Blog Posts Tagged With Enforcement Action

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In re Tai-Cheng Yang (A.P. Apr. 5, 2019, Settled)

Action against Respondent, an engineer for a private company, for alleged insider trading.  According to the SEC, Respondent’s wife learned material nonpublic information about an upcoming acquisition from a family member and shared the information with Respondent.  The SEC alleges that Respondent bought shares in the target company while in possession of this information and sold the shares for a profit after the acquisition was publicly announced.  Respondent has agreed to pay disgorgement of $27,761.55,
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In re KLJ & Associates, LLP et al. (A.P. Apr. 5, 2019, Settled)

Action against Respondents, an accounting firm and two of its partners, for alleged deficient audits and improper professional conduct.  According to the SEC, Respondents failed to obtain sufficient evidence in support of their audit reports, adequately document their procedures, and comply with engagement quality review requirements, among other deficiencies.  Respondents have agreed to a five-year bar with the right to apply for reinstatement.

SEC Administrative Release

SEC Order
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SEC v. Jeffrey E. Wall and The Lighthouse Events, LLC (D. Me. Apr. 4, 2019, Contested)

Action against Defendants, a music promoter and his company, for alleged offering fraud. According to the SEC, Defendants solicited investor funds based on false claims regarding use and repayment of the funds. The SEC alleges that Defendants misappropriated the funds for purposes including debt repayment and Ponzi-like payments to earlier investors.

SEC Complaint

SEC Litigation Release
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SEC v. Jeffrey C. Mack and Lawrence C. Blaney (D. Minn. Apr. 3, 2019, Contested)

Action against Defendants, two former officers of a fintech company, for alleged accounting fraud.  According to the SEC, Defendants falsely recorded revenue from certain contracts subject to secret side letters that gave customers an unconditional right to cancel without an obligation to make any payments.  The SEC alleges that the cancellation right precluded recognition of the revenue under GAAP.

SEC Complaint

SEC Litigation Release
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SEC v. Peter Armbruster, et al. (E.D. Wis. Apr. 3, 2019, Contested)

Action against Defendants, the former CFO and two former employees of a transportation company, for alleged accounting fraud.  According to the SEC, Defendants fraudulently deferred expenses to be spread over multiple quarters, failed to write off overvalued assets, and overstated receivables to meet earnings targets and projections.  Defendants have been charged in a parallel criminal case.

SEC Complaint

SEC Press Release
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SEC v. Daniel Mattes (N.D. Cal. Apr. 2, 2019, Settled); In re Chad Starkey (A.P. Apr. 2, 2019, Settled)

Actions against Defendant, the founder and former CEO of a fintech company, and Respondent, the company’s former CFO, for alleged fraud and negligence.  According to the SEC, Defendant overstated the company’s revenue and subsequently sold his company shares to secondary market investors, concealing his gains from the company’s board.  The SEC alleges that Respondent knew or should have known of Defendant’s alleged fraud and failed to exercise reasonable care with respect to company financial statements. 
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Follow-on APs, Suspensions, and Bars

In re Jennifer F. Wolf, CPA (A.P. Apr. 1, 2019, Settled)

In re Evan R. Kita, CPA (A.P. Apr. 3, 2019, Contested)

In re Joseph Mario Genzone (A.P. Apr. 4, 2019, Settled)

In re Alonzo R. Cahoon (A.P. Apr. 5, 2019, Settled)

In re James K. McKillop (A.P. Apr. 9, 2019, Settled)

In re Adam C. Derbyshire (A.P. Apr. 9, 2019, Settled)

In re Martin R. Stancik (A.P. Apr. 10, 2019, Settled)

In re James
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In re Omar Zaki (A.P. Apr. 1, 2019, Settled)

Action against Respondent, co-founder of an investment adviser, for alleged fraud.  According to the SEC, Respondent issued prospectuses to investors that contained false statements related to, for example, fund performance and fund management.  Respondent has agreed to pay a civil penalty of $25,000 and to officer and director and associational bars with the right to apply for reinstatement after three years.

