SEC Enforcement

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 announced fraud charges against Connecticut-based investment advisory firm Atlantic Asset Management LLC for investing clients in certain bonds with a hidden financial benefit to the broker-dealer connected to the firm.  The SEC alleges that Atlantic invested more than $43 million of client funds in illiquid bonds issued by a native American tribal corporation without disclosing the conflict of interest that the bond sales generated a private placement fee for the broker-dealer, whose parent company partially owns Atlantic.  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 10, 2015

Through orders instituting settled administrative proceedings, the SEC suspended five accountants and two associated auditing firms from practicing or appearing before the SEC.  The SEC’s orders found that the accountants and firms at various times performed deficient audits of public companies, jeopardized the independence of other audits, falsified and backdated audit documents, and violated other key rules designed to preserve the integrity of the financial reporting system. SEC

December 7, 2015

The SEC announced a series of enforcement actions against lawyers across the country charged with offering EB-5 investments while not registered to act as brokers.  The SEC settled administrative proceedings against at least seven immigration law firms and/or attorneys, who agreed to cease and desist from acting as unregistered brokers, and collectively will pay over $700,000 in disgorgement, penalties, and prejudgment interest.  The SEC also filed a complaint in federal district court in Los Angeles alleging that immigration attorney Hui Feng and the Law Office of Feng & Associates not only acted as unregistered brokers by selling EB-5 investments to more than 100 investors, but also defrauded their clients by failing to disclose their receipt of commissions on the investments in breach of their fiduciary and legal duties. SEC

December 3, 2015

The SEC announced fraud charges against three Chicago-based traders, twin brothers Behruz and Shahryar Afshar and their friend and former broker Richard Kenny, for circumventing market structure rules through a pair of options trading schemes.  Options exchange rules provide that a non-broker-dealer that places more than 390 orders in options per day (on average) during any month will be designated as a “professional” for the next quarter.  This designation applies to all accounts beneficially owned by a trader.  The SEC alleges that despite far exceeding this threshold in every quarter between October 2010 and December 2012, the Afshar brothers were able to trade as non-professionals, thus obtaining execution priority and lower fees, by alternating their trading between accounts and falsely representing the ownership of their accounts.  The SEC also alleges that the defendants engaged in a “spoofing” scheme in which they placed non-bona fide orders to take advantage of a “maker-taker” program offered by an options exchange to encourage liquidity.  SEC

December 2, 2015

National audit firm Grant Thorton will pay $4.5 million to settle charges it ignored red flags and fraud risks while conducting deficient audits for publicly-traded Assisted Living Concepts (a senior housing provider) and Broadwind Energy (an alternative energy company) — both of which themselves faced SEC enforcement actions for improper accounting and other violations.  Grant Thorton’s deficient audits spanned from 2009 to 2011.  The SEC’s investigation found that Grant Thorton repeatedly violated professional standards and their inaction allowed the companies to make numerous false and misleading public filings.  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 30, 2015

Standard Bank will pay $4.2 million to settle SEC charges that it failed to disclose certain payments made in connection with debt issued by the Government of Tanzania in 2013.  The bank acted as a lead manager for the offering but failed to disclose that its affiliate, Stanbic Bank Tanzania Limited, would pay $6 million of the proceeds of the $600 million offering to a private Tanzanian firm that performed no substantive role in the transaction.  A representative of the Government of Tanzania was a director of the private firm and the offering was not finalized until Standard and Stanbic agreed to pay the firm a percentage of the proceeds of the offering.  The payment is part of a global coordinated settlement with the United Kingdom’s Serious Fraud Office under which Standard Bank will pay a total of $36.9 million.  SEC