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SEC Enforcement Actions

					
The  (SEC) is the United States agency with primary responsibility for enforcing federal securities laws. Whistleblowers with knowledge of violations of the federal securities laws can submit a claim to the SEC under the SEC Whistleblower Reward Program, and may be eligible to receive 听monetary rewards and protection against retaliation by employers.


Below are summaries of recent SEC settlements or successful prosecutions. If you believe you have information about fraud which could give 听rise to an SEC enforcement action and claim under the SEC Whistleblower Reward Program, please contact us to speak with one of our experienced whistleblower attorneys.

				

			

			
						
					
			

	
		
		

			

				
				
June 1, 2018

				 The SEC today announced settlements with 13 registered investment advisers who repeatedly failed to provide required information that the agency uses to monitor risk.听According to the SEC鈥檚 orders, the advisers failed to file annual reports on Form PF informing the agency about the private funds they advise, including the amount of assets under management, fund strategy, performance, and use of borrowed money and derivatives. Private fund advisers managing $150 million or more of assets have been required to make annual filings on Form PF听since 2012. The orders found that the 13 advisers were delinquent in their filings over multi-year periods. The SEC鈥檚 orders find that the advisers violated the reporting requirements of the Investment Advisers Act of 1940. Without admitting or denying the findings, the advisers agreed to be censured, to cease and desist, and to each pay a $75,000 civil penalty.听 During the course of the SEC鈥檚 investigation, the advisers also remediated their failures by making the necessary filings.听				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 31, 2018

				 The SEC听charged an employee of a prominent investment bank with repeatedly using his access to highly confidential information in order to place illicit and profitable trades in advance of deals on which the bank was providing investment banking advisory services.听According to the SEC鈥檚 complaint, Woojae 鈥淪teve鈥� Jung, a Vice President of Investment Banking who worked in the bank鈥檚 San Francisco and New York offices, used sensitive client information in order to trade in the securities of 12 different companies prior to the announcement of market-moving events.听The SEC alleges that between 2015 and 2017, Jung used an account held in the name of a friend living in South Korea to place these illegal trades and generate profits of approximately $140,000.听As alleged in the complaint, by using his friend鈥檚 brokerage account, Jung attempted to evade detection by skirting his employer鈥檚 requirements that he pre-clear his trades and that he use an approved brokerage firm that would have reported the trading to his employer.听				 					 

						
Tagged in:
													  Insider Trading, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 30, 2018

				 The SEC charged a former registered representative with defrauding long-standing brokerage customers in an $8 million investment scam.听According to the SEC鈥檚 complaint, Steven Pagartanis, who was affiliated with a registered broker-dealer, told some investors 鈥� including retirees who had been Pagartanis鈥檚 customers for many years 鈥� that he would invest their funds in either a publicly-traded or private land development company. He promised that the funds would be safe and also promised guaranteed monthly interest payments on the investments. At Pagartanis鈥檚 direction, his investors wrote checks payable to a similarly-named entity that was secretly controlled by Pagartanis. In all, the customers invested approximately $8 million, which Pagartanis used to pay personal expenses and make the guaranteed 鈥渋nterest鈥� payments to his customers. To conceal the scam, which unraveled earlier this year when Pagartanis stopped making the so-called interest payments to customers, Pagartanis created fictitious account statements reflecting ownership interests in the land development companies.听				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
													  Misrepresentations, 
													  Ponzi Schemes, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 29, 2018

				 The SEC听announced听it has obtained a court order halting an ongoing fraud involving an initial coin offering (ICO) that raised as much as $21 million from investors in and outside the U.S.听The court also approved an emergency asset freeze and the appointment of a receiver for Titanium Blockchain Infrastructure Services Inc., the firm behind the alleged scheme.听An SEC complaint unsealed today charges that Titanium President Michael Alan Stollery, a/k/a Michael Stollaire, a self-described 鈥渂lockchain evangelist,鈥� lied about business relationships with the Federal Reserve and dozens of well-known firms, including PayPal, Verizon, Boeing, and The Walt Disney Company.听The complaint alleges that Titanium鈥檚 website contained听fabricated testimonials from corporate customers and that Stollaire publicly 鈥� and fraudulently 鈥揷laimed to have relationships with numerous corporate clients.听The complaint alleges that Stollaire promoted the ICO through videos and social media and compared it to investing in 鈥淚ntel or Google.鈥澨�				 					 

						
Tagged in:
													  Cryptocurrency, 
													  Misrepresentations, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 16, 2018

				 The SEC announced fraud charges against three former Constellation Healthcare Technologies Inc. executives who falsified financial and other information they provided to a private firm in the course of negotiating the private firm鈥檚 acquisition of a majority stake in Constellation. Houston-based Constellation filed for bankruptcy in March, a little more than a year after the January 2017 acquisition.听According to the SEC鈥檚 complaint, the executives convinced a private firm to acquire a majority of Constellation鈥檚 equity and provided fake information, including financial statements for three fictitious subsidiaries supposedly acquired for more than $62 million. The complaint alleges that the former executives funded the sham acquisitions with stock sales in London and then diverted the proceeds to themselves. The complaint charges former Constellation chief executive Parmjit (Paul) Parmar, former chief financial officer Sotirios (Sam) Zaharis, and former company secretary Ravi Chivukula. In September 2017, amid concerns about Constellation鈥檚 financial condition, Parmar resigned and Zaharis and Chivukula were put on administrative leave.听				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 16, 2018

