Blog Posts Tagged With Enforcement Action

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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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CFTC v. Kelvin Oscar Ramirez (S.D. Tex. Jan. 14, 2019, Contested)

Action against Defendant, a self-professed forex trader and investment manager, for alleged fraud and failure to register as a commodity pool operator and commodity trading advisor.  According to the CFTC, Defendant fraudulently solicited investments in forex pools by making exaggerated claims about his investing success and other misrepresentations, primarily via social media.  The CFTC further alleges that Defendant misappropriated nearly all of the funds that he raised for personal use.  The Court entered a preliminary
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In re Katz, Sapper & Miller, LLP, and Scott C. Price, CPA (A.P. Jan. 9, 2019, Settled)

Action against Respondents, an accounting firm and one of its partners, for alleged misconduct related to investment fund audits.  According to the SEC, Respondents violated the Advisers Act’s custody rule by auditing the same financial statements that they themselves prepared.  The SEC also alleges that Respondents lacked relevant knowledge, training, and experience, failed to exercise due professional care, and, with respect to Respondent firm, failed to implement sufficient quality control standards.  Respondent firm has agreed
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In re Hertz Global Holdings, Inc., and The Hertz Corporation (A.P. Dec. 31, 2018, Settled)

Action against Respondents, a rental car company and its holding company, for alleged financial misstatements.  According to the SEC, Respondents misstated pretax income, failed to disclose material facts to investors, issued earnings guidance that was inaccurate based on internal analyses, and failed to maintain adequate accounting controls.  Respondents have agreed to pay a civil penalty of $16 million.

SEC Order
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In re Polycom, Inc. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a communication product company, for alleged violations of the FCPA’s books and records and internal accounting controls provisions.  According to the SEC, Respondent’s subsidiary provided discounts to distributors and resellers with the understanding that the discounts would be used to make cash payments to government officials who had influence over purchasing decisions.  The SEC further alleges that Respondent failed to maintain adequate accounting controls and lacked an effective anti-corruption compliance program with
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In re Centrais Elétricas Brasileiras S.A. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a partially state-owned Brazilian energy company, for alleged violations of the FCPA’s books and records and internal accounting controls provisions.  According to the SEC, officers of Respondent’s subsidiary engaged in a scheme to rig construction bids, inflate contract prices, and pay bribes to government officials.  The SEC further alleges that Respondent’s accounting controls were inadequate.  Respondent has agreed to pay a civil penalty of $2.5 million.

SEC Order

SEC Administrative Summary
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In re Nutriband, Inc., et al. (A.P. Dec. 26, 2018, Settled)

Action against Respondents, a nutritional patch manufacturer and two of its directors, for alleged filing of misleading statements.  According to the SEC, Respondents misrepresented the FDA’s jurisdiction over the company’s products and failed to disclose that the products required FDA approval.  Respondent directors have agreed to pay civil penalties of $25,000 each.

SEC Order
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In re Lightyear Capital LLC (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a registered investment adviser, for alleged violations of the Investment Advisers Act with respect to the management of private equity and employee funds.  According to the SEC, Respondent failed to properly allocate certain expenses to certain of its funds and co-investors and failed to properly offset management fees in connection with fee-sharing agreements and implement policies, including ones consistent with representations to investors.  Respondent has agreed to pay a civil penalty of
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In re ADT Inc. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a home security firm, for failure to comply with disclosure requirements with respect to non-GAAP financial measures.  According to the SEC, Respondent used non-GAAP metrics in its financial statements and failed to give equal or greater prominence to comparable GAAP metrics.  Respondent has agreed to pay a civil penalty of $100,000.

SEC Order
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SEC v. Joseph A. Meyer, Jr. and Statim Holdings, Inc. (N.D. Ga. Dec. 26, 2018, Contested)

Action against Defendants, an investment adviser and its principal, for alleged fraud against investors. According to the SEC, Defendants misappropriated funds from the investment fund they managed and falsified the fund’s books to support illusory promises of guaranteed returns and loss protection.

SEC Litigation Release

SEC Complaint
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In re JPMorgan Chase Bank, N.A. (A.P. Dec. 26, 2018, Settled)

Action against Respondent, a financial services firms, in connection with an industry-wide sweep into practices related to the pre-release of American Depositary Receipts (ADRs).  According to the SEC, Respondent pre-released ADRs to pre-release brokers pursuant to an agreement which required the broker receiving the pre-released ADRs to represent, among other things, that it beneficially owned the ordinary shares (or an equivalent security) represented by the ADRs.  The SEC alleges that Respondent should have known or
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In re American Portfolios Advisors, Inc. (A.P. Dec. 21, 2018, Settled)

Action against Respondent, an investment adviser, for alleged violations of the antifraud and compliance provisions of the federal securities laws.  According to the SEC, Respondent invested client funds in mutual fund share classes that charged 12b-1 fees when less expensive share classes were available.  The SEC alleges that Respondent failed to disclose conflicts of interest, violated the duty of best execution, and failed to maintain adequate compliance policies.  Respondent has agreed to pay disgorgement of
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In re Crowe Horwath, et al. (A.P. Dec. 21, 2018, Settled)

