With the EB-5 Investor Visa Integrity Reform Bill EB-5 Regional Center Program set to expire on June 30th, absent bipartisan integrity reforms, Senator Patrick Leahy (D-Vt.), a senior member and former chairman of the Judiciary Committee, and Senator Chuck Grassley (R-Iowa), Ranking Member of the Senate Judiciary Committee, introduced the EB-5 Reform and Integrity Act of 2021 to address fraud and national security vulnerabilities in the EB-5 investor visa Regional Center Program, which has been exploited and abused for years.
It can be the worst feeling in the world. You wake up, get your trading station all ready for a new day of profitable trading, but then the unthinkable happens. The market opens, but not that volatile issuer that had been running big, making your trading account look so good.
On May 19, 2021, the Securities and Exchange Commission (the “SEC”) charged a New Jersey-based healthcare company and its founder, Josiah David (formerly known as Dennis Lee), with fraudulently raising nearly $4 million from over 130 investors nationwide through the sale of membership units in the company.
On May 20, 2021, Ted Brent Alexander, 55, and Jon Darrell Seawright, 49, both of Jackson, Mississippi, were indicted by a federal grand jury for their roles in a large multi-million dollar Ponzi scheme that adversely affected hundreds of victims across multiple states over about eight years.
Startups and businesses with limited cash looking to go public are understandably very money-conscience and want to use the most cost-effective route. The survival and/or further development of their business may depend on getting access to capital raised through the public marketplace and managing the process without breaking the bank.
On Friday, May 14, 2021, David C Coggins, 42, of Miami, was sentenced to 51 months in prison, followed by 36 months of supervised release, and ordered to pay $1,305,000 in restitution for operating an investment scheme in which he used investor funds to repay other investors and misappropriated funds for himself, including to pay for personal use, a vehicle and travel.
The Securities and Exchange Commission (the “SEC”) began its whistleblower program in August of 2011.
The concept was simple, to catch more bad guys and minimize the harm done to investors, the SEC created a program that would incentivize people with knowledge of possible securities law violations and other forms of fraud for sharing that information, allowing the SEC to more swiftly and efficiently hold accountable those responsible for unlawful conduct.
If the information proves to be original and leads to SEC action, the whistleblower is eligible for an award ranging between 10% and 30% of the money collected. Since the SEC would likely not have brought litigation without the information provided by the whistleblower, it is a win-win situation for all involved, especially the victims who otherwise may not have ever recouped any of their losses.
On May 12, 2021, the Securities and Exchange Commission (the “SEC”) announced settled charges against GWFS Equities Inc. (GWFS), a Colorado-based registered broker-dealer and affiliate of Great-West Life & Annuity Insurance Company, for violating the federal securities laws governing the filing of Suspicious Activity Reports (SARs).
On May 3, 2021, the Securities and Exchange Commission (“SEC”) charged sports apparel manufacturer Under Armour Inc (NYSE: UAA) with misleading investors as to the basis of its revenue growth and failing to disclose known uncertainties concerning its future revenue prospects. Under Armour has agreed to pay $9 million to settle the action.
On April 16, 2021, the Securities and Exchange Commission (“SEC”) case against Robinhood Financial moved one step closer to a payout when the SEC issued an Order appointing JND Legal Administration as the Fund Administrator of the Fair Fund established for the $65,000,000 that Robinhood Financial had agreed to pay on December 17, 2020.
The Fair Fund will be used to distribute the $65,000,000 among harmed investors.
On Wednesday, April 14, 2021, five Individuals were indicted for a stock manipulation/money laundering scheme involving a private oil and gas company and two public Issuers, OrgHarvest Inc (“ORGH”) and ERF Wireless Inc (“ERFB”).
The five-count indictment filed in federal court in Brooklyn charged Richard Dale Sterritt, Jr (“Sterritt”), Michael Greer (“Greer”), Robert Magness (“Magness”), Mark Ross (“Ross”) and Robyn Straza (“Straza”) with conspiracy to commit securities fraud, wire fraud and money laundering, among other offenses.
On November 17, 2017, the Securities and Exchange Commission (“SEC”) filed an enforcement action against Ibrahim Almagarby and his company Microcap Equity Group LLC. Both defendants were charged with two counts: effecting transactions, or inducing or attempting to induce the purchase or sale of securities using the instrumentalities of interstate commerce while not registered with the Commission of a dealer; and, as to Almagarby only, violating the Securities and Exchange Act of 1934 (“Exchange Act”) through his control of Microcap Equity. The SEC Action was filed in the U.S. District Court for the Southern District of Florida.
On February 4, 2021, the U.S. Securities and Exchange Commission announced charges against two associates of Rudy Giuliani, the former New York City mayor and lawyer for Donald Trump, alleging they raised $2 million from investors by making false and misleading representations.
According to the Complaint, Lev Parnas and David Correia raised the money for their company, Fraud Guarantee, between January 2013 and mid-2019, but instead of using the money to get the company off the ground as promised, Parnas and Correia misappropriated the bulk of those funds to pay for personal expenses, including travel, jewelry, cars, and disbursements at a casino.
On January 8, 2021, the Securities and Exchange Commission (the “SEC”) announced settled charges against a Utah corporation, its principals, Mark W Wiseman and Clark J Madsen, and two securities fraud recidivists, Thomas J Robbins and Daniel J Merriman, for orchestrating two inter-related frauds resulting in approximately $11 million in investor losses to around 80 investors.
According to details in the Complaint, Robbins and Merriman met while behind bars serving out sentences from prior securities fraud convictions, sharing stories of their past schemes, and plotting for the future.
On November 12, 2020, President Donald Trump signed Executive Order 13959. The Order’s goal is “Addressing the Treat From Securities Investments That Finance Communist Chinese Military Companies”.
The executive order prohibits all U.S. Investors (institutional and retail alike) from purchasing or investing in securities of companies identified by the U.S. government as “Communist Chinese military companies.” The prohibition went into effect on January 11, 2021, and immediately resulted in its first casualties, with 3 listed stocks being delisted and several OTC stocks having their symbols deleted.
The plan will allow companies that opt for a direct list to save on bank underwriting fees and raise capital by issuing new shares and selling them to public investors on the first day of trading.
On Friday, the Securities and Exchange Commission (the “SEC”) announced that it had settled charges against The Cheesecake Factory Incorporated (CAKE) for making misleading disclosures about the impact of the COVID-19 pandemic on its business operations and financial condition.
As part of the settlement, Cheesecake Factory agreed to pay $125,000 to the SEC within 15 days.
The action is the SEC’s first charging a public company for misleading investors about the financial effects of the pandemic.
If approved by the SEC, the new listing rules would require all companies listed on the Nasdaq exchange to publicly disclose “consistent, transparent diversity statistics regarding their board of directors.” Additionally, the new rules would require most Nasdaq-listed companies to have, or explain why they don’t have, at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+.