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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 24, 2016

				 The SEC obtained a court order to freeze the profits of Nauman A. Aly, a trader in Pakistan, who allegedly made more than $425,000 in profits by manipulating a technology stock through false company filings.  The SEC alleges that Aly filed a form 13D on the SEC’s Edgar system falsely stating that his group of investors had purchased a 5.1% beneficial ownership of Silicon Valley-based Integrated Device Technology (IDT) and had offered to acquire all of the company’s shares for a price that represented a 65 percent premium.  The market reacted quickly to the filing and IDT’s stock price increased by more than 25% in less than 10 minutes.  Aly then sold all of his IDT call options for an illicit profit of more than $425,000.  The asset freeze ensures that Aly cannot withdraw the $425,000 from his U.S.-based account.  SEC				 					 

						
Tagged in:
													  Market Manipulation and Trading Violations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 20, 2016

				 The SEC announced a whistleblower award of more than $450,000 to be split between two individuals for a tip that led the agency to open a corporate accounting investigation and for their assistance once the investigation was underway.  SEC				 					 

						
Tagged in:
													  Accounting Fraud, 
													  SEC Whistleblower Reward Program, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 19, 2016

				 Eric J. Kellogg, mayor of Harvey, Illinois, will pay $10,000 and has agreed to never participate in a municipal bond offering again, in order to settle SEC fraud charges.  The SEC alleged that Kellogg was connected to a series of fraudulent bond offerings by the city.  Investors were told that their money would be used to develop and construct a Holiday Inn hotel in Harvey, but instead city officials diverted at least $1.7 million in bond proceeds to fund the city’s payroll and other operational costs.  SEC				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 19, 2016

				 The SEC announced insider trading charges against professional sports gambler William “Billy” Walters.  The SEC alleges that Walters was owed money by Thomas C. Davis, former board member of Dean Foods.  According to the SEC’s complaint, Davis regularly shared insider information about Dean Foods with Walters in advance of market-moving events.  The two communicated using prepaid cell phones and through other methods in an effort to avoid detection.  Around 2013, when Davis was lacking market-moving information about Dean Foods to share with Walters, he began sharing non-public information about strategic plans for Darden Restaurant group which Davis had subject to a non-disclosure agreement.  Walters allegedly made $40 million based on the illegal stock tips from Davis.  The SEC also included professional golfer Phil Michelson as a relief defendant.  The SEC alleges that Mickelson owed Walters money and Walters urged him to trade in Dean Food securities based on Davis’ information.  Michelson reaped more than $931,000 in profits based on his trading of Dean Foods securities and used part of the money to pay his trading debts to Walters.  Michelson has agreed to full disgorgement of his trading profits plus interest.  SEC				 					 

						
Tagged in:
													  Insider Trading, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 17, 2016

				 The SEC announced a whistleblower award of more than $5 million to a former company insider whose detailed tip led the agency to uncover securities violations that would have been nearly impossible for it to detect but for the whistleblower’s information.  SEC				 					 

						
Tagged in:
													  SEC Whistleblower Reward Program, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 13, 2016

				 The SEC announced a whistleblower award of more than $3.5 million to a company employee whose tip bolstered an ongoing investigation of wrongdoing that strengthened the SEC’s case.  SEC				 					 

						
Tagged in:
													  SEC Whistleblower Reward Program, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 13, 2016

				 The SEC announced fraud charges against attorneys Jay Mac Rust and Christopher K. Brenner for making undisclosed risky investments and stealing money from escrow accounts of small business owners seeking commercial loans.  The SEC alleges Rust and Brenner collected $13.8 million acting as escrow agents between their clients and a purported loan company called Atlantic Rim Funding.  Rust and Brenner assured clients that their deposits of 10 percent of the desired loan amount would be held safe and only used to purchase liquid, government-backed securities.  According to the SEC’s complaint, Atlantic had no ability or intention to obtain these loans.  Yet Rust and Brenner continued to make misrepresentations to clients and collect more money from clients anyway.  Rust and Brenner took over $1 million in client funds to pay themselves and others and gambled on risky securities derivatives with the remainder of the money.  SEC				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 12, 2016

				 The SEC announced fraud charges against California stock promoter Imran Husain and New Jersey lawyer Gregg Evan Jaclin for creating sham companies and selling them until the SEC issued stop orders and suspended the registration statements of the last two companies they created.  The SEC alleges that Husain and Jaclin created nine shell companies and sold seven by creating a sham business plan for each company, installing puppet CEOs, preparing bogus legal documents purporting to sell each company’s shares to straw shareholders who were actually given cash to pay for the stock they purchased plus a commission, and then filing misleading quarterly and annual reports once the companies were registered.  Husain obtained about $2.25 million in total proceeds when the empty shell companies were sold.  Jaclin and his firm received nearly $225,000 for their legal services.  SEC				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 11, 2016

				 The SEC charged Jason Galanis, his father John Galanis, and five associates with defrauding investors in sham Native American tribal bonds in order to steal millions of dollars in proceeds to fund their own extravagant expenses and criminal defense costs.  The SEC alleges that Jason and John convinced a Native American tribal corporation to issue limited recourse bonds they had previously structured, acquired two investment advisory firms, and installed officers to arrange the purchase of $43 million in bonds using clients’ funds.  The SEC alleges that instead of investing bond proceeds as promised in annuities to benefit the tribal corporation and generate sufficient income to repay bondholders, the money wound up in a bank account in Florida belonging to a company controlled by the defendants.  The misappropriated funds were used for the purchase of luxury goods and to pay attorneys representing Jason and John in a criminal case brought parallel to fraud charges brought by the SEC last year.  SEC				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 6, 2016

				 Pittsburgh, Pa.-based financial adviser Martin Blazer III, founder of Blazer Capital Management, agreed to settle fraud charges brought by the SEC.  The SEC’s complaint, filed in federal court in Manhattan, alleges that Blazer targeted professional athletes and other high-net worth individuals as clients, took approximately $2.35 million from five clients without their authorization to invest in two movie projects in which he had a personal financial interest, and then took money from one client’s account when another found out about the unauthorized investment and threatened to sue if the money was not returned.  When SEC examiners uncovered the unauthorized withdrawals, Blazer lied and produced false deal documents he created in an attempt to hide his misconduct.  A determination of disgorgement and financial penalties will be determined by the court at a later date.  SEC				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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