Archive

March 8, 2018

The SEC has filed fraud charges in a scheme to inflate the share price of an Israeli medical marijuana company’s common stock.  The court today entered a partial asset freeze of the proceeds of the alleged fraud. The SEC’s complaint, which was filed on March 5 in federal district court in Denver, alleges that Colorado resident Jeffrey O. Friedland touted OWC Pharmaceutical Research Corp. while misrepresenting both his own investment in OWC and the true nature of his professional relationship with the company.  As alleged in the complaint, Friedland was compensated with more than five million OWC shares for handling the company’s media and investor relations efforts.  Friedland then touted OWC to media, industry, and investors, creating the false impression that he was merely an early investor in OWC and later, a member of its advisory board, without disclosing his role as a paid promoter.  Friedland is alleged to have sold his OWC shares for almost $7 million, after which he and his spouse placed a portion of the proceeds in a investment account in the name of Lane 6552, acquired two homes in all-cash purchases, and made other purchases and uses of the funds.  Friedland’s sales took place from March through September 2017 and were made through accounts in the names of Lane 6552 LLC and Intiva Pharma LLC.  The United States District Court today, among other things, froze certain accounts that received proceeds of Lane 6552’s sales of OWC stock. SEC

March 8, 2018

The SEC has charged Shezad Akbar, Americrude, Inc., and Daniel Waite with defrauding investors out of at least $950,000 through a string of fraudulent oil-and-gas securities offerings. The SEC’s complaint, which was filed yesterday in federal court in the Northern District of Texas, alleges that Akbar used his company, Americrude, Inc., to defraud multiple investors in seven securities offerings that purportedly raised funds to acquire working interests in oil-and-gas prospects.  The SEC alleges that Americrude, Akbar, and Waite, who was Americrude’s nominal President, used a combination of cold calls, high-pressure sales pitches, and false and misleading statements to lure investors into Americrude’s fraudulent offerings.  The defendants misrepresented Americrude’s track record, the reserve potential of its oil-and-gas prospects, and its intended use of proceeds from the offerings.  Akbar is also alleged to have used an alias to conceal his involvement in the offering fraud and to hide his prior felony convictions from potential investors. Waite consented, without admitting or denying the SEC’s allegations, to the entry of a final judgment that permanently restrains and enjoins him from violating multiple SEC law and regulations; restrains and enjoins him from participating in the issuance, purchase, offer, or sale of any oil-and-gas related securities, provided however that such injunction does not prevent Waite from purchasing or selling oil-and-gas related securities for his own personal account; and orders him to pay disgorgement of ill-gotten gains totaling $32,409.52, prejudgment interest of $1,763.30, and a penalty of $100,000. SEC

March 8, 2018

The SEC announced settled charges against Merrill Lynch, Pierce, Fenner & Smith Inc. for its failure to perform required gatekeeping functions in the unregistered sales of securities on behalf of a China-based issuer and its affiliates. The SEC’s order found that Merrill Lynch sold almost three million shares of Longtop Financial Technological Limited’s securities into the market despite red flags indicating that the sales could be part of an unlawful unregistered distribution.  Ultimately, the distribution generated almost $38 million in proceeds for the overseas issuer and its affiliates. In settlement, without admitting or denying the SEC’s findings, the firm agreed to be censured and consented to the order requiring it to cease and desist from committing or causing any future violations of the registration provisions of the Securities Act.  The order also requires Merrill Lynch to pay a penalty of $1.25 million and more than $154,000 in disgorgement and prejudgment interest from commissions and fees earned on the improper sales. SEC

March 6, 2018

The SEC announced that it charged the New York Stock Exchange and two affiliated exchanges with regulatory failures in connection with multiple episodes, including several disruptive market events.  The charges arose from five separate investigations and include the first-ever charged violation of Regulation SCI.  The Commission adopted Reg SCI to strengthen the technology infrastructure and integrity of the U.S. securities markets, and today charged two NYSE exchanges with violating Reg SCI’s business continuity and disaster recovery requirement.  In settlement, the exchanges agreed to pay a $14 million penalty. According to the SEC’s order, the violations include erroneously implementing a market-wide regulatory halt, negligently misrepresenting stock prices as “automated” despite extensive system issues ahead of a total shutdown of two of the exchanges, and applying price collars during unusual market volatility on Aug. 24, 2015, without a rule in effect to permit them – a move that resulted in order imbalances being resolved more slowly. SEC

