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March 26, 2021

British citizen Benjamin Reynolds, who did business as Control-Finance Limited, has been ordered to pay a total of $571 million – $143 million in restitution and $429 million as a civil penalty – by default judgment in an enforcement action brought by the CFTC.  Reynolds solicited customers on the internet and by e-mail, falsely representing that Control-Finance would engage in virtual currency trades on their behalf, with a guaranteed profit.  Reynolds also created an affiliate marketing network, falsely claiming that he would pay referral bonuses to customers.  In fact, Reynolds made no trades on customers’ behalf, earned no trading profits for them, and paid no referral rewards or bonuses. Over the course of six months in 2017, Reynolds secured at least 22,191 bitcoin, worth $143 million at the time, from more than 1,000 customers worldwide, including at least 169 residing in the U.S.  CFTC

Tagged in: Cryptocurrency, Fraud in CFTC-Regulated Markets, Misrepresentations,

March 26, 2021

David Boice, the co-founder and CEO of Trustify Inc., was sentenced to 8 years in prison and ordered to pay $18.1 million in restitution and $3.7 million in forfeiture following SEC charges that Boice misrepresented Trustify, an online marketplace purportedly designed to connect customers to a network of private investigators, as a successful business, fraudulently offering and selling over $18.5 million of securities to more than 250 individual and corporate investors.  Boice inflated company revenues in financial statements, fabricated customer relationships, forged correspondence purportedly from potential investors, and misrepresented the use of investor funds.  Trustify was placed in corporate receivership in 2019.  USAO ED VA

Tagged in: Criminal Proceedings, Financial and Investment Fraud, Misrepresentations, Securities Fraud,

March 19, 2021

The CFTC has ordered digital asset exchange operator Coinbase Inc. to pay a civil monetary penalty of $6.5 million to settle charges of reporting false, misleading, or inaccurate information on the company’s GDAX electronic trading platform, which is published by various reporting firms and used by market participants to gauge the volume and liquidity of digital assets.  The CFTC also found Coinbase vicariously liable for a former employee who placed deceptive orders in Litecoin in order to artificially generate market interest.  CFTC

Tagged in: Cryptocurrency, Financial and Investment Fraud, Fraud in CFTC-Regulated Markets, Misrepresentations,

March 9, 2021

The SEC will pay $1.5 million to an unidentified whistleblower who provided original information to the Commission regarding the whistleblower’s employer, causing them to open an investigation.  The whistleblower provided detailed written information, identified potential witnesses, and assisted throughout the investigation.  SEC

Tagged in: SEC Whistleblower Reward Program, Whistleblower Rewards,

March 4, 2021

Sohrab Sharma, a co-founder of Centra Tech, which claimed to offer products including a debit card that would allow users to make retail purchases using cryptocurrency, has been sentenced to eight years in prison following his guilty plea to charges arising from Centra’s fraudulent representations to participants in its unregistered initial coin offering of “Centra Tokens” or “CTR tokens,” which raised more than $25 million from victims.  Sharma and his co-defendants falsely claimed that Centra Tech had an experienced executive team, agreements with card issuers, and licenses to operate in 38 states when, in fact, Centra Tech had none of these things.  USAO SDNY

Tagged in: Criminal Proceedings, Cryptocurrency, Financial and Investment Fraud, Regulatory Violations, Securities Fraud,

February 25, 2021

The SEC has awarded two whistleblowers two awards totaling more than $1.7 million.  Under the first award, one whistleblower received over $900,000 for providing significant evidence, including a critical declaration, that helped shut down an ongoing fraud scheme.  Under the second award, the whistleblower received over $800,000 for providing important information through an interview and documents that helped return millions to harmed investors.  SEC

Tagged in: Anonymity, Financial and Investment Fraud, SEC Whistleblower Reward Program, Securities Fraud, Whistleblower Rewards,

February 24, 2021

William Taylor, the former chief operating officer of publicly-traded biopharmaceutical company MiMedx Group, Inc., was sentenced to one year in prison and ordered to pay a fine or $250,000 following his jury trial conviction on charges arising from accounting fraud.  The government presented evidence at trial that Taylor authorized the false recognition of revenue upon the shipment of MiMedx products to distributors despite knowing that the GAAP criteria for such revenue recognition had not been met.  Instead, MiMedx had promised the distributors that they could return the product or did not need to pay for it, in some cases knowing that the distributors were unable to pay for the product.  As a result, MiMedx reported materially inflated revenue in 2015.  USAO SDNY

Tagged in: Accounting Fraud, Criminal Proceedings, Financial and Investment Fraud, Misrepresentations,

February 24, 2021

Florida man David John Ridling was sentenced to 15 years in prison following his guilty plea on charges that he defrauded five financial institutions, securing over $40 million in loan proceeds and lines of credit, some of which he used to pay amounts to earlier victims.  Ridling, who owned and ran a farm, used fabricated and forged brokerage account statements, financial statements, and tax returns, and impersonated brokerage company personnel to misrepresent his financial condition.  USAO MD FL

Tagged in: Criminal Proceedings, Financial and Investment Fraud,

February 24, 2021

Leroy King, the former chief of Antigua’s Financial Services Regulatory Commission, was sentenced to 10 years in prison for his role in obstructing the SEC’s investigation into the $7 billion Ponzi scheme perpetrated by R. Allen Stanford and the Stanford International Bank.  Stanford provided King with cash and luxury gifts, and in exchange King improperly denied his agency’s assistance to the SEC.  DOJ

Tagged in: Criminal Proceedings, Financial and Investment Fraud, Ponzi Schemes,

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