Archive

December 17, 2015

The SEC charged Martin Shkreli, former CEO of pharmaceutical company Retrophin, with committing fraud during a five-year period when he was also working as a hedge fund manager.  The SEC alleges that Shkreli misappropriated money from two hedge funds he founded and made material misrepresentations to investors among other widespread misconduct, including fraudulently inducing Retrophin to issue stock and make cash payments to certain disgruntled investors in Shkreli’s hedge funds who were threatening legal action.  The SEC also charged Retrophin’s former outside counsel and corporate secretary Evan Greebel with aiding and abetting certain aspects of Shkreli’s alleged fraud.  In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York announced criminal charges against Shkreli and Greebel.  SEC

December 16, 2015

The SEC barred hedge fund adviser Owen Li from the securities industry and censured his associated firm Canarsie Capital LLC after Li made a series of false statements to investors and ultimately caused a fund’s collapse.  In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Li.  Monetary sanctions are expected to be ordered in this parallel criminal proceeding.  SEC

December 15, 2015

The SEC charged New Jersey resident Samuel DelPresto and his company MLF Group, Inc. with illicitly pocketing $13 million from an elaborate pump-and-dump scheme.  The SEC alleges that DelPresto teamed with others to secretly obtain control of substantially all available stock in four microcap companies,BioNeutral Group, NXT Nutritionals Holdings, Mesa Energy Holdings, and Clear-Lite Holdings, and facilitate coordinated trading that created the appearance of liquidity and market demand for the stocks.  After unwitting investors were enticed through promotional campaigns to buy the stock at inflated prices, DelPresto dumped his shares on the market.  In a parallel action, the U.S. Attorney’s Office for the District of new Jersey announced criminal charges against DelPresto.  SEC

December 11, 2015

The SEC announced fraud charges and a court-ordered asset freeze against penny stock company Oxford City Football Club, Inc.  The SEC alleges that Oxford City’s CEO, Thomas Anthony Guerriero, used pressure tactics and a boiler room of salespeople to raise more than $6.5 million from primarily inexperienced investors who were misled to believe that the company was a thriving conglomerate of sports teams, academic institutions, and real estate holdings.  The company even falsely touted itself as “the largest publicly traded diversified portfolio of professional sports teams in the world.”  In reality, the company was losing millions of dollars each year and turning zero profit from its two lower-division soccer teams in the U.K.  SEC

December 1, 2015

The SEC charged “Bitcoin mining” companies GAW Miners andZenMiner, and their founder, Homero Joshua Garza, with conducting a Ponzi scheme to defraud investors.  Bitcoin “mining” means to apply computer power to complex equations that verify a group of transactions in a virtual currency.  The first computer to solve an equation is awarded new units of the virtual currency.  The SEC’s complaint alleges that Garza, through GAW Miners and Zen Miners, purported to offer shares of a digital Bitcoin mining operation.  In reality, the companies did not own enough computer power for the mining it promised to conduct.  Therefore, most investors paid for a share of computing power that never existed.  Returns paid to some investors came from proceeds generated from sales to other investors.  SEC

November 17, 2015

The SEC announced fraud charges against several alleged perpetrators behind a $78 million pump-and-dump scheme involving the stock of Jammin’ Java, a company that operates as Marley Coffee and uses trademarks of late reggae artist Bob Marley to sell coffee products.  The SEC alleges that Jammin Java’s former CEO Shane Whittle orchestrated the scheme with three others who live abroad and operate entities offshore.  Whittle utilized a reverse merger to secretly gain control of millions of Jammin Java shares, and he spread the stock to the offshore entities controlled by Wayne Weaver of the UK and Canada, Michael Sun of India, and René Berlinger of Switzerland.  The shares were later dumped on the unsuspecting public after the stock price soared following fraudulent promotional campaigns.  SEC

November 16, 2015

Investment management firm Virtus Investment Advisers agreed to pay $16.5 million to settle charges that it misled mutual fund investors through advertisements containing false historical performance data about AlphaSector, a major exchange-traded fund (ETF) portfolio strategy.  Virtus publicized a substantially overstated performance track record received from F-Squared, a sub-adviser it had hired for mutual funds and other clients following the AlphaSector strategy.  Virtus accepted F-Squared’s historical performance misrepresentations at face value and ignored red flags that called these claims into question.  During the period in which Virtus used the false and misleading advertisements, its AlphaSector funds’ assets under management grew from $191 million at the end of 2009 to $11.5 billion by 2013.  SEC

November 5, 2015

The SEC filed securities fraud charges against Scottish trader James Alan Craig based on false “tweets” authored by Craig which caused sharp drops in the stock prices of two companies.  Craig created fake twitter accounts designed to look like the twitter accounts of well-known securities research firms.  His false tweets, claiming that the target companies were under investigation, caused the share price of Audience, Inc. to fall 28% and the share price of Sarepta Therapeutics, Inc. to fall 16%.  Craig bought and sold shares of the two companies in a largely unsuccessful attempt to profit from the sharp price swings.  SEC

October 19, 2015

UBS advisory firms, UBS Willow Management LLC and UBS Fund Advisor LLC, agreed to pay $17.5 million to settle SEC charges arising from a failure to disclose a change in investment strategy used by UBS Willow Fund, a closed-end fund they advised.  UBS Willow Fund was marketed as one that primarily invested in distressed debt, a strategy predicated on the debt increasing in value.  In 2008, instead of focusing on investments in debt, UBS Willow Management had the fund purchase large quantities of credit default swaps, a strategy predicated on the debt decreasing in value.  Due to this change in strategy, the fund started incurring large losses and was liquidated in 2012.  UBS Willow Management did not provide adequate disclosure of the change in investment strategy to the fund’s investors or board of directors.  UBS Fund Advisor, which retained ultimate control over the fund, was aware of the change in investment strategy and failed to provide appropriate supervision by allowing the change without adequate disclosure.  SEC

October 13, 2015

UBS AG will pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary exchange trading strategy.  This is the first case by the SEC involving misstatements and omissions by an issuer of structured notes, a complex financial product that typically consists of a debt security with a derivative tied to the performance of other securities, commodities, currencies, or proprietary indices.  The return on the structured note is linked to the performance of the derivative over the life of the note.  UBS, one of the largest issuers of structured notes in the world, settled the SEC’s charges that it misled U.S. investors in structured notes tied to the V10 Currency Index with Volatility Cap by falsely stating that the investment relied on a “transparent” and “systematic” currency trading strategy using “market prices” to calculate financial instruments underlying the index, when, in fact, undisclosed hedging trades by UBS reduced the index price by about 5%.  SEC