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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.

August 14, 2014

The SEC charged New York-based brokerage firm Linkbrokers Derivatives LLC with unlawfully taking secret profits of more than $18M from customers by adding hidden markups and markdowns to their trades.  According to the SEC, Linkbrokers defrauded customers by purporting to charge them very low commission fees, but in reality extracting fees that in some cases were more than 1,000 percent greater than represented.  The scheme was difficult for customers to detect because the brokers charged the markups and markdowns during times of market volatility in order to conceal the false prices they were reporting to customers.  Linkbrokers agreed to pay $14M to settle the SEC’s charges.  SEC

August 11, 2014

As part of its nationwide review of municipal bond offerings, the SEC charged the state of Kansas with failing to properly disclose material pension liabilities and other risks to investors.  According to the SEC’s cease-and-desist order, the state’s offering documents failed to disclose the state’s pension system was significantly underfunded and created a repayment risk for investors in those bonds.  The SEC previously sanctioned New Jersey for failing to disclose to investors that it was underfunding the state’s two largest pension plans.  It also charged Illinois last year for its misleading pension disclosures.  SEC

August 8, 2014

The SEC charged Bahamas-based brokerage firm Alliance Investment Management Limited (AIM) and its president Julian R. Brown with misrepresenting themselves as the “custodian” for assets under the management of hedge fund manager Nikolai Battoo when they did not have such custody.  They also allowed Battoo to create false account statements on AIM letterhead that vastly overstated the value of investors’ assets by more than $150 million.  Brown and AIM then routinely provided the false account statements to auditors and others acting on behalf of Battoo’s investors.  SEC

August 8, 2014

The SEC charged New York-based brokerage firm Crucible Capital Group and its founder Charles “Chuck” Moore for allegedly violating net capital requirements and falsifying books and records to conceal the capital deficiencies.  According to the SEC, they attempted to disguise the firm’s extensive net capital insufficiencies by improperly off-loading its liabilities onto the books of an affiliated firm and improperly treating non-marketable stock as an allowable asset.  Moore went so far as to try to hide Crucible’s true financial condition from SEC examiners by providing them doctored invoices that sought to mask the extent of those liabilities.  SEC

August 7, 2014

The SEC charged Anthony G. Blumberg, the former CEO of a broker-dealer subsidiary of ConvergEx Group LLC, with deceiving brokerage customers with hidden fees to buy and sell securities.  According to the SEC, the scheme entailed concealing the practice of routing orders to an offshore affiliate in Bermuda to add mark-ups or mark-downs.  The hidden fees known as “trading profits” were in addition to and often much higher than the commissions paid by customers to have their orders executed.  The charges against Blumberg follow those announced in December by the SEC against three ConvergEx subsidiaries that agreed to pay more than $107 million and admit wrongdoing to settle the matter.  SEC

August 4, 2014

The SEC charged Houston-based oil-and-gas exploration and production company Houston American Energy Corp. and its CEO John F. Terwilliger with making fraudulent claims about the company’s oil reserves.  According to the SEC, Terwilliger and his company fraudulently claimed that a Colombian exploration concession in which Houston American only owned a fractional interest held between 1 billion and 4 billion barrels of oil reserves, and that the reserves were worth more than $100 per share to Houston American’s investors.  SEC

August 1, 2014

The SEC obtained a final judgment requiring Richmond, Va.-based financial services holding company AIC Inc., its subsidiary brokerage firm Community Bankers Securities LLC, and their CEO Nicholas D. Skaltsounis to pay nearly $70 million for conducting an offering fraud while selling AIC promissory notes and stock to numerous investors across multiple states, many of whom were elderly or unsophisticated brokerage customers.  SEC

July 31, 2014

Virginia-based broker Donna Jessee Tucker agreed to disgorge $730,000 in ill-gotten gains to settle charges of defrauding elderly customers, including some who are legally blind, by stealing their funds for her personal use and falsifying their account statements to cover up her fraud.  SEC
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