Archive

July 16, 2019

AR Capital LLC, together with its founder Nicholas Schorsch and its former CFO Brian Block, have agreed to pay $39 million in disgorgement and interest, as well as penalties totaling $21.75 million, to resolve allegations that they wrongfully inflated incentive fees and took unsupported charges in two separate mergers involving the publicly-traded REIT American Realty Capital Properties, Inc. that AR Capital sponsored and managed.  Defendants allegedly failed to properly disclose their compensation to shareholders.  SEC

July 15, 2019

Nomura Securities, Inc. agreed to provide $25 million to reimburse customers that purchased mortgage-backed securities from Nomura.  The SEC orders find that Nomura traders made false and misleading statements to customers, including about the price at which Nomura bought securities, the amount of profit Nomura would receive on the potential trade, and the current owner of the security.  The SEC furhter alleged that Nomura failed to reasonably supervise its traders.  Nomura, which cooperated in the investigation, will also pay $1.5 million in penalties.  Two individual traders were previously charged by the SEC.  SEC

July 3, 2019

A Florida man convicted in February of causing the collapse of one of the largest banks in Puerto Rico has been sentenced to 30 years in prison and ordered to pay $103 million in restitution to the FDIC.  Jack Kachkar had fraudulently secured $142 million in loans from Westernbank of Puerto Rico by presenting fake invoices from his company, Inyx Inc.  When he failed to repay the loans, the bank suffered a catastrophic loss that forced it to close.  DOJ; USAO SDFL

June 25, 2019

Merrill Lynch Commodities, Inc. (MLCI) has agreed to pay $25 million for spoofing and manipulating the precious metals market on the Commodity Exchange from 2008 to 2014.  In the non-prosecution agreement signed with DOJ, MLCI admitted that its employees had placed thousands of fraudulent orders to create a false sense of demand and induce other market participants to make purchases or sales.  CFTC, DOJ

June 19, 2019

The former CEO of Quintillion, a telecommunications company in Alaska, has been sentenced to 5 years in prison and ordered to forfeit $896,698 for defrauding investors of more than $270 million.  In order to secure funding to build a high-speed fiber optic cable system, Elizabeth Pierce had presented two New York investment companies with contracts that made it appear as if Quintillion was guaranteed revenue of nearly $1 billion.  Unbeknownst to investors and her own staff, however, the contracts were allegedly forged and the actual contracts she’d negotiated would generate only a fraction of that amount.  Quintillion eventually reported her to the DOJ.  USAO SDNY

May 31, 2019

The FTC has settled with the operators of a worldwide negative option scam that falsely advertised "risk free" products trials, but then charged consumers full price and enrolled them in costly, ongoing plans without their consent.  California-based defendants Triangle Media Corps., Jasper Rain Marketing LLC, and Brian Phillips, had been charged with violating the FTC Act, the Restore Online Shoppers' Confidence Act (ROSCA), and the Electronic Fund Transfer Act (EFTA) through their trickery over the course of five years.  Co-defendants Hardwire Interactive Inc., Global Northern Trading Ltd., and Devin Keer, who helped spread the scheme worldwide, faced the same charges. As part of the settlement, the defendants have been ordered to pay judgments ranging from $48.1 million to $123.1 million, which will be partially suspended upon payment of $400,000 and $3 million, respectively.  FTC

May 6, 2019

The FTC has filed a complaint against a Texas man who raised more than $800,000 through four deceptive crowdfunding campaigns launched between 2015 and 2016. Douglas Monahan allegedly told consumers that contributions to Indiegogo and Kickstarter campaigns benefiting his company, iBackPack of Texas, LLC, would go toward developing, producing, and distributing various tech-enhanced products, including a power bank-equipped backpack and shoulder bag and a magnetic USB cable system. Instead, Monahan improperly spent the money on personal expenses and marketing efforts. Monahan’s fraudulent behavior was eventually reported by hundreds of disgruntled consumers. FTC

May 3, 2019

New Hampshire-based GT Advanced Technologies, Inc. and its then-CEO Thomas Gutierrez have consented to entry of an order by the SEC finding that they publicly misrepresented the status of an agreement the company had with Apple to supply "sapphire glass" for iPhones, falsely stating that the company expected to hit performance targets under its agreement with Apple, securing funding from Apple and achieving sales projections.  In fact, the company had repeatedly failed to meet Apple's performance milestones and faced liability to repay more than $300 million that Apple had advanced to GT.  GT was also found to have misclassified this Apple debt in its financial reports.  GT later filed for bankruptcy protection.  The parties agreed to cease and desist from further violations, and Gutierrez agreed to pay a $140,000 monetary sanction.  SEC

April 29, 2019

In an enforcement action initiated by the CFTC, Michael Shah and Zilmil, Inc., both of Jacksonville, Florida, have been ordered to pay nearly $23 million for their roles as "affiliate marketers" for unregistered binary options trading schemes, targeting consumers with false and misleading advertising for the trading systems.  CFTC

April 25, 2019

Morgan Stanley will pay $150 million to the State of California to resolve allegations under the California False Claims Act, Corporate Security Law and False Advertising Law, that the bank concealed the risk of residential mortgage-backed securities sold to the California Public Employees’ Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS) between 2003 to 2007. CA