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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 3, 2016

The SEC charged Rhode Islanders Michael J. Maciocio and David P. Hobson with insider trading in the securities of deal targets being pursued by the pharmaceutical company where Maciocio worked.  The SEC alleges that Maciocio obtained confidential clinical and business data about pharmaceutical firms being considered by his company for potential acquisitions and business relationships, and that he used this nonpublic information to trade in their stocks.  Maciocio made approximately $116,000 in illegal profits based on this trading activity.  The SEC also alleges that Maciocio illegally tipped his childhood friend, Hobson, a stockbroker who utilized the nonpublic information to realize at least $187,000 in illicit trading profits for himself and $145,000 for his customers.  SEC

June 2, 2016

The SEC charged New York City-based trader Haena Park with defrauding investors out of millions of dollars by misrepresenting her investment track record, the profitability of her investments, and her use of investor funds.  The SEC alleges that Park touted her supposedly profitable futures and foreign exchange trading strategy when soliciting friends, family, former Harvard classmates, and individuals with connections to them.  She pooled investor finds and incurred heavy trading losses month after month in the futures and forex markets, yet repeatedly told investors that their investments were profitable and sent them monthly account statements showing fictitious profits.  She raised at least $14 million from more than 30 investors since 2012, and has suffered more than $16 million in trading losses during that time.  SEC

June 2, 2016

The SEC announced fraud charges and an asset freeze against Charles C. Liu, his wife Xin “Lisa” Wang, and their companies Pacific Proton Therapy Regional Center, Pacific Proton EB-5 Fund, and Beverly Proton Center LLC.  The SEC’s complaint alleges that Liu and Wang raised $27 million for a proton therapy cancer treatment center in Southern California from 50 investors in China through the EB-5 immigrant investor program.  They touted in promotional materials that the project would create more than 4,500 new jobs and have a substantial impact on the local economy while giving foreign investors an opportunity for future U.S. residency.  But presently there is no construction at the proposed site after more than 18 months of collecting investments.  Meanwhile, Liu has transferred $11 million in investor funds to three firms in China and diverted another $7 million to his and his wife’s personal accounts.  SEC

June 2, 2016

North Carolina-based investment adviser Richard W. Davis, Jr. has agreed to settle charges of defrauding investors by secretly steering portions of real estate-related investments into deals with companies he owned or operated.  The SEC further alleges that Davis made false and misleading statements to investors before and after they made their investments, failed to inform investors of their losses as his companies failed to pay the loans, and improperly received at least $1.5 million from bank accounts which commingled investor funds when he was only entitled to less than $150,000 in management fees.  Davis has agreed to a settlement subject to court approval with disgorgement plus interest and penalties to be determined by the court at a later date.  SEC

June 1, 2016

Wall Street-based brokerage firm Albert Friend & Company (AF&Co) will pay $300,000 to settle charges it failed to sufficiently evaluate or monitor customers’ trading for suspicious activity.  Specifically, an SEC investigation found that AF&CO failed to file Suspicious Activity Reports with bank regulators for more than five years despite red flags tied to its customers high-volume liquidations of low-priced securities.  SEC

June 1, 2016

Maryland-based private equity firm Blackstreet Capital Management and its owner, Marry N. Gunty, will pay $3.1 million to settle charges that they engaged in brokerage activity and charged fees without registering as a broker-dealer and committed other securities law violations.  Blackstreet and Gunty performed in-house brokerage services rather than using investment banks or broker-dealers to handle the acquisition and disposition of portfolio companies for a pair of private equity funds they advise.  Blackstreet fully disclosed that it would provide brokerage services in exchange for a few, but failed to comply with the registration requirements to operate as a broker-dealer.  An SEC investigation further found that Blackstreet and Gunty engaged in conflicted transactions and inadequately disclosed fees and expenses.  SEC

May 31, 2016

The SEC charged two California men, Jaswant “Jason” Gill and Javier Rios, along with their investment firm, JSG Capital Investments, with operating a Ponzi scheme as they purported to specialize in serving middle-class investors and securing exorbitant returns by investing in hot pre-IPO stocks.  The SEC alleges that instead of using the firm’s purported proprietary trading models and investing in pre-IPO shares of well-known tech companies, as promised to investors, Gill and Rios personally pocketed at least $2.8 million in investor funds.  They never actually invested in any pre-IPO shares and used money from new investors to pay supposed returns to earlier investors.  They raised approximately $10 million by catering to average retail investors and promising them exclusive investment opportunities “previously only available to the one-percenters.”  The SEC also obtained a court ordered asset-freeze against the defendants.  SEC

May 31, 2016

The SEC charged Nashville-based investment advisory firm Hope Advisers, Inc. and its owner, Karen Bruton, with scheming to collect extra fees from a pair of hedge funds they managed.  The SEC alleges that Hope Advisers and Bruton orchestrated certain trades to cause the funds to realize large gains near the end of the month, while basically guaranteeing a large loss to be realized the following month, in order to circumvent the funds’ fee structure under which Hope Advisers was entitled to fees only if the funds’ profits in the month exceeded past losses.  Without the fraudulent trades, Hope Advisers would have received almost no incentive fees since October 2014.  Hope Advisers and Bruton have consented to an interim order that restricts them from accessing $7 million of their own investments in the funds.  SEC

May 31, 2016

California-based mortgage company First Mortgage Corporation (FMC), along with six senior executives, will pay $12.7 million to settle charges that they orchestrated a scheme to defraud investors in the sale of residential mortgage-backed securities guaranteed by the Government National Mortgage Association (Ginnie Mae).  FMC is a mortgage lender that issued Ginnie Mae RMBS backed by loans it originated.  The SEC alleges that from March 2011 to March 2015, FMC and its senior-most executives pulled current, performing loans out of Ginne Mae RMBS by falsely claiming they were delinquent in order to sell them at a profit into newly-issued RMBS.  According to the SEC’s complaint, FMC purposely delayed depositing checks from borrowers who had been behind on their loans, falsely claiming to both investors and Ginnie Mae that such loans remained delinquent when in reality they were current.  After repurchasing at prices applicable to delinquent loans, FMC was able to resell the loans into new Ginnie Mae RMBS pools at higher prices applicable to current loans for an immediate, nearly risk-free profit.  FMC’s Chairman and CEO Clement Ziroli Sr., President Clement Ziroli Jr., CFO Pac Wong, Senior VP Ronald Vargas, Senior VP Scott Lehrer, and Servicing Department Managing Director Edward Joseph Sanders will pay collectively over $1 million to settle the SEC’s charges.  SEC

May 31, 2016

The SEC announced insider trading charges against investment banker Steven McClatchey and his friend and plumber Gary Pusey.  The SEC alleges that McClatchey had regular access to highly confidential nonpublic information about impending transactions being pursued for investment bank clients.  McClatchey allegedly tipped Pusey on 10 different occasions ahead of public merger announcements.  Pusey allegedly used the misappropriated nonpublic information to generate $76,000 in illicit trading profits.  In return for the tips, Pusey provided McClatchy with free services during his bathroom remodel and paid him thousands of dollars in cash that he typically placed in McClatchey’s gym bag while at the marina where they kept their boats or which he handed to him directly in his garage.  SEC
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