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Securities Fraud

This archive displays posts tagged as relevant to securities fraud. You may also be interested in the following pages:

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July 15, 2022

An anonymous whistleblower was awarded $3 million based on SEC findings that the individual, who was solicited to invest in a product, expeditiously contacted the SEC to report misrepresentations regarding the product.  That report prompted the Commission to open an investigation, during which the individual provided additional assistance.  SEC

July 11, 2022

Attorney Shimon Rosenfeld was ordered to pay over $7 million in disgorgement and prejudgment interest and will spend 6 months in prison for defrauding real estate investors. For a period of nearly four years, from May 2014 to March 2018, Rosenfeld solicited investors for a pooled real estate investment fund whose profits would be split with the investors. Instead, Rosenfeld misappropriated the funds to trade securities in his personal brokerage account, resulting in a $6 million loss of investor funds. SEC

June 29, 2022

UBS Financial Services Inc. has agreed to pay $25 million in connection with a complex investment strategy that it ran from 2016 to 2017.  Though it marketed and sold YES, or Yield Enhancement Strategy, to some 600 investors, UBS did not adequately inform those investors about possible risks, nor provide its financial advisors with enough training and oversight to counteract those risks.  SEC

June 14, 2022

Energy Capital Partners Management LP will pay a $1 million penalty and has paid back more than $3.3 million to a private equity fund it advises, for allocating a disproportionate share of expenses to the fund, a violation of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940, and Rule 206(4)-7 and 206(4)-8. ECPM should have either disclosed the disproportionate allocation or not have allocated them in this manner. SEC

June 14, 2022

Weiss Asset Management LP will pay $6.9 million for its Rule 105 violation, i.e., short selling stocks and then purchasing the same stocks in public offerings. Weiss sold short the stocks, despite the stocks being under a 5-day restricted period. Weiss regularly miscalculated the applicable restricted period and dismissed internal red flags alerting them to the potential noncompliance. SEC

June 13, 2022

Charles Schwab & Co., Inc., Charles Schwab Investment Advisory, Inc., and Schwab Wealth Investment Advisory, Inc. will pay $187 million for violating the antifraud provisions of the Investment Advisers Act of 1940. Mandated disclosures for Schwab Intelligent Portfolios—Schwab’s robo-adviser product—stated that the amount of cash in the robo-adviser portfolios utilized a “disciplined portfolio construction methodology,” and would seek “optimal return[s].” Instead, Schwab swept cash from the robo-adviser portfolios to its affiliate bank, loaned it out, and kept the difference between the interest it earned on the loans and the interest it paid to the robo-adviser clients. This resulted in customers making less money while taking on the same amount of risk. SEC

June 8, 2022

CohnReznick LLP and its partners Stephen M. Wyss, Stephen H. Jackson, and Robert G. Hilbert were charged with improper professional conduct in their engagement with clients Sequential Brands Group, Inc. and Longfin Corp, violations of Rule 102(e) of the SEC’s Rules of Practice, Rule 2-02(b)(1) of Regulation S-X, and violations of Section 13(a) of the SEC Act of 1934. CohnReznick failed to obtain sufficient evidence to support Sequential’s conclusion that its goodwill was not impaired or reduced in value, despite the firm’s own valuation specialists expressing concern. In its Longfin audit, CohnReznick failed to address known issues involving related party transactions used to fraudulently inflate Longfin’s revenues. CohnReznick’s $1.9 million penalty will be returned to investors. SEC

June 8, 2022

Michael Gastauer, of Germany, and his 6 related entities will pay over $15 million for aiding and abetting an international securities scheme wherein Gastauer used his U.S. bank accounts to disburse illegal stock sale proceeds to offshore brokerage accounts, masking the sellers’ true identities. The scheme was orchestrated by UK citizen Roger Knox and his Swiss-owned entity, Wintercap SA. In a parallel criminal action, Knox was indicted on and pled guilty to one count of securities fraud and one count of conspiracy to commit securities fraud. Knox’s sentencing is pending. SEC

June 7, 2022

Morningstar Credit Ratings, LLC will pay a civil monetary penalty of $1,150,000 for disclosure and internal controls violations related to rating commercial mortgage-backed securities. Analysts were permitted to adjust key stresses in the rating model, without disclosing they had done so, impacting 30 transactions from 2015 to 2016. Additionally, effective internal controls were neither established nor enforced for these adjustments from 2015 to 2017, impacting 31 transactions. SEC

June 7, 2022

Synchronoss Technologies, Inc. and seven senior employees were charged with accounting improprieties running from 2013 to 2017, including improperly accounting for numerous transactions, filing with the SEC materially misleading financial statements, and having material weaknesses in its internal financial reporting controls. Synchronoss will pay a civil penalty of $12.5 million. SEC
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