Securities Fraud

May 6, 2022

NVIDIA Corporation has agreed to a cease-and-desist order and to pay a $5.5 million penalty for violations of the Securities Act and the disclosure provisions of the Securities Exchange Act. NVIDIA failed to disclose cryptomining as a significant element of its material revenue growth, depriving investors of critical information related to the investment’s volatility. SEC

May 6, 2022

The SEC awarded $3.5 million to 4 whistleblowers in a single covered action. Three joint whistleblowers provided staff with information that caused a new investigation to be opened, and a fourth whistleblower provided analytical insights of publicly available information that focused the staff’s attention on new allegations that advanced the investigation. SEC

May 4, 2022

Brenda Smith, former investment manager for Broad Reach Capital LP, pleaded guilty to seven counts of securities fraud. She will pay $47.2 million in restitution, spend 109 months in prison, and spend another 3 years thereafter under supervised release, for orchestrating a $100 million securities fraud scheme. To further her fraud, Smith provided investors with false monthly account statements, made false representations about her personal investment in the company, satisfied redemption requests by diverting other investors’ funds to pay the redemption amounts, and transferred clients’ funds to investments that were outside the scope of the promised investment strategy. NJ USAO

April 25, 2022

The SEC has awarded five whistleblowers a total of $6 million for their assistance in a single successful enforcement action.  According to the agency, one group of the whistleblowers provided key documents that prompted the agency to request additional documents from the respondent, while the second group provided firsthand accounts of the misconduct.  SEC

April 21, 2022

Bernard L. Compton, former accountant at Domino’s Pizza, will pay nearly $2 million for insider trading. Compton illicitly leveraged his insider role at Domino’s to trade ahead of 12 of the company’s earnings announcements between 2015 and 2020. Compton attempted to hide his crime by spreading the trades across several different brokerage accounts held by himself and his family members. Compton is permanently enjoined from practicing before the SEC. SEC

March 31, 2022

Seth Levine, Norse Holdings’ founder, received a 97-month sentence for his decade-long, $60 million refinancing- and securities-related real estate fraud. Levine, through his 70-plus companies, directed the scheme, submitting falsified documents which inflated the value of the subject properties. The overvaluation of properties led to shortfalls, which Levine covered with cash-out refinances, leaving victim lenders with at least $47 million in losses. Levine defrauded securities investors of at least $13 million by inducing them to invest in multifamily properties. Levine overstated his personal investment in the properties via forged documents provided to investors, sold portions of his properties without investor consent, and brought on additional investors without investor consent—all contrary to representations made during the solicitation. USAO NJ

March 24, 2022

Michael Gastauer of Germany has been ordered to pay $17 million in disgorgement, prejudgment interest, and civil penalty after he and his six U.S.-based entities were found to have aided and abetted a $165 million microcap fraud scheme.  Gastauer and his entities had allegedly disbursed of illegal stock sales orchestrated by Roger Knox of the U.K. via a Swiss entity called Wintercap SA.  Knox is awaiting sentencing in a parallel criminal action brought by the U.S. Attorney for the District of Massachusetts.  SEC

March 18, 2022

The SEC has made three awards totaling approximately $3 million to three whistleblowers whose actions helped lead to three enforcement actions.  All three whistleblowers were said to have provided information that prompted the agency to open investigations into potential securities law violations.  Two of the whistleblowers were company insiders who reported concerns internally before coming forward.  SEC

March 8, 2022

The SEC has awarded more than $3.5 million to a whistleblower whose information significantly contributed to two successful enforcement actions by prompting staff to further investigate securities violations, saving time and resources, and helping to advance settlement discussions.  SEC