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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 19, 2017

				 The Securities and Exchange Commission today filed fraud charges against Robert W. Murray a Virginia-based mechanical engineer accused of scheming to manipulate the price of Fitbit stock by making a phony regulatory filing. According to the SEC鈥檚 complaint, Murray purchased Fitbit call options just minutes before a fake tender offer that he orchestrated was filed on the SEC鈥檚 EDGAR system purporting that a company named ABM Capital LTD sought to acquire Fitbit鈥檚 outstanding shares at a substantial premium.聽 Fitbit鈥檚 stock price temporarily spiked when the tender offer became publicly available on Nov. 10, 2016, and Murray sold all of his options for a profit of approximately $3,100. The SEC alleges that Murray created an email account under the name of someone he found on the internet, and the email account was used to gain access to the EDGAR system.聽 Murray then allegedly listed that person as the CFO of ABM Capital and used a business address associated with that person in the fake filing.聽 The SEC also alleges that Murray attempted to conceal his identity and actual location at the time of the filing after conducting research into prior SEC cases that highlighted the IP addresses the false filers used to submit forms on EDGAR.聽 According to the SEC鈥檚 complaint, it appeared as though the system was being accessed from a different state by using an IP address registered to a company located in Napa, California. 				 					 

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

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 15, 2017

				 The Securities and Exchange Commission today charged James Im and Kee Chan a pair of former head traders who ran the commercial mortgage-backed securities (CMBS) desk at Nomura Securities International Inc. with deliberately lying to customers in order to inflate the profits of the CMBS desk and line their own pockets as a result. The SEC alleges that Im and Chan each misrepresented price information while acting as intermediaries on trades with Nomura鈥檚 customers who sought to buy and sell CMBS on the secondary market.聽 In certain instances, Im and Chan allegedly pretended they were still negotiating bond purchases with a third-party seller at higher prices when Nomura had already acquired the bonds at a lower price. The SEC alleges that in one instance, Im bragged about his purposeful deception of a customer, and Chan once altered an email to a customer to prop up his lie about the bid price for a bond.聽 According to the SEC鈥檚 complaints, Chan and Im fraudulently generated more than $750,000 in extra trading profits for the CMBS desk, and they received substantial bonuses based largely on the desk鈥檚 performance. 				 					 

						
Tagged in:
													  Housing and Mortgage Fraud, 
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 11, 2017

				 The Securities and Exchange Commission today charged Walter C. Little a former partner at an international law firm and his neighbor Andrew M. Berke with making more than $1 million in illicit profits by insider trading around corporate announcements. The SEC alleges that Little accessed confidential documents on his law firm鈥檚 internal computer network related to at least 11 impending announcements involving law firm clients, none of which he personally advised or billed for services.聽 Little then allegedly traded in advance of each announcement and often tipped Berke with material nonpublic information so he could similarly trade in company stocks before the announcements were made publicly.聽 According to the SEC鈥檚 complaint, the insider trading occurred from February 2015 to February 2016. 鈥淎s alleged in our complaint, Little used highly-confidential information about his law firm's clients to make more than $1 million for himself and his neighbor through illegal insider trading and tipping,鈥� said Stephanie Avakian, Acting Director of the SEC鈥檚 Enforcement Division. In a parallel action, the U.S. Attorney鈥檚 Office for the Southern District of New York today announced criminal charges against Little and Berke. 				 					 

						
Tagged in:
													  Insider Trading, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 11, 2017

				 Public companies must properly disclose perks, benefits, and other forms of compensation paid to CEOs and certain other highly compensated executive officers.聽 The Securities and Exchange Commission today announced that Miles S. Nadal the former CEO of a marketing company has agreed to pay $5.5 million to settle charges that his perks were not properly disclosed to shareholders.

According to the SEC鈥檚 order, shareholders were informed in annual filings that Nadal received an annual perquisite allowance of $500,000 in addition to other benefits as the chairman and CEO of MDC Partners.聽 But the SEC鈥檚 investigation found that without disclosing information to investors as required, MDC Partners paid for Nadal鈥檚 personal use of private airplanes as well as charitable donations in his name, yacht and sports car expenses, cosmetic surgery, and a wide range of other perks.聽 All total, Nadal improperly obtained an additional $11.285 million in perks beyond his disclosed benefits and $500,000 annual allowances.聽 He has since resigned and returned $11.285 million to the company. 				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 10, 2017

				 The Securities and Exchange Commission today announced an enforcement action requiring Barclays Capital to refund advisory fees or mutual fund sales charges to clients who were overcharged. In a settlement of more than $97 million, Barclays agreed to settle three sets of violations that resulted in clients being overbilled by nearly $50 million.聽 The SEC鈥檚 order finds that two Barclays advisory programs charged fees to more than 2,000 clients for due diligence and monitoring of certain third-party investment managers and investment strategies when in fact these services weren鈥檛 being performed as represented.聽 Barclays also collected excess mutual fund sales charges or fees from 63 brokerage clients by recommending more expensive share classes when less expensive share classes were available.聽 Another 22,138 accounts聽paid excess fees to Barclays due to miscalculations and billing errors by the firm. 				 					 

