Government Official Gordon Johnson Reaches Settlement for Insider Trading

Gordon Johnston - Insider Trading SettlementOn November 14, 2016 the Securities and Exchange Commission (“SEC”) announced that it entered into a settlement agreement with Gordon Johnston, a former official at the U.S. Food and Drug Administration’s Office of Generic Drugs (OGD) who allegedly participated in an insider trading scheme while working as a trade association representative.

On June 15, 2016, the SEC filed a complaint in federal district court in Manhattan alleging that Johnston concealed his role as a hedge fund consultant to obtain confidential information from his former OGD colleagues and friends about anticipated FDA approvals for a drug called enoxaparin, which is a generic version of the brand name drug Lovenox. Johnston allegedly passed the material, nonpublic information to a portfolio manager at Visium Asset Management, L.P. (Visium), where Johnston earned approximately $108,000 as a paid consultant. The portfolio manager allegedly made millions of dollars illicitly trading on the nonpublic information that Johnston provided. Read More

Attorney Adam Tracy & the Nefarious World of Custodianship Shells

Adam Tracy

The Securities and Exchange Commission (“SEC”) says it doesn’t like over-the-counter shell companies, and would like to see them gone from the marketplace.  To that end, its Enforcement Division cooked up an initiative it called  “Operation Shell-Expel”.  It began with a bang on May 14, 2012, when the agency coupled an announcement of Shell-Expel with the suspension of trading in the stock of 379 dormant penny companies.  It was, the SEC said, the largest such action in agency history.  What danger did these sorry companies present and if they are so dangerous why are there so many dormant shell companies still out there being fraudulently taken over?

The existence of empty shell companies can be a financial boon to stock manipulators who will pay as much as $750,000 to assume control of the company in order to pump and dump the stock for illegal proceeds to the detriment of investors. But with this trading suspension’s obligation to provide updated financial information, these shell companies have been rendered essentially worthless and useless to scam artists.

The shells were “rendered essentially worthless” because the suspension meant they’d be delisted to the Grey Market, the graveyard of bad pennies, in which market makers are forbidden to publish quotes.

Critics of rampant abuse in the OTC market cheered the SEC on, hoping Operation Shell-Expel signaled a new, and far less tolerant, attitude toward dormant shells that were often serially pumped and dumped.  The following June, the agency suspended trading in another 61 issuers, and in February 2014, it followed up by shutting down another 255 shells.  The hammer came down on 128 more in March 2015.  There’s been no similar action in 2016.  At the time of the 2015 suspensions, Enforcement director Andrew J. Ceresney remarked, “We are getting increasingly aggressive and adept at ridding the microcap marketplace of dormant shells within a year of the companies becoming inactive.”  Many market participants see the SEC’s failure to pursue corporate hijackers of dormant shells as one of the greatest enforcement failures of the penny stock markets in the last decade. We have identified hundreds of hijacked tickers and/or companies involving penny stocks with minimal effort yet these companies are illegally acquired and have been used in schemes robbing investors of millions of dollars and eliminating existing stockholders of their holdings.
Read More

What Is An Unregistered Broker? – Going Public Lawyers

What is an Unregistered Broker? Going Public Lawyers

The Securities and Exchange Commission (the “SEC”) is pursuing unregistered broker or broker dealer activity which runs rampant in the penny stock markets particulary in transactions involving reverse merger companies. Often these unregistered broker-dealers claim to be exempt from the broker dealer registration requirements.  SEC enforcement actions demonstrate there are serious consequences for those who engage in unregistered broker dealer activity.

This Securities Lawyer 101 Q &A addresses the most common questions we receive about unregistered broker-dealer activity. Read More

President of TelexFree James Merrill Pleads Guilty to Running Pyramid Scheme

TelexFree Inc - Pyramid SchemeOn October 24, 2016, James M. Merrill, of Ashland, Massachusetts, the former president of TelexFree, Inc. and TelexFree, LLC, pled guilty to criminal charges related to his operating a pyramid scheme through TelexFree. On May 9, 2014, Merrill and another defendant, Carlos N. Wanzeler, who is a fugitive located in Brazil, were charged in a federal criminal complaint, charging them with conspiracy to commit wire fraud. The criminal charges against Merrill arose out of the same fraudulent conduct alleged by the SEC in a civil securities fraud action filed in April 2014. Read More

Attorney Adam Tracy & the Nefarious World of Custodianship Shells

Adam Tracy Lawyer - Custodianship Shell Attorney

The Securities and Exchange Commission (“SEC”) says it doesn’t like over-the-counter shell companies, and would like to see them gone from the marketplace.  To that end, its Enforcement Division cooked up an initiative it called  “Operation Shell-Expel”.  It began with a bang on May 14, 2012, when the agency coupled an announcement of Shell-Expel with the suspension of trading in the stock of 379 dormant penny companies.  It was, the SEC said, the largest such action in agency history.  What danger did these sorry companies present and if they are so dangerous why are there so many dormant shell companies still out there being fraudulently taken over?

The existence of empty shell companies can be a financial boon to stock manipulators who will pay as much as $750,000 to assume control of the company in order to pump and dump the stock for illegal proceeds to the detriment of investors. But with this trading suspension’s obligation to provide updated financial information, these shell companies have been rendered essentially worthless and useless to scam artists.

The shells were “rendered essentially worthless” because the suspension meant they’d be delisted to the Grey Market, the graveyard of bad pennies, in which market makers are forbidden to publish quotes.

