SEC Charges Microcap Fraudster with Running a Pump-and-Dump Scheme

The SEC charged David Loflin for his role in a pump-and-dump scheme in the stock of Greenway Design Group, Inc., a Phoenix, Arizona company that was secretly controlled by David Loflin's now-deceased business partner.The SEC charged David Loflin on April 22,2019, for his role in a pump-and-dump scheme in the stock of Greenway Design Group, Inc., a Phoenix, Arizona company that was secretly controlled by David Loflin’s now-deceased business partner.

According to the SEC’s complaint, in 2013, David Loflin helped his business partner gain control of Greenway, using a front company to hide his partner’s identity. David Loflin then created back-dated convertible promissory notes to document debts owed by Greenway that could be repaid with the company’s stock. David Loflin purchased portions of the notes, converted them into stock and prepared all of the paperwork. David Loflin secured false attorney opinion letters in order to obtain stock certificates and deposit them for sale with his brokerage firm. The letters and paperwork contained false and misleading information, meant to give the impression that David Loflin was permitted to sell the shares into the open market. Read More

SEC Charges Kimberly Sredich with Misappropriation Scheme

On April 18, 2019, the SEC charged Kimberly Sredich, a Michigan resident, with misappropriating funds from brokerage customers of a registered broker-dealer with which she was associated. The SEC's complaint alleges that between 2014 and 2018, Kimberly Sredich sold securities in at least 15 customer accounts and misappropriated the proceeds of the sales.

On April 18, 2019, the SEC charged Kimberly Sredich, a Michigan resident, with misappropriating funds from brokerage customers of a registered broker-dealer with which she was associated. The SEC’s complaint alleges that between 2014 and 2018, Kimberly Sredich sold securities in at least 15 customer accounts and misappropriated the proceeds of the sales.

According to the complaint, many of the customers were elderly. The complaint further alleges that Kimberly Sredich forged customers’ signatures and used blank letters of authorization previously signed by customers to transfer funds to a company she controlled. She then allegedly transferred most of the misappropriated funds to a personal bank account. Read More

SEC Charges Yuh-Yue Chen, a California Engineer with Insider Trading

The SEC announced  on April 18,2019, the filing of insider trading charges against Yuh-Yue Chen, a former engineer at Skyworks Solutions, Inc., a Massachusetts-based company with executive offices and a design center in Irvine, California that designs, manufactures and sells wireless analog semiconductors.The SEC announced  on April 18,2019, the filing of insider trading charges against Yuh-Yue Chen, a former engineer at Skyworks Solutions, Inc., a Massachusetts-based company with executive offices and a design center in Irvine, California that designs, manufactures and sells wireless analog semiconductors.

The SEC’s complaint alleges that Yuh-Yue Chen, while working as an engineer at Skyworks in Irvine, traded multiple times in advance of the company’s earnings announcements. The complaint further alleges that Yuh-Yue Chen improperly accessed the company’s accounting and finance area, reviewed non-public financial reports, and used that information to purchase Skyworks securities in advance of the company’s announcements of financial results for the second and third quarters in 2014. The SEC charges that after Skyworks announced positive quarterly financial results on April 22, 2014 and again on July 17, 2014, Yuh-Yue Chen sold Skyworks securities for a total profit of at least $739,959. The complaint further alleges that in September 2014, Chen fled the country after Skyworks’ security found him loitering in the office restricted area designated for the accounting and finance staff. He recently returned to the United States for a visit at the end of March, when he was interviewed and subsequently served with the SEC’s complaint prior to his planned departure. Read More

SEC Obtains Final Judgments Against Joseph Meli and Parties involved in Ticket Resale Investment Scams

On April 11, 2019, two federal court judges entered final judgments against Joseph Meli, a New York City man, and six of his companies, in connection with two SEC cases that charged Joseph Meli with operating multi-million dollar fraudulent schemes involving purported purchases and resales of tickets to popular concerts and Broadway shows. Joseph Meli and his companies settled with the SEC and collectively agreed to pay more than $58 million in disgorgement and prejudgment interest.

