Archive

August 9, 2021

Cryptocurrency trading platform Poloniex LLC has agreed to pay more than $10 million in disgorgement, interest, and penalties to settle charges that it operated an unregistered online digital asset exchange.  The SEC found that between 2017 and 2019 the Poloniex trading platform met the criteria of an “exchange” as defined by the securities laws but was neither registered as a national securities exchange nor subject to an exemption from registration. SEC

August 6, 2021

Blockchain Credit Partners, which did business as DeFi Money Market, and its principals, Gregory Keough and Derek Acree, have agreed to disgorge $12.85 million and cease and desist from the unregistered sale of securities using smart contracts and so-called “decentralized finance” (DeFi) technology.  The SEC found that defendants offered and sold mTokens and DMG governance tokens purporting to pay interest and profits, and told purchasers that that DeFi Money Market would pay them those amounts by using investor assets to buy “real world” income-generating assets like car loans. However, these income-generating assets did not generate enough income to cover appreciation of the investors’ principal, largely as a result of the price volatility of the digital assets used to purchase the tokens.  Rather than disclose this to investors, defendants used other funds, including personal funds, to make principal and interest payments for mToken redemptions. Keough and Acree have each also agreed to pay penalties of $125,000.  SEC

July 19, 2021

UBS Financial Services Inc. will pay $8 million to resolve claims of compliance failures with respect to the sale of an exchange-traded product designed to track short-term volatility expectations in the market as measured against derivatives of a volatility index. UBS placed restrictions on the sale of the product to brokerage customers, but did not place similar restrictions on activity by financial advisors, and failed to monitor concentration limits on volatility-linked ETPs. SEC

July 14, 2021

Following a lawsuit filed by the FTC in 2018, online lender LendingClub has agreed to pay $18 million to settle claims of deceiving consumers about hidden fees, misrepresenting consumers’ approvals for loans, and withdrawing money from consumer bank accounts without authorization.  In addition to the monetary penalty, LendingClub is now required to clearly and conspicuously disclose all fees, as well as the total amount of funds being borrowed.  FTC

July 13, 2021

A subsidiary of Teachers Insurance and Annuity Association of America (TIAA) has agreed to pay $97 million in restitution and make significant reforms to settle charges for making misleading statements and failing to disclose conflicts of interests to tens of thousands of customers.  Between 2012 and 2018, advisors with TIAA-CREF Individual & Institutional Services LLC (TC Services) pressured customers—many of them teachers and public sector employees—to move their investments from low-cost employer-sponsored retirement plans to higher-cost individually-managed accounts, which generated hundreds of millions of dollars in fees for TIAA.  NY AG; SEC

July 12, 2021

A non-bank institution in Georgia called GreenSky, LLC has been ordered to refund or cancel up to $9 million in fraudulent loans, pay a $2.5 million civil penalty, and implement new procedures to prevent future financial abuse.  According to the CFTC, GreenSky’s inappropriate and ineffective controls enabled third-party merchants to take out loans on behalf of thousands of consumers without their knowledge or authorization.  In addition to the financial resolution, GreenSky is now required to verify consumer identities and confirm authorizations before activating or disbursing loans, implement a consumer complaint management program, and properly oversee third-party merchant partners.  CFTC

July 9, 2021

Registered investment advisor Kestra Advisory Services, LLC will pay disgorgement and interest of $8.5 million and a civil penalty of $1.5 million to resolve SEC charges that it failed to disclose revenue sharing payments received by an affiliated broker-dealer when its clients invested in certain mutual funds.  SEC

June 30, 2021

Following its 2020 SEC penalty, Robinhood Financial LLC was ordered to pay $70 million by FINRA -- a $57 million penalty and $12.6 million in restitution and interest to harmed customers -- to resolve charges that the firm provided false and misleading information, improperly authorized customers for options trading without appropriate due diligence, and failed to reasonably supervise the technology it used to provide core broker-dealer services including for the acceptance and execution of customer orders.  FINRA

June 30, 2021

Investment advisor Securities America, Inc. will pay a $1.75 million civil penalty to resolve charges that it failed to implement policies and procedures that were reasonably designed to protect client assets from misappropriation.  While affiliated entities to whom SAA had delegated responsibility for surveillance of advisory accounts had received automated alerts about potentially suspicious withdrawals from client accounts, those alerts were ignored and approximately $8 million was misappropriated from SAA advisory accounts.  SEC

June 29, 2021

Neovest Inc., a JPMorgan Chase & Co. subsidiary that provides an order and execution management system (OEMS) that facilitates electronic trading, will pay $2.75 million for its failure to register as a broker-dealer. Neovest's OEMS allows customers to route orders for stocks and options to more than 360 customer-selected destination brokers who entered into agreements with Neovest for execution. In exchange for its OEMS services, Neovest received transaction-based compensation, which were sent to J.P. Morgan Securities LLC, a registered broker-dealer, and then transferred to Neovest. SEC