						
Tagged in:
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 9, 2017

				 The Securities and Exchange Commission today charged David R. Humphrey, a former SEC employee, with securities fraud in connection with his trading of options and other securities. The SEC鈥檚 complaint alleges that David R. Humphrey, who worked at the SEC from 1998 to 2014, concealed his personal trading from the SEC鈥檚 ethics office and later misrepresented his trading activities to the SEC鈥檚 Office of Inspector General when questioned during an investigation.聽 鈥淎s alleged in our complaint, Humphrey never sought pre-clearance for his prohibited options trades and he filed forms that falsely represented his securities holdings,鈥� said Gerald W. Hodgkins, Associate Director in the SEC鈥檚 Division of Enforcement.聽 SEC employees are subject to rigorous rules regarding securities transactions to guard against even the appearance of using public office for private gain.聽 The ethics rules specifically prohibit trading in options or derivatives.聽 The rules also require staff to disclose their securities holdings and transactions to the agency鈥檚 ethics office in annual filings. According to the SEC鈥檚 complaint, Humphrey violated the rules by engaging in transactions involving derivatives, failing to obtain pre-clearance before trading non-prohibited securities, and failing to hold securities for the required period. 				 					 

						
Tagged in:
													  Regulatory Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 4, 2017

				 The Securities and Exchange Commission today announced that Verto Capital Management and William Schantz III have agreed to pay more than $4 million to settle charges that they used new investor money to repay earlier investors in Ponzi-like fashion and tapped investor funds for the CEO鈥檚 personal use. According to the SEC鈥檚 complaint, Verto Capital Management and Schantz 聽raised approximately $12.5 million selling promissory notes to purportedly fund Verto Capital鈥檚 purchase and sale of life settlements, which are life insurance policies sold in the secondary market.聽 The SEC alleges that they misrepresented to investors that Verto Capital was a profitable company and investor funds would be used for general working capital purposes.聽 Verto Capital and other Schantz businesses had been unprofitable for several years, according to the SEC鈥檚 complaint, and Schantz resorted to taking disproportionately large distributions of investor funds for himself and using new investor money to repay earlier investors.聽 Verto Capital and Schantz also allegedly made misrepresentations to investors about the safety of the notes and collateral underlying them.聽 The SEC alleges that the promissory notes were primarily sold through a group of insurance brokers in Texas, and religious investors were targeted. 鈥淎s alleged in our complaint, investors were told that the life settlement-backed notes were short-term investments with an unlikely event of default.聽 Schantz and Verto misled investors about the company鈥檚 past performance and the value of the collateral, and they diverted significant investor funds for Schantz鈥檚 personal use,鈥� said Andrew M. Calamari, Director of the SEC鈥檚 New York Regional Office. 				 					 

						
Tagged in:
													  Ponzi Schemes, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 2, 2017

				 The Securities and Exchange Commission today announced that a company insider has earned a whistleblower award of more than $500,000 for reporting information that prompted an SEC investigation into well-hidden misconduct that resulted in an SEC enforcement action. 鈥淭his company employee saw something wrong and did the right thing by reporting what turned out to be hard-to-detect violations of the securities laws,鈥� said Jane Norberg, Chief of the SEC鈥檚 Office of the Whistleblower.聽 鈥淐ompany insiders are in a unique position to provide specific information that allows us to better protect investors and the marketplace.聽 We encourage insiders with information to bring it to our attention.鈥� The whistleblower award is the second announced by the SEC in the past week.聽 Approximately $154 million has now been awarded to 44 whistleblowers who voluntarily provided the SEC with original and useful information that led to a successful enforcement action. 				 					 

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

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 1, 2017

				 The Securities and Exchange Commission today announced that MagnaChip Semiconductor Corp. a South Korea-based semiconductor manufacturer and its former CFO Margaret Sakai have agreed to settle charges related to an accounting scheme to artificially boost revenue and manipulate the financial results reported to investors. The SEC鈥檚 order finds that MagnaChip overstated revenues for nearly two years in response to immense pressure placed on employees each quarter to meet revenue and gross margin targets that had been communicated to the public.聽 Then-CFO Sakai directed or approved several fraudulent accounting practices to make it falsely appear the company had met those targets.聽 For example, MagnaChip recognized revenue on sales of incomplete or unshipped products, and the company delayed booking obsolete or aged inventory to manipulate its reported gross margin.聽 MagnaChip also engaged in roundtrip transactions to manipulate accounts receivable balances, and concealed from auditors that there were side agreements with distributors to induce them to accept products early. 鈥淢agnaChip engaged in a panoply of accounting tricks to artificially meet its financial targets,鈥� said Jina L. Choi, Director of the SEC鈥檚 San Francisco Regional Office.聽 鈥淐ompanies that sell stock in the U.S. markets should prioritize a robust accounting culture that is entirely truthful with investors.鈥� 				 					 

						
Tagged in:
													  Accounting Fraud, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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