Securities Fraud

July 28, 2023

Thomas D. Renison and Timothy J. Allcott, co-founders of ARO Equity, LLC, were sentenced to 48 months and 30 months in prison, respectively, for lying to current and prospective investors about ARO's performance and for using new investors' funds to pay interest to older investors. For at least 3 years, and despite Renison being barred in 2014 by the SEC from associating with any investment adviser or broker-dealer, Renison and Allcott deceptively convinced investors to cash out their retirement accounts and invest instead with ARO, touting double-digit returns and zero downside, ultimately raising nearly $6 million from investors. ARO's investments began failing almost immediately, but Renison and Allcott continued to tell investors their investments were as safe with ARO as they were with a bank. In addition to their prison sentences, Renison was ordered to pay restitution of $6,098,198.30 and Allcott will pay restitution of $6,249,983.30. SEC

July 28, 2023

Summitcrest Capital, Inc., and its principals, Johnny Tseng and Kevin Zhang, raised approximately $19.8 million from Chinese-speaking investors in the United States and China, misleading them to believe the funds would be used to make real estate-related loans "to the general public" and the income from these loans would be used to make interest payments and return of capital to investors. Tseng and Zhang, through their entity SC Development Fund, instead used investor funds for loans to Zhang's many real estate development and contracting businesses. Summitcrest, Tseng, and Zhang are on the hook jointly and severally for $16.6 million in disgorgement and over $4.3 million in prejudgment interest. Summitcrest and Zhang are permanently enjoined from violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act. Additionally, Tseng is barred from acting as an officer or director and will pay disgorgement of $60,000, plus $15,721 in prejudgment interest and a $414,366 penalty. SEC

July 12, 2023

The SEC has awarded a whistleblower more than $9 million for sparking an investigation and providing significant information and assistance.  According to the SEC, the whistleblower first reported concerns i­nternally, but after gaining no headway from multiple internal reports, made a report to the agency.  SEC

June 26, 2023

Sanjay Singh, of Broward County, Florida, and his company, Royal Bengal Logistics Inc., have been charged by the SEC for fraudulently raising $112 million through a 5-year, Ponzi-like scheme, which targeted as many as 1,500 primarily Haitian-American investors through an unregistered securities offering. Singh promised investors guaranteed returns of 12.5 to 325 percent, and that the investors’ funds would be used to expand operations and increase its fleet of semi-trucks and trailers. Despite telling investors Royal Bengal generated up to $1 million in revenue per month, RB instead was operating at a loss and used approximately $70 million of new investor funds to make payments to other investors. Singh misappropriated at least $14 million of investor funds, and diverted more than $19 million into two brokerage accounts he controlled, engaged in highly speculative equities trading on margin in those accounts, and as a result lost more than $1 million of investor money. SEC

April 17, 2023

Jonah Engler and Barbara Desiderio, already enjoined from further violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, will pay over $5 million in disgorgement, interest, and civil penalties for illegally trading in retail customer accounts as their company, Global Arena Capital Corp., was going out of business. Engler, Desiderio, and two others caused customer losses of over $4 million, while generating over $2.4 million in unlawful markups, markdowns, and commissions for Global Arena. SEC

March 28, 2023

James K. Couture, a Massachusetts-based investment adviser, defrauded his clients of nearly $3 million from 2009 to December 2019, convincing them to sell portions of their securities to fund large money transfers to an entity Couture controlled—a detail not shared with his clients. Couture consented to a final judgment enjoining him from future violations of the securities laws’ antifraud provisions. Couture will spend 100 months in prison and was ordered to pay approximately $4.7 million in restitution and forfeiture for his deceptive, Ponzi-like scheme. SEC

February 16, 2023

Derivative clearing organization (DCO) The Options Clearing Corporation (“OCC”) has been ordered to pay $17 million to the SEC and $5 million to the CFTC for its failure to establish, implement, maintain, and enforce policies and procedures to manage operational risks related to its automated systems, in violation of numerous rules and regulations, including the Commodity Exchange Act and CFTC regulations called DCO Core Principles.  Due to those deficiencies, between 2019 and 2021, OCC’s Clearing Fund was underfunded by $200 million to nearly $600 million.  OCC previously settled other charges with the SEC for $15 million and the CFTC for $5 million.  SEC; CFTC

January 19, 2023

Cryptocurrency company Nexo Capital Inc. has agreed to pay $22.5 million and comply with a cease and desist order in order to settle SEC charges of failing to register the offer and sale of its retail crypto asset lending product.  The company has agreed to pay another $22.5 million and comply with additional terms in order to settle similar charges in California, Indiana, Kentucky, Maryland, New York, Oklahoma, South Carolina, Vermont, Washington, and Wisconsin.  As part of those additional terms, Nexo must notify all remaining U.S. investors to withdraw all remaining assets from Nexo’s platform by April 2023.  SEC, AG NY