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Top Ten SEC and CFTC Recoveries of 2022

Posted  February 1, 2023

In 2022, the SEC and CFTC redoubled their efforts to preserve market integrity and shut down financial frauds.  Both in size and composition, the agencies’ major recoveries look quite different from a year prior.  2021 was all about crypto, with four of the top ten recoveries relating to crypto offerings or exchanges.  With the recent collapse of the crypto market—exposing some of the biggest frauds since the financial crisis—we expect a resurgence in major crypto recoveries in the years to come.  But 2022 took on a more traditional bent, with the SEC and CFTC hammering large financial institutions, Big Four accounting firms, and major corporations with billions of dollars in penalties and restitution.

Below we detail the Top Ten SEC and CFTC recoveries of 2022 in cases other than Foreign Corrupt Practices Act (FCPA) enforcement (we’ve separately chronicled 2022’s major FCPA recoveries). These major recoveries set the stage for more large whistleblower awards, building on the recent success of both the SEC and CFTC whistleblower programs, which empower whistleblowers to report wrongdoing and obtain awards upon a successful agency recovery.  For example, during the 2022 fiscal year, the SEC received the largest number of submissions to the program in its history and issued over 100 whistleblower awards totaling more than $229 million—continuing the much faster pace of award determination since 2021.  Likewise, the CFTC received a record-breaking number of tips and issued the largest-ever award in its program history.  Based on the recoveries below, it’s likely more record-breaking years are on the way.

Without further ado, here are the Top Ten SEC and CFTC recoveries of 2022 in cases other than FCPA enforcement, with links to more information about each of the cases:

  1. Off-Channel Messaging Sweep – The SEC and CFTC joined forces to collect over $1.8 billion from major financial institutions—including Barclays, Bank of America, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, and others—over their failure to prevent employees for using untracked and unpreserved messaging applications on their personal devices. The widespread use of these messaging applications violated the agencies’ recordkeeping laws and resulted in lost evidence that inhibited investigations.  The defendants also agreed to sweeping changes to their policies and procedures relating to the use and retention of electronic communications on personal devices.
  2. Glencore International A.G. – For the second year in a row, the CFTC has the largest individual recovery on our list—its massive $1.186 billion settlement with Glencore over manipulation of the global oil market. The settlement includes both the largest civil monetary penalty and the highest disgorgement amount ever in a CFTC case.  Glencore and an affiliate also paid over $1.1 billion in criminal penalties and forfeitures and plead guilty to violations of the Foreign Corrupt Practices Act and conspiracy to engage in commodity price manipulation.  As part of the criminal plea agreement, Glencore admitted that for over a decade it paid more than $100 million in bribes to officials in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea, Brazil, Venezuela, and the Democratic Republic of the Congo.  In addition, the CFTC found that Glencore sought to juice profits by manipulating four oil benchmarks and related futures and swaps.
  3. Allianz Global Investors U.S. LLC – The largest SEC individual SEC recovery comes from Allianz, which paid a $675 million penalty and nearly $350 million in disgorgement over its alleged lies to investors.  Allianz also agreed to pay a fine of $2.3 billion and over $3 billion in disgorgement and restitution to victims in a related criminal proceeding.  Three former AGI senior portfolio managers, Gregoire TournantTrevor Taylor, and Stephen Bond-Nelson, also plead guilty to related charges.  The government alleged that Allianz and the individual defendants manipulated numerous financial reports and other information given to investors to conceal the risk in a large investment fund.  The fund ultimately collapsed, causing investors to lose billions of dollars.
  4. Barclays – Just two days after agreeing to pay the SEC $125 million as part of the off-channel communications sweeps, Barclays PLC and Barclays Bank PLC agreed to pay an additional $361 million over charges that they offered and sold $17.7 billion of securities in unregistered transactions because of their complete failure to set up internal controls. The firms eventually self-reported to regulators and commenced a rescission offer.
  5. Boeing – The Boeing Company and its former CEO, Dennis Muilenburg, agreed to pay $200 million and $1 million respectively to resolve SEC charges concerning their misleading statements following the tragic 737 MAX crashes in 2018 and 2019, which killed hundreds of people. Despite knowing the software system at fault would be an ongoing safety issue, Boeing and Muilenburg repeatedly assured investors and the public otherwise.  Relatedly, you can read about our client Ed Pierson and his efforts to alert regulators and the public about dangerous production conditions and profit-over-safety culture at Boeing’s 737 factory.
  6. Charles Schwab The SEC hit Charles Schwab & Co., Inc., Charles Schwab Investment Advisory, Inc., and Schwab Wealth Investment Advisory, Inc. with $187 million in penalties and disgorgement for alleged misstatements and omissions about their conflict of interest in handling customer funds and the resulting drag on customer returns.
  7. BlockFi – In our first crypto entry on the list, BlockFi agreed to pay a total of $100 million to resolve SEC and state claims based on its cryptocurrency lending products, including its BlockFi Interest Accounts. In a key precedent-setting ruling, the SEC’s order found that BlockFi Interest Accounts were securities that should have been registered under U.S. securities laws.  The SEC also found that BlockFi failed to timely register as an investment company and made misrepresentations about the risk in its loan portfolios.
  8. EY – In the largest penalty ever imposed on an accounting firm, the SEC hit Ernst & Young LLP (EY) with a $100 million penalty after a significant number of its auditors cheated on the ethics portion of their professional exams over several years.  EY also admitted that it withheld evidence of the cheating from the SEC during its investigation.  As part of the settlement, EY agreed to undertake extensive remedial efforts.  The SEC settled a similar case with KPMG for $50 million in 2019.
  9. Hudson Advisors L.P. and Lone Star Global Acquisitions Ltd. – The SEC charged registered investment advisers Hudson Advisors L.P. and Lone Star Global Acquisitions Ltd. for improperly including $54.6 million of their owner’s anticipated U.S. tax liability in the fees charged to funds under their management. By law, those tax liabilities were payable by the owner, and the firms were not authorized to pass them through as fees without full and fair disclosure to investors. The firms agreed to pay an $11.2 million civil penalty and reimburse the affected funds $68.5 million.
  10. Equitable Financial Life Insurance Company – Rounding out our list, Equitable Financial Life Insurance Company paid $50 million to settle charges that made materially misleading statements and omissions regarding its fees to 1.4 million variable annuity investors, including public school teachers and staff. The company also agreed to change how it presents fee information going forward.

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Annual Whistleblower Insider Top Ten Lists

Every January, Whistleblower Insider looks back at the significant government enforcement actions of the past year. Our Top Ten lists highlight the biggest recoveries and significant enforcement efforts by different government actors in cases of interest to whistleblowers.
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