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Regulatory Violations

This archive displays posts tagged as relevant to violations of rules and regulations government the financial markets and its participants. You may also be interested in the following pages:

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September 2, 2022

Swapnil Rege, SwapStar Capital LLC, and Reema Rege have been ordered to pay $5 million in disgorgement and pre-judgment interest for engaging in fraudulent solicitation and misappropriation, including on Swapnil’s part, engaging in trading despite an existing bar for prior violations, and on Reema’s part, receiving illegally-obtained profits she was not entitled to.  The orders resulted from parallel but separate enforcement actions by the CFTC and SEC, and included a permanent trading and registration ban against Swapnil.  CFTC; SEC

August 10, 2022

Angel Oak Capital Advisors and its portfolio manager Ashish Neghandi will pay $1.75 million and $75,000 respectively to settle charges of misleading investors via their $90 million securitization of home renovation loans. When delinquency rates on their “fix-and-flip” loans increased unexpectedly, rather than accelerating return payments to certain investors, as contractually required, defendants artificially reduced delinquency rates by diverting borrowers’ funds to pay down outstanding loan balances. SEC

August 3, 2022

Surgalign Holdings, Inc.—formerly RTI Surgical Holdings, Inc.—and its former executives Brian Hutchison and Robert Jordheim will collectively pay over $2.25 million in civil penalties and disgorgement, for accelerating revenue in contravention of GAAP principles, and in violation of the ’33 Act, the ’34 Act, and SOX. Falling short of their sales targets, RTI shipped future orders ahead of schedule to “pull forward” revenue. This practice cannibalized future revenue streams, damaged important customer relationships, and kept investors in the dark as to the true financial condition of the company. RTI restated its public financial statements from 2014 through 2019 to correct errors caused by this practice. SEC, SEC

August 2, 2022

Crown Bridge Partners, Soheil Ahdoot, and Sepas Ahdoot, will pay more than $9 million for operating as unregistered securities dealers, and are required to surrender all conversion rights, unexercised warrants, and cancel any shares acquired by converting notes or exercising related warrants resulting from their fraud. Over a 5-year period, from 2016 to 2020, the defendants bought convertible notes, converted them into billions of newly issued shares of heavily-discounted stock, and sold the new shares at significant profit, all while not being registered as dealers with the SEC, skirting regulatory oversight. Defendants are subject to a 5-year penny stock bar in addition to the monetary penalties. SEC

July 28, 2022

Jaeson Birnbaum, disbarred attorney and owner of now-bankrupt litigation finance firm, Cash4Cases, will spend 3 years in prison for defrauding investors, in addition to paying over $2.6 million in restitution, and forfeiting another $2.6 million in fraud proceeds. Birnbaum offered sham “Investor Security Agreements,” allowing investors to share in recoveries from lawsuits supposedly purchased by Cash4Cases. Birnbaum netted over $3 million in investors’ funds through his fraud, misappropriated client funds for personal use, and directed his employee to falsify the company’s books and records to show already-paid-out funds as still available to be pledged as collateral to new investors. USAO SDNY

July 28, 2022

U.S. Bank will pay a $37.5 million penalty and is required to make harmed customers whole for illegally accessing their credit reports and opening new, unauthorized accounts in these customers’ names. The bank’s actions violated the Consumer Financial Protection Act, the Fair Credit Reporting Act, the Truth in Lending Act, and the Truth in Savings Act. The bank pressured its employees to hit certain sales goals and implemented an incentive-compensation program that financially rewarded employees for selling bank products. As a result, the bank’s customers held unwanted accounts, had negative effects on their credit profiles, and lost control over their personally identifiable information—not to mention the time-consuming hassle of closing unauthorized accounts and resolving other consequences stemming from this practice.  CFPB

July 27, 2022

Three registered broker-dealers have been ordered to pay civil penalties based on SEC findings that each had deficiencies in its programs to prevent customer identity theft, in violation of the SEC’s Identity Theft Red Flags Rule, or Regulation S-ID.  J.P. Morgan Securities LLC will pay $1.2 million, UBS Financial Services Inc. will pay $925,000, and TradeStation Securities, Inc. will pay $425,000.  The SEC found that the broker-dealers’ cybersecurity policies failed to detect identity theft red flags in connection with customer accounts or to incorporate those red flags into their programs, and that the firms failed to adequately train staff, failed to review and update the policies as required, did not include appropriate board oversight, and failed to oversee service provider arrangements.  SEC

July 26, 2022

Hyundai Capital America will pay $19 million for their failures to provide accurate information to nationwide credit reporting companies, tarnishing the records of more than 2.2 million consumer accounts through no fault of their own. Between January 2016 and March 2020, because of their outdated systems and processes, Hyundai violated the Fair Credit Reporting Act and failed to: report complete and accurate loan and lease account information; provide date of first delinquency information when required; modify or delete information when required; have reasonable identity theft procedures; and have reasonable accuracy and integrity policies and procedures. CFPB

July 18, 2022

Equitable Financial Life Insurance Company has agreed to pay $50 million to settle charges of providing statements to 1.4 million variable annuity investors, which included public school teachers and staff, that failed to list all fees paid during the period.  In addition to the monetary settlement, Equitable has agreed to cease and desist from future violations and revise how it presents fee information.  SEC

July 15, 2022

A number of California- and Colorado-based people and their affiliated entities have been ordered to pay over $29 million in total in order to resolve multiple charges of violating CFTC regulations.  A federal judge had found California-based John D. Black, his associates Christopher Mancuso and Joseph Tufo, and his entities Financial Tree, Financial Solution Group, and New Money Advisors—as well as Colorado-based John P. Glenn and his law firm—liable for solicitation fraud in connection with binary options and forex transactions, registration violations, and other charges.  CFTC
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