Securities Fraud

February 7, 2019

The founder and president of an online gaming company has been arrested and charged with securities fraud for allegedly defrauding more than 50 investors of about $9 million in a scheme that ran from 2013 to 2017. To execute the fraud, Robert Alexander allegedly lied to investors about his professional background, Kizzang LLC's financial condition, and the expected returns on investment. He then allegedly appropriated $1.3 million for his own use. If convicted, he faces a maximum sentence of 40 years in prison and millions in fines. SEC; USAO SDNY

January 31, 2019

Samuel Brown of Idaho was sentenced to three years of probation and ordered to pay restitution of $22,237 for participating in a market manipulation scheme involving the stock of Endeavor Power Corp. He was also found to have made false statements to the SEC in connection with its investigation of the fraud scheme. DOJ

January 31, 2019

David Aubel of North Carolina was sentenced to over seven years in prison and ordered to pay $242,553 in restitution for his role in a market manipulation scheme targeting Green Energy Renewable Solutions, Inc. Aubel and co-conspirator Robert Raffa covertly acquired Green Energy’s unrestricted stock without reporting their controlling interest, and then engaged in scheme to manipulate the stock price to their benefit. They were caught thanks to a cooperating promoter and an undercover agent. DOJ

January 31, 2019

Saleem Khan, of Dublin, pleaded guilty to conspiracy and securities fraud charges arising from an insider trading scheme in which he obtained and traded on material, non-public information. Khan admitted he obtained material, non-public information relating to the sales and financial performance of Ross Stores, Inc., a discount-clothing retailer then headquartered in Pleasanton, Calif., from a friend who worked in Ross’s finance department. Based on this material, non-public information, Khan entered into options contracts regarding Ross securities in advance of Ross’s monthly sales announcements. He admitted he provided pecuniary benefits to the Ross “tipper” and made profits in excess of $3,500,000 as a result of the scheme. DOJ

January 29, 2019

Four public companies – Grupo Simec S.A.B de C.V., Lifeway Foods Inc., Digital Turbine Inc., and CytoDyn Inc. – have agreed to cease and desist orders, findings of violations, and civil penalties with respect to their failures to maintain internal control over financial reporting (ICFR).  Although each of the companies had disclosed material weaknesses in ICFR, the SEC found that they had failed to adequately remediate the weaknesses.  SEC

January 28, 2019

The Woodbridge Group of Companies LLC and its former owner Robert H. Shapiro have been ordered to pay $1 billion in penalties and disgorgement for operating a ponzi scheme targeting retail investors, including many retirees, through 281 related companies.  Shapiro was ordered to pay a $100 million civil penalty and disgorge $18.5 million in ill-gotten gains; the companies were ordered to disgorge $892 million.  SEC

December 26, 2018

JPMorgan Chase Bank N.A. has agreed to pay more than $135 million to settle charges that it improperly handled “pre-released” American Depositary Receipts (ADRs).  ADRs are securities that represent shares in a foreign company, and ordinarily require that a corresponding number of foreign shares be held at a depository bank. However, “pre-release” allows ADRs to be issued without the deposit of foreign shares, provided that brokers have an agreement with a depository bank and the broker or its customer owns the required number of foreign shares. The SEC found that JPMorgan improperly provided ADRs to brokers when, in fact, neither the broker nor its customer had the foreign shares needed to support those new ADRs, a practice which can result in inappropriate short selling and dividend arbitrage. SEC