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Page 23 of 66

October 3, 2018

The SEC froze the assets of U.K. citizen Roger Knox and the Swiss-based company Wintercap SA based on their role in a scheme that generated more than $165 million of illegal sales of stock in at least 50 microcap companies.  The parties are alleged to have helped securities holders conceal their stock ownership and to have provided anonymous access to brokerage accounts to sell the shares in the U.S. market. Knox allegedly helped facilitate pump-and-dump and other market manipulation schemes by selling massive quantities of microcap securities on behalf of the concealed shareholders, and simultaneously orchestrating promotional campaigns and other efforts to artificially inflate the price and trading volume of those shares.  DOJ announced parallel civil and criminal proceedings.  SEC; DOJ

Tagged in: Market Manipulation and Trading Violations, Regulatory Violations, Securities Fraud,

September 26, 2018

Two brokerage firms, UK-based TFS-ICAP LIMITED and New York-based TFS-ICAP LLC, pled guilty to securities fraud under New York's Martin Act for their roles in posting fake trades, bids, and offers by inter-dealer brokers for emerging market foreign exchange currency options.  The fake trades were intended to create a false appearance of liquidity in the emerging markets FX options market and encourage traders to buy and sell FX options via TFS-ICAP rather than other brokers.  In addition to the criminal pleas by the companies, a civil settlement requires them to implement remedial procedures, retain an independent monitor, pay $1.5 million, and cooperate in ongoing investigations.  NY AG.

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, Foreign Exchange, Market Manipulation and Trading Violations,

September 26, 2018

Registered broker-dealer and investment advisor Voya Financial Advisors Inc. will pay $1 million to resolve SEC allegations that it failed to comply with the Safeguards Rule, Identity Theft Red Flags Rule, and related regulations in its response to a computer systems intrusion that compromised personal information of thousands of customers. SEC

Tagged in: Cybersecurity and Data Breaches, Financial and Investment Fraud, Financial Institution Fraud,

August 20, 2018

Merrill Lynch, Pierce, Fenner & Smith has agreed to pay $8.9 million to resolve claims that it violated the anti-fraud provisions of the Investment Advisers Act by failing to disclose its conflicts of interests to clients. According to the SEC, the violation occurred when Merrill Lynch failed to go through with a planned vote on whether to stop offering certain products managed by a third party, and then failed to disclose to clients that this decision was due to its own business interests. SEC

Tagged in: Financial Institution Fraud, Regulatory Violations, Securities Fraud,

August 14, 2018

In the largest civil penalty imposed by the Justice Department for FIRREA violations leading up to the 2008 financial crisis, the Royal Bank of Scotland Group plc (RBS) will pay $4.9 billion to resolve claims that it knowingly misled investors of its residential mortgage-backed securities (RMBS), including Fannie Mae and Freddie Mac. According to a statement of facts included with settlement details, RBS knew from its own reviews that its loans carried a high risk of default but failed to disclose that to investors. Furthermore, it allowed its due diligence process to become a total sham by not requiring that loan originators correct errors, instructing due diligence vendors to waive defects, and self-imposing caps on the number of faulty loans it removed from a RMBS. DOJ; USAO MA

Tagged in: Financial Institution Fraud, FIRREA, Housing and Mortgage Fraud, Misrepresentations, Securities Fraud,

August 2, 2018

Aurora Loan Services, LLC, a subsidiary of Lehman Brothers Holdings, Inc., has agreed to pay a civil penalty of $41 million to settle allegations of FIRREA violations in the loans it sold between 2004 and 2008. The mortgage originator gave preferential treatment to five "Platinum" lenders by allowing them to underwrite their own loans and freeing them from quality control standards that were imposed on other lenders. The resulting decline in loan quality was linked to a higher rate of default, hurting investors who bought residential-based mortgage securities from Lehman Brothers. USAO CO

Tagged in: Financial and Investment Fraud, Financial Institution Fraud, FIRREA, Housing and Mortgage Fraud, Misrepresentations, Securities Fraud,

August 1, 2018

Wells Fargo Bank has agreed to pay a civil penalty of $2.09 billion to settle allegations that it knowingly misrepresented the quality of its mortgage loans to investors, in violation of FIRREA, in order to double its production of subprime and Alt-A loans. Nearly half of those loans subsequently defaulted, leading to billions of dollars in losses for investors, including federally insured financial institutions. DOJ; USAO NDCA

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

July 30, 2018

The CFTC ordered Chicago-based R.J. O’Brien & Associates (“RJO”) to pay a $600,000 civil penalty in connection with the company’s failure to detect its client’s post-execution trade allocation scheme. As a registrant, RJO had a duty to monitor the relevant transactions for suspicious activity, but failed to adequately do so, according to the Commission. As a result, the scheme went undetected, and the client was able to allocate profitable trades to specific accounts, sending less profitable trades to the customer or Pool accounts. CFTC

Tagged in: Fraud in CFTC-Regulated Markets, Market Manipulation and Trading Violations, Regulatory Violations,

July 20, 2018

The CFPB announced a proposed settlement with TCF National Bank regarding the bank’s marketing and sale of overdraft services. TCF allegedly obscured the overdraft fees it charged and made consenting to overdraft fees seem mandatory for new customers to open an account. TCF has agreed to pay $25 million in restitution to customers who were charged overdraft fees and has agreed to an injunction to prevent future violations. CFPB

Tagged in: Financial Institution Fraud,

July 20, 2018

Two subsidiaries of Deutsche Bank will pay just under $75M to settle allegations that they improperly handled “pre-releases” of American Depository Receipts (ADRs). ADRs are U.S. securities that represent foreign shares of a foreign company and require a corresponding number of foreign shares to be held in custody at a depository bank. The SEC found that the companies’ practices allowed inappropriate short selling and inappropriate profiting around ADR dividend payments. SEC

Tagged in: Financial Institution Fraud, Securities Fraud,

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