Securities Fraud

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

August 6, 2021

Blockchain Credit Partners, which did business as DeFi Money Market, and its principals, Gregory Keough and Derek Acree, have agreed to disgorge $12.85 million and cease and desist from the unregistered sale of securities using smart contracts and so-called “decentralized finance” (DeFi) technology.  The SEC found that defendants offered and sold mTokens and DMG governance tokens purporting to pay interest and profits, and told purchasers that that DeFi Money Market would pay them those amounts by using investor assets to buy “real world” income-generating assets like car loans. However, these income-generating assets did not generate enough income to cover appreciation of the investors’ principal, largely as a result of the price volatility of the digital assets used to purchase the tokens.  Rather than disclose this to investors, defendants used other funds, including personal funds, to make principal and interest payments for mToken redemptions. Keough and Acree have each also agreed to pay penalties of $125,000.  SEC

August 6, 2021

Colorado resident Wayde McKelvy was sentenced to 18 years in prison and ordered to pay $37 million in restitution following conviction on charges related to his operation of a Ponzi scheme.  McKelvy and others operated Mantria Corporation, which they claimed offered huge returns by investing in real estate and green energy projects.  Through these misrepresentations, defendants obtained more than $54 million in funds from duped investors.  USAO ED PA

August 2, 2021

Ernst & Young LLP and three of its audit partners, along with William Stiehl, who was serving as the chief accounting officer of a public company, collectively agreed to pay more than $10 million to resolve SEC claims of wrongdoing with respect to EY’s pursuit of audit business from the public company.  EY and its partners were alleged to have solicited and received confidential competitive intelligence and confidential audit committee information from Stiehl during the issuer’s auditor’s selection process, in violation of auditor independence rules.  EY agreed to pay $10 million and comply with a detailed set of undertakings for a period of two years; the individual auditors agreed to pay civil monetary penalties between $15,000 and $50,000 and to be suspended from appearing or practicing before the Commission for times ranging from one to three years; Stiehl agreed to pay a civil monetary penalty of $51,000 and to be suspended from appearing or practicing before the Commission for two years.  SEC

July 21, 2021

Suneet Singal, First Capital Real Estate Investments, LLC, and related entities, agreed to pay fines totaling over $7 million to resolve claims that they made material misrepresentations and omissions concerning First Capital Real Estate Trust Inc., a real estate investment trust.  The SEC alleged that defendants misrepresented the REIT’s property holdings, and that Singal fraudulently directed funds to his own use.  Singal was barred from the securities industry for at least ten years.  SEC

July 13, 2021

Special purpose acquisition corporation Stable Road Acquisition Company, its CEO Brian Kabot, and the SPAC’s proposed merger target Momentus Inc. will collectively pay penalties of $8 million to resolve charges that Momentus, a space transportation company, and its CEO Mikhael Kokorich, misrepresented the company's technology and ability to secure required governmental licenses, and that Stable Road repeated those misleading statements in public filings associated with its proposed merger with Momentus.  Stable Road claimed to have conducted extensive due diligence of Momentus, but it never reviewed the results of Momentus’s in-space test or received sufficient documents relevant to government licensing issues and, in particular, national security risks associated with Kokorich. SEC

June 29, 2021

Neovest Inc., a JPMorgan Chase & Co. subsidiary that provides an order and execution management system (OEMS) that facilitates electronic trading, will pay $2.75 million for its failure to register as a broker-dealer. Neovest's OEMS allows customers to route orders for stocks and options to more than 360 customer-selected destination brokers who entered into agreements with Neovest for execution. In exchange for its OEMS services, Neovest received transaction-based compensation, which were sent to J.P. Morgan Securities LLC, a registered broker-dealer, and then transferred to Neovest. SEC

June 24, 2021

Gateway One Lending & Finance, LLC, which originates, securitizes, and services auto loans, agreed to pay $6.5 million in disgorgement, prejudgment interest, and civil penalties to resolve charges that it understated the historic losses of its auto loans and overstated the projected future performance for six auto loan-backed securitizations.  SEC