Blog Posts Tagged With Ponzi Schemes, Offering Frauds, and Other Scams

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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 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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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 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 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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SEC v. Robert S. “Lute” Davis, Jr., et al. (C.D. Cal. Dec. 18, 2018, Contested); SEC v. Jordan E. Goodman (S.D. Fla. Dec. 18, 2018, Settled); SEC v. Alan H. New, et al. (S.D. Ind. Dec. 18, 2018, Settled)

Action against Defendants, 13 individuals and 10 companies, for alleged unlawful sale of securities to retail investors.  According to the SEC, Defendants sold unregistered securities as part of a Ponzi scheme.  The SEC also alleges that one Defendant touted the securities without disclosing that he was paid to do so.  One Defendant has agreed to pay disgorgement of $2.29 million, prejudgment interest of $315,850, and a civil penalty of $100,000, and to industry and penny-stock
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In re Chris D. Rosenthal (A.P. Dec. 18, 2018, Settled)

Action against Respondent, a former municipal bond salesman, for alleged fraud.  According to the SEC, Respondent helped unregistered brokers pose as retail investors to gain priority in municipal bond offerings.  Respondent has agreed to pay disgorgement of $284,080, prejudgment interest of $15,128, and a civil penalty of $75,000.

SEC Order 

SEC Administrative Summary 

Related Action
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SEC v. Craig Arsenault, et al. (C.D. Cal. Dec. 13, 2018, Contested)

Action against Defendants, an investment adviser and his advisory firms, for alleged misrepresentations to investors and misappropriation of investor funds.  According to the SEC, Defendants falsely represented that funds would be invested in secured loans but instead put the funds towards riskier investments.  The SEC also alleges that Defendant adviser issued false account statements and misused investor funds.

SEC Litigation Release  

SEC Complaint
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SEC v. Hector A. May, et al. (S.D.N.Y. Dec. 13, 2018, Partially Settled, Partially Contested)

Action against Defendants, an investment adviser and his daughter, for alleged operation of a Ponzi scheme.  According to the SEC, Defendants used investor funds intended for investments in bonds for personal and business expenses and sent investors falsified account statements to conceal the scheme.  Defendant adviser has agreed to injunctive relief and monetary relief to be determined at a later date.  Parallel criminal charges have been filed against Defendant adviser.

SEC Press Release 

SEC Complaint
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In re America Modern Green Senior (Houston) LLC, et al. (A.P. Dec. 12, 2018, Settled)

Action against Respondents, three development companies organized to use EB-5 investor funds to finance development and construction projects, for alleged offering fraud.  According to the SEC, Respondents represented to investors that funds would be used to finance a real estate development project but instead used the funds for unrelated purposes.  Respondents have agreed to pay a total of $51,444,135.40 in disgorgement, prejudgment interest, and civil penalties.  $49.5 million of the disgorgement amount will be satisfied
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SEC v. Jared Jeffrey Davis and Dale Burke Pinchot (N.D. Ohio, Dec. 10, 2018, Settled)

Action against Defendants, two business partners, for alleged operation of  an unregistered binary options trading business and fraud on investors.  According to the SEC, Defendants misrepresented to investors the probability of success and failed to disclose that one Defendant manipulated its software to the detriment of customers.  Defendants have agreed to a permanent injunction against participating in the issuance, purchase, offer, sale, or promotion of any binary option security, and disgorgement and civil penalties to
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SEC v. David G. Dreslin, et al. (M.D. Fla. Dec. 3, 2018, Partially Settled, Partially Contested)

Action against Defendants—a CPA, former broker, and the broker’s spouse—for alleged involvement in a scheme related to the creation and sale of a public shell company.  According to the SEC, Defendants created a shell company and then filed falsified regulatory filings and business documents in order to sell the company for profit.  Defendant spouse has agreed to five-year officer-and-director and penny stock offering bars and to pay a civil penalty of $25,000.

