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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.

June 26, 2023

U.S.-based citizens Ronald Flynn and Richard Marchitto, their U.S.-based company Vuuzle Media Corp., and UAE-based company Vuuzle Media Corp Limited have been ordered to pay over $26 million in civil monetary penalties, and another $26 million in disgorgement and prejudgment interest, after they were found to have fraudulently raised over $25 million through high pressure sales tactics.  Using a boiler room of salespeople based largely in the Philippines, the defendants misled victims into believing Vuuzle was a legitimate and profitable company, when in fact, it was not, and investor funds were instead used on Flynn and Marchitto’s personal and business expenses.  SEC

June 21, 2023

Audit firm Marcum LLP has agreed to pay $10 million after an SEC investigation and order found systemic quality control failures in the company’s audit work.  Following an explosion of SPAC clients in the past couple years, Marcum tripled its number of clients, but the rapidly increased workload revealed the company’s failures to design, implement, and monitor a quality control system.  As a result, about 25-50% of audits reviewed in connection with the investigation were found to violate auditing standards.  SEC

June 20, 2023

Insight Venture Management LLC has agreed to pay $1.5 million in penalties and over $800,000 in disgorgement and prejudgment interest to the SEC to settle charges that it charged excess management fees and failed to disclose a conflict of interest to investors.  As a result of these failures, investors were unaware that Insight was able to manipulate the calculation of its management fees.  SEC

June 16, 2023

Pacific Investment Management Company LLC (PIMCO) has agreed to pay $9 million to settle two SEC enforcement actions.  In the first action, PIMCO was found to have failed to disclose material information to investors concerning the use of interest rate swaps by one of its funds, and the impact those swaps had on the funds’ dividend.  In the second action, PIMCO was found to have failed to comply with a fund’s agreement to waive approximately $27 million in advisory fees between 2011 and 2017, and maintain adequate policies and procedures concerning advisory fee calculations and waivers until 2018.  SEC

June 16, 2023

Convertible note dealer, BHP Capital NY, Inc., and its managing member, Bryan Pantofel, have agreed to pay more than $2.5 million and surrender unregistered securities for cancellation in order to settle charges of failing to register with the SEC as securities dealers.  The defendants allegedly operated as an unregistered dealer—including purchasing notes from microcap issuers, converting the notes into four billion shares of stock, and selling the stocks—from 2017 to 2022.  SEC

May 30, 2023

The former head of Wells Fargo’s Community Bank, Carrie Tolstedt, has agreed to pay a $3 million penalty to settle charges of misleading investors about its financial success.  Over a two-year period, Tolstedt publicly and repeatedly touted a metric used by Wells Fargo to measure financial success, even though she knew it did not accurately track accounts or products used or needed by customers.  In addition to the penalty, Tolstedt will pay almost $1.5 million in disgorgement and over $400,000 in pre-judgment interest.  The funds will be combined with prior payments of $500 million by Wells Fargo and $2.5 million by its former CEO and Chairman, John Stumpf, and will be distributed to harmed investors.  SEC

May 30, 2023

Former Coinbase manager, Ishan Wahi, and his brother, Nikhil Wahi, have been sentenced to 2 years and 10 months in prison respectively and ordered to forfeit cryptocurrency and cash in order to resolve civil and criminal charges of insider trading.  As part of his position at Coinbase, Ishan helped coordinate public listing announcements for crypto assets, at least nine of which were crypto securities.  In violation of Coinbase’s rules as well as federal law, Ishan tipped his brother Nikhil and friend Sameer Ramani off to the assets’ release, allowing them to purchase them and sell them for a profit.  SEC

May 12, 2023

HSBC Bank USA, N.A., HSBC Securities (USA) Inc., and HSBC Bank plc (collectively HSBC Affiliates) have been ordered to pay $30 million to the CFTC and $15 million to the SEC to settle charges of violating recordkeeping and supervisory requirements.  As part of the settlement, HSBC Affiliates admitted that it failed to stop employees from communicating internally and externally through unapproved mediums, and failed to preserve those messages as business records even if they pertained to the businesses.  CFTC; SEC

May 11, 2023

The Bank of Nova Scotia and Scotia Capital USA Inc. (collectively BNS Affiliates) have been ordered to pay $15 million to the CFTC and $7.5 million to the SEC to settle charges of violating recordkeeping and supervisory requirements.  BNS Affiliates admitted that its employees often communicated internally and externally through unapproved channels, and though some messages pertained to the businesses, failed to preserve those messages as records, and would be unable to produce them if requested.  CFTC; SEC

May 11, 2023

Dutch medical supplier Koninklijke Philips N.V. has agreed to pay $62 million to settle charges that it violated the Foreign Corrupt Practices Act while selling medical equipment to hospitals in China.  A SEC investigation found that Philips’ Chinese subsidiaries gave distributors special pricing discounts that invited excessive funds to be used for improper payments, made such payments to curry favor toward their products, and manipulated the fair bidding process to fake compliance with Chinese laws.  The SEC had previously charged Philips for similar conduct in Poland between 1999 and 2007.  SEC
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