The Securities and Exchange Commission (SEC) announced that on September 29, 2015, a final judgment was entered against Efstratios “Elias” Argyropoulos of Santa Barbara, California, and his solely owned company, Prima Capital Group, Inc. In addition to the permanent injunction to which the defendants had previously consented, the Court granted the SEC’s motion for monetary relief, finding the defendants jointly and severally liable for disgorgement of $1,495,657, together with prejudgment interest of $84,239.59 totaling $1,579,896.59, and also ordering Argyropoulos to pay a civil penalty of $1,495,697.

On December 23, 2014, the SEC filed the action, claiming that the defendants illegally raised nearly $3.5 million from investors, supposedly to purchase Facebook and Twitter shares before the companies’ initial public offerings (IPOs). Read More

On December 1, 2015 the Securities and Exchange Commission (SEC) charged two Bitcoin mining companies and their founder with conducting a Ponzi scheme that used the lure of quick riches from virtual currency to defraud their investors.

The complaint alleges that “mining” for Bitcoin or other virtual currencies means applying computer power to try to solve complex equations that verify a group of transactions in that virtual currency. The first computer or collection of computers to solve an equation is awarded new units of that virtual currency.

The SEC claims that Homero Joshua Garza perpetrated the Ponzi scheme through his two companies GAW Miners and ZenMiner by purporting to offer shares of a digital Bitcoin mining operation. In reality, GAW Miners and ZenMiner did not own enough computing power for the mining it promised to conduct, so most investors paid for a share of computing power that never existed. Returns paid to some investors came from proceeds generated from sales to other investors. Read More

The Securities and Exchange Commission (SEC) announced an asset freeze obtained against two people in San Bernardino, California accused of defrauding Chinese investors who invested in their related companies in an effort to obtain U.S. residency through the EB-5 Immigrant Investor Program. The EB-5 program provides a method to obtain visas by investing $1 million, or at least $500,000 in an area designated as rural or high unemployment, and which creates or preserves at least ten jobs for U.S. workers.

According to the SEC’s complaint filed in U.S. District Court for the Central District of California, Robert Yang, MD, Claudia Kano, and their affiliated “Suncor” entities have raised approximately $20 million from 40 investors located in China for the development of three “sub-acute nursing care facilities” located in Fontana, Hesperia, and Lynwood, California. But the SEC alleges that Yang and Kano diverted more than $10 million for personal and other uses and jeopardized investors’ prospects for U.S. residency under the terms of the EB-5 program. Read More

On November 12, 2015, a federal court in Boston, Massachusetts, entered a final judgment against Tropikgadget FZE and Tropikgadget Unipessoal LDA (collectively, “Tropikgadget”) of Portugal, defendants in a previously-filed enforcement action. In February 2015, the SEC charged Tropikgadget operating under the name Wings Network, plus three company officers and 12 promoters, with operating an international pyramid scheme targeting Latino communities in the U.S.

The judgment enjoins Tropikgadget from future violations of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b 5 thereunder. The Court also ordered Tropikgadget to pay disgorgement of $25,213,990, representing profits gained as a result of the operation of the pyramid scheme, plus prejudgment interest of $961,742, and a third-tier civil penalty of $725,000. Read More

On November 17, 2015 the Securities and Exchange Commission charged Steven Watson with insider trading fraud, claiming he illegally profited from news of a proposed acquisition of Cooper Tire and Rubber Company by Apollo Tyres Ltd.

Earlier this year, the SEC charged two long-time friends, Amit Kanodia and Iftikar Ahmed, with insider trading fraud and alleged that another close friend of Kanodia also profited by trading on the confidential information provided by Kanodia. In a separate complaint filed November 12, 2015, the SEC filed fraud charges against Watson, another close friend of Kanodia. Read More

The Securities and Exchange Commission (SEC) announced that it has obtained final judgments against a former Los Angeles-based immigration attorney, his wife, his former law firm partner and five entities he controlled for conducting an investment scheme to defraud foreign investors seeking to come to the U.S. through the EB-5 Immigrant Investor Program.