Critics of rampant abuse in the OTC market cheered the SEC on, hoping Operation Shell-Expel signaled a new, and far less tolerant, attitude toward dormant shells that were often serially pumped and dumped.  The following June, the agency suspended trading in another 61 issuers, and in February 2014, it followed up by shutting down another 255 shells.  The hammer came down on 128 more in March 2015.  There’s been no similar action in 2016.  At the time of the 2015 suspensions, Enforcement director Andrew J. Ceresney remarked, “We are getting increasingly aggressive and adept at ridding the microcap marketplace of dormant shells within a year of the companies becoming inactive.”  Many market participants see the SEC’s failure to pursue corporate hijackers of dormant shells as one of the greatest enforcement failures of the penny stock markets in the last decade. We have identified hundreds of hijacked tickers and/or companies involving penny stocks with minimal effort yet these companies are illegally acquired and have been used in schemes robbing investors of millions of dollars and eliminating existing stockholders of their holdings.
Read More

Marc Broidy Charged with Defrauding Investors in 3 Separate Schemes

Marc Broidy - Investment Advisor FraudOn October 27, 2016 the Securities and Exchange Commission (“SEC”) charged a Los-Angeles based investment advisory firm and its owner, Marc Broidy with fraudulently overbilling clients and stealing assets from their trusts to pay such personal expenses as his home mortgage, overseas trips, and leases on two Mercedes-Benz vehicles.

The SEC’s complaint alleges that Broidy and his firm Broidy Wealth Advisors obtained more than $1.4 million in ill-gotten gains since February 2011. Broidy allegedly billed clients approximately $643,000 in excess fees And covered it up by altering the amount of management fees recorded on forms issued by brokerage firms before sending the forms to his clients. The SEC further alleges that he fraudulently obtained additional funds to pay his personal expenses by misappropriating approximately $865,000 in assets from clients’ trusts for which he was trustee. Read More

Southlake Resources Group and Owner Cody Winters Charged with Fraud

Southlake Resources Group - FraudTexas company Southlake Resources Group, LLC and its president Cody Winters have agreed to pay over $5.4 million to settle charges by the Securities and Exchange Commission (“SEC”) that they orchestrated an oil-and-gas fraud. The SEC also charged the president and a company vice president with acting as unregistered brokers in the transactions underlying the fraud.

According to the SEC’s complaint, filed on October 24, 2016, in the U.S. District Court for the Northern District of Texas, Southlake and its founder and president, Winters, raised approximately $5.2 million from more than 70 investors in 12 fraudulent oil-and-gas joint ventures. Winters and Southlake employed sales agents, including vice president Nicholas Hamilton, to offer and sell joint-venture interests to investors in 26 states from approximately June 2010 through September 2014. Read More

Brazilian Airplane Manufacturer Embraer S.A. Charged with FCPA Violations

Embraer S.A. - FCPA ViolationsThe Securities and Exchange Commission (“SEC”) announced a global settlement along with the U.S. Department of Justice and Brazilian authorities that requires aircraft manufacturer Embraer S.A. to pay more than $205 million to resolve alleged violations of the Foreign Corrupt Practices Act (FCPA).

The SEC’s complaint alleges that Embraer made more than $83 million in profits as a result of bribe payments from its U.S.-based subsidiary through third-party agents to foreign government officials in the Dominican Republic, Saudi Arabia, and Mozambique. Embraer allegedly created false books and records to conceal the illicit payments, and also engaged in an alleged accounting scheme in India. Read More

Executive of Pinnacle Financial Partners James Cope Charged with Insider Trading

James Cope - Pinnacle Financial Partners - Insider TradingOn October 21, 2016 the Securities and Exchange Commission (“SEC”) charged a James Cope, a Tennessee lawyer who served on the executive committee of the board of directors of Nashville-based Pinnacle Financial Partners with insider trading based on nonpublic information he learned about an impending merger.

The SEC alleges that Cope obtained more than $56,000 in ill-gotten gains by purchasing securities in Pinnacle’s acquisition target, Avenue Financial Holdings, prior to the banks’ joint public announcement later that month. According to the SEC’s complaint, Cope learned confidential details about the planned merger during a board executive committee meeting on January 5, 2016, and proceeded to place his first order to purchase Avenue Financial stock while that executive committee meeting was still in progress. Read More

Christopher Salis and Douglas and Edward Miller Charged with Insider Trading

Christopher Salis and Doulgas and Edward Miller - Insider TradingA federal grand jury in the Northern District of Indiana has indicted Christopher Salis, Douglas Miller, and Edward Miller on charges relating to insider trading, money laundering, and structuring currency transactions. The 17-count indictment also charges Douglas Miller with false statements and Edward Miller with obstruction of justice and witness harassment. All three defendants were charged earlier this year in a parallel SEC matter.

According to the indictment, returned October 19, 2016, Salis was employed as a global vice president at SAP America in August 2014 when he obtained material, nonpublic information related to SAP’s intent to acquire Concur Technologies. The indictment alleges that Salis tipped his close friend, Douglas Miller, who in turn, tipped his brother, Edward Miller, and others. The Miller brothers and others allegedly purchased short-term, risky Concur call options, yielding illegal profits exceeding $500,000 after the acquisition was announced publicly on September 18, 2014. In an effort to avoid scrutiny and to evade currency transaction reporting requirements, the Miller brothers allegedly used cash, money orders, and checks to transfer some of these profits to Salis. Read More