Archive

January 13, 2023

The SEC has awarded more than $5 million to a whistleblower who first reported internally, and whose subsequent tip to the agency helped shape its investigation.  Based on the whistleblower’s information, agency staff were able to identify witnesses and effectively draft document and information requests.  SEC

January 11, 2023

A man accused of defrauding ten pension funds out of $43 million has been ordered to pay over $10.2 million in disgorgement, interest, and penalties.  Jason Sugarman, his partner Jason Galanis, and six other co-conspirators had acquired control of two investment advisors with the intent to use their clients’ funds to purchase Native American tribal bonds.  Instead, the group misappropriated the funds and used them to acquire a foreign insurance company and the second investment advisor.  SEC

December 21, 2022

Precious metals firm Monex Deposit Company, together with related entities and individual owners, have been ordered to pay a civil penalty of $5 million, and customer restitution of $33 million, to resolve claims arising from the defendants’ operation of a retail over-the-counter trading platform, known as “Atlas,” which allowed customers to speculate on precious metals price movements, with Monex acting as the counterparty to every transaction. While the defendants claimed in marketing that leveraged trading of precious metals was highly profitable, in fact, the majority of the trades resulted in losses for customers.  CFTC

December 20, 2022

Futures commission merchant CHS Hedging LLC will pay civil penalty of $6.5 million to resolve claims that it failed to implement an adequate AML program and failed to implement risk-based limits concerning trading in an account controlled by one of its customers that owned and controlled a ranching company and other related businesses.  The customer engaged in speculative trading that was inconsistent with its financial resources and hedging needs, and, over the course of four years, made net margin payments of more than $147 million to CHS Hedging.  The government alleged that the company did not adequately investigate the source of the customer’s funds or report the transactions as suspicious.  CFTC

December 20, 2022

Wells Fargo will pay a $1.7 billion penalty, and more than $2 billion in consumer restitution, following findings by the CFPB that the bank engaged in unlawful conduct including the imposition of improper fees and interest charges on auto and mortgage loans, misapplication of payments on such loans, and the imposition of unlawful surprise overdraft fees.  Wells Fargo’s failures in its servicing of auto loans resulted in the wrongful repossession of borrowers’ vehicles, and its improper denial of mortgage modifications led to some customers losing their homes to wrongful foreclosures.  According to the CFPB, the bank knew about problems in its account management and servicing for years before it took steps to correct them.  CFPB

December 20, 2022

Following his conviction on charges related to his direction of a Ponzi scheme and the fraudulent sale of purported N95 masks during the pandemic, Christopher Parris was sentenced to 20.3 years in prison.  In the Ponzi scheme, which collapsed in 2018, Parris and co-conspirators – including Perry Santillo, obtained at least $115.5 million from approximately 1,000 investors, with claims that they were investing in a diversified investment portfolio when, in fact, very little investor money was deployed in productive investments.  Parris also pleaded guilty to charges that he defrauded the U.S. Department of Veterans’ Affairs and others between February and April, 2020, by falsely representing that he was able to obtain brand-name N95 masks directly from authorized sources in the United States, when in fact, he had no ready access to such masks or other PPE.  Parris obtained upfront payments totaling approximately $7.4 million from at least eight clients, knowing that he had no access to or ability to obtain or deliver the PPE.  DOJ; USAO WD NY

December 19, 2022

A company outsider who submitted multiple anonymous tips to the SEC and the target company, which initiated an internal investigation based on the information, received a whistleblower award of $37 million.  The company reported the whistleblower’s information to the Commission, which then opened its own investigation.  Claimant submitted an additional tip to the Commission within 120 days that included the email that Claimant had sent to the company.  Claimant’s award was based on amounts recovered by the Commission and amounts recovered in a related action.  SEC

December 14, 2022

In a False Claims Act case pursued on a non-intervened basis, Academy Mortgage Corporation agreed to pay $38.5 million to resolve allegations that it improperly originated and underwrote mortgages insured by the Federal Housing Administration.  The whistleblower, Gwen Thrower, who was an underwriter at Academy, alleged that the Academy had an inadequate underwriting process that led to false certifications of compliance with underwriting requirements and, ultimately, to the government having to pay insurance claims on loans improperly underwritten by Academy.  Thrower will receive a whistleblower award of $11.5 million.  DOJ

December 13, 2022

Danske Bank will pay over $2 billion to resolve charges from the SEC and DOJ arising from failures in its anti-money laundering compliance program at an Estonian bank it acquired and began operating as a branch in 2007, and from its failure to disclose the risks posed by the program’s significant deficiencies.  Danske Bank had received information from an internal whistleblower, conducted internal audits, and received information from regulators, from which it knew that the Estonian branch served high-risk customers, including many Russians, who were engaged in billions of dollars in suspicious and potentially criminal transactions; that its internal policies were inadequate; and, that its AML and KYC procedures were not being followed.  Despite this knowledge, the bank made materially misleading statements and omissions that it complied with its AML obligations and that it had effectively managed its AML risks.  These statements mislead investors and U.S. banks and allowed its high-risk customers to gain unlawful access to the U.S. financial system.  Danske agreed to pay an SEC penalty of $413 million and, as part of a criminal plea to conspiracy to commit bank fraud, will forfeit over $2 billion, with $850 million of that amount being credited from separate criminal or civil resolutions with foreign and domestic authorities, including the SEC.  DOJ, SEC, SDNY