On October 29, 2015, the United States District Court for the Central District of California entered a final judgment against Defendant Justin Moongyu Lee, formerly an immigration attorney with an office in Los Angeles, and five entity defendants he controlled, after granting the SEC’s motion for entry of a final judgment by default. In addition to permanently enjoining the defendants from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, the judgment orders that the defendants are jointly and severally liable for disgorgement of $7,210,000, together with interest of $1,052,403.73, for a total of $8,262,403.73, and further orders Justin Lee to pay a civil penalty of $150,000. Read More

On November 12, 2015 the Securities and Exchange Commission (SEC) announced that the Court awarded summary judgment and entered a final judgment in favor of the SEC against defendants Brett Cooper, Global Funding Systems LLC, Dream Holdings, LLC, Fortitude Investing, LLC, Peninsula Waterfront Development, LP, and REOP Group Inc. The Court found that Cooper conned investors out of more than $2 million through various frauds, including advance fee schemes guaranteeing astronomical returns to investors in purported prime bank transactions and overseas debt instruments, by luring them into false “Prime Bank” or “High-Yield” investment contracts. These contracts promised exceptional returns on their investments in a matter of weeks, with little to no risk. The final judgment requires Cooper and his companies to pay more than $7.3 million as the outcome of a civil enforcement action originally filed in September, 2013.

In its pleadings and other court papers, the SEC claimed that the defendants, from at least November 2008 through about April 2012, perpetrated three fraudulent schemes and engaged in various fraudulent and deceitful acts, practices and courses of business in furtherance of those schemes. Read More

The Securities and Exchange Commission (SEC) announced that on November 5, 2015 an emergency enforcement action was filed in federal district court against Earl Miller (Miller) and two private investment vehicles that he controlled, 5 Star Commercial, LLC (5 Star Commercial) and 5 Star Capital Fund, LLC (5 Star Capital), alleging that he made material misrepresentations to investors and perpetrated a fraudulent scheme in raising investor funds for the 5 Star entities.

On November 6, 2015 the court issued a temporary restraining order (TRO) freezing the assets of Miller and the 5 Star entities, and prohibiting each of the defendants from soliciting, accepting or depositing any monies from actual or prospective investors while the TRO is in effect. The SEC’s complaint alleges that starting in 2008, Miller recruited investors for a number of private investment entities that he created. Miller recruited investors for 5 Star Commercial, 5 Star Capital and his other real estate entities from a network of predominantly novice investors, including members of the local Amish community. From July 29, 2014 to the present, he raised at least $3.9 million from more than 70 investors for his 5 Star Commercial and 5 Star Capital entities. Read More

On December 7, 2015 the Securities and Exchange Commission (SEC) announced a series of enforcement actions against lawyers across the country charged with offering EB-5 investments while not registered to act as brokers. In one case, a lawyer and his firm were charged with defrauding foreign investors in the government’s EB-5 Immigrant Investor Program, through which they seek a path to U.S. residency by investing in a specific project that creates or preserves at least 10 jobs for U.S. workers.

“Individuals and entities performing certain services and receiving commissions must be registered to legally operate as securities brokers if they’re raising money for EB-5 projects,” said Andrew Ceresney, Director of the SEC Enforcement Division. “The lawyers in these cases allegedly received commissions for selling, recommending, and facilitating EB-5 investments, and they are being held accountable for disregarding the relevant securities laws and regulations.” Read More

On November 10, 2015 the Securities and Exchange Commission (SEC) announced insider trading charges and an emergency asset freeze against cousins Zhichen Zhou and Yannan Liu. The SEC alleged that the Defendants traded in advance of the acquisition of two healthcare companies, MedAssets, Inc. and Chindex International Inc. The SEC also alleges that Zhou used funds provided by his cousin to trade illegally, resulting in profits of approximately $300,000. The SEC claimed that Liu, who was formerly employed by a private equity firm that was a bidder in both the MedAssets and Chindex International acquisitions, provided Zhou with the non-public information about the acquisitions. On November 2, 2015 when the acquisition of MedAssets was announced, the stock rose more than 30%. Similarly, Chindex International’s stock rose more than 13% on February 17, 2014, the date of the announcement. Read More

