Financial and Investment Fraud

November 10, 2021

The SEC has announced awards totaling more than $15 million to two whistleblowers.  Information provided by the first whistleblower, who received $12.5 million, prompted an investigation to open, while information from the second whistleblower, who received $2.5 million, was more limited but helped lead to a successful enforcement action.  SEC

November 9, 2021

The owner of California-based DC Solar, Jeff Carpoff, has been sentenced to 30 years in prison for his role in a billion-dollar Ponzi scheme, the largest criminal fraud scheme ever prosecuted in the Eastern District of California.  Together with his wife Paulette and five other co-conspirators, Carpoff lied to investors about market demand for his company’s mobile solar generator (MSG) units, using false lease contracts and financial statements to back up the lie.  In addition to selling thousands of MSGs that didn’t even exist, the defendants paid prior investors using funds from newer investors, then laundered their ill-gotten gains.  USAO EDCA; Add'l defendant sentencing at USAO EDCA

November 8, 2021

United States Commodity Funds LLC, a registered commodity pool operator , and United States Oil Fund LP, an exchange-traded product whose general partner is United States Commodity Funds LLC, will pay a total of $2.5 million to resolve charges by the SEC and CFTC.  USO’s stated investment objective was to track changes in the spot price of oil; however, during oil market turmoil in early 2020, USO’s sole futures commission merchant told USO it would not execute any new oil futures positions for USO. As a result of this limitation, USO was restricted from investing the proceeds generated by the future sale of newly created shares in oil future contracts, creating the risk that USO would not be able to meet its stated investment objective. The SEC and CFTC alleged that the defendants failed to fully disclose these limitations to commodity pool participants.  CFTC; SEC

October 29, 2021

Following amendments on types of actions that may be considered “related” under whistleblower rules, the SEC has awarded more than $2 million to an individual who was previously awarded for contributing to a successful enforcement action.  According to the agency, the whistleblower’s information sparked investigations by both the SEC and DOJ.  SEC

October 27, 2021

A Court has approved a $38.8 million settlement between the SEC and Akazoo, S.A., which went public in 2019 by way of a SPAC merger and claimed to offer music streaming services.  While the company told investors, both before and after the merger, that it had millions of paying subscribers and was increasing its subscriber base, earning hundreds of millions of dollars, the company in fact had no paying subscribers and negligible revenue.  The company raised nearly $55 million in the SPAC transaction and burned through more than $20 million before the SEC filed its complaint in 2020 and secured an asset freeze.  The $38.8 million disgorgement settlement will be deemed satisfied by the company’s payment of $35 million to investor victims in connection with several private class action lawsuits.  SEC

October 21, 2021

The CFTC has issued a final award of nearly $200 million to a whistleblower whose information significantly contributed to government investigations resulting in successful enforcement actions by the CFTC, another U.S. federal regulator, and a foreign regulator.  In making the award, the CFTC noted that the information provided by the whistleblower was specific and credible, leading to important, direct evidence of wrongdoing, as well as voluntarily provided and timely, even though the CFTC already had an open investigation at the time of the whistleblower’s report.  The CFTC had first issued a preliminary order denying the individual’s application; the whistleblower requested reconsideration and provided information about how his information was utilized, including in the parallel investigations.  CFTC