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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.

November 14, 2019

Veritaseum, Inc. and Veritaseum, LLC, together with their owner Reginald Middleton, agreed to pay $9.5 million to resolve claims of fraudulent conduct in their VERI Initial Coin Offering. Defendants were alleged to have misrepresented the potential profitability and viability of Veritaseum's purported operations, the use of funds raised in the VERI ICO, and the amount of funds raised in the VERI ICO.  Middleton was further alleged to have engaged in conduct to manipulate the price of VERI.  Defendants will disgorge $7.9 million in gains, plus interest, and Middleton will pay a $1 million civil penalty.  SEC

November 4, 2019

Golden California Regional Center and its principal Bethany Liou will pay over $50 million in disgorgement and interest to resolve charges of fraud in connection with their sale of interests in the GCRC Cupertino Fund, LP as securities qualifying under the EB-5 visa program.  Defendants represented that investor funds would be used to finance real estate development but, in fact, Liou diverted the funds to personal use.  SEC

October 29, 2019

The orchestrator and four promoters of a pyramid and Ponzi scheme has been ordered to pay almost $11 million for defrauding at least 1,400 Spanish and Portuguese-speaking investors.  According to an earlier press release from the SEC, ringleader Daniel Fernandes Rojo Filho’s company, DFRF Enterprises, LLC, allegedly told investors that it operated more than 50 gold mines in Brazil and Africa.  In reality, the company did not actually mine gold and its $15 million in revenues came solely from recruiting new members as investors, with earlier investors paid commissions in a Ponzi-like fashion.  Filho alone will pay over $10 million of the monetary judgment; his four associates will each pay between $100,00 and $266,000.  SEC

October 10, 2019

A Maryland-based man has been sentenced to 22 years in prison for his role in a $396 million Ponzi scheme, the largest ever charged in Maryland.  Unbeknownst to hundreds of victim investors, the consumer debt portfolios they invested in through Kevin Merrill and co-conspirators Jay Ledford and Cameron Jezierski were fake, with Merrill, Ledford, and Jezierski going to great lengths to keep up the illusion.  The trio created imposter companies and bank accounts, fake documents, and invited would-be investors to tours of their Texas “office.”  By the time they were arrested in 2018, the scheme had raked in over $396 million, with another $260 million pending.  As part of his sentence, Merrill has also been ordered to pay restitution of at least $189 millionUSAO MD; SEC

October 2, 2019

PlexCorps and its principals Dominic Lacroix and Sabrina Paradis-Royer have agreed to pay nearly $7 million to resolve charges related to their unregistered initial coin offering PlexCoin, and their false and misleading statements regarding PlexCoin, the amount of funds raised by PlexCoin, the use of funds raised in the ICO, and the size and scale of PlexCoin operations.  The SEC had obtained an emergency freeze on the ICO in 2017, and defendants will disgorge over $4.5 million in retained investor funds, plus interest; in addition, the individuals will each pay a $1 million penalty.  Defendants are enjoined from further violations, and the individuals are enjoined from participating in any digital-securities offerings.  SEC

October 2, 2019

Brokerage firm Lek Securities Corp. and its CEO Sam Lek will pay almost $2 million to resolve allegations that they facilitated the manipulative trading scheme of Ukraine-based customer Avalon FA, Ltd.  Lek provided Avalon with the means to engage in "layering" and other cross-market manipulation.  Layering involves placing and canceling orders to signal inaccurate prices.  Avalon also engaged in other practices to buy and sell stocks to artificially impact options prices.  Lek Securities will pay a $1 million penalty plus $526,000 in disgorgement and interest; Sam Lek will pay a $420,000 penalty.  Defendants have admitted the facts alleged and Lek Securities has agreed to retain an independent compliance monitor.  SEC

September 30, 2019

Longfin Corporation has been ordered to pay $6.8 million in a default judgment entered in a federal court case alleging that Longfin filed fraudulent papers to qualify for a public offering under Regulation A+, misrepresenting the business as being based in the U.S.  In addition, Longfin reported fictitious revenue from sham commodities transactions and unlawfully distributed Longfin shares, including in unregistered transactions and to insiders and affiliates.  SEC

September 27, 2019

Advisory firms BMO Harris Financial Advisors Inc. and BMO Asset Management Corp. have agreed to pay over $37 million to resolve allegations that the companies violated the Investment Advisers Act by steering customers in their Managed Asset Allocation Program to more expensive investments from which the BMO advisor entities profited without disclosing this practice or the associated conflict of interest.  BMO will pay $29.73 million in disgorgement and prejudgment interest, along with a civil penalty of $8.25 million.  SEC

September 27, 2019

Canadian Westport Fuel Systems, Inc., and its former CEO Nancy Gougarty will pay $4.1 million to resolve charges that they violated the Foreign Corrupt Practices Act in making payment to Chinese government officials.  The clean fuel technology company was found by the SEC to have transferred shares in a Westport Chinese joint venture to a Chinese private equity firm in which a government official held a financial interest, misrepresented the identity of the parties involved, and circumvented internal accounting controls.  SEC

September 27, 2019

Pharmaceutical manufacturer Mylan N.V. has agreed to pay $30 million to resolve SEC charges that the company failed to disclose or adequately accrue for possible losses arising from a DOJ investigation into Mylan's classification, pricing, and rebate practices regarding its EpiPen product.  In 2017, Mylan agreed to pay $465 million to resolve that DOJ investigation.  SEC
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