On November 9, 2015, the Securities and Exchange Commission (SEC) announced that on November 4, 2015 the Court entered a partial judgment against James Louks and FiberPop Solutions, Inc. (FiberPop). FiberPop and Louks, founder, President, CEO, Director, and Chairman of the Board of FiberPoP, both consented to the entry of the partial judgment, which imposes a permanent injunction against future violations of certain antifraud provisions of the federal securities laws. The Defendants are prohibited from raising investor capital while the SEC’s case is ongoing. They neither admitted nor denied the SEC’s allegations against them.On September 1, 2015 the SEC filed the Complaint charging Louks and FiberPop with fraud. The Complaint claimed that Louks and FiberPop had defrauded nearly 100 investors by convincing them to invest in notes that would theoretically help fund the company’s operations. The SEC alleged that Louks continued to solicit investors while knowing that none of the purported financing opportunities offered by FiberPoP during a 12-year period ever produced funding for the company or returns for investors. Read More

On November 6, 2015, the SEC announced that it charged James Alan Craig (Craig) with a market manipulation scheme. The SEC filed criminal securities fraud charges against Craig, a Scottish trader whose phony tweets caused sharp drops in the stock prices of two companies and triggered a trading halt in one of them. According to the SEC’s complaint, Craig created false accounts that looked just like the accounts of two well-known securities research firms claiming that they were both under investigation. Craig’s first false tweets caused one company’s share price to fall 28% before Nasdaq temporarily halted trading. The next day, Craig’s false tweets about a different company caused a 16% decline in that company’s share price. Both occasions, Craig bought and sold shares of the target companies in a very unsuccessful effort to profit from the sharp price swings. Read More

On November 4, 2015, the Securities and Exchange Commission (SEC) announced it has identified three more individuals to charge in a penny stock manipulation case that the agency filed last year against alleged corrupt brokers and others.

The SEC filed a request to lift the stay in its civil action so that it could file an amended penny stock complaint alleging that two additional brokers, Michael Morris and Ronald Heineman, assisted in the scheme through their brokerage firm while a third man, attorney Darren Ofsink, made illicit gains by selling unregistered shares that had no registration exemption applied.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York announced criminal charges against Morris and Ofsink. Read More

On September 30, 2015 the Court approved final distribution that concluded the receivership in the SEC’s litigation against Provident Capital Indemnity, Ltd. The litigation was ended by the Court’s order and was settled with the last remaining defendant, Minor Vargas Calvo, PCI’s former president, following his conviction in a parallel case. The receiver that was appointed by the Court has distributed about $2.3 million to approximately 2,000 victims of life settlement offerings supposedly bonded by PCI. Any amount that remains after payment of fees and expenses will be paid to the US Marshall for the payment of PCI’s asset forfeiture obligation in the parallel criminal case.

The SEC’s case was initiated on January 19, 2011, when the SEC charged PCI, Vargas, and PCI’s purported outside auditor Jorge Castillo (Castillo) with operating a massive life settlement bonding fraud. The complaint states that PCI provided financial guarantee bonds on life insurance policies, which intermediaries then packaged and sold as bonded life settlement investments across the U.S. and abroad. Read More

The SEC has announced charges against Vlad Spivnak for insider trading in the stock of American Dental Partners, Inc. (ADPI), a dental practice management company. The complaint alleges that Spivnak received the private information from his girlfriend at the time, Shirmila Doddi, who was a financial analyst at a commercial bank. After acquiring the confidential information from Doddi, Spivnak is alleged to have traded in the securities of ADPI, based on the tips provided by Doddi. The SEC claims that Doddi obtained the material, private information throughout her employment regarding an impending acquisition of ADPI by a private equity firm. Read More

The SEC released charges on October 30, 2015 alleging that William Apostelos and his companies, WMA Enterprises, Midwest Green Resources, and OVO Wealth Management conducted a fraudulent investment scheme. The complaint claims that the companies raised at least $66.7 million from about 350 investors since January of 2010.

