Securities Fraud

May 3, 2019

New Hampshire-based GT Advanced Technologies, Inc. and its then-CEO Thomas Gutierrez have consented to entry of an order by the SEC finding that they publicly misrepresented the status of an agreement the company had with Apple to supply "sapphire glass" for iPhones, falsely stating that the company expected to hit performance targets under its agreement with Apple, securing funding from Apple and achieving sales projections.  In fact, the company had repeatedly failed to meet Apple's performance milestones and faced liability to repay more than $300 million that Apple had advanced to GT.  GT was also found to have misclassified this Apple debt in its financial reports.  GT later filed for bankruptcy protection.  The parties agreed to cease and desist from further violations, and Gutierrez agreed to pay a $140,000 monetary sanction.  SEC

April 30, 2019

Brynee Baylor, a former D.C. attorney, was convicted for her role in a $2 million investment fraud scheme. Baylor and her co-conspirators recruited investors into a phony trading program which promised large profits in a short amount of time with little to no risk. Baylor faces five years in prison for the conspiracy count, 20 years for the securities fraud count, and 10 years in prison for each of the first-degree fraud counts. Sentencing has not yet been scheduled.   DOJ

April 25, 2019

Morgan Stanley will pay $150 million to the State of California to resolve allegations under the California False Claims Act, Corporate Security Law and False Advertising Law, that the bank concealed the risk of residential mortgage-backed securities sold to the California Public Employees’ Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS) between 2003 to 2007. CA

April 25, 2019

Indianapolis-based trucking company Celadon Group, Inc., has agreed to pay $42.2 million in restitution to shareholders, $7 million of which will be credited to a disgorgement pursuant to agreement with the SEC, to settle allegations of accounting fraud.  Celadon was alleged to have avoided the recognition of $20 million in impairment charges and losses by recording a series of equipment trades as sales at inflated values.  Celadon management is further alleged to have falsely stated to its auditors that the equipment was sold at fair market value. Celadon has entered into a deferred prosecution agreement calling for specific compliance measures and cooperation in ongoing investigation of the accounting fraud.  SEC; DOJ; USAO SD IN

April 9, 2019

Antonio Carlos de Godoy Buzaneli of Florida was sentenced to 20 years in prison for his role in a scheme that raised approximately $150 million from investors for his company Providence Holdings International, Inc., which Buzaneli represented would invest in the factoring of accounts receivable in Brazil. In fact, much of the investors’ funds were used to make Ponzi-style payments to other investors, and to make commission payments to Providence’s nationwide network of brokers. USAO Minn

April 2, 2019

Former CEO of Jumio, Daniel Mattes, will pay more than $17 million to settle SEC charges of defrauding investors in the Silicon Valley based private mobile payments company. The SEC complaint alleges that Mattes exaggerated Jumio’s 2013 and 2014 revenues while selling his personal shares to investors in the private, secondary market. When Jumio filed for bankruptcy in 2016, the shares became worthless and investors lost everything. Mattes is barred from being an officer or director of a publicly traded company in the U.S. Further, he must pay more than $16 million in disgorgement and prejudgment interest plus a $640,000 penalty. The SEC also settled separate proceedings against Jumio’s former CFO, Chad Starkey, for failing to exercise reasonable care concerning the financial statements and signing stock transfer agreements that falsely implied that the board of directors had approved Mattes’ sales. SEC

March 22, 2019

Merrill Lynch agreed to pay $8 million to settle charges by the SEC that it improperly borrowed ADRs from other brokers when it knew that these other brokers did not own the foreign shares needed to support the pre-released ADRs.  This practice artificially inflates the number of securities that are tradeable for a foreign issuer.  SEC

March 20, 2019

Wells Fargo Securities has been ordered to pay over $800,000 in civil penalties to the SEC for failing to disclose that a video game development project being financed by a bond it underwrote still faced a significant shortfall in funding. The lead banker on the deal, Peter Cannava, was additionally accused of failing to disclose the fees being paid to the firm by startup video game company, 38 Studios. SEC