Court Imposes Lifetime Officer-And-Director Bars On Two Corporate Officers

A federal district court has permanently barred two former corporate officers of a North Carolina-based hygiene and sanitation company from serving as officers or directors of public companies.A federal district court has permanently barred two former corporate officers of a North Carolina-based hygiene and sanitation company from serving as officers or directors of public companies.

The SEC charged the two officers of Swisher Hygiene, Inc., Michael J. Kipp, Swisher’s former CFO, and Joanne K. Viard, Swisher’s former Director of External Reporting, in 2016 with fraud for participating in an earnings management scheme. Read More

SEC Obtains Final Judgment Against Ponzi Scheme Targeting Retail Investors

The SEC obtained a final judgment on February 8, 2018, against Niket Shah, a New Jersey resident who was charged last year by the agency with stealing more than $250,000 in a Ponzi scheme in which his friends and coworkers invested.The SEC obtained a final judgment on February 8, 2018, against Niket Shah, a New Jersey resident who was charged last year by the agency with stealing more than $250,000 in a Ponzi scheme in which his friends and coworkers invested.

The court’s final judgment follows the court’s grant of summary judgment in the agency’s favor. In granting summary judgment, the court found that Niket Shah and his company, Spark Trading Group LLC, falsely claimed that Spark Trading was registered with the SEC; that their investments were profitable; that investors’ funds were guaranteed; and that defendants received $250,000 in start-up capital, including $200,000 that Shah deposited into a binary options trading account. Read More

The Cato Institute Files Action Challenging SEC Gag Orders

The Cato Institute believes that’s wrong, and on January 9, it filed suit against the SEC, its chairman Jay Clayton, and its secretary Brent J. Fields. Cato is a libertarian think tank located in Washington, D.C. It was founded in 1974 in Wichita, Kansas, as the Charles Koch Foundation, and was at first wholly funded by Koch. It’s by now considered one of the most influential think tanks in the world. Cato is not a public company, and is not regulated by the SEC. Ordinarily, it would have lacked standing to sue the agency, but thanks to special circumstances, it was able to file a complaint for declaratory and injunctive relief.

On January 9, the Cato Institute filed suit against the Securities & Exchange Commission (the “SEC”), its chairman Jay Clayton, and its secretary Brent J. Fields.  For decades, questions have been raised, and criticisms offered, of the SEC’s longstanding practice of requiring (or allowing, depending on one’s point of view) settling defendants in enforcement actions to sign consent decrees in which they “neither admit nor deny” the charges lodged against them.  Thanks to a standard clause in their decrees, for the rest of their lives, the defendants will be prevented from explaining what really happened, if their views don’t coincide with the agency’s.  These strictures apply to corporate as well as individual defendants.

The Cato Institute believes these SEC Gag Orders are wrong.  Cato is a libertarian think tank located in Washington, D.C.  It was founded in 1974 in Wichita, Kansas, as the Charles Koch Foundation, and was at first wholly funded by Koch.  It’s by now considered one of the most influential think tanks in the world.  Cato is not a public company, and is not regulated by the SEC.  Ordinarily, it would have lacked standing to sue the agency, but thanks to special circumstances, it was able to file a complaint for declaratory and injunctive reliefRead More

SEC Charges Robert Alexander, Founder of Online Gaming Company for Defrauding Investors

On February 7,2019, the SEC charged Robert Alexander with fraudulently raising approximately $9 million from more than 50 individuals by selling investments in Kizzang LLC, a purported online gaming business.

On February 7,2019, the SEC charged Robert Alexander with fraudulently raising approximately $9 million from more than 50 individuals by selling investments in Kizzang LLC, a purported online gaming business.

According to the SEC’s complaint, among other misrepresentations, Robert Alexander told investors that they would make a minimum of ten times their investment, Robert Alexander had personally invested millions of dollars in Kizzang, Robert Alexander had made a $50 million charitable donation, and that he had led the creation of a prominent video game. Rather than using investor funds for Kizzang’s business, Robert Alexander stole at least $1.3 million, including spending more than $450,000 on gambling sprees. Robert Alexander also used investor funds to finance his daily living and other personal expenses, including credit card bills, shopping and entertainment, and expenses for his daughter, including culinary school tuition and luxury car payments. Read More

Scottsdale and John Hurry Push Back – FINRA Assault on Small Broker Dealers

On December 17, 2018, John Hurry broker dealer, Scottsdale Capital Advisers Corporation sued the Financial Industry Regulatory Authority (“FINRA”), for breach of contract in the U.S. District Court for the District of Columbia.  Scottsdale and its sister company, Alpine Securities, Inc., are broker-dealers controlled by John J. Hurry and his wife Justine.  Both companies are FINRA members.  Both John and Justine Hurry are registered brokers regulated by FINRA.

The complaint alleges that FINRA has breached its agreement with and obligations to member firms by its “increasing and current failure to provide fair and meaningful representation” to them, and by taking “affirmative acts that have the effect if not the purpose of burdening competition, harming not only member firms but also issuers and customers.”  Broadly, Scottsdale is saying that rather than help small securities firms, it’s unfairly attacking and damaging them:

Through… improper enforcement efforts, FINRA has… engaged in “unfair discrimination” against certain of its members in violation of its governing statute and By-Laws.  It has aggressively targeted and sought to punish or even eliminate specific segments of the securities market.  Through its coercive actions against smaller member firms who are engaged in the microcap and low-priced securities business, FINRA has gotten to the point that it is gutting the ability of firms, issuers and investors to participate in that market. Read More

SEC Files Subpoena in Possible Market Manipulation Scheme

The SEC filed a subpoena enforcement action against three penny-stock companies and their CEO - Cherubim Interests, Inc., PDX Partners, Inc., Victura Construction Group, Inc., and Patrick Jevon Johnson - seeking an order directing them to comply with investigative subpoenas for documents.The SEC filed a subpoena enforcement action against three penny-stock companies and their CEO – Cherubim Interests, Inc., PDX Partners, Inc., Victura Construction Group, Inc., and Patrick Jevon Johnson – seeking an order directing them to comply with investigative subpoenas for documents.