March 5, 2018

The SEC charged a Edwin Shaw LLC with illegally brokering dozens of investments by foreign nationals seeking U.S. residency. Between April 2014 and March 2017, Edwin Shaw solicited foreign nationals to invest in securities issued by a taxi and limousine company based in Queens, New York.  The investments were marketed to investors interested in applying for legal residency through the federal government’s EB-5 Immigrant Investor Program, which provides a path to legal residency for foreigners who invest directly in a U.S. business or private “regional centers” that promote economic development in specific areas and industries. Edwin Shaw agreed to a cease-and-desist order and agreed to pay disgorgement of $400,000 plus prejudgment interest of $54,209.20 and a penalty of $90,535. SEC

March 2, 2018

The SEC announced securities fraud charges against a Beaufort Securities Ltd. and Peter Kyriacou in connection with manipulative trading in the securities of HD View 360 Inc., a U.S.-based microcap issuer.  The SEC also announced charges against HD View’s CEO Dennis Marcino, William T. Hirschy, and three entities they control for manipulating HD View’s securities as well as the securities of another microcap issuer, West Coast Ventures Group Corp.  The SEC further announced the institution of an order suspending trading in the securities of HD View. These charges arise in part from an undercover operation by the Federal Bureau of Investigation, which also resulted in related criminal prosecutions against these defendants by the Office of the United States Attorney for the Eastern District of New York. SEC

February 28, 2018

The SEC charged three-time recidivist Steven J. Muehler with operating an unregistered broker-dealer, facilitating an unregistered securities offering, and defrauding small businesses, while promising to help them raise money from investors.  Three companies under Muehler’s control, Muehler’s wife, Claudia M. Muehler, and his associate, Koorosh “Danny” Rahimi, were also charged.  Because the scheme is ongoing, the SEC is also seeking a preliminary injunction to stop Muehler’s ongoing violations of the securities laws, pending trial of the action. The SEC’s complaint, which was filed in federal court in Los Angeles, also charges Muehler with violating a cease-and-desist order issued by the Commission in 2016 barring Muehler from associating with any broker-dealer.  The SEC has filed a parallel action in the same court to enforce that Commission order. According to the complaint, Muehler’s companies are not registered as broker-dealers.  But since at least November 2015, Muehler and his companies have nonetheless agreed to provide broker-dealers services to more than 20 small businesses, including identifying and soliciting investors and utilizing a purportedly proprietary online securities exchange to help raise funds from investors.  In return, Muehler and his companies received fees, the right to a percentage of any funds raised from investors, and the right to an equity stake in each small business customer. SEC

February 28, 2018

The SEC announced that Minnesota-based broker-dealer and investment adviser Ameriprise Financial Services  has agreed to settle charges for recommending and selling higher-fee mutual fund shares to retail retirement account customers and for failing to provide sales charge waivers. According to the SEC’s order, Ameriprise Financial Services Inc. disadvantaged certain retirement account customers by failing to ascertain their eligibility for less expensive mutual fund share classes.  Ameriprise recommended and sold these customers more expensive mutual fund share classes when less expensive share classes were available.  Ameriprise also failed to disclose that it would receive greater compensation from the purchases and that the purchases would negatively impact the overall return on the customers’ investments. The SEC’s order instituted a settled administrative and cease-and-desist proceeding. Ameriprise consented to a cease-and-desist order, a censure, and a penalty of $230,000. SEC

February 16, 2018

The SEC announced charges against three Israeli residents, a Washington DC attorney, and an Israeli auditor for a fraudulent scheme to create a large amount of shell companies. The three Israeli residents were SharonePerlstein, Aric Swartz, and Hadas Yaron. The three created at least 15 shell companies and filed false or misleading registration statements and reports with the SEC. Jonathan Strum was the DC attorney that helped the Israeli residents in establishing the shell companies and Baltimore-based Israeli auditor Alan Weinberg issued misleading audit reports for at least seven of the shell companies.  The SEC charges resulted in penny stock bars for the Israeli residents and prohibitions for Strum and Weinberg from appearing before the SEC. SEC

April 30, 2018

Panasonic Avionics Corporation, a subsidiary of Japan-based electronics giant Panasonic Corporation, agreed to pay a $137.4 million criminal penalty to resolve charges of violating the Foreign Corrupt Practices Act through a scheme to make improper foreign payments through consultants and sales agents. Panasonic also agreed to pay roughly $143 million in disgorgement to the SEC for a total payout of more than $280 million. DOJ