The SEC claims that throughout the scheme, Apostelos knowingly made multiple misrepresentations to recruit prospective investors, including clients of OVO, a state-registered investment adviser.  Apostelos told certain investors that their investment funds would be pooled with funds from other investors and invested in stock, precious metals, real estate, or used to make short-term loans at high interest rates to small businesses and farmers, with returns being generated by the underlying investments.  He told other investors that he would place their funds in a pooled brokerage account and invest them in publicly traded stocks, bonds, and options. Read More

The SEC filed fraud charges against Diverse Financial Corporation, its CEO, Roy Dekel, and its former President David Kendell on October 28, 2015. The complaint claims that the defendants raised about $3.29 million from at least 16 investors through their fraudulent offer and promissory notes that were issued by DF Capital Partners, LLC, which is a bankrupt subsidiary of Diverse Financial. According to the complaint, the defendants lied about their use of the investors funds, saying that their funds would be used only to invest in premium finance lending, where loans are made to borrowers to pay premiums on their life insurance policies, or “short-term cash type investments,” pending such investments. In reality, alleged by the SEC, the company and its CEO diverted the money to pay for the company’s financial operations.  Read More

The Securities and Exchange Commission (SEC) filed a civil action against defendants Ascenergy LLC and its CEO, Joseph Gabaldon for offering fraudulent oil and gas investments. At the request of the SEC, the U.S. District Court for the District of Nevada has entered a temporary restraining order halting the offering, as well as an order for an asset freeze for the defendants and the relief defendants, Alanah Energy, LLC and Pyckl, LLC.

The SEC’s complaint claims that since at least 2014, the defendants have been involved in a scheme on crowdfunding websites and the company’s website to solicit investors to buy overriding royalty interests in undeveloped oil and gas wells. According to the complaint, Ascenergy has accumulated about $5 million from approximately 90 investors. Ascenergy has already spent at least $1.2 million of the offering proceeds, but it seems that only a few thousand dollars of the proceeds have been used for expenses relative to oil and gas. Read More

The Securities and Exchange Commission (SEC) announced that, on October 27, 2015, the United States District Court for the District of Arizona entered a settled final judgment against Rebecca Norton, the remaining defendant in SEC v. Mary Beth Knight and Rebecca Norton, Civ. 2:11-cv-00973 (DGC) (D. Ariz.). Norton agreed to entry of the final judgment, without admitting or denying the SEC’s claims in that action. The SEC’s complaint claimed that in 2006, Norton was involved in insider trading in the securities of Choice Hotels International, Inc. Read More

A settled civil injunctive action was filed by the Securities and Exchange Commission (SEC) against two Pennsylvania investment advisers, Kevin Brown and his father, George Brown, (collectively, the “Browns”), and several entities they managed, for conducting three offering frauds over the last decade. The unregistered offerings were in correlation with securities that were issued by a Nevada-chartered trust company, Summit Trust Company (“STC”), the Rampart Fund LP (“Rampart Fund”), a private fund managed by the Browns, and Trust Counselors Network, Inc. (“TCN”), a non-profit charitable organization.

The SEC alleges that between 2008 and 2014, the Browns accumulated over $33 million from over 150 investors in multiple states through the offering of STC’s preferred stock while insinuating that the proceeds would be used for business expansion and acquisitions. Instead, STC and the Browns allegedly used most of the proceeds to make Ponzi-like payments to existing preferred stock shareholders, to pay for obligations and expenses of the Browns’ other affiliated entities, and for undisclosed speculative investments. Read More

On October 20, 2015, the Securities and Exchange Commission (SEC) charged John Clifford Williams with his involvement in a misappropriation scheme. The complaint alleges that Williams misappropriated and diverted more than $3.1 million illicit funds that he accumulated from an investor in the course of securities offerings. According to the complaint, Williams took advantage of the investor’s trust and repeatedly solicited and gained illicit earnings that were based on the implication that the money would be used only for specific investments.

The SEC’s allegation states that between February 2009 and May 2014, Williams raised more than $8.1 million from the investor, including at least $2.6 million for Energy Operations Trust (“Energy Operations”), which Williams established to offer revenues derived from gold and manganese mines located in Central America, and $5.5 million for American Hydraulic Power, LLC (“AHP”), which Williams founded to develop and commercialize an energy efficient technology licensed from the U.S. Environmental Protection Agency. Read More

The Securities and Exchange Commission (SEC) announced on October 26, 2015 that on October 23, 2015, the United States District Court for the Eastern District of New York entered a final judgment against two fraudsters, Joseph Catapano and Michael Piervinanzi, for their involvement in a broker bribery scheme that was constructed to manipulate the market for the common stock of Euro Solar Parks, Inc.