On April 11, 2019, two federal court judges entered final judgments against Joseph Meli, a New York City man, and six of his companies, in connection with two SEC cases that charged Joseph Meli with operating multi-million dollar fraudulent schemes involving purported purchases and resales of tickets to popular concerts and Broadway shows. Joseph Meli and his companies settled with the SEC and collectively agreed to pay more than $58 million in disgorgement and prejudgment interest.

In January 2017, Joseph Meli was charged by the SEC, arrested by the FBI, and charged criminally by the U.S. Attorney. In the SEC case, Joseph Meli’s wife and mother were named as relief defendants based on their alleged receipt of stolen investor funds. In September 2017, the SEC charged Joseph Meli in a second case also involving an alleged ticket resale scheme, along with New York-based sports radio personality Craig Carton and six of their companies. Joseph Meli pled guilty to securities fraud in the parallel criminal case in October 2018 and was sentenced in April 2018. In connection with his guilty plea, Joseph Meli admitted to raising millions of dollars from investors, including by providing some investors with fake agreements containing fraudulent signatures that claimed to show Joseph Meli’s company had agreements with various production and management companies to purchase large blocks of tickets. Read More

SEC Charges Former Woodbridge Directors of Investment with Fraud

SEC Charges Former Woodbridge Directors of Investment with FraudOn April 11, 2019, the SEC charged two former directors of investments at Woodbridge Group of Companies LLC for their roles in its massive Ponzi scheme. The defendants, California-based Ivan Acevedo and Dane Roseman, were separately arrested and charged by criminal authorities, along with Woodbridge owner Robert H. Shapiro.

The SEC previously charged Woodbridge and Shapiro, and Woodbridge’s highest-earning unregistered brokers. In January, a federal court in Florida ordered Woodbridge, related companies, and Shapiro together to pay $1 billion for operating this Ponzi scheme. Read More

SEC Charges Dubai-Based Advisory Firm and Its Founder, Arif Naqvi

On April 11, 2019, the SEC charged Arif Naqvi and Abraaj Investment Management Limited, a Dubai-based investment advisory firm, with misappropriating funds from a private equity fund client.

On April 11, 2019, the SEC charged Arif Naqvi and Abraaj Investment Management Limited, a Dubai-based investment advisory firm, with misappropriating funds from a private equity fund client.

The SEC alleges that Arif Naqvi and his firm raised money for the Abraaj Growth Markets Health Fund (“Health Fund”), collecting more than $100 million over three years from U.S.-based charitable organizations and other U.S. investors. According to the SEC’s complaint, Arif Naqvi misappropriated money from the Health Fund and commingled the assets with corporate funds of Abraaj Investment Management Limited and its parent company, and used it for purposes unrelated to the Health Fund. The SEC alleges that Arif Naqvi and his firm made misrepresentations to investors and issued false and misleading financial statements to hide that they were spending investor money in unrelated ways. Read More

SEC Charges Investment Adviser, Gonzalo Ortiz with Securities Fraud

SEC Charges Investment Adviser, Gonzalo Ortiz with Securities FraudThe SEC filed a civil injunctive action on April 10,2019, charging a New Jersey resident, Gonzalo Ortiz with defrauding an investor by lying about his trading success, concealing trading losses, and misappropriating funds.

