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Page 19 of 212

August 16, 2022

Eagle Bancorp, Inc. has agreed to pay $13.35 million in penalties, disgorgement, and interest to resolve charges that it violated SEC regulations and GAAP in failing to disclose as related party transactions nearly $90 million in loans extended to trusts associated with its former CEO and chairman of the board, Ronald D. Paul, as well as tens of millions of dollars of loans to other Eagle directors and their family members.  The SEC further found that when questions about the reporting were raised publicly, the bank knowingly made false and misleading statements that the loans were not related party loans.  Paul agreed to settle related charges for a total of $431,000.  SEC

Tagged in: Accounting Fraud, Misrepresentations, Securities Fraud,

August 10, 2022

Angel Oak Capital Advisors and its portfolio manager Ashish Neghandi will pay $1.75 million and $75,000 respectively to settle charges of misleading investors via their $90 million securitization of home renovation loans. When delinquency rates on their “fix-and-flip” loans increased unexpectedly, rather than accelerating return payments to certain investors, as contractually required, defendants artificially reduced delinquency rates by diverting borrowers’ funds to pay down outstanding loan balances. SEC

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, Misrepresentations, Regulatory Violations, Securities Fraud,

August 9, 2022

The SEC has awarded two whistleblowers more than $16 million for their assistance in a successful enforcement action.  The first whistleblower, who received about $13 million, submitted information that sparked the investigation and later provided key witnesses and other critical information that helped move the investigation forward.  The second whistleblower, who received more than $3 million, later submitted new information that also aided the investigation.  SEC

Tagged in: SEC Whistleblower Reward Program, Securities Fraud, Whistleblower Rewards,

August 3, 2022

Surgalign Holdings, Inc.—formerly RTI Surgical Holdings, Inc.—and its former executives Brian Hutchison and Robert Jordheim will collectively pay over $2.25 million in civil penalties and disgorgement, for accelerating revenue in contravention of GAAP principles, and in violation of the ’33 Act, the ’34 Act, and SOX. Falling short of their sales targets, RTI shipped future orders ahead of schedule to “pull forward” revenue. This practice cannibalized future revenue streams, damaged important customer relationships, and kept investors in the dark as to the true financial condition of the company. RTI restated its public financial statements from 2014 through 2019 to correct errors caused by this practice. SEC, SEC

Tagged in: Accounting Fraud, Misrepresentations, Regulatory Violations,

August 3, 2022

Arthur Merson will spend 15 months in prison and will pay over $3.4 million in restitution for his scheme to defraud investors by conspiring to commit wire fraud. Merson acted as an intermediary between investors and the principal co-conspirators, representing to investors they could receive a portion of the value of multi-million-dollar Standby Letters of Credit with a minimal investment, and would reap multiples of their investment in a matter of weeks. In 2017 and 2018, Merson lied to investors, calling himself an independent consultant who would receive only a small finder’s fee for his efforts, when in reality he had significant financial interest in the investments and affirmatively misled investors when responding to their inquiries. USAO ME

Tagged in: Criminal Proceedings, Financial and Investment Fraud, Misrepresentations,

August 2, 2022

Crown Bridge Partners, Soheil Ahdoot, and Sepas Ahdoot, will pay more than $9 million for operating as unregistered securities dealers, and are required to surrender all conversion rights, unexercised warrants, and cancel any shares acquired by converting notes or exercising related warrants resulting from their fraud. Over a 5-year period, from 2016 to 2020, the defendants bought convertible notes, converted them into billions of newly issued shares of heavily-discounted stock, and sold the new shares at significant profit, all while not being registered as dealers with the SEC, skirting regulatory oversight. Defendants are subject to a 5-year penny stock bar in addition to the monetary penalties. SEC

Tagged in: Financial and Investment Fraud, Regulatory Violations, Securities Fraud,

July 29, 2022

Aegis Capital Corp., and two of its former representatives, Alan Z. Appelbaum and Paul F. Gallivan will pay around $2.5 million total for making materially false and misleading statements and making unsuitable investment recommendations, namely, variable interest rate structured products. Appelbaum, Gallivan, and 14 Aegis brokers recommended these highly complex and risky products to customers with “moderate” risk tolerance, despite having investment timelines inconsistent with the VRSP maturity dates. The targeted customers’ financial needs were disregarded, as were their risk tolerance, investment objectives, age, investment experience, and liquidity needs. SEC

Tagged in: Financial and Investment Fraud, Misrepresentations, Securities Fraud,

July 29, 2022

First American Payment Systems—a merchant payment processing provider—and two sales affiliates have been ordered to return $4.9 million to businesses harmed by FAPS’ hidden terms, surprise exit fees, and zombie charges. FAPS’ preyed mostly on merchants with limited English proficiency, promising low costs and an easy exit, but hit them with surprise fees and illegal charges when the customers tried to get out. In addition to the monetary penalty, FAPS is required to stop misleading customers about fees and pricing, stop unauthorized bank withdrawals, make service cancellation easier, and stop charging early termination fees. FTC

Tagged in: Financial and Investment Fraud, Misrepresentations,

July 28, 2022

Jaeson Birnbaum, disbarred attorney and owner of now-bankrupt litigation finance firm, Cash4Cases, will spend 3 years in prison for defrauding investors, in addition to paying over $2.6 million in restitution, and forfeiting another $2.6 million in fraud proceeds. Birnbaum offered sham “Investor Security Agreements,” allowing investors to share in recoveries from lawsuits supposedly purchased by Cash4Cases. Birnbaum netted over $3 million in investors’ funds through his fraud, misappropriated client funds for personal use, and directed his employee to falsify the company’s books and records to show already-paid-out funds as still available to be pledged as collateral to new investors. USAO SDNY

Tagged in: Accounting Fraud, Criminal Proceedings, Financial and Investment Fraud, Ponzi Schemes, Regulatory Violations, Securities Fraud,

July 28, 2022

U.S. Bank will pay a $37.5 million penalty and is required to make harmed customers whole for illegally accessing their credit reports and opening new, unauthorized accounts in these customers’ names. The bank’s actions violated the Consumer Financial Protection Act, the Fair Credit Reporting Act, the Truth in Lending Act, and the Truth in Savings Act. The bank pressured its employees to hit certain sales goals and implemented an incentive-compensation program that financially rewarded employees for selling bank products. As a result, the bank’s customers held unwanted accounts, had negative effects on their credit profiles, and lost control over their personally identifiable information—not to mention the time-consuming hassle of closing unauthorized accounts and resolving other consequences stemming from this practice.  CFPB

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, Regulatory Violations,

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