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November 1, 2022

Two Florida-based companies and their owners have been ordered to pay more than $24.8 million for violating the state Consumer Protection Act by sending 232,091 deceptive letters to more than 15,000 small business owners in Washington State, resulting in $1.3 million in payments to the fraudsters.  The letters by CA Certificate Service and Labor Poster Compliance appeared to originate from the government and demanded payment for certificates or posters that were implied to be mandatory, but were in fact available free of charge from state and federal agencies.  Although the nationwide fraud scheme resulted in $5.3 million in losses around the country, this is the first judgment against the defendants.  WA AG

October 31, 2022

The SEC has awarded more than $10 million to a whistleblower who provided critical information and assistance that contributed significantly to a successful enforcement action.  In addition to providing important documents, the whistleblower also met twice with agency staff, resulting in charges that closely mirrored the whistleblower’s allegations, as well as significant funds being returned to harmed investors.  SEC

October 21, 2022

Mattel Inc. has agreed to pay $3.5 million to settle charges of making material misstatements in its third and fourth quarter 2017 financial statements.  The toy manufacturer was found to have understated its third quarter tax valuation allowance by $109 million and overstated its fourth quarter tax expense by the same amount, resulting in a net loss and net loss per share that was understated by 15% and overstated by 63% respectively.  In connection with this action, the SEC launched an investigation into a former audit partner at Pricewaterhouse Coopers LLP, Joshua Abrahams, for the audit failure.  SEC

October 17, 2022

In one of New Jersey’s largest civil monetary recoveries ever, Credit Suisse Securities (USA) LLC, Credit Suisse First Boston Mortgage Securities Corp., and DLJ Mortgage Capital, Inc. (collectively, “Credit Suisse”) has agreed to pay $495 million to settle a lawsuit involving misrepresentations it made to investors on the risks of residential mortgage-backed securities (RMBS) in the years leading up to the 2008 financial crisis.  Approximately $100 million will resolve a civil monetary penalty, while another $300 million will be allocated toward restitution for victims nationwide.  Although Credit Suisse previously settled with DOJ for $5.28 billion and with New York for $10 million, the New Jersey settlement is the first to provide restitution.  NJ AG

October 13, 2022

Daniel Adam Hewko and his company, Main & Prospect Capital, LLC (MPC), have been ordered to pay over $7.9 million and be permanently barred from registering and trading with the CFTC, after they were found to have failed to register as an associate of a commodity pool operator, misappropriated client funds, and committed fraud.  Rather than invest client funds into a MPC-managed pooled investment vehicle called the Global Opportunity Fund, Hewko used the funds to benefit himself, his family, and unrelated companies, while issuing false statements to clients that showed false growth.  CFTC

October 7, 2022

After over a decade on the run, Baron Matson of Australia has been sentenced to 5 years in prison, ordered to pay $4.3 million in restitution, and ordered to forfeit $1.3 million for deceiving investors in Florida, Georgia, and Tennessee over twenty years ago.  Matson had misrepresented to investors that he and his father, Roger Matson—both operating under the surname Bronstein—earned large sums of money by betting on horse races, and that a $75,000 investment ahead of the 2000 Melbourne Cup would be guaranteed, with any profits distributed to investors after.  However, the Matsons disappeared with all the funds shortly after the race.  Baron Matson was discovered living under an alias in 2015, and after lengthy litigation, was extradited to the U.S. to face prosecution.  USAO MDFL

October 4, 2022

A rancher who was convicted of defrauding two food companies out of $244 million, in one of the largest fraud schemes ever prosecuted in the Eastern District of Washington, has been sentenced to 11 years in federal prison.  Cody Allen Easterday and his Easterday Ranches Inc. had entered into agreements with Tyson Foods and one other company, whereby the two food companies would advance Easterday funds for buying and raising cattle, then be repaid with interest after the cattle were slaughtered and sold.  Rather than buying and raising cattle, however, Easterday used the funds to cover losses incurred from commodity futures trading, benefit the ranch, and benefit himself.  Easterday also submitted false paperwork to the world’s largest financial derivatives exchange, the CME Group Inc., to exempt his ranch from certain position limits in live cattle futures contracts.  USAO EDWA

September 30, 2022

BGC Derivative Markets, L.P. (BGCD) has been ordered to pay $1.9 million in civil penalties and to comply with certain undertakings in order to settle charges of failing to accurately report nearly 16,000 swap transactions to the CFTC.  The failures were a result of 14 separate reporting systems issues.  As a result of the settlement, BGCD will have to conduct a review of its swaps reporting program, implement a reconciliation process for those transactions, and submitted a written report to the CFTC in a year.  CFTC

September 30, 2022

In order to settle charges of failing to perform proper audits of a company committing fraud, audit firm RSM US LLP has been ordered to pay $3.75 million and retain an independent consultant, while partners Steven Kirn and Richard Condon, and senior audit manager Michael Piqueira have agreed to be suspended for 1-3 years.  Over the four-year period in which RSM audited Revolution Lighting Technologies Inc., RSM allegedly failed to detect that the company was fraudulently inflating revenue with bill and hold sales in violation of accounting principles.  SEC

September 29, 2022

The Chinese affiliate of accounting firm Deloitte, known as Deloitte Touche Tohmatsu Certified Public Accountants LLP, has agreed to pay a $20 million penalty and submit to extensive remedial measures for its failures to comply with fundamental U.S. auditing requirements in audits of companies listed on U.S. exchanges.  According to multiple SEC audits spanning multiple years, instead of properly reviewing client financial statements and internal controls, Deloitte-China had a practice of asking clients to select their own samples for testing and prepare their own audit documentation.  SEC
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