The SEC’s complaint, filed in federal court in Brooklyn, alleges that Gonzalo Ortiz, of Hackensack, New Jersey, falsely touted his success in investing in stocks and promised the investor a minimum 50% return in a year, and induced the investor to give him control of over $570,000 the investor’s retirement savings. The complaint alleges that contrary to these promises, Gonzalo Ortiz misappropriated almost half of the funds and invested the other funds in high-risk microcap companies that generated significant losses. Gonzalo Ortiz then concealed the misappropriation and losses by providing the investor with a phony account statement that falsely showed high returns. According to the complaint, Gonzalo Ortiz misappropriated approximately $224,500 of the investor’s money, and lost approximately $290,000 through his trading. Read More

SEC Brings Actions Against Fifteen Unregistered Brokers for Their Participation in an IIIegal Offering of Microcap Securities

SEC Brings Actions Against Fifteen Unregistered Brokers for Their Participation in an IIIegal Offering of Microcap Securities

On April 9,2019, the SEC charged fifteen individuals with acting as unregistered brokers or aiding-and-abetting such activity in connection with Intertech Solutions, Inc.’s fraudulent and unregistered securities offerings.

The SEC’s complaints allege that Alexander Bevil, Richard Bohnsack, Daniel Broyles, Charles Davis, Michael Duke, Joel Duncan, Martin Lewis, Mark Parman, William Roth, Paula Saccomanno, Kenneth Shelton, Billy Ray Statham, Jr., Glenn Story, Dennis Swerdlen, and Harold Wasserman were hired by Intertech Solutions to engage in or facilitate cold-call solicitations of hundreds of prospective investors throughout the United States and Canada from at least February 2014 through December 2016. The complaints allege that, as a result of the defendants’ conduct, Intertech Solutions raised over $7 million from retail investors. According to the complaints, Intertech Solutions paid the defendants exorbitant commissions ranging from 35% to 50% of the funds provided by each investor. The complaints allege that the defendants did not disclose their commission rates to investors and instead distributed private placement memoranda that indicated that only 10% of investor proceeds would be used as commissions. The SEC previously charged Intertech Solutions and its control persons with orchestrating the fraudulent and unregistered offerings. Read More

Does Regulation A+ Allow Testing the Waters?

Issuers utilizing Regulation A+ are permitted to “test the waters” with potential purchaser and use solicitation materials both before and after the offering statement is filed, subject to compliance with SEC rules on filing and disclaimers. Using Regulation A+, issuers can advertise the offering opportunity to solicit interests before spending hundreds of thousands of dollars on the actual filing itself, to see if there’s sufficient interest to spend the money to move forward with qualifying a Regulation A Offering

Issuers utilizing Regulation A+ are permitted to “test the waters” with potential purchaser and use solicitation materials both before and after the offering statement is filed, subject to compliance with SEC rules on filing and disclaimers.  Using Regulation A+, issuers can advertise the offering opportunity to solicit interests before spending hundreds of thousands of dollars on the actual filing itself, to see if there’s sufficient interest to spend the money to move forward with qualifying a Regulation A Offering.

Testing the waters materials used prior to the filing of the Form 1-A must be filed as an exhibit with the initial filing on Form 1-A.  Although the SEC does not pre-review pre-filing advertising, issuer should exercise caution with what they say in offering materials.  Solicitation materials are subject to the anti-fraud and other civil liability provisions of the federal securities laws and issuers can be sued for statements in the advertising materials, even if they don’t include the information in the 1-A Offering Circular itself. Read More

SEC Charges Former Seaworld Associate General Counsel, Paul Powers with Insider Trading

On April 10, 2019, the SEC charged Paul B. Powers, a former senior lawyer at SeaWorld Entertainment Inc with insider trading based on nonpublic information that the company's revenue would be better than anticipated for the second quarter of 2018.

On April 10, 2019, the SEC charged Paul Powers, a former senior lawyer at SeaWorld Entertainment Inc with insider trading based on nonpublic information that the company’s revenue would be better than anticipated for the second quarter of 2018.

The SEC alleges that Paul Powers had early access to key revenue information as the company’s associate general counsel and assistant secretary, and he purchased 18,000 shares of SeaWorld stock the day after he received a confidential draft of the 2018 second quarter earnings release that detailed a strong financial performance by the company after a lengthy period of decline.  According to the SEC’s complaint, Paul Powers immediately sold his SeaWorld shares for approximately $65,000 in illicit profits after the company announced its positive earnings and the company’s stock price increased by 17 percent. Read More