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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 聽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 聽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.

				

			

			
						
					
			

	
		
		

			

				
				
May 8, 2018

				 The SEC announced the hedge fund advisory firm Visium Asset Management LP has agreed to settle charges related to asset mismarking and insider trading by its privately managed hedge funds and portfolio managers. Separately, the firm鈥檚 CFO agreed to settle charges that he failed to respond appropriately to red flags that should have alerted him to the asset mismarking. The SEC鈥檚 order finds that two portfolio managers of New York-based Visium falsely inflated the value of securities held by hedge funds it advised, causing the funds to falsely inflate returns, overstate their aggregate net asset value, and pay approximately $3.15 million in excess fees to Visium. The order also finds that certain Visium portfolio managers traded in the securities of pharmaceutical companies in advance of two generic drug approvals by the U.S. Food and Drug Administration (FDA). The trades were based on confidential information received from a former FDA official working as a paid consultant to Visium. Trades were also made in the securities of home healthcare providers in advance of a proposed cut to certain Medicare reimbursement rates by the Centers for Medicare and Medicaid Services (CMS), based on confidential information received from a former CMS employee working as a paid consultant to Visium.听Visium agreed to settle the SEC鈥檚 charges by, among other things, disgorging illicit profits totaling more than $4.7 million plus interest of $720,711, and paying a penalty of more than $4.7 million. Ku agreed to pay a $100,000 penalty and to be suspended from the securities industry for twelve months. Visium and Ku each consented to the applicable SEC order without admitting or denying the findings.听				 					 

						
Tagged in:
													  Financial Institution Fraud, 
													  Insider Trading, 
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 1, 2018

				 The SEC announced the unsealing of fraud charges against a Mississippi company and its principal who allegedly bilked at least 150 investors in an $85 million聽Ponzi scheme. The defendants agreed to permanent injunctions, an asset freeze, and expedited discovery.听The SEC鈥檚 complaint alleges that Arthur Lamar Adams lied to investors by telling them that their money would be used by his company, Madison Timber Properties, LLC, to secure and harvest timber from various land owners located in Alabama, Florida, and Mississippi, and promised annual returns of 12-15%. But Madison Timber never obtained any harvesting rights. Instead, Adams allegedly forged deeds and cutting agreements as well as documents purportedly reflecting the value of the timber on the land. Adams also allegedly paid early investors with later investors鈥� funds and convinced investors to roll over their investments. According to the complaint, Adams used investors鈥� money for personal expenses and to develop an unrelated real estate project.听				 					 

						
Tagged in:
													  Misrepresentations, 
													  Ponzi Schemes, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
April 30, 2018

				 The SEC announced that Japan-based Panasonic Corp. will pay more than $143 million to resolve charges of Foreign Corrupt 91吃瓜网 Act (FCPA) and accounting fraud violations involving its global avionics business.听According to the SEC鈥檚 order, Panasonic鈥檚 U.S. subsidiary, Panasonic Avionics Corp. (PAC), a provider of in-flight entertainment and communication systems, offered a lucrative consulting position to a government official at a state-owned airline to induce the official to help PAC in obtaining and retaining business from the airline. At the time it orchestrated the bribery scheme, PAC was negotiating two agreements with the airline valued at more than $700 million. PAC ultimately retained the official and paid approximately $875,000 for a position that required little to no work, using an unrelated third-party vendor to conceal the payments.听				 					 

						
Tagged in:
													  Accounting Fraud, 
													  FCPA, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
April 24, 2018

