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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.

				

			

			
						
					
			

	
		
		

			

				
				
July 25, 2017

				 The Securities and Exchange Commission today announced an award of nearly $2.5 million to an employee of a domestic government agency whose whistleblower tip helped launch an SEC investigation and whose continued assistance enabled the SEC to address a company's misconduct. ''Whistleblowers can provide a wealth of information and ongoing assistance that helps our agency bring enforcement actions quicker and more efficiently,''聽said Jane Norberg, Chief of the SEC's Office of the Whistleblower. 聽''This whistleblower not only helped us open the case, but also provided timely ongoing assistance along with critical documents and testimony that accelerated the pace of our enforcement action.'' Approximately $156 million has now been awarded to 45 whistleblowers who voluntarily provided the SEC with original and useful information that led to a successful enforcement action.聽 No money has been taken or withheld from harmed investors to pay whistleblower awards. 				 					 

						
Tagged in:
													  SEC Whistleblower Reward Program, 
													  Whistleblower Eligibility, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
July 12, 2017

				 The Securities and Exchange Commission today announced insider trading charges against a research scientist who allegedly searched the internet for 鈥渉ow sec detect unusual trade鈥� before making a trade that the agency flagged as suspicious through data analysis. The SEC鈥檚 complaint alleges that Fei Yan loaded up on stocks and options in advance of two corporate acquisitions late last year based on confidential information obtained from his wife, an associate at a law firm that worked on the deals.聽 According to the SEC鈥檚 complaint,聽Yan made approximately $120,000 in illicit profits by selling his holdings in Mattress Firm Holding Corp. and Stillwater Mining Company following public announcements that they would be acquired by other companies. Yan allegedly attempted to conceal his illegal activity by placing the illicit trades in a brokerage account bearing the name of his mother, who lives in China.聽 Among the internet searches he conducted was 鈥渋nsider trading in an international account.鈥澛�				 					 

						
Tagged in:
													  Insider Trading, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
July 12, 2017

				 The Securities and Exchange Commission today brought fraud charges against 13 individuals allegedly involved in two Long Island-based cold calling scams that bilked more than one hundred victims out of more than $10 million through high-pressure sales tactics and lies about penny stocks. The SEC alleges that the orchestrators of the scheme used boiler room-style call centers to make hundreds of thousands of cold calls that included the use of threatening and deceitful sales techniques to pressure victims 鈥� many of whom were senior citizens 鈥� into purchasing penny stocks. 聽For example, as part of one such scam, a boiler room salesman allegedly claimed that the Walt Disney Company was buying into a purported media and internet company and that would cause the penny stock鈥檚 price to increase substantially. 				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 30, 2017

				 The Securities and Exchange Commission today filed fraud charges against the clandestine founder of a purported Bitcoin platform and a chain of co-working spaces located in former bars and restaurants, alleging that he bilked investors in both companies while hiding his connection given his checkered past with regulators in the U.K.聽 The SEC alleges that Renwick Haddow, a U.K. citizen living in New York, created a broker-dealer and did not register the firm with the SEC as required under the federal securities laws.聽 Haddow allegedly used sales representatives to cold call potential investors and sell securities in Bitcoin Store Inc. and Bar Works Inc. According to the SEC鈥檚 complaint, offering materials presented to investors in both companies touted the backgrounds of senior executives who do not appear to exist. 聽The materials also misrepresented other key facts about both companies鈥� operations.聽 Haddow allegedly diverted more than 80 percent of the in funds raised by the broker-dealer for the Bitcoin Store, and sent more than $4 million from the Bar Works bank accounts to one or more accounts in Mauritius and $1 million to one or more accounts in Morocco. 				 					 

						
Tagged in:
													  Cryptocurrency, 
													  Misrepresentations, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 30, 2017

				 The Securities and Exchange Commission has charged Chicago-area information technology company Quadrant 4 System Corp. (QFOR) and two former top executives in an accounting fraud scheme that misled investors and allowed the former executives to siphon millions from the firm for their personal benefit. The SEC鈥檚 complaint, filed yesterday in the U.S. District Court for the Northern District of Illinois, alleges that former chief executive officer Nandu Thondavadi and former chief financial officer Dhru Desai stole more than $4 million from Schaumburg, Illinois-based QFOR over a nearly five-year period. The former executives also are alleged to have caused QFOR to understate its liabilities and inflate its revenues and assets, evading scrutiny by lying to the company鈥檚 auditors and providing them with forged and doctored documents. According to the SEC鈥檚 complaint, the alleged scheme continued until November 2016, when Thondavadi and Desai were arrested and criminally charged with fraud.聽 QFOR announced their resignations in December 2016 and disclosed that the company鈥檚 financial reports could no longer be relied upon and required a restatement. 

