Archive

November 12, 2014

The SEC charged Pankaj Srivastava and Nataraj Kavuri, two India-based operators of an alleged high-yield investment scheme, with seeking to exploit investors through pervasive social media pitches on Facebook, YouTube, and Twitter.  According to the SEC, the two individuals offered “guaranteed” daily profits as they anonymously solicited investments for their purported investment management company called Profits Paradise, but the guaranteed returns were allegedly false and the investments being offered bore the hallmark of a fraudulent high-yield investment program.  SEC

November 6, 2014

The SEC charged California attorney Richard Weed behind a pump-and-dump scheme that defrauded investors in the Boston-based ticket brokering business CitySide Tickets, Inc.  According to the SEC, Weed created backdated promissory notes and authored false legal opinion letters that enabled Thomas Brazil and Coleman Flaherty to obtain millions of purportedly unrestricted shares of stock in the company.  Investors were then blitzed with a false and misleading promotional campaign touting CitySide Tickets as a budding national leader on the verge of acquiring smaller ticket firms across the country and positioning itself as an attractive takeover target for Ticketmaster.  As the company’s stock price increased on the false hype, Brazil and Flaherty sold their shares to unsuspecting investors for illicit proceeds of approximately $3M.  Shortly thereafter, the market for CitySide Tickets stock collapsed and the company eventually went out of business.  SEC  

November 6, 2014

The SEC charged the City of Allen Park, Michigan and two former city leaders, former mayor Gary Burtka and former city administrator Eric Waidelich, in connection with a municipal bond offering to support a movie studio project within the city.  An SEC investigation found that offering documents provided to investors during the Detroit suburb’s sale of $31 million in general obligation bonds contained false and misleading statements about the scope and viability of the movie studio project as well as Allen Park’s overall financial condition and its ability to service the bond debt.  SEC

November 5, 2014

The SEC announced enforcement actions against 10 companies for failing to make the required disclosures about financing deals and other unregistered sales that diluted their stock.  The relevant companies and the penalties they will pay are as follows: APT MotoVox Group Inc., formerly known as Frozen Food Gift Group Inc. ($25,000); CoroWare Inc. ($50,000); ERF Wireless Inc.($50,00); Green Automotive Company ($50,000); MineralRite Corporation($25,000); Mondial Ventures Inc. ($50,000); Monster Arts Inc. ($25,000); Red Giant Entertainment Inc. ($25,000); Seaniemac International Ltd. ($50,000); Worthington Energy Inc. ($25,000).  SEC

November 3, 2014

The SEC charged Canadian citizens Bruce D. Strebinger and Brent Howard Chapman with conducting an international microcap fraud scheme by stockpiling shares in the coal mining company Americas Energy Company and funding a multi-million dollar promotional campaign to hype the stock while simultaneously dumping their shares and routing the proceeds through offshore accounts.  According to the SEC, as the scheme was attracting new investors and Americas Energy’s share price was significantly increasing, Strebinger and Chapman were secretly selling their shares through an intricate web of offshore corporations, foreign accounts, and financial institutions located in Canada, Nevis, Panama, Switzerland, and the Turks and Caicos Islands.  Strebinger and Chapman generated proceeds of more than $17M through their elaborate scheme.  SEC

November 3, 2014

The SEC sanctioned 13 firms for violating a rule primarily designed to protect retail investors in the municipal securities market.  It related to improper sales in a $3.5B offering of junk bonds by the Commonwealth of Puerto Rico earlier this year.  The sanctioned firms include: Charles Schwab & Co., Hapoalim Securities USA, Interactive Brokers LLC, Investment Professionals Inc., J.P. Morgan Securities, Lebenthal & Co., National Securities Corporation,Oppenheimer & Co., Riedl First Securities Co. of Kansas, Stifel Nicolaus & Co.,TD Ameritrade, UBS Financial Services, and Wedbush Securities.  SEC

October 31, 2014

The SEC announced securities fraud charges against New York businessman Gregory Rorke and his software company Navagate Inc. for making false statements to investors while raising more than $3M to fund operations.  According to the government, Rorke falsely told investors that he possessed millions of dollars in liquid assets to personally guarantee their purchase of promissory notes issued by Navagate Inc.  However, virtually all of the liquid assets and real estate he claimed as his own actually belonged solely to his wife who did not pledge any of her assets in connection with the securities offering and had no obligation to make good on Rorke’s personal guarantee.  Ultimately, Navagate defaulted on the notes and Rorke did not adhere to his promise to pay investors under his personal guarantee.  SEC

October 29, 2014

The SEC announced charges against investment advisory firm Sands Brothers Asset Management LLC and three top officials for violating the “custody rule” that requires firms to follow certain procedures when they control or have access to client money or securities.  Specifically, the government alleges Sands Brothers has been repeatedly late in providing investors with audited financial statements of its private funds, and the firm’s co-founders Steven Sands and Martin Sands along with chief compliance officer and chief operating officer Christopher Kelly were responsible for the firm’s failures to comply with the custody rule.  SEC

October 16, 2014

New York City-based high frequency trading firm Athena Capital Research agreed to pay $1M to settle charges it placed a large number of aggressive, rapid-fire trades in the final two seconds of almost every trading day during a six-month period to manipulate the closing prices of thousands of NASDAQ-listed stocks.  This marks the first high frequency trading manipulation case.  According to the government, Athena Capital used an algorithm that was code-named Gravy to engage in a practice known as “marking the close” in which stocks are bought or sold near the close of trading to affect the closing price.  The massive volumes of Athena’s last-second trades allowed Athena to overwhelm the market’s available liquidity and artificially push the closing market price in Athena’s favor.  Athena was well aware of the price impact of its algorithmic trading, calling it “owning the game” in internal e-mails.  SEC

October 15, 2014

The SEC announced an enforcement action against former Wells Fargo Advisors compliance officer Judy K. Wolf for allegedly altering a document before it was provided to the SEC during an investigation and then lying about it.  The SEC previously charged Wells Fargo in the case, and the firm agreed to pay $5M settle the charges.  Prior to the enforcement action, Wells Fargo placed Wolf on administrative leave and ultimately terminated her employment.  SEC