Action against Respondents, an auditing firm and two of its partners, for alleged audit standard violations.  According to the SEC, Respondents conducted a deficient audit despite known fraud risks and failed to maintain independence due to an ongoing business relationship with the audited company.  Respondent firm and partners have agreed to pay respective civil penalties of $1.5 million, $25,000, and $15,000.  Respondent partners have agreed not to appear or practice as accountants before the SEC.
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In re Wealthfront Advisers, LLC (f/k/a Wealthfront, Inc.) (A.P. Dec. 21, 2018, Settled)

Action against Respondent, a robo-adviser, for alleged false statements to clients.  According to the SEC, Respondent failed to monitor client accounts for transactions that would cause wash sales, despite promising to do so, improperly published client testimonials, improperly paid for client referrals, and failed to implement adequate policies, procedures, and a compliance program.  Respondent has agreed to pay a civil penalty of $250,000.

SEC Order

SEC Press Release
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In re PPS Advisors, Inc., and Lawrence Nicholas Passaretti (A.P. Dec. 21, 2018, Settled)

Action against Respondents, an investment adviser and its CEO, for alleged violations of the antifraud and compliance provisions of the federal securities laws.  According to the SEC, Respondents invested client funds in mutual fund share classes that charged 12b-1 fees when less expensive share classes were available.  The SEC alleges that Respondents failed to disclose conflicts of interest, violated the duty of best execution, and failed to maintain adequate compliance policies.  Respondents have agreed to
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In re Mitchell J. Rubin, CPA, and Michael Bernstein, CPA (Dec. 21, 2018, Settled)

Action against Respondents, two partners of a defunct auditing firm, for alleged audit standard violations.  According to the SEC, Respondents performed a deficient audit and failed to address identified fraud risks.  The SEC further alleges that one Respondent failed to comply with partner rotation requirements. Respondents have agreed to pay civil penalties of $25,000 each.  Respondents have also agreed not to appear or practice as accountants before the SEC.

SEC Order 

SEC Press Release 

Related
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In re Hedgeable, Inc. (A.P. Dec. 21, 2018, Settled)

Action against Respondent, a robo-adviser, for alleged misleading statements to clients regarding Respondent’s performance.  According to the SEC, Respondent’s promotional material included select data from high-performing client accounts and made false comparisons against competitors’ trading models.  The SEC also alleges that Respondent failed to maintain required records and a compliance program reasonably designed to prevent violations of the securities laws.    Respondent has agreed to pay a civil penalty of $80,000.

SEC Order

SEC Press Release
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SEC v. China United Insurance Service, Inc., et al. (Dec. 21, 2018, Settled)

Action against Defendants, a Taiwanese insurance company and former manager, for alleged manipulation of trading volume.  According to the SEC, Defendants used multiple brokerage accounts to fraudulently inflate trading volume in order to obtain a Nasdaq listing.  Defendant company has agreed to retain a compliance consultant.  The SEC did not impose a monetary penalty due to the Defendant company’s cooperation.   Defendant manager has agreed to pay a civil penalty of $30,000.

SEC Litigation Release 

SEC
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In re Newport Private Capital LLC and Jonathan Hansen (A.P. Dec. 21, 2018, Settled)

Action against Respondents, a commodity trading firm and its principal, for an alleged cherry-picking scheme.  According to the CFTC, Respondents executed intraday commodities trades in order to allocate profitable trades to themselves and non-profitable trades to customers and also kept inadequate records.  Respondents have agreed to pay, jointly and severally, a civil penalty of $315,000 and post-judgment interest and to permanent commodity interest trading and CFTC registration bans.

CFTC Press Release 

CFTC Order
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In re Thoroughbred Financial Services, LLC, et al. (A.P. Dec. 21, 2018, Settled)

Action against Respondents, an investment adviser and its representatives, for alleged breaches of fiduciary duty and fraud.  According to the SEC, Respondents invested client funds in certain mutual fund share classes that charged 12b-1 fees when less expensive share classes were available.  The SEC further alleges that Respondents misled clients and maintained inadequate policies and procedures.  Respondent adviser has agreed to pay $740,250.20 in disgorgement, $108,368.10 in prejudgment interest, and a civil penalty of $260,000. 
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In re Mark J. Moskowitz (A.P. Dec. 20, 2018, Contested)

Action against Respondent, a former representative of a broker-dealer and investment adviser, for alleged fraud.  According to the SEC, Respondent pled guilty in a federal criminal proceeding related to the alleged operation of a Ponzi scheme, was sentenced to a 33-month prison term, and required to pay restitution and forfeiture in the amount of $694,576.71.  The SEC’s order states that Respondent was also found to have operated the scheme in a prior state court judgment
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