Robare Group v. SEC (D.C. Cir. Apr. 30, 2019)

The D.C. Circuit held that while a defendant investment adviser’s failure to disclose conflicts of interests on registration applications was sufficient to support the SEC’s finding of a violation of § 206 of the Investment Advisers Act, which imposes a negligence standard, the evidence was insufficient to support the SEC’s finding of a violation of § 207 of the Act, which imposes a willfulness standard. According to the court, in order to prove willfulness, the
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SEC v. James Siniscalchi (S.D.N.Y. Apr. 29, 2019, Contested)

Action against Defendant, the chief compliance officer of a ticket resale company, for alleged misappropriation of investor funds. According to the SEC, Defendant’s company represented to investors that their funds were used to purchase Broadway musical and sporting event tickets and resell them at a profit, when Defendant and his business partners in fact used the funds for their personal benefit. The SEC alleges that Defendant also concealed the involvement of his cousin in the
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SEC v. Christopher D. Dougherty, et al. (S.D. Cal. Apr. 26, 2019, Contested)

Action against Defendants, an investment adviser and his three companies, for an alleged Ponzi scheme. According to the SEC, Defendants solicited investment advisory clients to invest in various entities under Defendant adviser’s control but instead misappropriated client funds for personal expenses and to pay off existing investors.

SEC Complaint 

SEC Litigation Release
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In re Deutsche Bank Trust Company Americas (A.P. Apr. 25, 2019, Settled)

Action against Respondent, a commercial bank, for alleged material omissions in marketing materials and other documents related to Respondent’s hedge fund selection process.  According to the SEC, Respondent failed to disclose that its research group limited its evaluation of hedge funds to funds that would agree to share management fees with Respondent.  Respondent has agreed to pay a civil penalty of $500,000.

SEC Order
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SEC v. Celadon Group, Inc. (S.D. Ind. Apr. 25, 2019, Settled)

Action against Defendant, a truckload freight company, for alleged accounting fraud.  According to the SEC, Defendant purchased and sold used trucks at inflated prices to avoid recognizing certain charges and losses.  The SEC alleges that as a result, Defendant overstated its financials in its annual report.  Defendant has agreed to pay disgorgement of $7 million, which the SEC will deem satisfied by Defendant’s payment of restitution in a parallel criminal case.

SEC Complaint

SEC Litigation
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In re Charter Capital Management, LLC, and Steven Morris Bruce (A.P. Apr. 23, 2019, Settled)

Action against Respondents, an investment adviser and its founder and CEO, for alleged failure to disclose conflicts of interest and misrepresentations to investors.  The SEC alleges that Respondent adviser made a loan on behalf of its funds to a Norwegian individual and his company, which was never fully repaid, and that Respondent CEO made a personal loan to the same company shortly afterward.  According to the SEC, Respondents failed to disclose this conflict of interest
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In re Michael F. Cronin, CPA (A.P. Apr. 23, 2019, Settled)

Action against Respondent, an accountant, for alleged violation of a PCAOB order that barred him from practicing at a registered public accounting firm for a three-year period. According to the SEC, Respondent continued to practice accounting after this order was issued. Respondent agreed to a bar and to pay disgorgement of $95,630, prejudgment interest of $12,446, and civil penalties of $42,918.

SEC Order
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SEC v. Eric D. Lyons, et al. (D. Mass. Apr. 22, 2019, Contested)

Action against Defendant, an investment adviser and hedge fund manager, for alleged misappropriation of client assets and securities fraud.  According to the SEC, Defendant caused the hedge fund he managed to transfer client funds to his own account and subsequently used those funds on personal expenses.  The SEC also alleges that Defendant obtained funds from investors based on false and misleading statements.

SEC Complaint

SEC Litigation Release
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In re Dov Zaidman, CPA, and ZBS Group LLP (A.P. Apr. 22, 2019, Settled)

Action against Respondents, an audit firm and its managing partner, for their roles in a scheme to avoid registration and reporting requirements through the creation of “blank check” shell companies. According to the SEC, Respondents performed audits on the “blank check” companies that deviated from PCAOB standards. The SEC alleges that Respondents performed the deficient audits to avoid SEC registration and reporting requirements for the sale of the companies. Respondents have agreed to five-year bars
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In re Prosper Funding LLC (A.P. Apr. 19, 2019, Settled)

Action against Respondent, a marketplace lender, for alleged misstatements related to annualized net returns. According to the SEC, Respondent erroneously excluded certain securities in its returns calculation and did not correct the error, despite the fact that investors complained about possible problems with the calculations. Respondent has agreed to pay a civil penalty of $3 million.

SEC Order
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SEC v. David M. Loflin (D. Ariz. Apr. 19, 2019, Settled)

Action against Defendant, a business partner of the controlling shareholder of a public company, for his alleged role in an unregistered offering and pump-and-dump scheme. According to the SEC, Defendant and his partner falsified documents and misled the company’s transfer agent and a brokerage in order to obtain stock certificates without restrictive legends, which would have required the company to file a registration statement or be exempt from doing so. The SEC further alleges that
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SEC v. Kimberly Sredich (E.D. Mich. Apr. 18, 2019, Contested)

Action against Defendant, a former sales assistant at a registered broker-dealer, for alleged misappropriation of funds from brokerage customers. According to the SEC, Defendant used the proceeds of sales of securities for personal expenses. The SEC alleges that Defendant also falsified customer signatures on letters of authorization to move funds to her personal bank account. Defendant has been charged in a parallel criminal case.

SEC Complaint 

SEC Litigation Release
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In re Matthew R. Rossi and SJL Capital, LLC (A.P. Apr. 17, 2019, Settled)

Action against Respondents, an investment adviser company and its owner, for alleged fraud on investors.  According to the SEC, Respondents represented that they would invest client funds in a well-diversified portfolio but instead engaged in unhedged options trading.  The SEC alleges that Respondents concealed losses from investors and misrepresented their financial performance.  Respondents have agreed to officer-and-director and associational bars.

SEC Order
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SEC v. Quentin Louis Wilcox (D. Ariz. Apr. 16, 2019, Settled)

Action against Defendant, a former financial manager at an electronic component company, for alleged insider trading.  According to the SEC, Defendant purchased shares while in possession of material nonpublic information about his employer’s earnings, sold the stock short, and purchased put option contracts shortly before the earnings announcement was publicized.  Defendant has agreed to pay disgorgement of $55,154.70, prejudgment interest of $3,744.83 and a civil penalty of $55,154.70.

SEC Complaint

SEC Litigation Release
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CFTC v. Oasis International Group, Limited, et al. (M.D. Fla. Apr. 15, 2019, Contested)

Action against Defendants, financial management companies and their principals, for alleged fraud against investors. According to the CFTC, Defendants falsely represented to investors that their funds would be used for pooled investments in retail forex. The CFTC alleges that Defendants instead misappropriated the funds for personal use and to make Ponzi-like payments to other investors. The CFTC further alleges that Defendants issued false account statements to pool participants.

CFTC Complaint 

Press Release
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