Financial and Investment Fraud

May 30, 2023

The former head of Wells Fargo’s Community Bank, Carrie Tolstedt, has agreed to pay a $3 million penalty to settle charges of misleading investors about its financial success.  Over a two-year period, Tolstedt publicly and repeatedly touted a metric used by Wells Fargo to measure financial success, even though she knew it did not accurately track accounts or products used or needed by customers.  In addition to the penalty, Tolstedt will pay almost $1.5 million in disgorgement and over $400,000 in pre-judgment interest.  The funds will be combined with prior payments of $500 million by Wells Fargo and $2.5 million by its former CEO and Chairman, John Stumpf, and will be distributed to harmed investors.  SEC

May 30, 2023

Former Coinbase manager, Ishan Wahi, and his brother, Nikhil Wahi, have been sentenced to 2 years and 10 months in prison respectively and ordered to forfeit cryptocurrency and cash in order to resolve civil and criminal charges of insider trading.  As part of his position at Coinbase, Ishan helped coordinate public listing announcements for crypto assets, at least nine of which were crypto securities.  In violation of Coinbase’s rules as well as federal law, Ishan tipped his brother Nikhil and friend Sameer Ramani off to the assets’ release, allowing them to purchase them and sell them for a profit.  SEC

April 21, 2023

Michael Zeto, in coordination with foreign telemarketers, used elderly American consumers’ banking information to create fraudulent checks payable to companies he controlled. The multimillion-dollar scheme will net him up to 20 years in prison. DOJ

April 17, 2023

Jonah Engler and Barbara Desiderio, already enjoined from further violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, will pay over $5 million in disgorgement, interest, and civil penalties for illegally trading in retail customer accounts as their company, Global Arena Capital Corp., was going out of business. Engler, Desiderio, and two others caused customer losses of over $4 million, while generating over $2.4 million in unlawful markups, markdowns, and commissions for Global Arena. SEC

April 11, 2023

Rishi Shah, Shradha Agarwal, and Brad Purdy, all former executives of Outcome Health, were convicted in a $1 billion scheme to fraudulently obtain funds from their clients, lenders, and investors. Outcome installed tv screens and tablets in physicians’ offices around the US, and then sold non-existent advertising inventory to be shown on the installed screens. Outcome billed clients in full, despite under-delivering on the contract, and inflated metrics to lie about the frequency in which patients accessed the tablets. Using inflated engagement data and revenue numbers, they raised $110 million in debt financing in April 2016, $375 million in debt financing in December 2016, and $487.5 million in equity financing in early 2017. The trio faces decades in prison because of their fraud. DOJ

March 30, 2023

Siblings John and Jonatina Barksdale offered unregistered crypto asset “Ormeus Coin” securities through their multilevel marketing scheme called Ormeus Global. The pair produced social media posts, YouTube videos, and other promotional materials, while John held roadshows around the world to promote the securities. Defendants claimed Ormeus Coin had a quarter-billion-dollar mining operation, mining $5.4 to $8 million per month, but the mining operation generated less than $3 million in total revenue, and mining operations ceased. The Barksdales were ordered to pay over $46 million in disgorgement, prejudgment interest of $10 million, and a civil penalty of $23 million each. SEC

March 28, 2023

One of the largest iron ore producers in the world, Brazilian mining company Vale S.A., has agreed to pay $55.9 million to settle charges of making false and misleading disclosures concerning the stability of its dams.  One of the dams in particular, Brumadinho, failed to meet international safety standards and subsequently collapsed in January 2019, killing 270 people.  The settlement consists of $25 million in civil penalties and disgorgement, and $30.9 million in pre-judgment interest.  SEC

March 28, 2023

James K. Couture, a Massachusetts-based investment adviser, defrauded his clients of nearly $3 million from 2009 to December 2019, convincing them to sell portions of their securities to fund large money transfers to an entity Couture controlled—a detail not shared with his clients. Couture consented to a final judgment enjoining him from future violations of the securities laws’ antifraud provisions. Couture will spend 100 months in prison and was ordered to pay approximately $4.7 million in restitution and forfeiture for his deceptive, Ponzi-like scheme. SEC

March 24, 2023

Michael Alan Stollery, the CEO and founder of purported cryptocurrency investment platform Titanium Blockchain Infrastructure Services Inc. (“TBIS”), has been sentenced to over 4 years in prison.  According to the DOJ, Stollery failed to register TBIS’s ICO with the SEC and falsified information on TBIS’s website and white papers, including information about TBIS’s prospects for profitability, client testimonials, and business relationships.  Additionally, he misappropriated client funds to pay off personal expenses.  DOJ

March 23, 2023

The co-founder of formerly registered investment adviser International Investment Group (IIG), Martin Silver, has been ordered to pay over $2.3 million in disgorgement and over $240,000 in prejudgment interest, which will be deemed satisfied upon the payment of restitution and forfeit of assets ordered in a parallel criminal proceeding against him in the Southern District of New York.  Silver was found to have grossly overvalued the assets in IIG’s flagship hedge fund, and falsely reported that certain loan assets were legitimate and fairly valued when in fact they were not.  SEC