On April 10, 2018, the U.S. District Court for the Western District of Washington entered a final judgment against Vincent Cassano for his role in a fraudulent stock promotion scheme. According to the SEC’s complaint, Lidingo Holdings, LLC hired writers like Vincent Cassano to publish hundreds of bullish articles on its clients, which appeared to be independent research pieces but, in fact, were paid advertisements.

The final judgment permanently enjoins Vincent Cassano from violating Sections 17(a) and 17(b) of the Securities Act, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Vincent Cassano consented to the entry of the final judgment, and neither admitted nor denied the allegations in the SEC’s complaint. Read More

On February 27, 2018, the United States District Court for the District of New Jersey entered an amended judgment against Verto Capital Management LLC and William Schantz, of Moorestown, New Jersey. Verto Capital Management LLC and William Schantz had previously agreed to pay more than $4 million to settle charges that they used new investor money to repay earlier promissory note investors, tapped investor funds for William Schantz’s personal use, and made misrepresentations to investors about the safety of the notes and life settlement collateral underlying them. As reflected in the amended judgment, Verto Capital Management LLC and William Schantz have agreed to pay an additional $620,594 to cover investments that were identified after the initial judgment and to correct the amount of interest owed to some investors on certain notes. Without admitting or denying the allegations, Verto Capital Management LLC and William Schantz consented to this additional relief as well as the pledge of a policy and property to repay investors. A Fair Fund has been created and has been returning money collected in the settlement to harmed investors. Read More

On April 5, 2018, The Securities and Exchange Commission charged Charlie Chen for making an extraordinarily profitable series of unlawful trades in the securities of Massachusetts-based VistaPrint, N.V.

According to the SEC’s complaint, Charlie Chen used private information obtained directly or indirectly from a VistaPrint insider to place illegal trades in advance of eight VistaPrint quarterly earnings announcements over a two-year period. Each time, Charlie Chen’s trades were consistent with the news – whether good or bad-in VistaPrint’s pending earnings announcements. On some occasions, Charlie Chen placed extremely aggressive bets, wagering a substantial portion of his retirement savings on risky VistaPrint options before the company’s announcement of disappointing earnings results in April 2014. Charlie Chen generated approximately $390,000 on the April 2014 trade and more than $900,000 in illicit profits over the course of the scheme.

In addition to detailing Charlie Chen’s uncannily successful pattern of trading, the SEC also alleges that upon being questioned by the Federal Bureau of Investigation, Charlie Chen claimed that he did not know anyone who worked at VistaPrint and falsely denied having a close relationship with a VistaPrint insider and her husband with whom he had vacationed. Read More

On October 25, 2017, the Securities and Exchange Commission charged Mohammed Rashid, a former senior partner at Apollo Management L.P., with defrauding his fund clients by secretly billing them for approximately $290,000 in personal expenditures, including his family vacations, visits to a hair salon, and purchases of designer clothing and high-end electronics.

The SEC’s complaint alleges that Mohammed Rashid falsely claimed that certain individuals accompanied him to dinners to make it appear his various personal expenses had a business purpose, and he doctored a receipt in an effort to justify his purchase of a $3,500 suit for his father as a business expense. Read More

The Securities and Exchange Commission announced charges against Marc Andrew Tager and Jersey Consulting LLC, a Utah-based company and several solicitors of the company’s securities in an ongoing offering fraud that has already targeted more than 80 individual investors.

The SEC’s complaint, filed in federal district court in Salt Lake City, Utah, alleges that, since September 2014, Marc Andrew Tager of Utah and his company, Jersey Consulting LLC, have engaged in the fraudulent offering of unregistered Jersey securities and employed paid telemarketers to raise at least $6 million from investors located across the U.S. None of the telemarketers-Suzanne Aileen Gagnier, Kenneth Stephen Gross, Jeffrey Rowland Lebarton, and Jonathan Edward Shoucair-are registered to sell securities. According to the complaint, Jersey investors were promised extraordinary returns of 100% or more within 12 months from the application and licensing of Jersey’s “soil remediation” technology, and were misled about the commercial viability of Jersey’s technology and Jersey’s purported rights to a “mineral rich” claim in Arizona. Jersey in fact had no rights to the claim and its technology was not commercially viable. Jersey also failed to disclose Tager’s prior felony conviction and that investor funds were diverted to pay for Tager’s personal expenses, including the purchase of a Harley-Davidson motorcycle. Read More

On March 14, 2018, the Securities and Exchange Commission charged Elizabeth Holmes and  Silicon Valley-based private company Theranos Inc., with raising more than $700 million from investors through an elaborate, years-long fraud scheme in which they exaggerated or made false statements about the company’s technology, business, and financial performance.  Theranos and Elizabeth Holmes have agreed to resolve the SEC charges against them.  Importantly, in addition to a penalty, Holmes has agreed to give up majority voting control over the company, as well as to a reduction of her equity which, combined with shares she previously returned, materially reduces her equity stake.

