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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.

December 10, 2018

Steven Pagartanis pled guilty to conspiring to commit mail and wire fraud for orchestrating a Ponzi scheme that ran for 18 years. Pagartanis solicited elderly victims by guaranteeing a fixed return of 4.5 to 8 percent annually in real estate-related investments. Pagartanis directed his victims to make checks payable to an entity he secretly controlled and then utilized a network of bank accounts to launder the stolen funds, which he used to pay for exorbitant personal expenses and to cover purported “interest” payments. Pagartanis’ scheme resulted in actual losses of over $9 million and many of his victims lost substantial portions of their life savings. A civil case against Pagartanis has also been filed by the SEC. DOJ

November 29, 2018

Professional boxer Floyd Mayweather Jr. and music producer DJ Khaled have settled SEC charges that they promoted initial coin offerings (ICOs) by Centra Tech Inc. without making required disclosures about payments they received from Centra Tech.  Mayweather agreed to pay disgorgement, penalties, and interest totaling $614,775, and Khaled agreed to pay a total of $152,725. SEC

November 16, 2018

CarrierEQ Inc. (Airfox) and Paragon Coin Inc. have agreed to pay civil penalties of $250,000 each to resolve charges that they conducted initial coin offerings (ICOs) in 2017 without registering the ICOs pursuant to federal securities laws.  Airfox's offering had raised $15 million and Paragon had raised $12 million.  The companies also agreed to provide compensation to harmed investors and to register their tokens as securities.  SEC

November 7, 2018

Citibank N.A. has agreed to pay $38.7 million to settle charges that it improperly handled “pre-released” American Depositary Receipts (ADRs).  ADRs are securities that represent shares in a foreign company, and ordinarily require that a corresponding number of foreign shares be held at a depository bank. However, "pre-release” allows ADRs to be issued without the deposit of foreign shares, provided that brokers have an agreement with a depository bank and the broker or its customer owns the required number of foreign shares. The SEC found that Citibank improperly provided ADRs to brokers when, in fact, neither the broker nor its customer had the foreign shares needed to support those new ADRs.  SEC

November 8, 2018

Zachary Coburn, the founder of EtherDelta, a digital "token" trading platform, settled SEC charges that the platform operated as an unregistered exchange.  Over an 18-month period, EtherDelta's users executed more than 3.6 million orders for ERC20 tokens, including tokens that are securities under the federal securities laws.  Because it was functioning as an online national securities exchange, EtherDelta was required to register with the SEC or qualify for an exemption.  Coburn consented to the order and agreed to pay $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty.  SEC

November 7, 2018

ITG Inc. and its affiliate AlterNet Securities Inc. have agreed to pay a $12 million SEC fine to settle charges that ITG made misstatements about the operation of its dark pool, POSIT, and failed to establish adequate safeguards and procedures to protect POSIT subscribers’ confidential trading information.  The SEC found that ITG improperly disclosed the confidential dark pool trading information of firm clients, and failed to disclose certain structural features of the dark pool, including segmentation and speed limits.  SEC

October 23, 2018

The SEC has settled with the head of Breitling Oil and Gas Corporation (BOG) and Breitling Energy Corporation (BECC), Christopher A. Faulkner, for charges of securities fraud, engaging in illegal monetary transactions, and tax evasion. Between 2011 to 2016, the self-proclaimed "Frack Master" allegedly lied to investors about his experience and the estimated costs of drilling, pocketed a difference of about $80 million for his companies, and then funneled about $23 million of those funds for his personal use. The agency had previously settled with most of the 11 other individuals and entities that were also charged in this scheme. Faulkner will now serve 12 years in federal prison and pay $25 million in disgorgement and interest. SEC; USAO NDTX

October 18, 2018

Jean Danhong Chen, an attorney, and Tony Jianyun Ye have been charged by the SEC with securities violations arising from their sale of EB-5 securities to Chen's clients, earning over $10 million in undisclosed commissions.  Chen and Ye operated an EB-5 regional center, Golden State Regional Center LLC, and advised Chen's clients to invest in the center’s projects while concealing their ownership interest. After learning of the SEC’s investigation, Chen and Ye allegedly backdated documents and scrubbed other business records to conceal their role in the alleged scheme.  SEC

October 18, 2018

Michael Siva, a broker and financial advisor at a New York City investment bank, pleaded guilty to securities violations in connection with his role in an insider trading scheme in which Siva and co-defendants traded on material non-public information regarding potential and unannounced merger and acquisition transactions, including tender offers, which they obtained from a co-conspirator employed as a technology consultant at a different investment bank.  Siva and a co-defendant generated illicit profits in excess of $3 million on the trades, and Siva also earned thousands of dollars in commissions on the illegal trades entered on behalf of his clients. SDNY.  See also, August 2017 SEC Action.

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
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