SEC Litigation Release
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SEC v. Mark Suleymanov (E.D.N.Y. Dec. 3, 2018, Settled)

Action against Defendant, an options broker, for alleged unregistered securities offering and fraud on investors.  According to the SEC, Defendant operated several websites from which he publicly offered and sold binary options but failed to register with the SEC, misrepresented the profitability of the offered securities, manipulated trading results, and prevented investors from withdrawing funds.  According to the SEC, Defendant also misused and commingled investor funds with his own.  Defendant has agreed to pay disgorgement,
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SEC v. Jared Gabriel Forrester (S.D. Ga. Nov. 30, 2018, Settled)

Action against Defendant, the purported president and CEO of an energy company, for an alleged fraudulent offering and sale of securities in the energy company. According to the SEC, Defendant failed to disclose to investors that two individuals with previous felony convictions were actually in charge of the energy company. According to the SEC, Defendant also misrepresented that he had a substantial background in oil and gas development. The SEC further alleges that Defendant assisted
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In re Khaled Khaled (A.P. Nov. 29, 2018, Settled)

Action against Respondent, a celebrity music producer, for alleged touting violations in connection with initial coin offerings. According to the SEC, Respondent promoted three initial coin offerings on his social media accounts without disclosing that the issuers were compensating him for the publicity.  Defendant has agreed to pay disgorgement of $50,000, prejudgment interest of $2,725.72, and a civil penalty of $100,000.

SEC Order

SEC Press Release
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In re Floyd Mayweather Jr. (A.P. Nov. 29, 2018, Settled)

Action against Respondent, a professional boxer, for alleged touting violations in connection with initial coin offerings.  According to the SEC, Respondent promoted three initial coin offerings on his social media accounts without disclosing that the issuers were compensating him for the publicity.  Respondent has agreed to pay disgorgement of $300,000, prejudgment interest of $14,775.67, and a civil penalty of $300,000.

SEC Order

SEC Press Release
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SEC v. Eric T. Landis and Ridgeview Capital Partners LLC (D. Mass. Nov. 29, 2018, Contested)

Action against Defendants, a self-described penny stock promoter and an entity that he controlled, for alleged manipulative trading in microcap stocks. According to the SEC, Defendant promoter falsely claimed that he would distribute promotional materials for stocks in microcap companies. The SEC alleges that Defendant promoter instead traded microcap shares himself using multiple accounts in order to appear to be generating business.

SEC Litigation Release

SEC Press Release

SEC Complaint
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SEC v. Morrie Tobin, et al. (D. Mass. Nov. 27, 2018, Contested)

Action against Defendants, two attorneys, the head of a financial services company, and the owner of an environmental packaging company and pharmaceutical company, for their alleged role in a scheme to manipulate and illegally sell stock in the Defendant owner’s companies. According to the SEC, Defendants concealed the Defendant owner’s control of the companies and his sale of company shares. The SEC also alleges that Defendants made hidden payments to a promoter to encourage investment
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SEC v. Giga Entertainment Media, Inc., et al. (E.D.N.Y. Nov. 15, 2018, Partially Settled, Partially Contested)

Action against Defendants, a software development company and five of its former officers and directors, for alleged fraud against investors. According to the SEC, Defendants purchased sham downloads in order to improve the rating of their app and made false statements to investors about the reasons for the rating increase. The SEC alleges that Defendants also concealed from investors an individual Defendant’s prior mail fraud conviction. Two individual Defendants have agreed to pay penalties of
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SEC v. Thomas H. Laws and THL Financial Services Corporation (D.N.M. Nov. 15, 2018, Contested)

Action against Defendant, a former CEO of a public mining company, for misappropriation of investor funds.  The SEC has named an entity controlled by Defendant CEO as a relief defendant.  According to the SEC, Defendant transferred investor funds from the corporation to a different entity under his control in order to purchase equipment and services.  The SEC also alleges that Defendant falsified related documents shown to an independent auditor.

SEC Litigation Release 

SEC Complaint
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SEC v. Mark Burnett, et al. (E.D.N.Y. Nov. 15, 2018, Contested)

Action against Defendants, an alleged boiler room and five individuals, for alleged fraudulent manipulation of stock prices. According to the SEC, the five individual Defendants engaged in manipulative and concealed trading practices and hired the Defendant corporation to solicit investors. Four of the individual Defendants have been charged in a parallel criminal action. A related action by the SEC against the Defendant corporation and 14 other defendants is pending.

SEC Litigation Release
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SEC v. Giga Entertainment Media, Inc., et al. (E.D.N.Y. Nov. 15, 2018, Partially Settled, Partially Contested)

Action against Defendants, a software development company and five of its former officers and directors, for alleged fraud against investors.  According to the SEC, Defendants purchased sham downloads in order to improve the rating of their app and made false statements to investors about the reasons for the rating increase.  The SEC alleges that Defendants also concealed from investors an individual Defendant’s prior mail fraud conviction.  Two individual Defendants have agreed to pay penalties of
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