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July 16, 2014

The SEC charged Natural Blue Resources Inc. with concealing from investors that two lawbreakers actually ran the company.  According to the SEC, the company was to create, acquire, or otherwise invest in environmentally-friendly companies.  What investors didn’t know was that two individuals with prior fraud violations — James E. Cohen and Joseph Corazzi — secretly controlled the operational and management decisions of Natural Blue while calling themselves outside “consultants.”  SEC

Tagged in: Environmental Fraud, Misrepresentations, Regulatory Violations, Securities Fraud,

July 2, 2014

The SEC charged five traders for committing short selling violations while trading for themselves and Worldwide Capital Inc.  This is the Long Island, N.Y.-based proprietary firm that in March paid $7.2M, the largest-ever monetary sanction, for Rule 105 violations.  Rule 105 prohibits the short sale of an equity security during a restricted period – generally five business days before a public offering – and the subsequent purchase of that same security through the offering.  SEC

Tagged in: Market Manipulation and Trading Violations, Securities Fraud,

June 25, 2014

The SEC announced fraud charges against three former senior managers of Regions Bank for intentionally misclassifying loans that should have been recorded as impaired for accounting purposes.  As a result, the bank’s publicly-traded holding company overstated its income and earnings per share in its financial reporting.  Regions will pay a total of $51M to resolve parallel actions by the SEC, Federal Reserve Board, and Alabama Department of Banking.  SEC

Tagged in: Accounting Fraud, Securities Fraud,

June 25, 2014

The SEC announced it has charged two additional brokers with trading on inside information ahead of the $1.2B acquisition of SPSS Inc. in 2009 by IBM Corporation.  The SEC alleged that former brokers Benjamin Durant III and Daryl M. Payton illegally traded on a tip about the acquisition from Thomas C. Conradt, a friend and fellow broker in the New York office of a Connecticut-based broker-dealer.  SEC

Tagged in: Insider Trading, Market Manipulation and Trading Violations, Securities Fraud,

June 23, 2014

The SEC charged hedge fund advisory firm Weston Capital Asset Management LLC and its founder and president Albert Hallac with illegally draining more than $17M from a hedge fund they managed and transferred the money to a consulting and investment firm known as Swartz IP Services Group Inc.  The transaction went against the hedge fund’s stated investment strategy and wasn’t disclosed to investors, who received account statements falsely portraying that their investment was performing as well or even better than before.  Weston Capital and Hallac agreed to settle the SEC’s charges with monetary sanctions to be determined at a later date.  SEC

Tagged in: Misrepresentations, Securities Fraud,

June 16, 2014

Albany, N.Y.-based hedge fund advisory firm Paradigm Capital Management and owner Candace King Weir agreed to pay $2.2M to settle charges of engaging in prohibited principal transactions and then retaliating against the employee who reported the trading activity to the SEC.  This is the first time the SEC has filed a whistleblower retaliation case under its new authority to bring such enforcement actions under the Dodd-Frank Act.  SEC

Tagged in: Regulatory Violations, Retaliation, SEC Whistleblower Reward Program, Securities Fraud, Whistleblower Case, Whistleblower Rewards,

June 13, 2014

The SEC charged four Northern California residents with insider trading in Ross Stores stock options based on nonpublic information about monthly sales results leaked by one of the retailer’s employees.  The agency alleged that Saleem Khan was routinely tipped by his friend Roshanlal Chaganlal, who was a director in the Ross Stores finance department and used confidential information to illegally trade on more than 40 occasions ahead of the company’s public release of financial results.  Khan also tipped his work colleagues Ranjan Mendonsa and Ammar Akbari so they too could trade in Ross stock options based on the nonpublic information.  The insider trading resulted in collective profits of more than $12M.  SEC

Tagged in: Insider Trading, Securities Fraud,

June 6, 2014

The SEC announced charges against LA-based market access provider Wedbush Securities and two officials accused of violating the agency’s market access rule that requires firms to have adequate risk controls in place before providing customers with access to the market.  The SEC’s Enforcement Division alleges the company, which has consistently ranked as one of the five largest firms by trading volume on NASDAQ, failed to maintain direct and exclusive control over settings in trading platforms used by its customers to send orders to the markets.  SEC

Tagged in: Regulatory Violations, Securities Fraud,

June 3, 2014

The SEC filed an emergency enforcement action to halt an ongoing fraud by Scott Valente and his Albany-based firm, the ELIV Group.  The SEC alleges that Valente and his company have fraudulently raised more than $8.8M from approximately 80 clients by falsely claiming they achieve outsized positive returns when in fact ELIV Group has earned no positive results at all, instead sustaining consistent investment losses for the past three years.  Meanwhile, Valente has been making substantial cash withdrawals of client funds and spending their money on his home improvements and mortgage payments as well as jewelry and a vacation condominium.  SEC

Tagged in: Misrepresentations, Securities Fraud,

June 2, 2014

The SEC charged a charter school operator in Chicago with defrauding investors in a $37.5M bond offering for school construction by making materially misleading statements about transactions that presented a conflict of interest.  The SEC alleges that UNO Charter School Network Inc. and United Neighborhood Organization of Chicago not only failed to disclose a multi-million-dollar contract with a windows company owned by the brother of one of its senior officers, but investors also weren’t informed about the potential financial impact the conflicted transaction had on its ability to repay the bonds.  SEC

Tagged in: Misrepresentations, Regulatory Violations, Securities Fraud,

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