The SEC complaints allege that Theranos, Elizabeth Holmes, and Balwani made numerous false and misleading statements in investor presentations, product demonstrations, and media articles by which they deceived investors into believing that its key product – a portable blood analyzer – could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood testing industry.  In truth, according to the SEC’s complaint, Theranos’ proprietary analyzer could complete only a small number of tests, and the company conducted the vast majority of patient tests on modified and industry-standard commercial analyzers manufactured by others. Read More

On February 21, 2018, the Securities and Exchange Commission charged a former bitcoin-denominated platform known as BitFunder and its operator with operating an unregistered securities exchange and defrauding users of that Bitcoin exchange. The SEC also charged the operator with making false and misleading statements in connection with an unregistered offering of securities.

The SEC alleges that BitFunder and its founder, Jon E. Montroll, operated BitFunder as an unregistered online securities exchange and defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 bitcoins. The SEC also alleges that Montroll sold unregistered securities that purported to be investments in the exchange and misappropriated funds from that investment as well in connection with BitFunder. Read More

On March 23rd the Securities and Exchange Commission announced charges and a preliminary injunction and asset freeze against Niket Shah, a New Jersey resident who it alleges stole more than $250,000 in a Ponzi scheme in which his friends and coworkers invested.

Based on investor complaints, the SEC moved quickly to investigate and charge Shah. According to the SEC’s complaint, unsealed on March 22, 2018, in federal court in Brooklyn, New York, Shah used Spark Trading Group, LLC to defraud more than 15 investors into contributing hundreds of thousands of dollars to two funds that Shah marketed. Shah obtained investments for the funds by lying about his success as a trader, Spark Trading’s returns, and how he intended to use investors’ money, including altering financial statements to make the funds appear profitable when they were actually losing money. For instance the complaint alleges that Shah promised investors he would pay them monthly returns and guaranteed against losses. According to the complaint, Shah misused investor money for his own benefit and suffered substantial losses on the amounts actually invested. When investors sought their money back, he lied and said the money had been frozen by government agencies, including the Commission. Read More

A federal judge has ordered the co-founder and former CEO of investment management firm F-Squared Investments to pay over $13 million after a federal jury found him liable for making false and misleading statements to investors as the public face of F-Squared.

The Securities and Exchange Commission has charged Brian Sodi, a penny stock promoter based in Florida with defrauding investors in a pair of gold mining stocks by secretly amassing shares before touting the companies publicly.  He allegedly sold the bulk of his stock and reaped more than $1.1 million in illicit profits after his promotions caused the share prices and trading volumes to skyrocket.

The SEC’s complaint alleges that Brian Sodi, known in penny stock circles as “Mailman” for his pervasive participation in direct-mailed penny stock promotions, committed a fraud known as scalping.  He allegedly disseminated promotions recommending the purchase of the stocks in Southern USA Resources Inc. and Goff Corporation without disclosing he owned shares and planned to sell them through a foreign bank.  Sodi also allegedly hid from investors that he was being paid in stock for one of these promotions.  According to the SEC’s complaint, Brian Sodi proceeded to unload hundreds of thousands of his own shares to the detriment of other investors who bought in to the hype. The unlawful practice of promoting a stock while secretly selling is known as scalping. Read More

On March 13th the Securities and Exchange Commission charged foreign affiliates of KPMG, Deloitte & Touche, and BDO for their involvement in audit work that circumvented the full oversight of the Public Company Accounting Oversight Board (PCAOB).

The firms agreed to settle the charges by paying penalties or disgorging their profits from the audits.

According to the SEC’s orders, the Zimbabwe affiliates of Deloitte & Touche and KPMG improperly audited the majority of assets and revenues of a publicly traded company without registering with the PCAOB.  The two principal auditors – KPMG’s affiliate in South Africa and BDO’s Canadian affiliate – were registered with the PCAOB but improperly relied upon the work of the two unregistered foreign component auditors to complete their audits of the company.  This violated PCAOB standards requiring sufficient analysis and inquiry when using the work of another auditor.  Read More

On March 14th the Securities and Exchange Commission charged Jun Ying, a former chief information officer of a U.S. business unit of Equifax with insider trading in advance of the company’s September 2017 announcement about a massive data breach that exposed the social security numbers as well as other personal information of about 148 million U.S. customers.

According to the SEC’s complaint, Jun Ying, who was next in line to be the company’s global CIO, allegedly used confidential information entrusted to him by the company to conclude that Equifax had suffered a serious breach.  The SEC alleges that before Equifax’s public disclosure of the data breach, Ying exercised all of his vested Equifax stock options and then sold the shares, reaping proceeds of nearly $1 million.  According to the complaint, by selling before public disclosure of the data breach, Ying avoided over $117,000 in losses. Read More

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According to an SEC complaint filed in 2016 in federal court in Miami, Ariel Quiros allegedly misused more than $50 million in investor funds to purchase a different ski resort and to fund personal expenses such as income taxes and two luxury New York City condominium purchases. Investors were told their money would specifically be used for construction projects at the Jay Peak Resort and a nearby proposed biomedical research facility. Read More