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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:

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April 12, 2022

Robert A. Karmann, a CPA and former CFO of DC Solar, was sentenced to 6 years in prison and ordered to pay $624 million for his role in perpetrating a Ponzi-style scheme, by taking new investor money to pay older investors, and deploying circular transactions to cover up their illicit behavior. DC Solar manufactured trailer-mounted solar generators and marketed them as having extensive third-party lease demand. Karmann and his co-conspirators offered falsified financial statements and operation reports and provided fabricated revenue summaries to victims of the scheme. Karmann oversaw the hidden transfers of funds, gave false information to investor representatives, and instructed a subordinate to “make it up” when asked by a customer for reports on the location of their solar generators. USAO EDCA

April 11, 2022

The former managing partner and chief investment officer of Manhattan-based International Investment Group (IIG) has been sentenced to 12 years in prison after being found guilty of defrauding IIG clients and investors of over $120 million.  David Hu had pled guilty in January 2021 to overvaluing distressed loans, creating fake loans to hide losses, selling overvalued and fake loans to a collateralized loan obligation trust, and using proceeds to pay earlier investors.  In addition to the prison sentence, he was also ordered to serve 3 years of supervised release, with a restitution order to be imposed at a later date.  USAO SDNY

April 8, 2022

Danish resident Casper Mikkelsen, also known as Carsten Nielsen, Brian Thomson, Thomas Jensen, and Casper Muller, has been ordered to pay $1.2 million in restitution and $3.6 million in penalties after he was found to have misappropriated client funds for his personal use, used earlier investor funds to pay later investors, and failed to register as a commodity trading advisor.  Mikkelsen’s victims had believed they were investing their funds to trade in forex.  CFTC

April 7, 2022

Alan Friedland, Fintech Investment Group, Inc., and Compcoin LLC will pay $1.8 million to settle allegations of Commodities Exchange Act violations. Friedland, through his companies, fraudulently solicited customers to invest in a nonexistent proprietary forex trading algorithm, ART, which promised highly successful prediction of forex rates for its users. The defendants solicited customers over a 2-year period, knowing that the required approval from National Futures Association had not been obtained. The approval never materialized, and the investors were saddled with a worthless digital asset. The Court entered an order for permanent injunction, monetary sanctions, and equitable relief against the defendants. CFTC

March 31, 2022

Seth Levine, Norse Holdings’ founder, received a 97-month sentence for his decade-long, $60 million refinancing- and securities-related real estate fraud. Levine, through his 70-plus companies, directed the scheme, submitting falsified documents which inflated the value of the subject properties. The overvaluation of properties led to shortfalls, which Levine covered with cash-out refinances, leaving victim lenders with at least $47 million in losses. Levine defrauded securities investors of at least $13 million by inducing them to invest in multifamily properties. Levine overstated his personal investment in the properties via forged documents provided to investors, sold portions of his properties without investor consent, and brought on additional investors without investor consent—all contrary to representations made during the solicitation. USAO NJ

March 24, 2022

Michael Gastauer of Germany has been ordered to pay $17 million in disgorgement, prejudgment interest, and civil penalty after he and his six U.S.-based entities were found to have aided and abetted a $165 million microcap fraud scheme.  Gastauer and his entities had allegedly disbursed of illegal stock sales orchestrated by Roger Knox of the U.K. via a Swiss entity called Wintercap SA.  Knox is awaiting sentencing in a parallel criminal action brought by the U.S. Attorney for the District of Massachusetts.  SEC

March 17, 2022

USAA Federal Savings Bank will pay $140 million in penalties and admit that it willfully failed to implement and maintain an anti‑money laundering (AML) program that met the requirements of the Bank Secrecy Act, and willfully failed to submit timely and accurate suspicious activity reports.  FinCEN imposed a $140 million penalty, and the bank will receive credit for its payment of a $60 million penalty imposed by the Office of the Comptroller of the Currency (OCC) for related violations. FinCEN; OCC

March 15, 2022

London-based swap dealer ED&F Man Capital Markets, Ltd. will pay $3.25 million to resolve claims that it failed to comply with swap dealer requirements including by failing to report accurate swaps data to a swaps data repository, failing to disclose to its U.S. swaps counterparties that affiliated-entity proprietary traders had access to counterparties’ trade information, and failing to disclose mid-market marks to counterparties. The CFTC further found that the entity failed to maintain an adequate supervisory system or perform its supervisory obligations diligently.  CFTC

March 15, 2022

Fund manager Eric Malley, his company MG Capital Management LP, and related entities MG Capital Realty Management LLC and MG GP III LP, have agreed to pay $12 million to resolve charges of defrauding investors.  In order to market two real estate funds managed by MG Capital, Malley allegedly made a number of material misrepresentations, including that he’d previously managed two highly successful funds and that investor funds were protected against loss.  In fact, Malley was a real estate broker with no experience managing investments, the prior funds did not exist, and he was misappropriating millions from the new funds.  SEC

March 11, 2022

A whistleblower was awarded $14 million by the SEC in a decision that departed from the recommendation of the Claims Review Staff to deny the award.  A report about a fraud committed by a company and its CEO was published online; two individuals claimed to be authors of the report, which contained analysis derived from a large number of publicly-available and non-public sources.  Neither submitted a TCR to the SEC at the time the report was published, although the whistleblower who received the award provided the report directly to Commission staff and provided additional information during the course of the enforcement action that the SEC initiated based on the report’s allegations.   The whistleblower did submit a TCR two months after the SEC posted a Notice of Covered Action, more than four years after the report was publicly released.  The Commission found that it would be in the public interest and consistent with the protection of investors to exercise its discretionary authority and grant an award despite the individual’s failure to initially file a TCR.  The second claimant, who did not submit a TCR at any time, and who did not communicate with enforcement staff, was denied an award.  SEC
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