				 The SEC announced that the entity formerly known as Yahoo! Inc. has agreed to pay a $35 million penalty to settle charges that it misled investors by failing to disclose one of the world鈥檚 largest data breaches in which hackers stole personal data relating to hundreds of millions of user accounts.听According to the SEC鈥檚 order, within days of the December 2014 intrusion, Yahoo鈥檚 information security team learned that Russian hackers had stolen what the security team referred to internally as the company鈥檚 鈥渃rown jewels鈥�: usernames, email addresses, phone numbers, birthdates, encrypted passwords, and security questions and answers for hundreds of millions of user accounts. Although information relating to the breach was reported to members of Yahoo鈥檚 senior management and legal department, Yahoo failed to properly investigate the circumstances of the breach and to adequately consider whether the breach needed to be disclosed to investors. The fact of the breach was not disclosed to the investing public until more than two years later, when in 2016 Yahoo was in the process of closing the acquisition of its operating business by Verizon Communications, Inc.听				 					 

						
Tagged in:
													  Cybersecurity and Data Breaches, 
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
April 20, 2018

				 The SEC announced additional fraud charges stemming from an investigation of Centra Tech Inc.鈥檚 $32 million initial coin offering.听In an amended complaint filed today, the SEC charged one of Centra鈥檚 co-founders, Raymond Trapani, in a fraudulent scheme related to Centra鈥檚 2017 ICO, in which the company issued 鈥淐TR Tokens鈥� to investors. Earlier this month, the SEC and criminal authorities charged Centra鈥檚 two other co-founders, Sohrab 鈥淪am鈥� Sharma and Robert Farkas, for their roles in the scheme.听The SEC鈥檚 amended complaint alleges that Trapani was a mastermind of Centra鈥檚 fraudulent ICO, which Centra marketed with claims about nonexistent business relationships with major credit card companies, fictional executive bios, and misrepresentations about the viability of the company鈥檚 core financial services products. The amended complaint further alleges that Trapani and Sharma manipulated trading in the CTR Tokens to generate interest in the company and prop up the price of the tokens.听				 					 

						
Tagged in:
													  Cryptocurrency, 
													  Misrepresentations, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
April 12, 2018

				 The SEC announced a whistleblower award of more than $2.1 million to a former company insider whose information led to multiple successful enforcement actions. The whistleblower鈥檚 information strongly supported the findings in the underlying actions and the whistleblower provided ongoing assistance to the staff during the investigation.听鈥淭he SEC has issued nearly $90 million in whistleblower awards in the past month alone,鈥� said Jane Norberg, Chief of the SEC鈥檚 Office of the Whistleblower. 鈥淎s these awards demonstrate, we continue to receive high-quality information from whistleblowers, which we use to detect and prosecute securities violations and safeguard investors.鈥澛燬ince issuing its first award in 2012, the SEC has awarded more than $266 million to 55 individuals under the whistleblower program. In that time, almost $1.5 billion in monetary sanctions have been ordered against wrongdoers based on actionable information received from whistleblowers, including more than $740 million in disgorgement of ill-gotten gains and interest, the majority of which has been or is scheduled to be returned to harmed investors.听				 					 

						
Tagged in:
													  SEC Whistleblower Reward Program, 
													  Securities Fraud, 
													  Whistleblower Case, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
April 9, 2018

				 The SEC charged two Texas companies and their principals in a $2.4 million Ponzi scheme and in a related, $1.4 million offering fraud targeting retirees. The SEC's complaint alleges that, from 2010 to 2017, Clifton E. Stanley ran a Ponzi scheme through his retirement planning and real estate investment business, The Lifepay Group, LLC. Stanley is alleged to have lured at least 30聽elderly victims to invest approximately $2.4 million of their retirement savings with baseless promises and claims of outsized investment returns. He kept the scheme afloat for years by paying early investors with later investors'聽funds and by convincing investors to roll over their investments. 聽The SEC further alleges that Stanley pilfered from the estate of an elderly woman's family trust, diverting nearly $100,000 to fund the Lifepay Ponzi scheme. In addition, the SEC's complaint alleges that, beginning in 2015, Stanley and Michael E. Watts orchestrated a second offering fraud through a company they controlled, SMDRE, LLC.听Stanley and Watts allegedly used a collection of misrepresentations and empty promises to convince a group of predominantly elderly victims to invest roughly $1.4 million in SMDRE.听				 					 

