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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.

May 31, 2022

Healthcare company SCWorx Corp. has agreed to resolve SEC charges that it made false and misleading statements in an April, 2020 press release, claiming in a press release that it had received a purchase order for millions of COVID-19 rapid test kits.  The announcement caused the company’s stock price to surge, but the SEC alleged that the company had neither a legitimate supplier of COVID-19 test kits nor an executed purchase agreement with a buyer.  When the true facts became public, investors lost at least $116 million.  The company has agreed to pay a civil penalty of $125,000 and contribute stock valued at $600,000 as disgorgement and prejudgment interest to harmed investors in a private class action.  The company’s former CEO, Marc Schessel, has been indicted for securities fraud with respect to the scheme.  SEC; USAO NJ

May 25, 2022

RiverSource Distributors Inc. will pay a $5 million civil penalty for violating Section 11 of the Investment Company Act by employing sales practices wherein variable-annuities-holding customers were unknowingly switched from one variable annuity to another, increasing sales commissions for employees and boosting RiverSource’s revenues. These trades were effectuated through Ameriprise Financial Services, LLC, an affiliated broker-dealer/investment adviser. RiverSource’s compliance department caused the sales practice to stop in 2018, but only after these types of transactions saw a significant increase from 2016 until then. RiverSource was also hit with a cease-and-desist order and a censure, in addition to the civil penalty.  SEC

May 23, 2022

Registered investment advisor BNY Mellon Investment Adviser agreed to pay a $1.5 million penalty to resolve allegations that it misstated or omitted material facts with respect to investment decisions for certain mutual funds in managed.  Specifically, the SEC alleged that BNY Mellon represented or implied that all investments in the funds had undergone a review with respect to Environmental, Social, and Governance (“ESG”) considerations, even though that was not always the case.  SEC

May 20, 2022

Wells Fargo Advisors, which is a registered broker-dealer and investment advisor, agreed to pay $7 million to resolve allegations that it had an inadequate anti-money laundering system.  As a result, the SEC alleged, Wells Fargo did not file timely suspicious activity reports including with respect to foreign wire transfers to or from its customers’ brokerage accounts.  SEC

May 19, 2022

Sohrab “Sam” Sharma, Robert Farkas, and Raymond Trapani will disgorge over $40 million for raising more than $32 million from investors in their unregistered ICO of “CTR tokens” through their controlled entity, Centra Tech Inc. The fraudsters made material misrepresentations in their marketing of the tokens, including claiming partnerships with Visa, MasterCard, and The Bancorp; created fake executive bios; misrepresented the company’s viability; and manipulated trading in the tokens to generate interest. The three defendants have been sentenced to imprisonment in addition to the financial penalties levied. SEC

May 17, 2022

Allianz Global Investors U.S. LLC pleaded guilty to securities fraud and agreed to pay a criminal fine of $2.3 billion, an SEC penalty of $675 million, and over $5 billion in disgorgement and restitution to victims.  Three former AGI senior portfolio managers, Gregoire Tournant, Trevor Taylor, and Stephen Bond-Nelson, also pleaded guilty to related charges and will be sentenced at a later date.  As part of its plea, AGI admitted that between 2014 and 2020, AGI and the individual defendants made false and misleading statements to current and prospective investors in AGI’s Structured Alpha Funds which understated downside risks and overstated the level of independent risk oversight over the funds.  While the funds promised risk management and hedging, the actual investment strategy prioritized returns over risk management, and the promised hedging positions were not purchased.  To conceal losses and understate the magnitude of the actual risks, defendants fraudulently altered numerous financial reports and other information provided to investors.  The scheme was exposed when the funds experienced billions in losses during the 2020 COVID-related market volatility. With its guilty plea, AGI US is disqualified from providing advisory services to U.S.-registered investment funds for the next ten years, and will exit the business of conducting these fund services.  SEC; DOJ; SDNY

May 6, 2022

NVIDIA Corporation has agreed to a cease-and-desist order and to pay a $5.5 million penalty for violations of the Securities Act and the disclosure provisions of the Securities Exchange Act. NVIDIA failed to disclose cryptomining as a significant element of its material revenue growth, depriving investors of critical information related to the investment’s volatility. SEC

May 6, 2022

The SEC awarded $3.5 million to 4 whistleblowers in a single covered action. Three joint whistleblowers provided staff with information that caused a new investigation to be opened, and a fourth whistleblower provided analytical insights of publicly available information that focused the staff’s attention on new allegations that advanced the investigation. SEC

April 28, 2022

Publicly-traded asset manager Medley Management and its former CEOs, Brook and Seth Taube, have agreed to pay $10 million in civil penalties to resolve SEC charges of making material misrepresentations to investors and clients.  Through multiple public filings dating back to at least 2016, Medley and the Taubes allegedly overstated assets under management, failed to disclose certain risks, and made unfounded projections of Medley’s likely future growth to sway investors toward voting for a merger between Medley and two of its clients.  SEC

April 25, 2022

The SEC has awarded five whistleblowers a total of $6 million for their assistance in a single successful enforcement action.  According to the agency, one group of the whistleblowers provided key documents that prompted the agency to request additional documents from the respondent, while the second group provided firsthand accounts of the misconduct.  SEC
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