Financial and Investment Fraud

December 21, 2022

Precious metals firm Monex Deposit Company, together with related entities and individual owners, have been ordered to pay a civil penalty of $5 million, and customer restitution of $33 million, to resolve claims arising from the defendants’ operation of a retail over-the-counter trading platform, known as “Atlas,” which allowed customers to speculate on precious metals price movements, with Monex acting as the counterparty to every transaction. While the defendants claimed in marketing that leveraged trading of precious metals was highly profitable, in fact, the majority of the trades resulted in losses for customers.  CFTC

December 20, 2022

Futures commission merchant CHS Hedging LLC will pay civil penalty of $6.5 million to resolve claims that it failed to implement an adequate AML program and failed to implement risk-based limits concerning trading in an account controlled by one of its customers that owned and controlled a ranching company and other related businesses.  The customer engaged in speculative trading that was inconsistent with its financial resources and hedging needs, and, over the course of four years, made net margin payments of more than $147 million to CHS Hedging.  The government alleged that the company did not adequately investigate the source of the customer’s funds or report the transactions as suspicious.  CFTC

December 20, 2022

Wells Fargo will pay a $1.7 billion penalty, and more than $2 billion in consumer restitution, following findings by the CFPB that the bank engaged in unlawful conduct including the imposition of improper fees and interest charges on auto and mortgage loans, misapplication of payments on such loans, and the imposition of unlawful surprise overdraft fees.  Wells Fargo’s failures in its servicing of auto loans resulted in the wrongful repossession of borrowers’ vehicles, and its improper denial of mortgage modifications led to some customers losing their homes to wrongful foreclosures.  According to the CFPB, the bank knew about problems in its account management and servicing for years before it took steps to correct them.  CFPB

December 19, 2022

A company outsider who submitted multiple anonymous tips to the SEC and the target company, which initiated an internal investigation based on the information, received a whistleblower award of $37 million.  The company reported the whistleblower’s information to the Commission, which then opened its own investigation.  Claimant submitted an additional tip to the Commission within 120 days that included the email that Claimant had sent to the company.  Claimant’s award was based on amounts recovered by the Commission and amounts recovered in a related action.  SEC

December 14, 2022

In a False Claims Act case pursued on a non-intervened basis, Academy Mortgage Corporation agreed to pay $38.5 million to resolve allegations that it improperly originated and underwrote mortgages insured by the Federal Housing Administration.  The whistleblower, Gwen Thrower, who was an underwriter at Academy, alleged that the Academy had an inadequate underwriting process that led to false certifications of compliance with underwriting requirements and, ultimately, to the government having to pay insurance claims on loans improperly underwritten by Academy.  Thrower will receive a whistleblower award of $11.5 million.  DOJ

December 13, 2022

Danske Bank will pay over $2 billion to resolve charges from the SEC and DOJ arising from failures in its anti-money laundering compliance program at an Estonian bank it acquired and began operating as a branch in 2007, and from its failure to disclose the risks posed by the program’s significant deficiencies.  Danske Bank had received information from an internal whistleblower, conducted internal audits, and received information from regulators, from which it knew that the Estonian branch served high-risk customers, including many Russians, who were engaged in billions of dollars in suspicious and potentially criminal transactions; that its internal policies were inadequate; and, that its AML and KYC procedures were not being followed.  Despite this knowledge, the bank made materially misleading statements and omissions that it complied with its AML obligations and that it had effectively managed its AML risks.  These statements mislead investors and U.S. banks and allowed its high-risk customers to gain unlawful access to the U.S. financial system.  Danske agreed to pay an SEC penalty of $413 million and, as part of a criminal plea to conspiracy to commit bank fraud, will forfeit over $2 billion, with $850 million of that amount being credited from separate criminal or civil resolutions with foreign and domestic authorities, including the SEC.  DOJ, SEC, SDNY

December 12, 2022

The SEC approved a whistleblower award of $20 million to an anonymous individual who voluntarily provided original information to the Commission that significantly contributed to an investigation that had been previously opened based on a referral from the Division of Examinations.  While noting that much of the information provided by the whistleblower was already known to Enforcement staff, the individual provided some helpful new information, met with Enforcement Division staff multiple times, and remained cooperative throughout the investigation.  SEC

November 29, 2022

William Sadleir, the founder, owner, and operator of a defunct film distribution company accused of defrauding a publicly traded fund, has been ordered to spend 6 years in prison and pay $31.6 million in restitution to resolve a criminal case against him.  A separate SEC order to pay $13.8 million in disgorgement and nearly $4 million in prejudgment interest was deemed satisfied by the restitution order in the criminal case.  According to the press release, Sadleir’s Aviron Group LLC received a $75 million investment by BlackRock Multi-Sector Income Trust (BIT).  Rather than use the funds to support its film distribution activities, however, Sadleir misappropriated them for his personal use, including buying, renovating, and furnishing a mansion.  SEC