						
Tagged in:
													  Misrepresentations, 
													  Ponzi Schemes, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
April 6, 2018

				 The SEC announced that three investment advisers have settled charges for breaching fiduciary duties to clients and generating millions of dollars of improper fees in the process. According to the SEC鈥檚 orders, PNC Investments LLC, Securities America Advisors Inc., and Geneos Wealth Management Inc. failed to disclose conflicts of interest and violated their duty to seek best execution by investing advisory clients in higher-cost mutual fund shares when lower-cost shares of the same funds were available. The SEC also charged Geneos for failing to identify its revised mutual fund selection disclosures as a 鈥渕aterial change鈥� in its 2017 disclosure brochure. Collectively, the firms will pay almost $15 million, with more than $12 million going to harmed clients.听The SEC鈥檚 orders find that PNCI, SAA, and Geneos each violated provisions of the Investment Advisers Act of 1940, including an antifraud provision. Without admitting or denying the findings, the advisers each consented to a cease-and-desist order and a censure. The orders require PNCI to pay $6,407,770 in disgorgement and prejudgment interest along with a $900,000 penalty. SAA must pay $5,053,448 in disgorgement and prejudgment interest along with a $775,000 penalty. Geneos must pay $1,558,121 in disgorgement and prejudgment interest along with a $250,000 penalty.听				 					 

						
Tagged in:
													  Financial Institution Fraud, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
April 6, 2018

				 The SEC has obtained a court order freezing more than $27 million in trading proceeds from allegedly illegal distributions and sales of restricted shares of Longfin Corp. stock involving the company, its CEO, and three other affiliated individuals. According to a complaint unsealed today in federal court in Manhattan, shortly after Longfin began trading on NASDAQ and announced the acquisition of a purported cryptocurrency business, its stock price rose dramatically and its market capitalization exceeded $3 billion. The SEC alleges that Dorababu Penumarthi, Suresh Tammineedi, and their co-conspirators then illegally sold large blocks of their restricted Longfin shares to the public while the stock price was highly elevated. Through their sales, Penumarthi, Tammineedi, and others collectively reaped more than $27 million in profits. 				 					 

						
Tagged in:
													  Cryptocurrency, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
April 5, 2018

				 The SEC charged convicted felon and former NHL team owner Peter H. Pocklington, his medical device company, and others with defrauding investors by hiding Pocklington鈥檚 recidivist history and by misappropriating investor funds.听The SEC alleges that聽in 2010, Pocklington pleaded guilty to a federal felony perjury charge and was later ordered to pay over $5 million as part of a settlement for unrelated state securities fraud and registration charges. Pocklington subsequently聽founded and now controls California-based The Eye Machine LLC (now known as Nova Oculus Partners LLC), a medical device company that raised聽辞惫别谤听$14 million between 2014 and 2017 from more than 260 investors in unregistered offerings.听According to the SEC鈥檚 complaint, Pocklington and聽his attorney, Lantson E. Eldred,聽structured the ownership of The Eye Machine to conceal Pocklington鈥檚 role with the company and held Eldred out as the company鈥檚 鈥渧isual front.鈥澛� In the offerings, Pocklington, Eldred, and The Eye Machine allegedly failed to disclose Pocklington鈥檚 checkered history and involvement, and misrepresented how investor funds would be spent.听Pocklington allegedly misappropriated over $600,000 of investor funds for personal use, including funding his gold mining companies and paying personal legal and credit card bills. The complaint also alleges that The Eye Machine paid millions of dollars in undisclosed and excessive sales commissions to defendants Yolanda C. Velazquez, Vanessa Puleo, and Robert A. Vanetten, who acted as unregistered brokers for the company. According to the complaint, Velazquez 鈥� whom the SEC previously barred from acting as a broker-dealer 鈥� and Puleo used聽鈥渂oiler room鈥� operations聽in Florida to 鈥渃old call鈥� investors.听				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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