The SEC’s complaint claims that Catapano and Piervinanzi conducted an undisclosed kickback arrangement with someone who claimed to represent a group of registered representatives with trading discretion over the accounts of wealthy customers.  Catapano and Piervinanzi promised to pay a 30% kickback in exchange for buying up to $3 million of Euro Solar stock through the customers’ accounts. Read More

On October 23, 2015 the Securities and Exchange Commission (SEC) announced a settlement with a stockbroker who was previously charged with insider trading in advance of over a dozen pending corporate transactions. These charges found Vladimir Eydelman guilty of insider trading and claims that he passed illegal tips using napkins and post-it notes at Grand Central Terminal.

Last year, the SEC charged Eydelman, a former stockbroker employed by Oppenheimer & Co. and later by Morgan Stanley, in a scheme involving insider trading of nonpublic information acquired by Steven Metro, a law firm employee, regarding pending corporate transactions involving clients of the firm. Metro supposedly passed the information to Eydelman through a mutual friend, Frank Tamayo, who settled a separate complaint. The SEC claimed that after getting the tips from Metro, Tamayo usually met Eydelman near the clock at the information booth at Grand Central Terminal and chewed up or ate post-it notes or napkins after using them to show Eydelman the ticker symbol of the company that would be acquired. Read More

On November 4, 2015, the U.S. Attorney for the Eastern District of New York announced that Darren Ofsink, a Manhattan attorney and founder of Ofsink LLC; Michael Morris, a registered broker and managing director of Halcyon Cabot Partners, Ltd. (Halcyon); and Darren Goodrich, a registered broker for fourteen years at BMA Securities, a firm controlled by Burt Martin Arnold were arrested earlier today on charges of securities fraud, wire fraud, and conspiracy to commit securities fraud, mail fraud, and wire fraud in connection with a $300 million market manipulation scheme. In addition to the three defendants arrested today, the eleven-count superseding indictment unsealed this morning charges four additional defendants who were arrested in July 2014: Abraxas J. Discala, also known as “AJ Discala,” the Chief Executive Officer of OmniView Capital Advisors LLC; Ira Shapiro, the Chief Executive Officer of CodeSmart Holdings, Inc., a publicly traded company; and Craig Josephberg, a registered broker. Three defendants, Marc Wexler, Matthew Bell, and Victor Azrak, who were charged in the underlying indictment, have pleaded guilty and are awaiting sentencing.

Ofsink and Morris will be arraigned later today. Darren Goodrich’s initial appearance for removal proceedings to the Eastern District of New York is scheduled for this afternoon at the United States Courthouse, 312 North Spring Street, Los Angeles, California. Discala, Shapiro and Josephberg will be arraigned on the superseding indictment at a later date. Read More

On October 21, 2015 the Securities and Exchange Commission (SEC) announced that on October 9, 2015, the United States District Court for the Southern District of New York entered default judgments against Premiere Power, LLC and its Chairman, Jerry Jankovic for the violation of the anti-fraud provisions of the federal securities laws, due to his failure to notify investors that they were using over half of the money they raised to defend a lawsuit that was unrelated, and by making other untrue and deceitful disclosures in the offering materials given to investors. The SEC’s request was granted by the Court for permanent injunctions against Premiere and Jerry Jankovic, holding them jointly and individually liable for repayment of illicit earnings with prejudgment interest, and ordering them to pay civil penalties.

The SEC’s offering fraud complaint claims that soon after establishing Premiere, a company supposedly pursuing projects relative to energy on Native American land, Jerry Jankovic and his son, CEO John Jankovic, agreed to use about half of the money they raised from investors in Premiere to cover the costs of an unrelated lawsuit pending against Jerry Jankovic and a business associate, Sandra Dyche. As a result of this agreement, the Jankovics and Dyche purportedly diverted $1 million out of a total of $1.95 million raised for Premiere. The SEC alleged that not only did they mislead Premiere investors about how their funds would be used, but Premiere also gave false accounts to investors about its affiliates, board membership, its auditor, and about Jerry Jankovic’s “proven track record” of creating “successful” energy companies. Read More

