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Financial and Investment Fraud

This archive displays posts tagged as relevant to financial and investment fraud. You may also be interested in the following pages:

Page 1 of 61

May 13, 2021

Financial services company State Street Corporation will pay a $115 million criminal penalty and enter into a deferred prosecution agreement following its voluntary disclosure to authorities that, over the course of 17 years, the bank defrauded its clients out of $290 million.  State Street  admitted that it secretly marked up “out-of-pocket” (OOP) expenses charged to clients, despite telling clients that OOP expenses were passed through without markups. State Street executives took steps to conceal the mark-ups from clients, including by misleading clients when they inquired about what they were being charged for OOP expenses. As part of the settlement, defendant agreed to cooperate with ongoing investigations, to enhance its compliance program, and to retain an independent corporate compliance monitor for a period of two years. DOJ

May 12, 2021

Registered broker-dealer GWFS Equities Inc. will pay a penalty of $1.5 million to settle allegations that it failed to respond appropriately when it detected external bad actors gaining, or attempting to gain, access to the retirement accounts of participants in the employer-sponsored retirement plans it serviced, including through the use of improperly obtained electronic login information, user names, email addresses, and passwords. There was no allegation that this personal identifying information was disclosed in a breach of GWFS systems. However, the bad actors used this information to request distributions from plan participant accounts. While GWFS detected and blocked many of these attempts, the SEC charged that GWFS failed to file suspicious activity reports, or filed incomplete SARs, with respect to the account takeovers. SEC

May 12, 2021

The SEC made a whistleblower award of $3.6 million to an individual who provided new information that resulted in the opening of an SEC investigation directly based on that information, and provided ongoing assistance to the Commission during the course of the investigation.  At the same time, the SEC denied a whistleblower award to a second individual who submitted information regarding the company in the same covered action, finding that the information provided by the second claimant did not significantly contribute to the success of the Covered Action.  SEC

CFTC Whistleblower Program Faces Challenges of its Success: What Whistleblowers Should Know

Posted  05/11/21
Screenshot of CFTC Whistleblower Program web page
This week, the Wall Street Journal reported (paywall) on “turmoil” in the CFTC Whistleblower Program. According to the article, the CFTC has under consideration a whistleblower award of approximately $100 million, based on a claim by a whistleblower in the 2015 $2.5 billion Deutsche Bank LIBOR manipulation settlement.  Given the size of the Deutsche Bank settlement, the potential whistleblower award is...

May 10, 2021

Two whistleblowers received a total of $22 million in awards from the SEC with respect to settled administrative proceedings against unidentified parties including a financial services firm.  The first whistleblower, whose tip initiated the SEC's investigation, was awarded $18 million.  The second whistleblower, whose tip was submitted several years later, was awarded $4 million.  Both whistleblowers challenged the SEC's preliminary determination of award, and the SEC's final order concludes that the first whistleblower, who suffered hardships while attempting to remedy the situation, was the main source of information for the Commission and provided extensive and ongoing assistance during the investigation.  While the second whistleblower provided important additional information as a percipient witness, the Commission also noted that the second whistleblower delayed reporting for several years after becoming aware of the wrongdoing.  SEC

May 3, 2021

Vivint Smart Home Inc., which sells “smart” home security and monitoring systems through a door-to-door sales force, has agreed to settle for $20 million in the largest civil penalty ever paid to resolve violations of the Fair Credit Reporting Act (FCRA).  According to the DOJ, Vivint’s lack of an Identity Theft Prevention Program allowed its sales force to fraudulently obtain credit reports of unsuspecting consumers in order to complete sales to potential Vivint customers who failed required credit checks.  Vivint then allegedly sold debt from Vivint customers who defaulted to debt collectors who attempted to collect from the unsuspecting victims.  Vivint recently paid $3.2 million to settle charges involving a different scheme.  DOJ

April 29, 2021

Following a self-disclosure, software company SAP SE will pay penalties totaling over $8 million and disgorge over $5 million to resolve claims that it violated Export Administration Regulations and the Iranian Transactions and Sanctions Regulations. Between 2010 and 2017, SAP and its partners and subsidiaries released U.S-origin software to users located in Iran and permitted Iranian users to access U.S.-based cloud services from Iran.  In both cases, SAP executives were aware of the issues but did not take steps to remedy or stop them.  SAP also entered into a non-prosecution agreement setting forth specific compliance procedures.  DOJ; USAO Mass; OFAC; Commerce

When the Deli’s Not Just a Deli

Posted  04/28/21
By Sarah “Poppy” Alexander
share certificate
A market mystery recently caught the attention of financial journalists and the public more generally: a New Jersey deli that is seemingly never open and reports minimal profits is—on paper at least—worth $100 million after issuing public shares.  The shareholders are few, and mostly in China.  The owners are local (the revered wrestling coach) and not (a father-son investor duo with a history of shady...

April 27, 2021

A man who defrauded his clients out of more than $4 million has been sentenced to 7 years in prison.  In a scheme running from 2013 to 2020, Edgardo Zeta Montalban convinced his clients to invest cash in a fake federal grant program that he called “Suppressed IRS Accounts” by claiming to be an accountant and tax preparer.  However, no such program existed, and he did not hold any of those positions.  Montalban was originally recommended to serve 10 years, but due to significant health issues, the 70-year-old’s sentence was reduced.  USAO CDCA

April 23, 2021

The SEC has granted awards totaling more than $3 million to two whistleblowers whose information led to two separate enforcement actions.  The first whistleblower was awarded approximately $3.2 million for helping to conserve agency resources by identifying key issues to focus on and providing subject matter expertise.  The second whistleblower was awarded more than $100,000 for significant information and ongoing assistance that helped stop an ongoing fraud.  SEC
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