Follow-on APs, Suspensions, and Bars (January 2019)

In re Perry Douglas West, Esq. (A.P. Jan. 29, 2019, Settled)

In re Robert H. Shapiro (A.P. Jan. 30, 2019, Settled)

In re John L. Gathright, Jr. (A.P. Jan. 31, 2019, Settled)

In re John Austin Gibson, Jr. (A.P. Jan. 31, 2019, Settled)

In re Evan Louis Greebel, Esq. (A.P. Jan. 31, 2019, Contested)

In re Jordan E. Goodman (A.P. Jan. 31, 2019, Settled)

In re Albert D. Klager (A.P. Jan. 31, 2019, Settled)

In
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In re Digital Turbine, Inc. (A.P. Jan. 29, 2019, Settled)

Action against Respondent, a technology company, for alleged failure to implement and maintain sufficient Internal Control Financial Reporting.  According to the SEC, Respondent’s Forms 10-K disclosed material weaknesses related to its financial statements and reporting over a period of seven years but did not adequately address those weaknesses, which included inadequate accounting staffing and inadequate financial information technology.  Respondent has agreed to pay a civil penalty of $100,000.

SEC Order

SEC Press Release
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In re Lifeway Foods, Inc. (A.P. Jan. 29, 2019, Settled)

Action against Respondent, a dairy foods producer, for alleged failure to implement and maintain sufficient Internal Control Financial Reporting (“ICFR”).  According to the SEC, Respondent’s Forms 10-K disclosed recurring material weaknesses related to its financial statements and reporting over a period of nine years but did not sufficiently address those weaknesses.  The SEC also alleges that Respondent failed to perform an ICFR evaluation and assessment for two consecutive years and that Respondent had restated its
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In re CytoDyn Inc. (A.P. Jan. 29, 2019, Settled)

Action against Respondent, a biotechnology company, for alleged failure to implement and maintain sufficient Internal Control Financial Reporting.   According to the SEC, Respondent’s Forms 10-K disclosed material weaknesses related to financial statements and reporting over a period of nine years, including inadequate segregation of financial duties, but provided insufficient information about the specific weaknesses.  Respondent has agreed to pay a civil penalty of $35,000.

SEC Order

SEC Press Release
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In re Grupo Simec S.A.B. DE C.V. (A.P. Jan. 29, 2019, Settled)

Action against Respondent, a manufacturer of iron and steel products, for alleged failure to implement and maintain sufficient Internal Control Financial Reporting (“ICFR”).  According to the SEC, Respondent’s Forms 10-K disclosed material weaknesses related to its financial statements and reporting over a period of 10 years but did not adequately address those weaknesses, which included inadequate segregation of financial duties, inadequate transaction controls, and inadequate financial oversight.  Respondent has agreed to pay a civil penalty
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SEC v. Robert H. Shapiro, et al. (S.D. Fla. Jan. 27, 2019)

The Southern District of Florida entered a final judgment in the SEC’s fraud action against Woodbridge Group of Companies LLC, its former owner, and other Defendants.  The SEC alleged that Defendants operated a $1.2 billion Ponzi scheme.  The Court ordered Defendant former owner to pay a civil penalty of $100 million, disgorgement of $18.5 million, and prejudgment interest of $2.1 million.  The court ordered Defendant companies to pay disgorgement of $892 million.

SEC Press Release
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SEC and CFTC Enforcement Slow During Government Shutdown (Jan. 26, 2019)

The federal government was shut down from December 22, 2018, through January 25, 2019.  SEC and CFTC enforcement activity fell off sharply during that period.  In January of 2019, the SEC announced four enforcement actions, compared to 10 in January of last year.  On the administrative side, the SEC announced two enforcement actions this month, compared to 23 in January of last year.  The CFTC issued one enforcement-related press release in January, compared to 13
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SEC v. Phillip Michael Carter, et al. (N.D. Tex. Jan. 25, 2019, Contested)

Action against Defendants and Relief Defendants—a real estate developer, two other individuals, and eight LLCs—for alleged offering fraud.  According to the SEC, Defendants misled investors to buy promissory notes from companies that, in reality, had no assets.  The SEC further alleges that the names of the issuing shell companies were deceptively similar to the names of actual real estate companies.

SEC Litigation Release

SEC Press Release

SEC Complaint
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SEC v. Charles D. Scoville and Traffic Monsoon, LLC (10th Cir. Jan. 24, 2019)

The Tenth Circuit upheld an extraterritorial application of U.S. securities law under the Dodd-Frank Act.  The SEC alleged that Defendants, operating from within the United States, ran a Ponzi scheme in which 90% of the fraudulent securities sales were to victims overseas.  On interlocutory appeal from an asset freeze and other preliminary relief, Defendants argued that the antifraud provisions of the Securities Act do not apply to the alleged overseas sales.  The Tenth Circuit disagreed,
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SEC v. Oleksandr Ieremenko, et al. (D.N.J. Jan. 15, 2019, Contested)

Action against Defendants and Relief Defendants, 11 individuals and two companies, for alleged hacking and insider trading. According to the SEC, Defendants hacked a newswire service and the SEC’s EDGAR system to obtain material nonpublic information on earnings announcements of public companies.  The SEC alleges that Defendants traded while in possession of this information.  The U.S. Attorney’s Office for the District of New Jersey has brought parallel criminal charges.

SEC Litigation Release

SEC Complaint

SEC
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In re LBB Associates LTD., LLP, and Carlos Lopez, CPA (A.P. Jan. 14, 2018, Contested)

Action against Respondents, an accounting firm and its managing partner, for alleged violations of PCAOB standards while auditing a technology firm.  According to the SEC, Respondents failed to investigate red flags suggesting that undisclosed related-party transactions had occurred, improperly reviewed known related-party transactions, and allowed the same person to serve as both engagement and EQR partner on the audits, contrary to PCAOB standards.

SEC Order
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Gupta v. United States (2d Cir. Jan. 11, 2019)

The Second Circuit rejected a collateral challenge to the 2012 insider trading conviction of Appellant, a former Goldman Sachs director.  Appellant Gupta brought a habeas motion arguing that the jury instructions delivered at his trial were invalidated by the decision in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), where the Second Circuit held that tips of material nonpublic information alone are insufficient for an insider trading conviction without evidence that the
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United States v. Schulman (2d Cir. Jan. 10, 2019)

The Second Circuit upheld the 2017 insider trading conviction of Appellant, a patent attorney, rejecting his challenge to the sufficiency of the government’s evidence.  Although Appellant conceded that he disclosed information regarding a planned acquisition to a friend over dinner, he testified that he intended his comments to be a joke or brag and that he did not intend for the alleged tippee to trade while in possession of the material nonpublic information.  Appellant argued
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