The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
September 24, 2018
(SEC Litigation Release No. 24280)
https://www.sec.gov/litigation/litreleases/2018/lr24280.htm
https://www.sec.gov/litigation/litreleases/2018/lr24280.htm
The United States District Court for the Southern District of New York entered a final judgment against Thomas Meyer ordering him to pay disgorgement plus interest of $41,185.29 and a penalty of $20,000. Without admitting or denying the allegations in the SEC Complaint, Meyer was permanently enjoined him from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as the anti-touting provisions of Section 17(b) of the Securities Act of 1933..Allegedly, CSIR Group, LLC had hired writers like Meyer to publish bullish articles on its clients, which appeared to be independent research pieces but, in fact, were paid advertisements.
SEC Obtains Consent Judgment Against Investment Advisor and Principal (SEC Litigation Release No. 24285)
https://www.sec.gov/litigation/litreleases/2018/lr24285.htm
https://www.sec.gov/litigation/litreleases/2018/lr24285.htm
In a Complaint filed in the United States District Court for the Northern District of Georgia, the SEC alleged that Hope Advisors, LLC and its principal Karen Bruton managed two private hedge funds in which their only compensation was an incentive fee in the form of a monthly profit share. The Complaint alleged that Hope and Bruton calculated as a share of the profits earned in the funds' accounts each month. The Complaint alleged that Hope and Bruton fraudulently inflated their incentive fee by structuring trading so that a profit would be realized at the end of the month and guaranteeing that losses would not be realized until the following month, which resulted in Hope avoiding over $50 million in losses in the hedge funds while earning millions of dollars in fees to which it was not entitled. The Court entered a consent judgment against Hope and Bruton ordering them to pay $1,237,235 disgorgement and a $250,000 civil penalty; and enjoins them from violations of the antifraud provisions of Sections 206(1), (2) and (4) of the Investment Advisers Act and Rule 206(4)-8 thereunder.
SEC Charges Unregistered Sales of Securities Issued Under EB-5 Immigrant Investor Program (SEC Release 2018-208)
https://www.sec.gov/news/press-release/2018-208
https://www.sec.gov/news/press-release/2018-208
Without admitting or denying the findings, CMB Export LLC, its Chief Executive Officer Patrick Hogan, and 37 affiliated limited partnerships agreed to settle charges set forth in an SEC Order related to securities issued under the EB-5 Immigrant Investor Program. The Order alleged that the affiliates offered EB-5 limited partnership interests without registering them with the SEC and without a valid registration exemption ; and that CMB and Hogan paid transaction-based compensation for the solicitation of foreign investors.cease and desist from further violations of the broker-dealer registration requirements of the federal securities laws. Without admitting or denying thefindings in the SEC's order, CMB Export and Hogan agreed to cease and desist from further violations of the broker-dealer registration requirements of the federal securities laws; and affiliates agreed to cease and desist from further violations of registration provisions of the federal securities laws. CMB Export will pay $5.15 million penalty, Hogan will pay $515,000 penalty; and each of the 37 affiliagtes will pay a $160,000 penalty. READ the FULL TEXT SEC Order https://www.sec.gov/litigation/admin/2018/33-10559.pdf
Public Customer, Brokers, And Brokerage Firm Spit Nails, Eat Lightning, And Crap Thunder (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4197/finra-newbridge-indemnification/
http://www.brokeandbroker.com/4197/finra-newbridge-indemnification/
They say that news isn't when a dog bites a man but when a man bites a dog. If that's the case, we start today's BrokeAndBroker.com Blog with a news story: Stockbrokers sue customer in a FINRA arbitration. From there, it's less about news and more about an epic battle among various contenders. In Round Two, the Customer sues. In Round Three, the New York State Supreme Court throws out one of the arbitrations and remands. In Round Four, one of the brokerage firms sues its former associated persons. We got Rocky. We got Apollo Creed. We got Drago. We even got some wise words from Mickey Goldmill.
(SEC Litigation Release No. 24283)
https://www.sec.gov/litigation/litreleases/2018/lr24283.htm
https://www.sec.gov/litigation/litreleases/2018/lr24283.htm
Securities and Exchange Commission v. Jason W. Galanis, et al., No. 1:15-cv-07547 (S.D.N.Y. filed Sept. 24, 2015)
U.S. v. Jason Galanis, et al., No. 15 Cr. 643 (S.D.N.Y.)
