Government Enforcement Actions

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

July 11, 2023

Fertilizer manufacturer J.R. Simplot Company has agreed to pay a $1.5 million civil penalty and implement waste management measures valued at $150 million in order to resolve allegations of failing to properly identify and manage hazardous waste streams at its Idaho plant, in violation of multiple environmental protection laws, including the Resource Conservation and Recovery Act; Clean Air Act; Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA); and Emergency Planning and Community Right-to-Know ACT (EPCRA).  Some of the required measures include recovering and reusing certain waste byproducts, ensure proper containment of waste products, replacing aging cooler towers with cooling ponds that would reduce emissions, and fund environmental mitigation work.  DOJ

July 11, 2023

The owner of one of California’s largest chains of pain management clinics has agreed to pay nearly $11.4 million to the federal government and the states of California and Oregon to settle allegations of defrauding Medicare and state Medicaid programs of millions of dollars.  A nearly four-year investigation by government data analysts found that Dr. Francis Lagattuta and his business, Lags Medical Clinics—which operates more than 20 facilities in California and Oregon—billed the healthcare programs for medically unnecessary tests and procedures that were provided to every patient as part of clinic protocols.  The investigation also found that patients who did not consent to such procedures had their pain medication reduced.  Furthermore, a respiratory therapist who was the spouse of an executive was recruited to interpret certain test results despite having no formal medical training.  In addition to the monetary penalty, Dr. Lagattuta is also barred from serving Medi-Cal beneficiaries for the next five years.  CA AG

July 11, 2023

Bank of America has been ordered to pay more than $100 million to harmed consumers, $90 million in penalties to the Consumer Financial Protection Bureau (CFPB), and $60 million in penalties to the Office of the Comptroller of the Currency (OCC) for multiple acts of misconduct.  The bank was found to charge consumers double fees on insufficient funds, withhold promised cash and point rewards on credit cards, and illegally obtain and use consumer credit reports without their approval.  CFPB

July 7, 2023

National Grid has agreed to pay $5.38 million in connection with the release of hazardous chemicals into soil and groundwater surrounding a former gas plant in Massachusetts.  The plant operated for a century, ending in 1952, and yielded toxic byproducts such as oils, sludges, and tars, which have gone on to contaminate natural resources in the area.  DOJ

July 6, 2023

Emerson Sousa Pires and Flavio Mendes Goncalves, who together operated a purported hedge fund called EmpiresX, has been ordered to pay over $32 million in disgorgement, over $2 million in prejudgment interest, and civil penalties of $6 million and $5 million, respectively.  The two men sold investments by assuring investors that a trading “bot,” or skilled manual trading, guaranteed daily profits of 1%.  In reality, the bot was fake, the profits were losses, and the defendants were using investor funds to fund personal expenses.  SEC