According to the SEC’s application, filed on December 21, 2018 in U.S. District Court for the Central District of California, the SEC is investigating whether certain individuals or entities engaged in a potential pump-and-dump scheme in the stock of Cherubim Interests, PDX Partners, Inc, and Victura Construction Group, Inc. Because the SEC was concerned about the accuracy of the companies’ disclosures, the SEC suspended trading in their securities on February 15, 2018 for ten business days. Based on its ongoing investigation, the SEC has reason to believe that each company issued false public statements in January 2018 to “pump” their stock price, claiming that it had acquired hundreds of millions of dollars of “AAA-rated” assets, even though each company appeared to have little to no assets. After the stock price and trading volume for each company increased as a result of the news, an entity associated with the companies may have “dumped” their overvalued shares for significant profits. Read More

SEC Charges Taiwan-Based Insurance, China United with Fraudulent Market Manipulation Scheme

A Taiwan-based insurance company and one of its former managers have agreed to settle fraud charges brought by the SEC relating to a scheme to manipulate the company's trading volume.A Taiwan-based insurance company, China United Insurance Service, Inc. and one of its former managers have agreed to settle fraud charges brought by the SEC relating to a scheme to manipulate the company’s trading volume.

The complaint alleges that, from approximately December 2013 through March 2018, China United Insurance Service, Inc. and Cheng-Hsiung Huang schemed to deceive the investing public and Nasdaq, for the purpose of obtaining a listing on Nasdaq, that the trading volume in the company’s stock was derived from bona fide market activity. Cheng-Hsiung Huang, acting on the company’s behalf, used multiple brokerage accounts to engage in numerous transactions in the company’s stock. When Cheng-Hsiung Huang’s trading was flagged by a U.S.-based brokerage firm for high volume and possible prearranged trading and several of the accounts were frozen, Cheng-Hsiung Huang and two colleagues contacted the brokerage firm and lied about their identities, their relation to China United, and their reasons for trading. Read More

SEC Obtains Judgment Against Former CEO John Place

On November 9, 2018, the SEC obtained a judgment against John Place, a former CEO of a brokerage consulting business who was charged by the SEC in August for his role in a multimillion dollar transition management fraud.On November 9, 2018, the SEC obtained a judgment against John Place, a former CEO of a brokerage consulting business who was charged by the SEC in August for his role in a multimillion dollar transition management fraud.

The SEC previously charged a brokerage consulting business known as GTS along with three of its former officers, including former CEO John Place, for misleading current and prospective customers about the fees the business charged in connection with securities transactions. According to the SEC’s complaint, John Place and other GTS officers told many of their customers that GTS would receive only clearly disclosed commissions charged on customers’ trades. In reality, GTS also received additional revenue from mark-ups and mark-downs charged by other brokers. Read More

SEC Obtains Asset Freeze Against Former CEO Charged with Misappropriating Investor Funds

The SEC announced on December 14, 2018 charges against Thomas Laws, the former CEO of Santa Fe Gold Corporation, for the misappropriation of investor funds. The SEC also obtained an asset freeze against Thomas Laws.The SEC announced on December 14, 2018 charges against Thomas Laws, the former CEO of Santa Fe Gold Corporation, for the misappropriation of investor funds. The SEC also obtained an asset freeze against Thomas Laws.

The SEC’s complaint, unsealed on December 6, 2018, alleges that, from at least August 2016 through February 2018, Santa Fe Gold, a public mining company based in Albuquerque, New Mexico, transferred approximately $1.1 million in investor funds to Thomas Laws and THL Financial Services Corporation, an entity controlled by Thomas Laws, for various corporate purposes, including the purchase of a silver mine and mining equipment and for third party services. According to the complaint, Thomas Laws misappropriated the funds and attempted to hide his theft from the company and its independent auditor by fabricating documents, including vendor invoices, agreements, bank records, and communications. Read More

SEC Sues Orange County Investment Adviser, Craig Arsenault for Defrauding Clients

On December 14, 2018 the SEC charged Craig Arsenault, a California investment adviser with misappropriating client funds and misleading his clients about how their money was invested and how their investments were performing. The SEC is seeking an asset freeze and the appointment of a receiver to prevent any ongoing misappropriation or dissipation of assets.On December 14, 2018 the SEC charged Craig Arsenault, a California investment adviser with misappropriating client funds and misleading his clients about how their money was invested and how their investments were performing. The SEC is seeking an asset freeze and the appointment of a receiver to prevent any ongoing misappropriation or dissipation of assets.

The SEC’s complaint alleges that Craig Arsenault defrauded clients of his advisory firm, Atlas Capital Management, Inc., who had invested $5.7 million in a company he controlled, ACT Global Investments. According to the complaint, Craig Arsenault solicited investments in Atlas Capital Management, telling his advisory clients that their funds would be used to make secured loans to doctors for the purpose of acquiring medical equipment. The complaint alleges that Craig Arsenault and ACT used client funds instead to make unsecured loans to, for example, a used car dealership, and to acquire undeveloped real estate. As alleged in to the complaint, Craig Arsenault then provided clients with deceptive account statements that made it appear as if these investments were generating substantial income when they were not. The SEC also alleges that he misappropriated and misused over $1 million of the client money invested in Atlas Capital Management. Read More