Misrepresentations

April 27, 2021

The owner of BMC Worldwide, Inc., which did business as Blue Moon Coins, Aaron Michael Scott, has agreed to an order for restitution of $1.4 million to customers who sent him funds for the purpose of purchasing gold and silver based on his false representations that he and BMC were a successful precious metals firm with an inventory of precious metals.  In fact, the defendants had no such inventory, and misappropriated customer funds for their own purposes.  Scott previously pleaded guilty to wire fraud and was sentenced to four years in prison.  CFTC

April 7, 2021

A default judgment was ordered against Negus Capital Inc. and its principal Aaron Butler, based on charges of commodity pool fraud in connection with binary options trading.  The order finds that defendants unlawfully solicited  the public to trade binary options contracts on the North American Derivatives Exchange, defrauded 70 customers who sent in nearly $300,000, misappropriated customer funds, and operated as an unregistered commodity pool operator. In addition to restitution, defendants were ordered to pay civil penalties of nearly $900,000.  CFTC

March 26, 2021

British citizen Benjamin Reynolds, who did business as Control-Finance Limited, has been ordered to pay a total of $571 million – $143 million in restitution and $429 million as a civil penalty – by default judgment in an enforcement action brought by the CFTC.  Reynolds solicited customers on the internet and by e-mail, falsely representing that Control-Finance would engage in virtual currency trades on their behalf, with a guaranteed profit.  Reynolds also created an affiliate marketing network, falsely claiming that he would pay referral bonuses to customers.  In fact, Reynolds made no trades on customers’ behalf, earned no trading profits for them, and paid no referral rewards or bonuses. Over the course of six months in 2017, Reynolds secured at least 22,191 bitcoin, worth $143 million at the time, from more than 1,000 customers worldwide, including at least 169 residing in the U.S.  CFTC

March 26, 2021

David Boice, the co-founder and CEO of Trustify Inc., was sentenced to 8 years in prison and ordered to pay $18.1 million in restitution and $3.7 million in forfeiture following SEC charges that Boice misrepresented Trustify, an online marketplace purportedly designed to connect customers to a network of private investigators, as a successful business, fraudulently offering and selling over $18.5 million of securities to more than 250 individual and corporate investors.  Boice inflated company revenues in financial statements, fabricated customer relationships, forged correspondence purportedly from potential investors, and misrepresented the use of investor funds.  Trustify was placed in corporate receivership in 2019.  USAO ED VA

March 19, 2021

The CFTC has ordered digital asset exchange operator Coinbase Inc. to pay a civil monetary penalty of $6.5 million to settle charges of reporting false, misleading, or inaccurate information on the company’s GDAX electronic trading platform, which is published by various reporting firms and used by market participants to gauge the volume and liquidity of digital assets.  The CFTC also found Coinbase vicariously liable for a former employee who placed deceptive orders in Litecoin in order to artificially generate market interest.  CFTC

February 24, 2021

William Taylor, the former chief operating officer of publicly-traded biopharmaceutical company MiMedx Group, Inc., was sentenced to one year in prison and ordered to pay a fine or $250,000 following his jury trial conviction on charges arising from accounting fraud.  The government presented evidence at trial that Taylor authorized the false recognition of revenue upon the shipment of MiMedx products to distributors despite knowing that the GAAP criteria for such revenue recognition had not been met.  Instead, MiMedx had promised the distributors that they could return the product or did not need to pay for it, in some cases knowing that the distributors were unable to pay for the product.  As a result, MiMedx reported materially inflated revenue in 2015.  USAO SDNY

February 12, 2021

General Motors (GM) has agreed to a $5.75 million settlement with the State of California to resolve allegations of making false and misleading statements to investors, including the state’s largest pension system, California Public Employees’ Retirement System (CalPERS).  According to Attorney General Xavier Becerra, GM cheated California twice—first by failing to disclose a faulty ignition-switch issue to the National Highway and Traffic Safety Administration (NHTSA) that it had been aware of for almost ten years, and which ultimately led to 124 fatalities and 274 injuries, and second by concealing the problem from investors and failing to build reserves for losses it knew was coming.  The company’s actions artificially inflated its stock price, causing CalPERS to lose millions of dollars.  CA AG

February 5, 2021

Private equity fund ACP X, LP, its manager Laurence Allen, and other corporate entities owned and controlled by Allen including NYPPEX Holdings, LLC, have been ordered to pay nearly $7 million.  Allen allegedly used investor funds to pay himself and others exorbitant salaries and cover the expenses of Allen’s affiliated entities, contrary to representations to investors.  A receiver was appointed to wind down the fund.  NY

February 2, 2021

Premier Holding Corp., a microcap issuer which described itself as a green energy services provider, and its former CEO, Randall Letcavage, have been ordered to pay a total of $10.5 million in disgorgement, penalties, and interest in connection with judgment finding that defendants materially mislead investors about the value of Premier’s assets and perks paid to Letcavage.  SEC