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
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.
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
The SEC filed a complaint stating that between at least 2007 and 2011, Bernath instructed three funds that were managed by his investment advisory firm to make loans to and investments in illiquid real estate and business ventures which he also oversaw and had personally invested in. The complaint also states that Bernath gave a false account to the Funds’ investors regarding these investment activities and did not disclose them until 2013. Also included in the SEC’s complaint is that from 2008 to 2011, Bernath regularly kept record of the value of these investments and loans, to the detriment of the Funds’ investors.
Bernath has agreed to partially settle the case against him, without admitting or denying the allegations. Read More
The Securities and Exchange Commission (SEC) announced on October 9, 2015, that on October 7, 2015, it secured a summary judgment on all of its claims against Andrew Farmer in a market manipulation case involving the securities of Chimera Energy Corp. The SEC suspended trading in Chimera Energy stock in 2012.
In its memorandum and order, the Honorable Keith I. Ellison of the United States District Court for the Southern District of Texas found that: Read More
The Securities and Exchange Commission (SEC) announced on October 9, 2015 that it has charged Nicolas Zanen, Vice President of Trading at a subsidiary of Cheniere Energy, Inc., and his college friend, Francis van Steenberge, with insider trading in Cheniere options ahead of announcements about Cheniere’s entry into contracts with certain counterparties and Cheniere’s public stock offering.
The SEC’s complaint regarding Zanen’s insider trading states that Zanen and van Steenberge entered into an arrangement in 2011 to share material, private information regarding Cheniere. Under their supposed arrangement, Zanen would share material, non-public information about Cheniere with van Steenberge, who then would trade, including in out of the money options, on the basis of that information in his personal brokerage account as directed by Zanen. The SEC’s insider trading complaint claims that in 2011 and 2012, van Steenberge traded ahead of least four announcements based on private information that Zanen gave him, resulting in nearly $800,000, which the two intended to share as part of their arrangement. The insider trading complaint also claims that by giving private information about Cheniere to van Steenberge for a personal benefit, Zanen breached a duty he owed to Cheniere. Read More
The Securities and Exchange Commission voted 3-1 to approve the long awaited equity crowdfunding rules. Equity Crowdfunding was adopted pursuant to Title III of the Jumpstart Our Business Act (JOBS Act). As adopted today, the rule allows companies to raise up to $1 million every 12 months in a crowdfunding campaign using an online funding portal or registered broker-dealer.
While the rules do allow non-accredited investors to participate, there are caps on the amounts that may be invested. Commissioner Michael Piwowar had harsh statements for the new rule pointing out the risks to both investors and small companies who failed to comply with the myriad of confusing and complex requirements of the equity crowdfunding exemption. He stated, “I fear that many traps for the unwary are hidden in the regulations, creating potential nightmares for small business owners that fail to place regulatory compliance at the top of their business plans. Such burdens will spook many small businesses from pursuing crowdfunding as a viable path to raising capital” Read More