Archive

August 24, 2016

The SEC announced enforcement actions against 71 municipal issuers and other obligated parties for violations related to their municipal bond offerings.  The actions were brought under the Municipal Continuing Disclosure Cooperation Initiative which offers favorable settlement terms to municipal bond underwriters, issuers, and obligated persons that self-report certain violations of federal securities laws.  The SEC found that from 2011 through 2014, the 71 issuers and obligated persons sold municipal bonds using offering documents that contained materially false statements or omissions about their compliance with continuing disclosure obligations.  The parties settled the actions and agreed to cease and desist from future violations and to undertake to establish appropriate policies, procedures, and training regarding continuing disclosure obligations.  SEC

August 23, 2016

Four private equity fund advisers affiliated with Apollo Global Management will pay $52.7 million to settle charges related to misleading fund investors about fees and a loan agreement and failing to supervise a senior partner who repeatedly charged personal expenses to the funds.  An SEC investigation found that the Apollo advisers failed to adequately disclose the benefits they received (to the detriment of fund investors) by accelerating payment of future monitoring fees owed by the funds’ portfolio companies upon their IPO or sale.  The lump sum payments received by the Apollo advisers essentially reduced the portfolio companies' value prior to their sale or IPO.  The SEC also found that one of the advisers failed to disclose certain information about interest payments made on a loan between the adviser’s affiliated general partner and five funds.  The purpose of the loan was to defer taxes on the general partner’s carried interest.  The loan agreement obligated the general partner to pay interest to the funds during the course of the loan and the funds’ financial statements disclosed the accruing interest as an asset of the funds.  But the interest was instead ultimately allocated solely to the general partner, making the financial statements misleading.  Finally, according to the SEC’s order, Apollo’s supervisory failures pertain to a then-senior partner at the firm who was twice caught improperly charging personal items to Apollo-advised funds.  SEC

August 16, 2016

The former head trader in residential mortgage-backed securities (RMBS) at Goldman Sachs, Edwin Chin, has agreed to be barred from the securities industry and pay $400,000 to settle charges that he repeatedly misled customers and caused them to pay higher prices.  An SEC investigation found that Chin generated extra revenue for Goldman by concealing the prices at which the firm had bought various RMBS and then re-selling them at higher prices to the buying customers with Goldman keeping the difference.  On other occasions, Chin misled purchasers by suggesting he was actively negotiating a transaction between customers when he was merely selling RMBS out of Goldman’s inventory.  SEC

August 15, 2016

The SEC announced fraud charges against New York-based Donald Lathen and his investment advisory firm Eden Arc Capital Management.  The SEC alleges that Lathen used contacts at nursing homes and hospices to identify patients with less than six months to live.  He then recruited at least 60 of them, by paying $10,000 apiece, to use their names on purportedly joint brokerage accounts he could use to purchase investments on behalf of his hedge fund.  When a patient died, Lathen redeemed the investments in the accounts by falsely representing to the issuers that he and the terminally ill individuals were the joint owners of the account and invoking a survivor’s option.  In fact, Lathen’s hedge fund was the true owner of the survivor’s option investments.  Issuers paid out more than $100 million in early redemptions as a result of the alleged misrepresentations and omissions.  The SEC further alleges that this conduct violated the custody rule by failing to properly place the hedge fund’s cash and securities in an account under the fund’s name or in an account containing only clients’ funds and securities under the investment adviser’s name as agent for the client.  SEC

August 11, 2016

The SEC announced fraud charges against San Francisco-based Nicolas M. Mitsakos and his investment advisory firm Matrix Capital Markets.  The SEC alleges that Mitsakos and Matrix solicited investors in a purported hedge fund while falsely marketing themselves as experienced money managers with a highly successful track record.  They claimed assets under management in the millions when in fact they did not manage any client assets at all.  When they were given $2 million in client assets to manage in September 2015, they proceeded to steal approximately $800,000 from the client and used most of it to pay for unauthorized personal and business expenses.  SEC

August 10, 2016

August 10, 2016 – The SEC charged former Philadelphia Eagle Merrill Robertson, Jr., his partner Sherman C. Vaughn Jr., and their company Cavalier Union Investments LLC, with defrauding investors by misleading them about their experience and the security of their investments and by diverting investor funds to personal use.  According to the SEC’s complaint, the defendants promised to invest in diversified holdings but instead diverted nearly $6 million of the $10 million raised to pay for personal expenses and repay earlier investors.  Allegedly the scheme targeted seniors and coaches, donors, alumni, and employees of schools where Robertson had attended and played football.  SEC

August 24, 2016

Florida obtained a court order temporarily shutting down a tech support company that, along with its owners, allegedly deceived consumers out of more than $25 million. The scam operated as Client Care Experts, formerly known as First Choice Tech Support, LLC, and is owned by CEO Michael Seward and his partner, Kevin McCormick. The defendants ran the tech support scam out of a boiler room in Boynton Beach and employed more than 200 telemarketers at the location. The order follows an effort by defendants to dissolve an earlier order obtained by Attorney General Bondi’s Office that temporarily shut down the business, froze the defendants’ assets to preserve funds for consumer restitution and appointed a receiver to oversee the operation through the conclusion of the case. The court denied the defendants’ motion to dissolve and kept the previous order in place pending the final judgment. FL

August 22, 2016

Irina Feldman, Cindium Inc., and Einstein Exchange Group Inc. agreed to pay more than $600,000 to settle charges of committing solicitation fraud and misappropriation in connection with operating a commodity pool that offered foreign currency and commodity futures transactions, and for failing to register with the CFTC as Commodity Pool Operators.  CFTC

August 17, 2016

The CFTC filed a civil enforcement action against Mirko Schacke of Antioch, California, and his company, TradeMasters USA, LLC, of Las Vegas, Nevada, charging them with fraudulently soliciting over $150,000 from at least 36 investors in connection with the purchase of futures trading software.  CFTC

August 8, 2016

Georgia and 42 other states announced a $100 million multistate settlement with Barclays Bank PLC and Barclays Capital Inc. for fraudulent and anti-competitive conduct involving the manipulation of the London interbank offered rate, or, Libor. This is a benchmark interest rate that affects financial instruments worth trillions of dollars and has a widespread impact on global markets and consumers. Barclays has agreed to pay $100 million, of which about $93 million will be used to reimburse government and nonprofit organizations that had Libor-linked swaps and other investment contracts with Barclays and that were harmed by the activity. A multistate investigation revealed that Barclays had manipulated Libor during the financial crisis period of 2007-2008 by understating the interest rates it would need to pay to borrow money in order to avoid the appearance that Barclays was in financial difficulty and would need to pay a higher rate than some of its peers. Government entities and not-for-profit organizations were defrauded when they entered into swaps and other investment instruments with Barclays without knowing that Barclays and other banks on the U.S. dollar-Libor-setting panel were manipulating Libor and colluding with other banks to do so. GA, VA, IL