Common Questions About Schedule 13D and 13G Filing Requirements For Public Companies

In going public transactions, a company can register a class of securities and thereby become subject to the SEC’s reporting requirements by filing a Form 10 Registration Statement or Form 8-A registration statement under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Shareholders of issuers with a class of securities registered under the Exchange Act are subject to insider reporting requirements. Sections 13(d) and 13(g) (15 USCS § 78m) of the Exchange Act require beneficial owners of more than 5 percent of a class of equity securities of a Securities & Exchange Commission (SEC) reporting issuer to disclose information relating to their beneficial ownership by filing a Schedule 13D or Schedule 13G with the SEC. This blog post addresses the most common questions we receive about Schedules 13D and Schedule 13G beneficial ownership reporting. Read More

With equity crowdfunding now legal, we can expect to see the Securities & Exchange Commission (“SEC”) keeping a close watch for unregistered broker dealers and funding portals. In an administrative proceeding a few weeks ago, the SEC ordered a public hearing to be held before an Administrative Law Judge within the next two months concerning the activities of Steven J. Muehler, Alternative Securities Markets Group Corp (“ASMG”)., Blue Coast Securities Corp. (“Blue Coast”), DBA Globalcrowdtv, Inc., and Blue Coast Banc.  The SEC also ordered Mueller and the companies under his control, to cease and desist from any engaging in any unlicensed and/or criminal acts of securities dealing.

Muehler was previously sanctioned by two state regulators for his conduct in the offering of unregistered securities and making misrepresentations as to his status as a registered broker-dealer. According to the SEC allegations, since at least August 2013, Muehler has been in the business of offering to help small business customers raise money from investors through Blue Coast and ASMG. Prior to April 2014, Muehler marketed his services using Blue Coast, which, at times, he operated using the names “GlobalCrowdTV, Inc.” and “Blue Coast Banc.” Muehler began marketing his services under the name of ASMG in approximately April 2014. Blue Coast and ASMG, however, are merely the most recent iterations of Muehler’s unregistered broker-dealer business, which he has operated using various entity names since at least 2008.

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Securities Lawyer 101 Blog

Between January of 2000 and present, the Securities and Exchange Commission (the “SEC”) has suspended or halted thousands of publicly traded companies.  Many were dormant penny stock issuers suspended to prevent corporate hijackings by fraudsters setting up receivership or custodianship shells.  Others were penny stock issuers engaged in massive pump and dump schemes.  Some of the suspended companies had been dormant for almost a decade.  How did all of these dormant companies manage to continue trading, albeit infrequently, for so long? Recent cases reflect that many of these shells are under the control of  jammed up government informants (including lawyers) with sealed dockets.  Could there be any other explanation for why the SEC and FBI have taken no action against these participants for their obvious violations of the securities laws? Nevada state court judges have expressed outrage at the practice of creating shells using fraudulent custodianship proceedings and made referrals to the Justice Department. Read More

On October 16, 2015, the Securities and Exchange Commission (SEC) filed fraud and other charges against Donald Lester and his private equity firm, Rubicon Alliance, LLC (“Rubicon”). According to the SEC’s fraud complaint, from about January 2010 through December 2014, Lester and Rubicon accumulated over $10 million by the selling unregistered securities for two investment funds that were managed by them, CFI Fund, LLC (“CFI”) and NuPower, LLC (“NuPower”). The complaint also alleges that prior to the recent offense, Lester was involved in selling unregistered securities for a group of investment funds known as Equity Edge, which was having trouble repaying investors. Among other things, the SEC’s complaint claims that Rubicon had guaranteed Equity Edge’s performance, and that Lester conducted a fraudulent and undisclosed scheme to use $2.8 million of CFI investor funds to repay Rubicon’s obligations to the Equity Edge investors.

The SEC also claims that the CFI and NuPower offerings breached several registration provisions of the federal securities laws. According to the fraud complaint, both the CFI and NuPower offerings were unregistered and not subject to any applicable immunity, CFI and NuPower acted as investment companies without registering with the SEC, and Rubicon and Lester halted transactions in securities without registering with the SEC as a broker or associating with a registered broker. Read More