it merely an item to be checked off to satisfy the lowest acceptable standard of process required by the Administrative Procedures Act? Or is it a vital component of a discussion between an administrative agency and the public in order to better understand the effects of a proposed rule, especially under a changed factual scenario? I believe it is the latter.A longer period, such as 45 days, would increase the likelihood that the Commission receives more thoughtful responses. Even for commenters who can provide feedback within the 30-day period, they likely would appreciate the additional time to fine tune their analysis, while continuing their regular duties and spending quality time with their family and friends during the holidays. Reopening of Comment Period for Share Repurchase Disclosure Modernization, SEC Release No. 34-96458 (Dec. 7, 2022), available at https://www.sec.gov/rules/proposed/2022/34-96458.pdf. 26 U.S.C. 4501. See Pub. L. No. 117-169, 136 Stat. 1818, 1828 (2022). Share Repurchase Disclosure Modernization, SEC Release No. 34-93783 (Dec. 15, 2021) [87 FR 8443 (Feb. 15, 2022)], available at https://www.sec.gov/rules/proposed/2021/34-93783.pdf. See 15 U.S.C. 78c(f) (requiring the Commission, whenever it is engaged in rulemaking, to "consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation") and 15 U.S.C. 78w(a)(2) (requiring the Commission to consider "the impact any [rulemaking] would have on competition" and prohibiting the Commission from adopting any rule that "would impose a burden on competition not necessary or appropriate in furtherance of the purpose of [the Securities Exchange Act of 1934]"). See, e.g., National Association of Manufacturers v. SEC, (W.D. Tex.) (Dec. 4, 2022) (stating that the "[c]ourt will not introduce its own policy preferences [over that of the Commission] about what is a 'meaningful opportunity' [to comment on a rulemaking proposal]" and denying the plaintiff's motion for summary judgment that a 31-day comment period covering Christmas and Hanukkah violated the Administrative Procedures Act), available at https://assets.law360news.com/1555000/1555037/https-ecf-txwd-uscourts-gov-doc1-181129330034.pdf. I have previously spoken about my concerns with the short comment periods for recent Commission rulemaking and the 30-day comment period in this instance is the latest example of those concerns. See Mark T. Uyeda, Remarks at the APABA-DC Awards and Installation Reception (Oct. 19, 2022), available at https://www.sec.gov/news/speech/uyeda-apaba-dc-20221019, and Mark T. Uyeda, Statement on Electronic Recordkeeping Requirements for Broker-Dealers, Security-Based Swap Dealers, and Major Security-Based Swap Participants (Oct. 12, 2022), available at https://www.sec.gov/news/statement/uyeda-statement-electronic-recordkeeping-requirements-101222.
After the Bernie Madoff scandal, the SEC created a whistleblower program that encouraged people to provide information by promising them a cut of the recovered funds.At first, the agency was inundated with tips. But now, the number of people reporting financial fraud is dwindling. The guests on this week's episode of our weekly podcast, On The Merits, say they know why.One problem: it's unclear how or why the SEC pays rewards to some whistleblowers but not others. And, even if you're entitled to a reward, it can take years of waiting for the agency to pay out. Bloomberg Law's John Holland speaks with whistleblower Janice Shell and whistleblower attorney Bill Singer about the problems with this program and how they can be fixed.