Securities Fraud

July 29, 2014

The SEC charged penny stock company MSGI Technology Solutions and its CEO J. Jeremy Barbera with defrauding investors by touting a joint venture to develop and manage solar energy farms across the country on land purportedly owned by an electricity provider operated by Christopher Plummer.  Barbera and Plummer co-authored press releases falsely portraying MSGI as a successful renewable energy company on the brink of profitable solar energy projects.  However, MSGI had no operations, customers, or revenue at the time, and Plummer’s company did not actually possess any of the assets or financing needed to develop the purported solar energy farms.  SEC

July 28, 2014

Peter A. Jensen, former chief operating officer at Harbinger Capital Partners, agreed to pay $200,000 to settle charges he assisted a scheme by the firm and its owner Philip A. Falcone to misappropriate millions of dollars from a hedge fund they managed to pay Falcone’s personal taxes.  Falcone and Harbinger consented to a settlement last year in which they agreed to pay more than $18M and admit wrongdoing.  SEC

July 25, 2014

Citigroup business unit LavaFlow, Inc., which operates an alternative trading system (ATS), agreed to pay $5M to settle charges of failing to protect the confidential trading data of its subscribers.  The payment includes a $2.85M penalty which is the SEC’s largest to date against an ATS.  SEC

July 24, 2014

Morgan Stanley agreed to pay $275M to settle charges of misleading investors in a pair of residential mortgage-backed securities (RMBS) securitizations it underwrote, sponsored, and issued.  In an asset-backed securities offering, federal regulations under the securities laws require the disclosure of delinquency information for the mortgage loans serving as collateral.  Morgan Stanley allegedly misrepresented the current or historical delinquency status of mortgage loans underlying two subprime RMBS securitizations that came against a backdrop of rising borrower delinquencies and unprecedented distress in the subprime market.  SEC

July 18, 2014

The SEC charged Christopher Plummer, a serial con artist and Lex M. Cowsert, the CEO of penny stock company CytoGenix, with misleading investors in a supposed vaccine development company by issuing false press releases portraying it as a successful venture when it was in fact a failing enterprise.  Specifically, the government alleged that Plummer and Cowsert teamed up to defraud investors with extravagant claims about the company’s revenues flowing from a “shared revenue agreement” with Franklin Power & Light, an electricity provider supposedly operated by Plummer.  However, Plummer’s entity was a complete sham and CytoGenix had actually lost all its vaccine patents and other intellectual property in a lawsuit.  SEC

July 17, 2014

The SEC charged the CEO and president of a supposed merchant banking firm, braxas “A.J.” Discala and Marc E. Wexler, with teaming up with brokers and the CEO of the medical education company CodeSmart, Ira Shapiro, to inflate the price of the company’s stock and profit at the expense of the brokers’ customers.  According to the SEC, they acquired 3 million restricted shares of CodeSmart stock following its reverse merger into a public shell company in May 2013, and improperly flooded the market with the shares as though they were unrestricted.  CodeSmart’s stock price crashed from a peak of nearly $7 per share to where it is currently trading at below 10 cents.  SEC

July 17, 2014

The SEC charged Dennis H. Daugs Jr., owner of Seattle-based investment advisory firm Lakeside Capital Management, with fraudulently misusing millions of dollars in client assets to make loans to himself to buy a luxury vacation home and refinance a rare vintage automobile.  SEC

July 16, 2014

The SEC charged Natural Blue Resources Inc. with concealing from investors that two lawbreakers actually ran the company.  According to the SEC, the company was to create, acquire, or otherwise invest in environmentally-friendly companies.  What investors didn’t know was that two individuals with prior fraud violations — James E. Cohen and Joseph Corazzi — secretly controlled the operational and management decisions of Natural Blue while calling themselves outside “consultants.”  SEC

July 2, 2014

The SEC charged five traders for committing short selling violations while trading for themselves and Worldwide Capital Inc.  This is the Long Island, N.Y.-based proprietary firm that in March paid $7.2M, the largest-ever monetary sanction, for Rule 105 violations.  Rule 105 prohibits the short sale of an equity security during a restricted period – generally five business days before a public offering – and the subsequent purchase of that same security through the offering.  SEC

June 25, 2014

The SEC announced fraud charges against three former senior managers of Regions Bank for intentionally misclassifying loans that should have been recorded as impaired for accounting purposes.  As a result, the bank’s publicly-traded holding company overstated its income and earnings per share in its financial reporting.  Regions will pay a total of $51M to resolve parallel actions by the SEC, Federal Reserve Board, and Alabama Department of Banking.  SEC