				 The SEC charged the owner of a Manhattan-based alternative investment firm with misappropriating close to $6 million in investor funds earmarked to finance the construction of an international airport in Belize.听The SEC鈥檚 complaint alleges that between 2014 and 2017, Brent Borland sold more than $21 million of promissory notes to dozens of investors, promising that the funds would be used as bridge financing for development of an international airport in Placencia, Belize, and that the investments would be protected by pledges of real estate as collateral. Borland marketed and sold the notes through two companies, Borland Capital Group LLC, which purports to be active in 鈥渁lternative investment,鈥� and Belize Infrastructure Fund I, LLC, which purports to be in the business of construction finance.听				 					 

						
Tagged in:
													  International Whistleblowers, 
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 16, 2018

				 The SEC announced settled charges against broker-dealers Chardan Capital Markets LLC and Industrial and Commercial Bank of China Financial Services LLC (ICBCFS) for failing to report suspicious sales of billions of penny stock shares. Broker-dealers are required to file Suspicious Activity Reports (SARs) for transactions suspected to involve fraud or with no apparent lawful purpose. According to the SEC, from October 2013 to June 2014, Chardan, an introducing broker, liquidated more than 12.5 billion penny stock shares for seven of its customers and ICBCFS cleared the transactions. Chardan failed to file any SARs even though the transactions raised red flags, including similar trading patterns and sales in issuers who lacked revenues and products. The SEC found that ICBCFS similarly failed to file any SARs for the transactions despite ultimately prohibiting trading in penny stocks by some of the seven customers.听The SEC鈥檚 orders found that Chardan and ICBCFS violated the Exchange Act and an SEC financial recordkeeping and reporting rule and that Chardan鈥檚 anti-money laundering (AML) officer, Jerard Basmagy, aided and abetted and caused the firm鈥檚 violations. The SEC also found that ICBCFS failed to produce documents promptly to SEC staff.听 Without admitting or denying the SEC鈥檚 findings, the parties agreed to settlements requiring Chardan to pay a $1 million penalty, ICBCFS to pay $860,000, and Basmagy to pay $15,000.听 Both firms consented to censures and, along with Basmagy, to cease and desist from similar violations in the future. 听Basmagy also agreed to industry and penny stock bars for a minimum of three years.听				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
													  Financial Institution Fraud, 
													  Money Laundering, 
													  Regulatory Violations, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 15, 2018

				 The SEC charged four individuals for their roles in a fraudulent scheme that generated nearly $34 million from unlawful stock sales and caused significant harm to retail investors.听The SEC鈥檚 complaint charges Francisco Abellan Villena, Guillermo Ciupiak, James B. Panther Jr., and attorney Faiyaz Dean.听According to the SEC鈥檚 complaint, the defendants manipulated the market for and illegally sold the stock of microcap issuer Biozoom Inc. As part of the alleged scheme, the defendants hid their ownership and sales of Biozoom shares by using offshore bank accounts, sham legal documents, a network of nominees, anonymizing techniques, and other deceptive practices. The defendants also allegedly directed a wide-ranging promotional campaign and employed sophisticated, manipulative trading techniques to artificially inflate Biozoom鈥檚 share price. The alleged scheme culminated in the defendants鈥� illegal sales of Biozoom, which netted them nearly $34 million in unlawful proceeds.听				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 9, 2018

				 The SEC听announced that it has charged New York-based investment adviser Premium Point Investments LP with inflating the value of private funds it advised by hundreds of millions of dollars.听The SEC also charged Premium Point鈥檚 CEO and chief investment officer Anilesh Ahuja as well as Amin Majidi, a former partner and portfolio manager at the firm, and former trader Jeremy Shor.听According to the SEC鈥檚 complaint, the scheme ran from at least September 2015 through March 2016 and relied on a secret deal where in exchange for sending trades to a broker-dealer, Premium Point received inflated broker quotes for mortgage-backed securities (MBS).听In addition, the defendants allegedly used 鈥渋mputed鈥� mid-point valuations, which were applied in a manner that further inflated the value of securities. This practice allegedly boosted the value of many of Premium Point鈥檚 MBS holdings and further exaggerated returns.听The complaint alleges that the defendants overstated the funds鈥� value in order to conceal poor fund performance and attract and retain investors.听				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 9, 2018

				 The SEC announced it charged a registered municipal advisor and its owner with defrauding a south Texas school district in connection with multiple municipal bond offerings.听The SEC鈥檚 order instituting proceedings found that in connection with three municipal bond offerings between January 2013 and December 2014, Mario Hinojosa and his wholly-owned municipal advisor, Barcelona Strategies LLC, misrepresented their municipal advisory experience and failed to disclose conflicts of interests to their client, a local school district in South Texas. While working as a paralegal, Hinojosa set up Barcelona, registered it as an SEC municipal advisor, drafted a marketing brochure about the firm, and circulated the brochure to the school district and other municipalities. The brochure created the misleading impression that Hinojosa and Barcelona had served as a municipal advisor on numerous municipal bond issuances and failed to disclose that Hinojosa had a financial interest in the school district鈥檚 offerings. By virtue of their misrepresentations and omissions, Barcelona and Hinojosa improperly earned hundreds of thousands of dollars in municipal advisory fees.听The SEC鈥檚 order found that Hinojosa and Barcelona engaged in fraudulent, deceptive, or manipulative acts and breached their fiduciary duties to municipal clients. Without admitting or denying the allegations, Barcelona and Hinojosa consented to a cease-and-desist order and are jointly and severally liable for paying $362,606 in disgorgement and $19,514 in prejudgment interest.听 Barcelona was also assessed a civil penalty of $160,000 while Hinojosa was assessed a civil penalty of $20,000. Finally, Hinojosa was barred from association with various regulated entities, including municipal advisors.听				 					 

						
Tagged in:
													  Government Procurement Fraud, 
													  Misrepresentations, 
													  Regulatory Violations, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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