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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.

				

			

			
						
					
			

	
		
		

			

				
				
March 19, 2018

				 The SEC announced its highest-ever Dodd-Frank whistleblower awards, with two whistleblowers sharing a nearly $50 million award and a third whistleblower receiving more than $33 million. The previous high was a $30 million award in 2014.聽鈥淭hese awards demonstrate that whistleblowers can provide the SEC with incredibly significant information that enables us to pursue and remedy serious violations that might otherwise go unnoticed,鈥� said Jane Norberg, Chief of the SEC鈥檚 Office of the Whistleblower. 鈥淲e hope that these awards encourage others with specific, high-quality information regarding securities laws violations to step forward and report it to the SEC.鈥澛燭he SEC has awarded more than $262 million to 53 whistleblowers since issuing its first award in 2012. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.聽				 					 

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

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 14, 2018

				 The SEC charged Silicon Valley-based private company Theranos Inc., its founder and CEO Elizabeth Holmes, and its former President Ramesh 鈥淪unny鈥� Balwani with raising more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company鈥檚 technology, business, and financial performance.聽 Theranos and Holmes have agreed to resolve the charges against them.聽 Importantly, in addition to a penalty, Holmes has agreed to give up majority voting control over the company, as well as to a reduction of her equity which, combined with shares she previously returned, materially reduces her equity stake.聽The complaints allege that Theranos, Holmes, and Balwani made numerous false and misleading statements in investor presentations, product demonstrations, and media articles by which they deceived investors into believing that its key product 鈥� a portable blood analyzer 鈥� could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood testing industry.聽 In truth, according to the SEC鈥檚 complaint, Theranos鈥� proprietary analyzer could complete only a small number of tests, and the company conducted the vast majority of patient tests on modified and industry-standard commercial analyzers manufactured by others.聽Theranos and Holmes have agreed to settle the fraud charges levied against them.聽 Holmes agreed to pay a $500,000 penalty, be barred from serving as an officer or director of a public company for 10 years, return the remaining 18.9 million shares that she obtained during the fraud, and relinquish her voting control of Theranos by converting her super-majority Theranos Class B Common shares to Class A Common shares.聽				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 13, 2018

				 The SEC charged foreign affiliates of KPMG, Deloitte & Touche, and BDO for their involvement in audit work that circumvented the full oversight of the Public Company Accounting Oversight Board (PCAOB).聽The firms agreed to settle the charges by paying penalties or disgorging their profits from the audits. According to the SEC鈥檚 orders, the Zimbabwe affiliates of Deloitte & Touche and KPMG improperly audited the majority of assets and revenues of a publicly traded company without registering with the PCAOB.聽 The two principal auditors 鈥� KPMG鈥檚 affiliate in South Africa and BDO鈥檚 Canadian affiliate 鈥� were registered with the PCAOB but improperly relied upon the work of the two unregistered foreign component auditors to complete their audits of the company.聽 This violated PCAOB standards requiring sufficient analysis and inquiry when using the work of another auditor.聽Without admitting or denying the findings, BDO Canada agreed to pay a $50,000 penalty, KPMG in South Africa agreed to pay a $100,000 penalty, Deloitte in Zimbabwe agreed to pay聽disgorgement and interest totaling $99,057, and KPMG in Zimbabwe agreed to pay disgorgement and interest totaling $141,305.聽				 					 

						
Tagged in:
													  Accounting Fraud, 
													  Regulatory Violations, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 9, 2018

				 The SEC has charged Brian Robert Sodi a penny stock promoter based in Florida with defrauding investors in a pair of gold mining stocks by secretly amassing shares before touting the companies publicly.聽 He allegedly sold the bulk of his stock and reaped more than $1.1 million in illicit profits after his promotions caused the share prices and trading volumes to skyrocket.聽The SEC鈥檚 complaint alleges that Sodi, known in penny stock circles as 鈥淢ailman鈥� for his pervasive participation in direct-mailed penny stock promotions, committed a fraud known as scalping.聽 He allegedly disseminated promotions recommending the purchase of the stocks in Southern USA Resources Inc. and Goff Corporation without disclosing he owned shares and planned to sell them through a foreign bank.聽 Sodi also allegedly hid from investors that he was being paid in stock for one of these promotions.聽 According to the SEC鈥檚 complaint, Sodi proceeded to unload hundreds of thousands of his own shares to the detriment of other investors who bought in to the hype.聽				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 9, 2018

				 The SEC barred Robert Ritch the president of a penny stock company from ever again serving as a public company officer or director after he was caught making false and misleading statements about the company to investors in an effort to increase demand for the stock.聽The SEC confronted him quickly and the misstatements were removed from the Internet and social media before any dramatic spike in stock price typically seen in聽pump-and-dump schemes聽could occur. 聽Following such spikes, fraudsters dump their shares and stop hyping the stock, the price typically falls, and investors lose their money.聽Without admitting or denying the SEC鈥檚 findings, Ritch consented to a cease-and-desist order, officer-and-director bar, penny stock bar, and $50,000 penalty. 聽The SEC also has聽suspended trading in MNZO.聽				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 8, 2018

