Financial and Investment Fraud

October 2, 2020

Jon Barry Thompson of Pennsylvania has been ordered to pay approximately $7.4 million in restitution for making false representations to two customers regarding purchases of Bitcoin.  According to the CFTC press release, Thompson induced the customers to send him the funds by assuring them he had the Bitcoin in hand.  However, after receiving the funds, he distributed the money to third parties, failed to provide the customers with any Bitcoin, and made false representations regarding the location of the Bitcoin and the status of the funds.  Thompson pleaded guilty to one count of commodities fraud in a parallel action relating to this matter, and will be sentenced in January 2021.  CFTC

September 30, 2020

Morgan Stanley & Co. LLC will pay a total of $10 million in civil monetary penalties to the SEC and CFTC.  In an agreement with the SEC, the company will pay a $5 million civil monetary penalty arising from charges that the firm violated the short sale procedures of Regulation SHO. Specifically, Morgan Stanley improperly used “long” and “short” aggregation units when it hedged synthetic exposure to swaps by purchasing or selling the securities referenced in the swaps.  The aggregation units were not independent and did not have separate trading strategies.  As a result, Morgan Stanley should have netted the long and short positions of both units together or across the entire broker-dealer and marked the orders as long or short based on that netting. The CFTC, which also imposed a $5 million penalty, charged that Morgan Stanley failed to comply with swap data reporting obligations, inaccurately reporting swap data for approximately three million swaps. SEC; CFTC

September 30, 2020

Two whistleblowers have been awarded approximately $22 million and $7 million for alerting the SEC of potential wrongdoing and providing substantial assistance.  Both were said to be insiders whose information helped return tens of millions of dollars to harmed investors.  SEC

September 30, 2020

The SEC has announced that it has concluded a record-breaking fiscal year for its whistleblower program by awarding four whistleblowers a total of $5 million.  For providing critical information and evidence of hard-to-detect violations, and providing extensive and ongoing assistance to the investigation, two whistleblowers were awarded $2.9 million and $1.7 million respectively.  The remaining two whistleblowers were awarded nearly $400,000 for jointly providing a tip and additional assistance, including meeting with staff to help decipher key documents and identify key witnesses.  These awards cap the program’s record of 39 individual awards, totaling about $175 million, that have been granted in a single fiscal year.  Since the whistleblower program launched in 2012, the SEC has made awards to 106 individuals totaling about $562 million.  SEC

September 29, 2020

The CFTC has awarded a whistleblower approximately $250,000 for providing significant information that led to an investigation.  Although the whistleblower also provided substantial assistance during the investigation, the award was reduced because the whistleblower did not report the violations in a timely manner.  CFTC

September 28, 2020

Fiat Chrysler N.V. will pay an SEC penalty of $9.5 million to settle charges that it made misleading disclosures.  Specifically, in February 2016, the company publicly stated that it had conducted an internal audit to confirm that its vehicles complied with emissions standards.  This statement misleadingly failed to disclose the limited nature of the internal audit and other related material facts, including about the existence of ongoing government investigations into the company’s diesel vehicle emissions systems.  SEC

September 28, 2020

Citibank N.A. and its related entities Citigroup Energy Inc. and Citigroup Global Markets, Inc. will pay a $4.5 million penalty for maintaining an inadequate telephone audio recording and preservation system.  According to the charges, Citibank internal reporting described the audio preservation system as having a flaw that was a “ticking time bomb” that could lead to the deletion of audio recordings.  When Citibank was required to produce recordings in response to a CFTC subpoena, the company disclosed that millions of audio files for 982 users had been deleted as a result of the flaw.  CFTC

September 28, 2020

An unnamed whistleblower has been awarded over $1.8 million for expeditiously reporting significant information about ongoing securities violations, which ultimately led to a successful enforcement action.  The award marks the 100^th award made to an individual since the inception of the SEC’s whistleblower program in 2012.  SEC