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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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June 28, 2022

In response to SEC charges, audit firm Ernst & Young LLP admitted that its employees cheated on CPA exams and in continuing professional education courses, and that the firm withheld evidence of this misconduct during the SEC’s investigation.  EY agreed to pay a $100 million penalty and undertake extensive remedial measures.  The cheating took place on the ethics component of CPA exams and in courses required to maintain CPA licenses, including ones designed to ensure that accountants can properly evaluate whether clients’ financial statements comply with Generally Accepted Accounting Principles.  SEC

May 20, 2022

Wells Fargo Advisors, which is a registered broker-dealer and investment advisor, agreed to pay $7 million to resolve allegations that it had an inadequate anti-money laundering system.  As a result, the SEC alleged, Wells Fargo did not file timely suspicious activity reports including with respect to foreign wire transfers to or from its customers’ brokerage accounts.  SEC

May 5, 2022

Arthur Hayes, Benjamin Delo, and Samuel Reed, co-founders of BitMEX, were ordered to pay $30 million for AML violations and for illegally operating a cryptocurrency derivatives trading platform. From late 2014 through 2020, the defendants failed to implement and enforce preventative controls against unlawful conduct. BitMEX operated without CFTC approval to operate as a Designated Contract Market or a Swap Execution Facility. Further, BitMEX operated without registration as a Futures Commission Merchant, failed to implement a Customer Information Program, did not employ proper KYC procedures, and failed to implement an adequate AML program. CFTC

April 7, 2022

Alan Friedland, Fintech Investment Group, Inc., and Compcoin LLC will pay $1.8 million to settle allegations of Commodities Exchange Act violations. Friedland, through his companies, fraudulently solicited customers to invest in a nonexistent proprietary forex trading algorithm, ART, which promised highly successful prediction of forex rates for its users. The defendants solicited customers over a 2-year period, knowing that the required approval from National Futures Association had not been obtained. The approval never materialized, and the investors were saddled with a worthless digital asset. The Court entered an order for permanent injunction, monetary sanctions, and equitable relief against the defendants. CFTC

March 15, 2022

London-based swap dealer ED&F Man Capital Markets, Ltd. will pay $3.25 million to resolve claims that it failed to comply with swap dealer requirements including by failing to report accurate swaps data to a swaps data repository, failing to disclose to its U.S. swaps counterparties that affiliated-entity proprietary traders had access to counterparties’ trade information, and failing to disclose mid-market marks to counterparties. The CFTC further found that the entity failed to maintain an adequate supervisory system or perform its supervisory obligations diligently.  CFTC

March 3, 2022

City National Rochdale, LLC agreed to a civil penalty just over $30 million to resolve SEC allegations that the registered investment adviser failed to disclose to discretionary account clients that it invested their assets in proprietary mutual funds that generated fees for CNR and its affiliates, rather than in competitor funds whose fees may be lower.  The government also alleged that CNR failed to fully inform certain prospective customers of fees with respect to its proprietary funds.  The disclosure failures resulted in an undisclosed conflict of interest according to the SEC.  SEC

February 23, 2022

The CFTC settled charges against Richard D. Neal and his company Golden Signals, LLC for failing to register as a commodity trading advisor and commodity pool operator. Neal and Golden Signals, LLC will pay over $2.6 million in restitution, disgorgement, and a civil monetary penalty for the fraud perpetrated over a 5-year period beginning in October 2016. They engaged in binary options solicitation and trading fraud via webpages and social media channels, touting “the highest profit percentage ratings in the world.” Additionally, customers lost over $1.2 million through Neal and Golden Signals’ fraudulent solicitations for binary options signal, trainings, and strategy course offerings. CFTC

February 14, 2022

BlockFi, Inc. will pay a total of $100 million to resolve SEC and state claims arising from its sale to retail customers of cryptocurrency lending products, including its BlockFi Interest Accounts.  Through the “BIAs,” investors lent cryptocurrency assets to BlockFi in exchange for the company’s promise to provide a variable monthly interest payment.  The SEC alleged that the BIAs were securities, offered without registration, that BlockFi operated as an unregistered investment company, and made false and misleading statements about risk levels.  SEC

January 19, 2022

William S. Evans III, who did business as Turning Point Investments, together with his wife Francis Evans, have consented to entry of judgment against them requirement the payment of $17 million as restitution as the disgorgement of $10 million.  Evans operated as an unregistered commodity pool operator, and marketed to customers with the promise that he would trade commodity futures on their behalf, making false statements about risks, the likelihood of profits, and his fees.  In fact, Evans misappropriated customer funds for his personal use and to pay other participants in a Ponzi-like scheme.  CFTC

Top Ten SEC and CFTC Recoveries of 2021

Posted  01/7/22
Top Ten Sign with Letters
As we recently detailed, 2021 proved to be a blockbuster year for whistleblowers under the CFTC and SEC Whistleblower ProgramsSeven of the ten largest whistleblower awards of 2021 were made to SEC and CFTC whistleblowers, including a massive $200 million CFTC award that was roughly twice as large as all prior CFTC awards combined.  In total, the SEC paid more awards—both in total dollars and individual...
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