The Securities and Exchange Commission has settled its action against John Galanis, his sons Jason Galanis, Derek Galanis, and Jared Galanis, as well as Gary T. Hirst, the former CEO and President of Gerova, and an investment adviser, Gavin Hamels. all of whom were named in a Complaint filed in the United States District Court for the Southern District of New York. The Complaint alleged that
Defendants schemed to secretly issue $72 million of unrestricted Gerova shares to a Galanis family, and then bribe investment advisers through client accounts those shares. Jason Galanis, his family and associates allegedly collectively realized approximately $20 million in illicit profits from the scheme. As noted below, each of the Defendants consented to a final judgment with the SEC that permanently enjoins him from violating the cited provisions:
Jason Galanis: Sections 5 and 17(a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder, which are offering and antifraud provisions of the federal securities laws, and permanently bars him from serving as an officer or director of a registered issuer. His disgorgement was deemed satisfied by the restitution ordered against him.John Galanis: Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. His disgorgement was deemed satisfied by the restitution ordered against him.Derek Galanis: Sections 5 and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. His disgorgement was deemed satisfied by the restitution ordered against him.Jared Galanis: Section 5 of the Securities Act, and ordered disgorgement of $207,500, plus prejudgment interest in the amount of $37,699. The SEC also previously instituted an administrative proceeding against Jared Galanis that imposed a suspension from appearing or practicing before the federal regulator under Rule 102(e)(2) of the Commission's Rules of Practice.Gary Hirst: Section 5 of the Securities Act, and Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and permanently bars him from serving as an officer or director of a registered issuer.Gavin Hamels: Sections 9(a)(1) and 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940. The SEC also previously instituted settled administrative proceedings against Hamels, which barred him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and barred him from participating in any offering of a penny stock.
In a separated criminal case, Jason Galanis, John Galanis, Derek Galanis, Jared Galanis and Gavin Hamels pled guilty to securities fraud and related charges. Jason Galanis was sentenced to 135 months in prison and was ordered to pay $37,032,337 in restitution; John Galanis and Derek Galanis were each sentenced to 72 months in prison and ordered to pay $19,019,404 in restitution. Jared Galanis was sentenced to 150 days in prison. Gavin Hamels was sentenced to two years' probation, and fined $10,000. A seventh defendant, Ymer Shahini, was charged in the criminal action but remains at large. After trial, Hirst was convicted of securities fraud, wire fraud, and conspiracy charges; and he was sentenced to 60 months in prison and was ordered to pay $19,019,404 restitution.
SEC Obtains Final Judgment Against Relief Defendant Wealthcfo, LLC (SEC Litigation Release No. 24284)
https://www.sec.gov/litigation/litreleases/2018/lr24284.htm
In Securities and Exchange Commission v. Tarek D. Bahgat, Lauramarie Colangelo, and WealthCFO, LLC, No. 17-cv-0971-LJV (United States District Court for the Western District of New York), the Court entered a final judgment against relief defendant WealthCFO, LLC, a company controlled by investment adviser Tarek D. Bahgat. The SEC obtained a default judgment against WealthCFO, and the Court entered a final judgment ordering WealthCFO to disgorge $369,601, representing funds that Bahgat misappropriated from his clients and paid to WealthCFO, together with prejudgment interest of $39,803, for a total of $409,405. The SEC's litigation against Bahgat for misappropriation of money from seven investment advisory clients continues. READ the FULL TEXT Complaint https://www.sec.gov/litigation/complaints/2018/comp24284.pdf
Business Services Company and Former CFO Charged with Accounting Fraud (SEC Litigation Release No. 24282)
https://www.sec.gov/litigation/litreleases/2018/lr24282.htm
In Securities and Exchange Commission v. James Douglas Miller, No. 18-civ-05761 (United States District Court for the Western District of Washington ), the SEC Complaint alleged that former Barrett Business Services Inc. Chief Financial Officer James D. Miller violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5 and 13a-14 thereunder, and Section 304(a) of the Sarbanes-Oxley Act of 2002. The complaint also alleges Miller aided and abetted the company's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13b2-1, 13b2-2, 13a-1, 13a-11, 13a-13 thereunder. The Complaint alleges that Miller manipulate BBSI's accounting records to hide the fact that its workers' compensation expense was increasing relative to its revenue. Miller allegedly concealed from BBSI's independent auditor a third-party actuarial report concluding that BBSI needed to add tens of millions of dollars to its workers' compensation liability. In a parallel action, the U.S. Attorney's Office for the Western District of Washington today announced criminal charges against Miller. READ the FULL TEXT Complaint https://www.sec.gov/litigation/complaints/2018/comp24282.pdf