Regulatory Violations

February 21, 2018

The SEC charged BitFunder and its founder Jon E. Montroll with operating an unregistered securities exchange and defrauding users of that exchange.  The SEC also charged the operator with making false and misleading statements in connection with an unregistered offering of securities. The SEC alleges that BitFunder and its Montroll operated BitFunder as an unregistered online securities exchange and defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 bitcoins. The SEC also alleges that Montroll sold unregistered securities that purported to be investments in the exchange and misappropriated funds from that investment as well. SEC

February 16, 2018

The SEC announced charges against three Israeli residents, a Washington DC attorney, and an Israeli auditor for a fraudulent scheme to create a large amount of shell companies. The three Israeli residents were SharonePerlstein, Aric Swartz, and Hadas Yaron. The three created at least 15 shell companies and filed false or misleading registration statements and reports with the SEC. Jonathan Strum was the DC attorney that helped the Israeli residents in establishing the shell companies and Baltimore-based Israeli auditor Alan Weinberg issued misleading audit reports for at least seven of the shell companies.  The SEC charges resulted in penny stock bars for the Israeli residents and prohibitions for Strum and Weinberg from appearing before the SEC. SEC

January 30, 2018

The Securities and Exchange Commission obtained a court order halting an allegedly fraudulent initial coin offering (ICO) that targeted retail investors to fund what it claimed to be the world’s first “decentralized bank.” According to the SEC's complaint, filed in federal district court in Dallas on Jan. 25 and unsealed late yesterday, Dallas-based AriseBank used social media, a celebrity endorsement, and other wide dissemination tactics to raise what it claims to be $600 million of its $1 billion goal in just two months. AriseBank and its co-founders Jared Rice Sr. and Stanley Ford allegedly offered and sold unregistered investments in their purported "AriseCoin" cryptocurrency by depicting AriseBank as a first-of-its-kind decentralized bank offering a variety of consumer-facing banking products and services using more than 700 different virtual currencies.  AriseBank’s sales pitch claimed that it developed an algorithmic trading application that automatically trades in various cryptocurrencies. SEC

December 21, 2017

The Securities and Exchange Commission today announced charges and an asset freeze against a group of unregistered funds and their owner who allegedly bilked thousands of retail investors, many of them seniors, in a $1.2 billion Ponzi scheme. SEC investigators filed this action to prevent further dissipation of investor assets after obtaining court orders in September and November in subpoena enforcement actions that forced the unregistered companies to open their books. According to the SEC’s complaint, unsealed today in federal court in Miami, Florida, Robert H. Shapiro and a group of unregistered investment companies called the Woodbridge Group of Companies LLC formerly headquartered in Boca Raton, Florida, defrauded more than 8,400 investors in unregistered Woodbridge funds. SEC

December 19, 2017

The Securities and Exchange Commission today charged a Wall Street stockbroker with illegally accepting more than $1 million in undisclosed kickbacks for giving certain customers preferential access to lucrative IPOs, enabling them to reap major trading profits in the secondary markets. The SEC alleges that Brian Hirsch subverted allocation policies and procedures at two brokerage firms where he worked on the wealth syndicate desk, making long-running arrangements with certain customers to give them larger allocations of coveted public offerings being marketed by the firms.  In most instances, the customers sold their stock into the market as soon as possible to turn a substantial profit at the expense of the firms’ other brokerage customers and the issuers’ interests in raising capital from long-term investors. SEC

December 11, 2017

The Securities and Exchange Commission today charged a former day trader with making more than $1 million in illegal insider trading profits as part of a ring that allegedly stole confidential information from investment banks and clients so they could trade in advance of secondary stock offerings. The SEC alleges that Joseph Spera schemed with former colleagues, posing as legitimate portfolio managers to induce investment bankers to bring them ''over the wall'' and share nonpublic details about upcoming secondary offerings while agreeing not to disclose the information to others or trade before the offerings were announced.  Spera and the others involved allegedly violated those agreements and tipped each other with confidential information that enabled them to trade for a profit ahead of public announcements. SEC

December 6, 2017

The Securities and Exchange Commission today continued its crackdown on brokers who defraud customers, charging two New York-based brokers with making unsuitable trades that were costly for customers and lucrative for the brokers.  The case follows similar charges of excessive trading by brokers brought in January, April, and September. The SEC’s complaint, filed in federal court in Manhattan, alleges that Zachary S. Berkey of Centerreach, New York, and Daniel T. Fischer of Greenwich, Connecticut, conducted in-and-out trading that was almost certain to lose money for customers while yielding commissions for themselves.  According to the complaint, 10 customers of Four Points Capital Partners LLC, where Berkey and Fischer previously worked, lost a total of $573,867 while Berkey and Fischer received approximately $106,000 and $175,000, respectively, in commissions. SEC