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SEC Enforcement Actions

The Securities and Exchange Commission (SEC) is the United States agency with primary responsibility for enforcing federal securities laws. Whistleblowers with knowledge of violations of the federal securities laws can submit a claim to the SEC under the SEC Whistleblower Reward Program, and may be eligible to receive  monetary rewards and protection against retaliation by employers.

Below are summaries of recent SEC settlements or successful prosecutions. If you believe you have information about fraud which could give  rise to an SEC enforcement action and claim under the SEC Whistleblower Reward Program, please contact us to speak with one of our experienced whistleblower attorneys.

October 3, 2018

The SEC froze the assets of U.K. citizen Roger Knox and the Swiss-based company Wintercap SA based on their role in a scheme that generated more than $165 million of illegal sales of stock in at least 50 microcap companies.  The parties are alleged to have helped securities holders conceal their stock ownership and to have provided anonymous access to brokerage accounts to sell the shares in the U.S. market. Knox allegedly helped facilitate pump-and-dump and other market manipulation schemes by selling massive quantities of microcap securities on behalf of the concealed shareholders, and simultaneously orchestrating promotional campaigns and other efforts to artificially inflate the price and trading volume of those shares.  DOJ announced parallel civil and criminal proceedings.  SEC; DOJ

September 29, 2018

Elon Musk and Tesla will pay a total of $40 Million in penalties to settle charges of securities fraud which were brought by the SEC against Musk one week ago and the charges made today against Tesla for failing to have the necessary disclosure controls and procedures in relation to the tweets of Elon Musk. One requirement of the settlement is Musk stepping down as Tesla’s Chairman. It will be three years before Musk can be re-elected as Chairman. Furthermore, there will be two new independent directors assigned to Tesla’s board and a new committee of independent directors who will put in place added controls and procedures to better manage Musk’s communications.  The payment of the $40 million will be made individually by Musk and Tesla – $20 million each. Finally, the investors who were affected will receive a distribution of the $40 million in penalties. SEC    

September 28, 2018

Credit Suisse Securities LLC has agreed to pay $5 million to the SEC and $5 million to New York to settle charges of violating the Securities Act by making material misrepresentations about retail customer orders. Between 2011 to 2015, the company allegedly failed to disclose to retail customers that their electronic system gave preferential treatment to orders that had a public reporting component over orders that did not. Additionally, the routing tactic used by the system gave customers of these non-reported orders less favorable execution prices. NY AG; SEC

September 28, 2018

Stryker Corp has agreed to pay $7.8 million to settle charges of violating the Foreign Corrupt Practices Act (FCPA) in sales of its products in China, India, and Kuwait. This is the company's second alleged violation of the FCPA in recent times; the company had paid $13.2 million to settle similar charges in 2013. According to the SEC, the current charges relate to inadequate internal controls and inaccurately recorded records. In addition to the penalty, the settlement will now require Stryker to retain an independent compliance consultant. SEC

September 27, 2018

Elon Musk, the CEO and Chairman of Tesla Inc, has been charged with violating the antifraud provisions of federal securities laws through misleading tweets made in August that a plan to privatize Tesla was imminent pending a shareholder vote. The statement allegedly caused significant market disruption, along with a 6 percent jump in Tesla's stock value, and has led the SEC to seek a permanent injunction and bar to prevent Musk from taking on a leadership position in a publicly traded company, in addition to the usual civil penalty and disgorgement. SEC

September 27, 2018

Petroleo Brasileiro S.A. has agreed to pay a $853 million penalty and $933 million in disgorgement to settle DOJ and SEC charges that it violated the Foreign Corrupt Practices Act and filed false documents with the SEC that misled U.S. investors. According to the non-prosecution agreement struck with the DOJ, and the related SEC order, the Brazilian oil and gas company allegedly paid billions of dollars in bribes to Brazilian politicians, and then falsely categorized these kickbacks in records as relating to asset acquisition and management. DOJ; SEC.

September 25, 2018

The CEO of a Chilean-based chemical and mining company, Patricio Contesse, has agreed to pay $125,000 to settle allegations of violating the Foreign Corrupt Practices Act (FCPA) by paying over $15 million in bribes to Chilean politicians over the course of seven years, falsifying documents, and lying to auditors. His company, Sociedad Quimica y Minera de Chile, S.A. (SQM), had previously paid $30 million to settle related civil and criminal charges. SEC

September 24, 2018

The SEC announced that it awarded $4 million to an individual residing overseas who had submitted a tip to the SEC Whistleblower Program.  The individual's tip led to an investigation.  The whistleblower's name, the subject of the underlying investigation, and the nature of the wrongdoing were not reported by the SEC, which offers anonymity under its Whistleblower Program.  SEC

September 19, 2018

Three men from three states have been indicted for allegedly conspiring to defraud more than 230 investors of more than $364 million in a classic Ponzi scheme, and in one of the largest ever charged in Maryland. Kevin B. Merrill, Jay B. Ledford, and Cameron Jezeierski of Maryland, Nevada, and Texas, respectively, allegedly persuaded investors across the country that they could make a profit by purchasing consumer debt portfolios that would either have their debt collected upon or be sold to other debt buyers. Instead, the defendants used the money to purchase expensive homes, boats, jewelry, and at least 25 cars, as well as lead a generally lavish lifestyle. To conceal the fraud, the defendants allegedly created fake debt selling companies, bank accounts, and brokers, and generated false contracts, records, and reports. They face both criminal charges from the DOJ and civil charges from the SEC, and if convicted, face both financial penalties as well as decades in prison for the combined charges. USAO MD; SEC

September 18, 2018

Clovis Oncology Inc., along with its CEO, Patrick Mahaffy, and former CFO, Erle Mast, have agreed to pay civil penalties totaling over $20 million to resolve allegations that it violated the Securities Act and Securities Exchange Act by misleading investors about the efficacy of a lung cancer drug that it was developing. According to the complaint, in 2015, the company reported to investors that the drug was 60% effective and continued to do so for months after it learned that the drug was really only 28% effective, which allowed it to raise about $298 million at a public stock offering. With the disclosure of its true efficacy, however, Clovis's stock value dropped by approximately 70%, and the drug ceased to be developed in 2016. To compensate investors harmed by the misinformation, the SEC will create a Fair Fund to distribute penalties. SEC
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