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June 8, 2022

CohnReznick LLP and its partners Stephen M. Wyss, Stephen H. Jackson, and Robert G. Hilbert were charged with improper professional conduct in their engagement with clients Sequential Brands Group, Inc. and Longfin Corp, violations of Rule 102(e) of the SEC’s Rules of Practice, Rule 2-02(b)(1) of Regulation S-X, and violations of Section 13(a) of the SEC Act of 1934. CohnReznick failed to obtain sufficient evidence to support Sequential’s conclusion that its goodwill was not impaired or reduced in value, despite the firm’s own valuation specialists expressing concern. In its Longfin audit, CohnReznick failed to address known issues involving related party transactions used to fraudulently inflate Longfin’s revenues. CohnReznick’s $1.9 million penalty will be returned to investors. SEC

June 8, 2022

Michael Gastauer, of Germany, and his 6 related entities will pay over $15 million for aiding and abetting an international securities scheme wherein Gastauer used his U.S. bank accounts to disburse illegal stock sale proceeds to offshore brokerage accounts, masking the sellers’ true identities. The scheme was orchestrated by UK citizen Roger Knox and his Swiss-owned entity, Wintercap SA. In a parallel criminal action, Knox was indicted on and pled guilty to one count of securities fraud and one count of conspiracy to commit securities fraud. Knox’s sentencing is pending. SEC

June 7, 2022

Morningstar Credit Ratings, LLC will pay a civil monetary penalty of $1,150,000 for disclosure and internal controls violations related to rating commercial mortgage-backed securities. Analysts were permitted to adjust key stresses in the rating model, without disclosing they had done so, impacting 30 transactions from 2015 to 2016. Additionally, effective internal controls were neither established nor enforced for these adjustments from 2015 to 2017, impacting 31 transactions. SEC

June 7, 2022

Synchronoss Technologies, Inc. and seven senior employees were charged with accounting improprieties running from 2013 to 2017, including improperly accounting for numerous transactions, filing with the SEC materially misleading financial statements, and having material weaknesses in its internal financial reporting controls. Synchronoss will pay a civil penalty of $12.5 million. SEC

May 31, 2022

Healthcare company SCWorx Corp. has agreed to resolve SEC charges that it made false and misleading statements in an April, 2020 press release, claiming in a press release that it had received a purchase order for millions of COVID-19 rapid test kits.  The announcement caused the company’s stock price to surge, but the SEC alleged that the company had neither a legitimate supplier of COVID-19 test kits nor an executed purchase agreement with a buyer.  When the true facts became public, investors lost at least $116 million.  The company has agreed to pay a civil penalty of $125,000 and contribute stock valued at $600,000 as disgorgement and prejudgment interest to harmed investors in a private class action.  The company’s former CEO, Marc Schessel, has been indicted for securities fraud with respect to the scheme.  SEC; USAO NJ

May 25, 2022

RiverSource Distributors Inc. will pay a $5 million civil penalty for violating Section 11 of the Investment Company Act by employing sales practices wherein variable-annuities-holding customers were unknowingly switched from one variable annuity to another, increasing sales commissions for employees and boosting RiverSource’s revenues. These trades were effectuated through Ameriprise Financial Services, LLC, an affiliated broker-dealer/investment adviser. RiverSource’s compliance department caused the sales practice to stop in 2018, but only after these types of transactions saw a significant increase from 2016 until then. RiverSource was also hit with a cease-and-desist order and a censure, in addition to the civil penalty.  SEC

May 23, 2022

Registered investment advisor BNY Mellon Investment Adviser agreed to pay a $1.5 million penalty to resolve allegations that it misstated or omitted material facts with respect to investment decisions for certain mutual funds in managed.  Specifically, the SEC alleged that BNY Mellon represented or implied that all investments in the funds had undergone a review with respect to Environmental, Social, and Governance (“ESG”) considerations, even though that was not always the case.  SEC

May 19, 2022

Sohrab “Sam” Sharma, Robert Farkas, and Raymond Trapani will disgorge over $40 million for raising more than $32 million from investors in their unregistered ICO of “CTR tokens” through their controlled entity, Centra Tech Inc. The fraudsters made material misrepresentations in their marketing of the tokens, including claiming partnerships with Visa, MasterCard, and The Bancorp; created fake executive bios; misrepresented the company’s viability; and manipulated trading in the tokens to generate interest. The three defendants have been sentenced to imprisonment in addition to the financial penalties levied. SEC

May 17, 2022

Allianz Global Investors U.S. LLC pleaded guilty to securities fraud and agreed to pay a criminal fine of $2.3 billion, an SEC penalty of $675 million, and over $5 billion in disgorgement and restitution to victims.  Three former AGI senior portfolio managers, Gregoire Tournant, Trevor Taylor, and Stephen Bond-Nelson, also pleaded guilty to related charges and will be sentenced at a later date.  As part of its plea, AGI admitted that between 2014 and 2020, AGI and the individual defendants made false and misleading statements to current and prospective investors in AGI’s Structured Alpha Funds which understated downside risks and overstated the level of independent risk oversight over the funds.  While the funds promised risk management and hedging, the actual investment strategy prioritized returns over risk management, and the promised hedging positions were not purchased.  To conceal losses and understate the magnitude of the actual risks, defendants fraudulently altered numerous financial reports and other information provided to investors.  The scheme was exposed when the funds experienced billions in losses during the 2020 COVID-related market volatility. With its guilty plea, AGI US is disqualified from providing advisory services to U.S.-registered investment funds for the next ten years, and will exit the business of conducting these fund services.  SEC; DOJ; SDNY

May 6, 2022

NVIDIA Corporation has agreed to a cease-and-desist order and to pay a $5.5 million penalty for violations of the Securities Act and the disclosure provisions of the Securities Exchange Act. NVIDIA failed to disclose cryptomining as a significant element of its material revenue growth, depriving investors of critical information related to the investment’s volatility. SEC
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