Archive

August 8, 2023

BNP Paribas, Société Générale, Wells Fargo, and Bank of Montreal have been ordered to pay a combined $260 million for violating CFTC rules around recordkeeping and supervision.  Separately, two of those institutions, BNP Paribas and Wells Fargo, along with BMO Capital Markets Corp., Houlihan Lokey Capital, Inc., Mizuho Securities USA LLC, Moelis & Company LLC, SMBC Nikko Securities America, Inc., and Wedbush Securities Inc., have agreed to pay a combined $289 million for violating similar SEC rules.  The financial institutions were found to have failed to maintain, preserve, or produce communications sent via unapproved channels, such as personal texts.  With this enforcement action, the CFTC has recovered over $1 billion from actions against 18 financial institutions for similar charges, while the SEC has recovered over $1.5 billion from actions against 30 financial institutions.  CFTC, SEC

July 31, 2023

The distributors of a product marked as a quick and easy way to quit smoking has been ordered to pay over $7 million in restitution as well as a $500,000 civil penalty.  Michael Connors and his companies ProTouch Marketing LLC (d/b/a Smart Day Supplements), Woodford Hills LLC, Oakhill Research LLC, Evergreen Marketing LLC, Sterling Health LLC, and Clara Vista Media LLC allegedly repeatedly violated the Federal Trade Commission (FTC) Act and the Opioid Addiction Recovery Fraud Prevention Act of 2018 by making misleading claims about their Smoke Away tablets, pellets, and homeopathic sprays, which were said to eliminate nicotine cravings and withdrawal symptoms.  DOJ

July 28, 2023

Thomas D. Renison and Timothy J. Allcott, co-founders of ARO Equity, LLC, were sentenced to 48 months and 30 months in prison, respectively, for lying to current and prospective investors about ARO's performance and for using new investors' funds to pay interest to older investors. For at least 3 years, and despite Renison being barred in 2014 by the SEC from associating with any investment adviser or broker-dealer, Renison and Allcott deceptively convinced investors to cash out their retirement accounts and invest instead with ARO, touting double-digit returns and zero downside, ultimately raising nearly $6 million from investors. ARO's investments began failing almost immediately, but Renison and Allcott continued to tell investors their investments were as safe with ARO as they were with a bank. In addition to their prison sentences, Renison was ordered to pay restitution of $6,098,198.30 and Allcott will pay restitution of $6,249,983.30. SEC

July 28, 2023

Summitcrest Capital, Inc., and its principals, Johnny Tseng and Kevin Zhang, raised approximately $19.8 million from Chinese-speaking investors in the United States and China, misleading them to believe the funds would be used to make real estate-related loans "to the general public" and the income from these loans would be used to make interest payments and return of capital to investors. Tseng and Zhang, through their entity SC Development Fund, instead used investor funds for loans to Zhang's many real estate development and contracting businesses. Summitcrest, Tseng, and Zhang are on the hook jointly and severally for $16.6 million in disgorgement and over $4.3 million in prejudgment interest. Summitcrest and Zhang are permanently enjoined from violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act. Additionally, Tseng is barred from acting as an officer or director and will pay disgorgement of $60,000, plus $15,721 in prejudgment interest and a $414,366 penalty. SEC

July 19, 2023

Amazon.com Inc. and its wholly-owned subsidiary Amazon.com Services LLC have agreed to pay a $25 million civil penalty to resolve allegations that its voice assistant service Alexa violated the Federal Trade Commission Act, Children’s Online Privacy Protection Act, and Children’s Online Privacy Protection Rule.  Since at least May 2018, Amazon has retained indefinitely and by default voice recordings of children interacting with Alexa. The company also falsely represented that such recordings, including transcriptions and geolocation information, could be deleted by Alexa users, when in fact user deletion requests were not always honored.  As part of the settlement, Amazon will have to identify and delete inactive child profiles and notify users about its retention and deletion practices.  DOJ

July 14, 2023

The former CEO of SPAC African Gold Acquisition Corp., Cooper J. Morgenthau, has been ordered to pay over $5 million in disgorgement with prejudgment interest to the SEC for stealing more than $5 million from the company and investors via unauthorized withdrawals, which he disguised through falsified documents to auditors and accountants.  In a related criminal action, Morganthau was sentenced to 3 years in prison, ordered to forfeit over $5 million, and pay over $5 million in restitution.  SEC

July 13, 2023

Cryptocurrency platform Celsius Network has been banned from handling consumer assets and ordered to pay a $4.7 billion judgment, suspended pending the return of remaining assets to consumers in ongoing bankruptcy proceedings.  Before filing for bankruptcy in July 2022, Celsius marketed the platform as a safe place to deposit cryptocurrency and made various representations to build consumer confidence, including promises that consumers could withdraw deposits at any time, that deposits were insured by a $750 million policy, that sufficient reserves were on hand, and that deposits could earn as high as 18% APY.  However, all of those claims were all false, and in fact, Celsius misappropriated $4 billion in deposits, using them to fund operations, reward other consumers, and make high-risk investments that often lost money.  FTC; SEC

July 12, 2023

The SEC has awarded a whistleblower more than $9 million for sparking an investigation and providing significant information and assistance.  According to the SEC, the whistleblower first reported concerns i­nternally, but after gaining no headway from multiple internal reports, made a report to the agency.  SEC

July 12, 2023

Florida man Adam Todd and his companies, Digitex LLC, Digitex Limited, Digitex Software Limited, and Blockster Holdings Limited Corporation, have been banned from registering with the CFTC and trading in CFTC-regulated markets, and ordered to pay almost $4 million in disgorgement and $12 million in civil monetary penalty.  According to the agency, the defendants failed to register with the CFTC, failed to comply with certain regulations, attempted to manipulate the price of a digital asset token, and violated anti-money laundering procedures.  CFTC

July 12, 2023

An attorney formerly employed at the SEC for over 14 years has been sentenced to 6 years in prison and ordered to pay almost $1.4 million in restitution for defrauding over 1,000 investors while on supervised release for an earlier offense. In 2010, after leaving the SEC, Phillip Offill of Texas was sentenced to 8 years in prison and 3 years of supervised release for participating in multimillion dollar pump-and-dump stock manipulation schemes.  In 2011, following a civil case brought by the SEC, he was permanently barred from participating in penny stock offerings.  In 2012, following another case by the SEC, he was permanently barred again.  Despite these obstacles, Offill still managed to conspire with others to misappropriate millions of shares of a publicly traded company and fraudulently market and pump up demand for the shares through false statements and documents.  DOJ