 				 					 

						
Tagged in:
													  Accounting Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 28, 2017

				 The Securities and Exchange Commission today charged a Canadian-based oil and gas company and three of its former top finance executives for their roles in an extensive, multi-year accounting fraud. The SEC's complaint alleges that Penn West Petroleum Ltd., which has since been renamed Obsidian Energy Ltd., fraudulently moved hundreds of millions of dollars in expenses from operating expense accounts to capital expenditure accounts.聽This alleged fraudulent movement caused Penn West to artificially reduce its operating costs by as much as 20 percent in certain periods, which falsely improved reported metrics for oil extraction efficiency and profitability.聽Penn West was one of Canada's largest oil producers at the time. According to the SEC's complaint, the fraud was orchestrated by the company's former CFO Todd Takeyasu, former vice president of accounting and reporting Jeffery Curran, and former operations controller Waldemar Grab.聽The SEC alleges that they manipulated the company's operating expenses in order to lower a key publicly reported metric concerning the cost of oil extraction and processing needed to sell a barrel of oil.聽Penn West allegedly created an internal budget target representing the amount it would improperly move in its publicly-reported financial statements and gave the illusion that it was spending less money to get oil of out the ground.聽In fact, the SEC alleges, the company historically struggled to keep its operating costs under control, and Takeyasu, Curran, and Grab managed operating expenses to meet the budget target.聽According to the SEC's complaint, they frequently met this target to the dollar by having the company record large, round number, and unsupported adjusting journal entries.聽Within the company, this practice was referred to as "reclass to capital." 				 					 

						
Tagged in:
													  Accounting Fraud, 
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 22, 2017

				 The Securities and Exchange Commission today announced additional charges in an enforcement investigation involving the improper handling of American Depositary Receipts (ADRs) by a Wall Street firm鈥檚 securities lending desk. The SEC鈥檚 order finds supervisory failures by Anthony Portelli, a former managing director and head of operations at broker-dealer ITG Inc.聽 Portelli supervised ITG鈥檚 securities lending operations and was responsible for the firm鈥檚 compliance with 鈥減re-release agreements鈥� for ADR transactions.聽 ADRs are U.S. securities that represent foreign shares of a foreign company.聽 Before obtaining a 鈥減re-released ADR鈥� to lend to a customer, brokers like ITG must own, or determine that a customer owns, the number of foreign shares that corresponds to the number of shares the ADR represents.聽 Under Portelli鈥檚 watch, personnel on ITG鈥檚 securities lending desk failed to take reasonable steps to determine whether the proper amounts of foreign shares were owned and held by ITG鈥檚 customers.聽 This failure opened up the possibility that the ADRs could be used improperly for short selling or dividend arbitrage. 				 					 

						
Tagged in:
													  Market Manipulation and Trading Violations, 
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 5, 2017

				 The Securities and Exchange Commission today charged 聽a Salt Lake City-based brokerage firm with securities law violations related to its alleged practice of clearing transactions for microcap stocks that were used in manipulative schemes to harm investors. To help detect potential securities law and money laundering violations, broker-dealers are required to file Suspicious Activity Reports (SARs) that describe suspicious transactions that take place through their firms.聽 The SEC鈥檚 complaint alleges that Alpine Securities Corporation routinely and systematically failed to file SARs for stock transactions that it flagged as suspicious.聽 When it did file SARs, Alpine Securities allegedly frequently omitted the very information that formed the bases for Alpine knowing, suspecting, or having reason to suspect that a transaction was suspicious.聽 As noted in the complaint, guidance for preparing SARs from the U.S. Treasury Department鈥檚 Financial Crimes Enforcement Network (FinCEN) clearly states that 鈥淸e]xplaining why the transaction is suspicious is critical.鈥� 				 					 

						
Tagged in:
													  Financial Institution Fraud, 
													  Market Manipulation and Trading Violations, 
													  Regulatory Violations, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 24, 2017

				 The Securities and Exchange Commission today announced charges in an alleged insider trading scheme involving tips of nonpublic information about government plans to cut Medicare reimbursement rates, which affected the stock prices of certain publicly traded medical providers or suppliers. The SEC鈥檚 complaint alleges that David Blaszczak, a former government employee turned political intelligence consultant, obtained key confidential details about upcoming decisions by the Centers for Medicare and Medicaid Services (CMS) from his close friend and former colleague at the agency, Christopher Worrall.聽 According to the SEC鈥檚 complaint, Worrall serves as a health insurance specialist in the Center for Medicare and tipped Blaszczak about at least three pending CMS decisions that affected the amount of money that companies receive from Medicare to provide services or products related to cancer treatments or kidney dialysis.聽				 					 

						
Tagged in:
													  Insider Trading, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
July 27, 2017

				 The SEC made a whistleblower award of more than $1.7 million to an undisclosed company insider who provided the agency with critical information to help stop a fraud that would have otherwise been difficult to detect.聽 The SEC reports that roughly $158 million has now been awarded to 46 whistleblowers who voluntarily provided the SEC with original and useful information that led to a successful enforcement action.聽 				 					 

						
Tagged in:
													  Anonymity, 
													  Whistleblower Case, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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