Market Manipulation and Trading Violations

May 24, 2018

Former registered broker Louis Petrossi was sentenced to 44 months imprisonment and ordered to pay $8 million in restitution and more than $335 million in forfeiture for his role in the fraudulent market manipulation of publicly-traded, NASDAQ-listed ForceField Energy, Inc.; the manipulation scheme involved (1) the undisclosed purchase and sale of ForceField stock through nominees, (2) orchestrated trades of ForceField stock to create the misleading appearance of genuine trading volume and interest, and (3) secret payments to stock promoters and broker dealers who promoted and sold the stock. USAO EDNY

May 15, 2018

Colorado attorney Diane Dalmy was sentenced to 3 years in prison and an additional 3 years of supervised release for conspiring with others to perpetrate a “pump and dump” securities fraud scheme in which she and her co-conspirators artificially drove up the price of certain stocks issued by connected shell companies by fraudulently inducing investors to purchase them, then selling their own large positions in the investments at a profit after prices rose. USAO DCT

January 18, 2018

UK-based financial services company HSBC Holdings plc agreed to pay a $63.1 million criminal penalty and $38.4 million in disgorgement and restitution, for a total payout of roughly $100 million, to resolve charges that it engaged in a scheme to defraud two bank clients through a multi-million dollar scheme commonly referred to as “front-running.” DOJ

October 31, 2017

Investment advisory firm Millennium Management LLC has agreed to pay more than $630,000 to settle charges that it shorted U.S. stocks in companies planning follow-on offerings and then illegally bought shares in the follow-on offerings.    An SEC investigation found that Millennium violated an anti-manipulation provision of the federal securities laws known as Rule 105 on four occasions in 2012.  Rule 105 prohibits short selling an equity security during a restricted period (generally five business days before a covered public offering) and then purchasing that same security through the offering.  By illegally purchasing shares in the follow-on offerings, Millennium reaped $286,889 in illicit profits. SEC

October 11, 2017

The Securities and Exchange Commission today James M. Schneider and Andrew H. Wilson alleging they helped facilitate a microcap fraud scheme involving undisclosed “blank check” companies secretly bound for reverse mergers. In complaints filed in the U.S. District Court for the Southern District of Florida, the SEC alleges that Schneider of Hillsboro Beach, Florida, and Wilson of Nevada City, California, contributed to a fraud involving at least 22 undisclosed blank check companies. Such companies have no operations, making them attractive targets for those seeking reverse mergers for use in pump-and-dump schemes.  Despite claims of legitimate business plans, separate management, and independent shareholders, the 22 companies and their securities were secretly controlled by Steven Sanders, along with Daniel P. McKelvey or Alvin S. Mirman, and sold in reverse mergers.  The SEC previously filed an enforcement action against Sanders, McKelvey, and Mirman, who were separately convicted of related criminal charges and sentenced to prison. SEC

August 18, 2017

The Securities and Exchange Commission today announced that broker Banca IMI Securities Corp. (BISC), an indirect, wholly-owned U.S. subsidiary of Italian bank Intesa Sanpaolo SpA, has agreed to pay more than $35 million to settle charges that it violated federal securities laws when it requested the issuance of and received American Depositary Receipts (ADRs) without possessing the underlying foreign shares. The SEC’s order finds that BISC obtained pre-released ADRs and lent them to counterparties without satisfying the proper requirements.  BISC’s improper handling of ADRs, which lasted from at least January 2011 to August 2015, made it possible for such ADRs to be used for inappropriate short selling or inappropriate profiting around dividend record dates. SEC

August 2, 2017

The Securities and Exchange Commission today announced that Joe Yiu Cheung has agreed to pay nearly $800,000 and be permanently barred from involvement in penny stocks after hiding his significant stake in a small oil & gas company while secretly funding a fraudulent promotional campaign that artificially boosted the company’s stock price before he dumped his shares. SEC enforcement investigators uncovered the fraud by peeling back layer upon layer of shell companies and nominee owners to reveal that Joe Yiu Cheung controlled United American Petroleum Corp. (UAPC).  According to the SEC’s order, Cheung utilized an elaborate network of overseas bank and brokerage accounts mostly in bank secrecy jurisdictions to conceal his UAPC ownership.  In addition, he did not file required reports that would have publicly disclosed his burgeoning ownership of UAPC stock.  Cheung paid for the issuance of promotional materials to 2.2 million U.S. residents, inducing investors with rosy falsehoods about UAPC’s operations and prospects. SEC

October 23, 2017

Mark Johnson, former head of global foreign exchange cash trading at HSBC Bank, was found guilty for his role in a scheme to defraud an HSBC client through a multimillion-dollar scheme commonly referred to as “front running.”  DOJ

November 14, 2017

– The Commodity Futures Trading Commission (CFTC) today issued an order filing and settling charges against FCStone Merchant Services LLC (FCStone Merchant) for entering into multiple noncompetitive trades and against INTL FCStone Financial Inc. (FCStone Financial), a registered Futures Commission Merchant based in Chicago, Illinois, for reporting non-bona fide prices to the Chicago Mercantile Exchange (CME) between December 2013 and March 2014. The CFTC Order also finds that FCStone Financial failed to have an adequate supervisory system in place with regard to the execution, handling, and reporting of exchange for related position transactions (EFRPs). The CFTC Order requires FCStone Financial and FCStone Merchant, jointly and severally, to pay a $280,000 civil monetary penalty, to comply with certain undertakings regarding their respective practices regarding EFRPs, and to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC Regulations, as charged. CFTC

November 14, 2017

The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Statoil ASA (Statoil), an international energy company headquartered in Stavanger, Norway. The CFTC Order finds that from as early as October 2011 through November 2011, Statoil attempted to manipulate the Argus Far East Index (FEI) in order to benefit Statoil’s physical and financial positions, including Statoil’s NYMEX-cleared over-the-counter swaps which settled to the Argus FEI. The Order requires Statoil to pay a $4 million civil monetary penalty and orders Statoil to cease and desist from violating Section 9(a)(2) of the Commodity Exchange Act (CEA). CFTC