SEC Order
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In re Mutual Coin Fund LLC and Usman Majeed (A.P. Apr. 1, 2019, Settled)

Action against Respondents, a cryptocurrency company and its principal, for an alleged unregistered public offering.  According to the SEC, Respondents submitted a Form D Notice of Exempt Offering but improperly solicited investments from the general public.  The SEC further alleges that in soliciting investments, Respondents misrepresented the amount of money raised and the sizes of other investors’ commitments.  Respondents have agreed to pay, jointly and severally, disgorgement of $10,000.

SEC Order
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SEC v. Motty Mizrahi and MBIG Company (C.D. Cal. Apr. 1, 2019, Contested)

Action against Defendants, a money manager and his company, for alleged fraud. According to the SEC, Defendants solicited investor funds with false claims of guaranteed returns, used the money to fund an unsuccessful options trading strategy and for personal expenses, and concealed the losses by falsifying account statements. Defendant manager has been charged in a parallel criminal case.

SEC Complaint

SEC Litigation Release
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In re Vision Financial Markets LLC (A.P. Mar. 29, 2019, Settled)

Action against Respondent, a clearing broker, for alleged failure to file Suspicious Activity Reports (SARs). According to the SEC, Respondent cleared a large number of penny stock transactions that involved suspicious trading patterns without filing SARs. Respondent has agreed to pay a penalty of $625,000.

SEC Order

SEC Administrative Summary
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In re Fresenius Medical Care AG & Co. KGaA (A.P. Mar. 29, 2019, Settled)

Action against Respondent, a German medical products and services company, for alleged violations of the FCPA’s anti-bribery, books and records, and internal accounting provisions. According to the SEC, Respondent made improper payments in a number of different countries to obtain business and failed to maintain adequate accounting controls and compliance measures. Respondent has agreed to pay disgorgement of $135 million and prejudgment interest of $12 million. The SEC did not impose a penalty due to
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SEC v. Keith Borge (S.D.N.Y. Mar. 28, 2019, Contested)

Action against Defendant, a former controller of a not-for-profit college, for alleged fraud related to the state of the college’s finances. The SEC alleges that Defendant falsified financial records, failed to file certain tax submissions, and failed to determine the likelihood that pledged donations would still be received in an effort to hide the school’s worsening financial performance from municipal bond investors.

SEC Complaint

SEC Press Release
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SEC v. Richard T. Diver (S.D.N.Y. Mar. 28, 2019, Contested)

Action against Defendant, a former COO of an investment adviser, for alleged fraud on investors. According to the SEC, Defendant managed payroll and billing systems at his firm and caused the firm to overbill several hundred clients. The SEC alleges that Defendant used this additional revenue to inflate his own salary.

SEC Complaint

SEC Litigation Release 

SEC Press Release
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SEC v. Dennis Gibb and Sweetwater Investments, Inc. (A.P. Mar. 28, 2019, Settled)

Action against Respondents, an investment adviser and its founder and sole owner, for alleged misappropriation of investor funds. According to the SEC, Respondent owner used investor funds to pay for personal expenses and falsified expense statements to conceal his actions. The SEC also alleges that Respondents made false statements in SEC filings. Respondents have agreed to pay, jointly and severally, disgorgement of $1,144,000 and prejudgment interest of $20,747.40. Respondent founder also agreed to a lifetime
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SEC v. Keith Borge (Mar. 28, 2019, Contested)

Action against Defendant, the former controller of a not-for-profit college, for alleged fraud. According to the SEC, Defendant falsified the college’s financial documents, resulting in an overstatement of net assets, and made misrepresentations to his supervisors and the college’s board of trustees about the finances. The SEC alleges that Defendant’s misstatements influenced purchases and sales by investors in the college’s bonds. Defendant has been charged in a parallel criminal case.

