Securities Fraud

September 15, 2021

Two unnamed whistleblowers received awards totaling $114 million for recoveries in an SEC enforcement action and two related actions.  The first whistleblower, who received an award of $110 million, provided independent analysis of publicly-available information about an unnamed company, as well as a witness list and substantial ongoing assistance during investigations by the SEC and another unidentified agency.  The second whistleblower, who received an award of $4 million, provided more limited information after the SEC had already undertaken significant investigative steps.    SEC

September 14, 2021

App Annie Inc. will pay $10 million to resolve claims of securities fraud arising from the company’s alleged misuse of mobile app “alternative data” shared by companies about the performance of their mobile apps with the promise that such data would be aggregated and anonymized.  In fact, App Annie used non-aggregated and non-anonymized data to develop models that it sold to customers to make investment decisions and trade ahead of upcoming earnings announcements.  The company’s co-founder and former CEO will also pay a fine of $300,000.  SEC

September 13, 2021

GTV Media Group Inc., Saraca Media Group Inc., and Voice of Guo Media Inc. will collectively pay more than $539 million to resolve SEC and New York State claims related to their alleged unregistered offering of GTV common stock and a digital asset security referred to as G-Coins or G-Dollars.  The SEC found that the respondents publicized the two offerings on their websites and social media platforms, raising approximately $487 million from more than 5,000 investors.  No registration statements were filed, and no registration exemption applied.  Without admitting or denying the SEC’s findings, respondents agreed to pay disgorgement of $486 million plus interest, and penalties totaling $35 million.  SEC; NY

September 3, 2021

The Kraft Heinz Company and two of its former executives will pay $62 million to resolve charges that between 2015 and 2018 the company falsely reported cost savings, including by recognizing unearned discounts from suppliers and maintaining false and misleading supplier contracts. In 2019, Kraft Heinz restated its financials, correcting a total of $208 million in improperly-recognized cost savings.  The SEC alleged that the company did not have effective internal accounting controls in its procurement division, and that former COO Eduardo Pelleissone and former Chief Procurement Officer Klaus Hoffman ignored red flags that expenses were not being accurately reported.  Pelleissone and Hoffman will pay civil penalties of $300,000 and $100,000, respectively.  SEC

August 24, 2021

Healthcare Services Group, Inc., which provides housekeeping, dining, and other services to healthcare facilities, will pay $6 million to resolve charges of improper accounting.  The SEC alleged that the company failed to comply with GAAP in 2014 and 2015 by failing to timely accrue for and disclose material loss contingencies related to litigation against the company despite evidence that liability was probable and reasonably estimable.  As a result, the company was able to report earnings per share that matched market expectations.  The SEC investigation resulted from its “EPS Initiative,” which uses data analytics to identify improper accounting and disclosure practices.  HCSG's former CFO John C. Shea and its controller, Derya Warner, will pay penalties of $50,000 and $10,000, respectively.  SEC

August 17, 2021

Investment advisor Murchinson Ltd., together with associated individuals Marc Bistricer and Paul Zogala, will pay restitution, interest, and penalties totaling nearly $9 million to resolve allegations that they caused a hedge fund client to violate Regulation SHO regarding uncovered short sales and other problematic trading practices.  Respondents allegedly provided erroneous order-marking information, thereby causing the hedge fund brokers to mismark the hedge funds’ sales as “long,” and resulting in their failure to borrow or locate shares prior to executing the sales.  SEC

August 9, 2021

Cryptocurrency trading platform Poloniex LLC has agreed to pay more than $10 million in disgorgement, interest, and penalties to settle charges that it operated an unregistered online digital asset exchange.  The SEC found that between 2017 and 2019 the Poloniex trading platform met the criteria of an “exchange” as defined by the securities laws but was neither registered as a national securities exchange nor subject to an exemption from registration. SEC