				 The SEC announced settled charges against Austin, Texas-based investment adviser Robert Mark Magee, the owner of Valor Capital Asset Management LLC for defrauding his clients through a 鈥渃herry-picking鈥� scheme.聽 The adviser, Magee, has agreed to be banned from the securities industry and pay more than $715,000 to resolve the charges.聽According to the SEC鈥檚 order, for almost three years, Magee traded securities in Valor鈥檚 omnibus account but waited to allocate the trades to client accounts until after the securities鈥� performance changed over the course of the day.聽 Magee then 鈥渃herry-picked鈥� the trades, disproportionately allocating profitable trades to his accounts and unprofitable trades to his clients鈥� accounts, reaping substantial profits for himself at his clients鈥� expense. The SEC鈥檚 order found that for most of the three-year period there was less than a one-in-a-trillion chance that the outsized performance of Magee鈥檚 personal account, compared to that of his clients鈥� accounts, was due to chance.聽				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 8, 2018

				 The SEC charged two investment adviser subsidiaries of Voya Holdings Inc. with failing to disclose conflicts of interest and making misleading disclosures in connection with their practice of recalling securities on loan so their affiliates could receive tax benefits.聽The advisers agreed to pay approximately $3.6 million to settle the charges, including more than $2 million directly to the affected mutual funds for the benefit of their investors. According to the SEC鈥檚 order instituting a settled administrative proceeding, Voya Investments LLC and Directed Services LLC served as investment advisers to certain insurance-dedicated mutual funds offered to annuity and life insurance customers through insurance companies affiliated with the advisers.聽 In order to generate additional income for the mutual funds and their investors, the Voya advisers lent securities held by the funds to parties looking to borrow the securities.聽 The Voya advisers recalled loaned securities before their dividend record dates so that the advisers鈥� insurance company affiliates, who were the record shareholders of the funds鈥� shares, could receive a tax benefit based on the dividends received.聽 But, as the order explains, the recall practice caused the funds and their investors to lose securities lending income without receiving any offsetting tax benefit.聽 The order found that the Voya advisers failed to disclose the conflict of interest to the funds鈥� board of directors or in the funds鈥� prospectuses.聽				 					 

						
Tagged in:
													  Misrepresentations, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 8, 2018

				 The SEC has filed fraud charges in a scheme to inflate the share price of an Israeli medical marijuana company鈥檚 common stock.聽 The court today entered a partial asset freeze of the proceeds of the alleged fraud.聽The SEC鈥檚 complaint, which was filed on March 5 in federal district court in Denver, alleges that Colorado resident Jeffrey O. Friedland touted OWC Pharmaceutical Research Corp. while misrepresenting both his own investment in OWC and the true nature of his professional relationship with the company.聽 As alleged in the complaint, Friedland was compensated with more than five million OWC shares for handling the company鈥檚 media and investor relations efforts.聽 Friedland then touted OWC to media, industry, and investors, creating the false impression that he was merely an early investor in OWC and later, a member of its advisory board, without disclosing his role as a paid promoter.聽 Friedland is alleged to have sold his OWC shares for almost $7 million, after which he and his spouse placed a portion of the proceeds in a investment account in the name of Lane 6552, acquired two homes in all-cash purchases, and made other purchases and uses of the funds. 聽Friedland鈥檚 sales took place from March through September 2017 and were made through accounts in the names of Lane 6552 LLC and Intiva Pharma LLC. 聽The United States District Court today, among other things, froze certain accounts that received proceeds of Lane 6552鈥檚 sales of OWC stock.聽				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 8, 2018

				 The SEC has charged Shezad Akbar, Americrude, Inc., and Daniel Waite with defrauding investors out of at least $950,000 through a string of fraudulent oil-and-gas securities offerings.聽The SEC鈥檚 complaint, which was filed yesterday in federal court in the Northern District of Texas, alleges that Akbar used his company, Americrude, Inc., to defraud multiple investors in seven securities offerings that purportedly raised funds to acquire working interests in oil-and-gas prospects.聽 The SEC alleges that Americrude, Akbar, and Waite, who was Americrude鈥檚 nominal President, used a combination of cold calls, high-pressure sales pitches, and false and misleading statements to lure investors into Americrude鈥檚 fraudulent offerings.聽 The defendants misrepresented Americrude鈥檚 track record, the reserve potential of its oil-and-gas prospects, and its intended use of proceeds from the offerings.聽 Akbar is also alleged to have used an alias to conceal his involvement in the offering fraud and to hide his prior felony convictions from potential investors.聽Waite consented, without admitting or denying the SEC鈥檚 allegations, to the entry of a final judgment that permanently restrains and enjoins him from violating multiple SEC law and regulations; restrains and enjoins him from participating in the issuance, purchase, offer, or sale of any oil-and-gas related securities, provided however that such injunction does not prevent Waite from purchasing or selling oil-and-gas related securities for his own personal account; and orders him to pay disgorgement of ill-gotten gains totaling $32,409.52, prejudgment interest of $1,763.30, and a penalty of $100,000.聽				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
March 8, 2018

				 The SEC announced settled charges against Merrill Lynch, Pierce, Fenner & Smith Inc. for its failure to perform required gatekeeping functions in the unregistered sales of securities on behalf of a China-based issuer and its affiliates.聽The SEC鈥檚 order found that Merrill Lynch sold almost three million shares of Longtop Financial Technological Limited鈥檚 securities into the market despite red flags indicating that the sales could be part of an unlawful unregistered distribution. 聽Ultimately, the distribution generated almost $38 million in proceeds for the overseas issuer and its affiliates.聽In settlement, without admitting or denying the SEC鈥檚 findings, the firm agreed to be censured and consented to the order requiring it to cease and desist from committing or causing any future violations of the registration provisions of the Securities Act.聽 The order also requires Merrill Lynch to pay a penalty of $1.25 million and more than $154,000 in disgorgement and prejudgment interest from commissions and fees earned on the improper sales.聽				 					 

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

					
	
							
	
		
		
	


 			


											

						

								

									
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