SEC Complaint

SEC Litigation Release
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Lorenzo v. SEC (U.S. Sup. Ct. Mar. 27, 2019)

The Supreme Court ruled in favor of the SEC in a 6-2 decision, holding that an investment banker had violated Rules 10b-5(a) and (c), Section 10(b) of the Exchange Act, and Section 17(a)(1) of the Securities Act by knowingly disseminating false information to prospective investors at the direction of his boss. The investment banker signed and forwarded two emails that were drafted by his boss to investors that contained false and misleading statements. The Supreme
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SEC v. James K. McKillop (D.D.C. Mar. 26, 2019, Settled); In re Tiber Creek Corp. and James M. Cassidy (A.P. Mar. 26, 2019, Settled)

Actions against Respondents, a business that assisted companies in going private and its president and sole shareholder, and Defendant, a business associate of Respondent president, for alleged failure to register as brokers and file beneficial ownership reports. According to the SEC, Respondent company created registered public shell companies through which Respondent president and Defendant performed securities transactions without registering as brokers. Respondents have agreed to pay, jointly and severally, disgorgement of $117,000, prejudgment interest of
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SEC v. Direct Lending Investments, LLC (C.D. Cal Mar. 22, 2019, Contested)

Action against Defendant, a registered investment adviser, for an alleged scheme to overcharge investors and inflate fund returns. According to the SEC, Defendant’s owner and then-CEO arranged, with a lending platform in which the funds invested, to falsify financial performance records and inflate the value of certain loans. The SEC alleges that Defendant collected excess management and performance fees because of the lending platform’s overstated valuation.

SEC Complaint

SEC Litigation Release
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In re Merrill Lynch, Pierce, Fenner & Smith Incorporated (A.P. Mar. 22, 2019, Settled)

Action against Respondent, a financial services firm, in connection with an industry-wide sweep into practices related to the pre-release of American Depositary Receipts (ADRs). According to the SEC, Respondent obtained ADRs from other brokers when Respondent should have known that the brokers did not own the requisite number of ordinary shares underlying the ADRs. The SEC further alleges that Respondent failed to implement adequate policies, procedures, and supervision related to the pre-release of ADRs. Respondent
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SEC v. Carol Ann Pedersen (C.D. Cal Mar. 20, 2019, Contested)

Action against Defendant, a former CPA and unregistered investment adviser, for an alleged Ponzi scheme. According to the SEC, Defendant falsely represented to investors that their funds would be invested in “federally guaranteed” securities and falsified account statements. The SEC alleges that Defendant misappropriated investor funds for payments to other investors and for personal use. Defendant has pleaded guilty in a parallel criminal action.

SEC Complaint

SEC Litigation Release
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SEC v. Timothy W. Crawford, et al. (S.D. Ohio Mar. 19, 2019, Contested)

Action against Defendants, an oil-and-gas penny stock company and its former CEO, for allegedly concealing in financial reports the loss of the company’s major revenue source. According to the SEC, after losing control over two oil-and-gas leases, Defendants made misrepresentations to investors in quarterly reports to conceal that development. The SEC also alleges that Defendants raised additional money from investors while improperly withholding information about the loss of revenue source, misreported the CEO’s stock ownership,
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SEC v. Kent R.E. direct, et al. (C.D. Cal Mar. 18, 2019, Contested)

Action against Defendants, two pastors, their church, and a related asset management company, for an alleged Ponzi scheme. According to the SEC, Defendants fraudulently solicited investments through radio and television advertisements, misappropriated funds, and made Ponzi-like payments to pay returns to investors.

SEC Complaint

SEC Litigation Release
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SEC v. Dale M. Walker (M.D. Ga. Mar. 15, 2019, Settled)

Action against Defendant, a former county manager, for an alleged conflict of interest in connection with a public pension fund. According to the SEC, Defendant, who was involved in the pension fund’s selection of an investment adviser, gave an unfair competitive advantage to an investment adviser due to his undisclosed relationship with a person associated with the adviser. The SEC alleges that Defendant gave confidential proposals to this adviser to review and falsely represented that
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