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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

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

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

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

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

May 29, 2014

The SEC charged Chicago-based investment fund manager Neal V. Goyal and two investment advisers he owned and controlled – Blue Horizon Asset Management and Caldera Advisors – with violating the antifraud provisions of the various securities laws.  According to the SEC’s complaint, Goyal raised more than $11.4M in the last several years for investments in four private funds that he managed and controlled.  Goyal’s investment strategy lost money from the outset, but he hid those losses from investors through the Ponzi payments and phony account statements.  Meanwhile, Goyal misused investor funds to make down-payments and pay the mortgages on two homes he purchased.  He also siphoned away investor money to invest in a Chicago tavern, fund two children’s clothing boutiques that his wife operates in Chicago, and purchase artwork and lavish furniture.  SEC

May 28, 2014

The SEC announced fraud charges and an emergency asset freeze against IST Shareholder Services and Robert G. Pearson for misusing money belonging to their corporate clients and the clients’ shareholders in order to fund their own payroll and business obligations.  According to the SEC’s complaint, Pearson misappropriated more than $1.3M during the past two years from an IST bank account holding the funds of clients who use IST as a paying agent to make cash disbursements to shareholders.  Pearson admitted to the scheme during questioning by SEC examiners.  SEC

May 22, 2014

The SEC charged a former director of the Long Island-based vitamin company, NBTY Inc., and others in his family circle with insider trading ahead of the company’s sale to private equity firm The Carlyle Group.  The SEC alleges that board member Glenn Cohen learned that NBTY was negotiating a sale to The Carlyle Group and tipped his three brothers and a brother’s girlfriend with the confidential information.  Craig Cohen, Marc Cohen, Steven Cohen, and Laurie Topal all traded on the inside information that Glenn Cohen provided and reaped illicit profits totaling $175,000.  The four Cohens and Topal agreed to settle the SEC’s charges by paying a total of more than $500,000.  SEC

May 21, 2014

The SEC charged Gaeton “Guy” S. Della Penna, a Sarasota, Florida-based private fund manager, with defrauding investors in a Ponzi scheme that ensued after he squandered their money on bad investments and personal expenses.  The SEC alleges that Della Penna raised $3.8M from investors in three private investment funds that he operated but then lost nearly all of their money by making unsuccessful investments and diverting more than a million dollars to himself and his girlfriend.  In an effort to cover up his fraud as it unraveled, Della Penna began operating a Ponzi scheme by using money from newer investors to pay fake returns to prior investors. SEC

May 20, 2014

The SEC charged James T. Adams, the former chief risk officer at Deloitte LLP, for causing violations of the auditor independence rules that ensure audit firms maintain their objectivity and impartiality with respect to their clients.  Specifically, Adams repeatedly accepted tens of thousands of dollars in casino markers while he was the advisory partner on subsidiary Deloitte & Touche’s audit of a casino gaming corporation.  Adams concealed his casino markers from Deloitte & Touche and lied to another partner when asked if he had casino markers from audit clients of the firm.  He agreed to settle the SEC’s charges by being suspended for at least two years from practicing as an accountant on behalf of any publicly traded company or other entity regulated by the SEC.  SEC
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