The Wall Street Legal & Regulatory Feed

Securities Industry Commentator by Bill Singer Esq

November 9, 2018

http://www.brokeandbroker.com/4281/thousand-oaks/

https://www.justice.gov/opa/pr/united-states-sues-ubs-recover-civil-penalties-fraud-sale-residential-mortgage-backed
In a civil Complaint filed in the United States District Court for the Eastern District of New York, the United States alleged that from 2006 through 2007, UBS AG and several of its United States affiliates misled investors about the quality of billions of dollars in subprime and Alt-A mortgage loans backing 40 Residential Mortgage-Backed Securities ("RMBS") deals; and that UBS knowingly misrepresented the loans in public documents, thereby concealing the loans were riskier and likelier to default than represented. The Complaint alleges that UBS' actions violated the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) based on alleged mail fraud, wire fraud, bank fraud, and other misconduct. READ the Civil Complaint 
http://www.brokeandbroker.com/PDF/UBSCivComplaintRMBS.pdf

https://www.justice.gov/opa/pr/los-angeles-man-pleads-guilty-defrauding-investors-through-83-million-binary-options-scheme
Former Citrades Chief Executive Officer Jason Benjamin Scharf pled to one count of conspiracy to commit wire fraud in the United States District Court for the Central District of California.  Scharf admitted that from February 2013 through December 2015, he oversaw the day-to-day operations of Citrades, a purported internet-based investment platform; and that he and his co-conspirators attempted to induce investors to purchase binary options based on materially misleading misrepresentations and omissions. Representatives of Citrades falsely claimed to be representing the interests of investors when, in reality, they were representing Citrades' financial interests. In reality, investors were not trading with other investors but but were investing in transactions whose parameters, including the "strike price" associated with the binary option, were set by a separate company that served as a platform provider.  Scharf further admitted that after being served with an administrative subpoena, he deleted potentially incriminating emails from an account that he used to conduct Citrades-related business. 

https://www.sec.gov/litigation/litreleases/2018/lr24340.htm
In a Complaint filed in the United States District Court for the District of Minnesota, the SEC charged James E. Hengen with violations of the antifraud provisions of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. Without admitting or denying the allegations in the SEC's complaint, Hengen consented to the entry of a final judgment that permanently enjoins him from future violations, and orders him to pay disgorgement of $63,804, prejudgment interest of $3,865, and a civil penalty of $72,144. The Complaint alleges that Hengen,whose wife worked for a subsidiary of UnitedHealth Group, Inc., misappropriated material, nonpublic information concerning UnitedHealth's pending acquisitions of two companies, USMD Holdings, Inc. and Surgical Care Affiliates, Inc. Allegedly, Hengen learned of the pending USMD acquisition when he overheard one of his wife's phone calls while she was working from home; and, thereafter in breach of an alleged duty to his wife, Hengen then purchased USMD stock and tipped four other individuals, who also purchased the stock. Hengen sold his stock for about a $32,315 profit and his tippees realized about $8,340 in profits. The Complaint alleges that Hengen subsequently misappropriated information from his wife concerning UnitedHealth's pending acquisition of Surgical Care, and realized about $31,489 in profits. READ the Complaint https://www.sec.gov/litigation/complaints/2018/comp24340.pdf

Hmmm . . . so . . . what seems sorta familiar about this next case? SEC Charges California Software Consultant with Insider Trading (SEC Litigation Release No. 24338) 
https://www.sec.gov/litigation/litreleases/2018/lr24338.htm
In a Complaint filed in the United States District Court for the Central District of California, the SEC charges software consultant Slobodan Dragojlovic with violations the antifraud provisions of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. Without admitting or denying the allegations in the SEC's complaint, Dragojlovic consented to the entry of a final judgment that permanently enjoins him from future violations, and orders him to pay disgorgement of $20,101, prejudgment interest of $1,038, and a civil penalty of $20,101. The Complaint alleged that The SEC alleges that Dragojlovic had misappropriated from his brother material, nonpublic information that Surgical Care Affiliates was in negotiations to be acquired by UnitedHealth Group, Inc.; and, thereafter, realized over $20,000 in insider-trading profits. READ the Complaint https://www.sec.gov/litigation/complaints/2018/comp24338.pdf

Court Bars Long Island Based Cold-Caller and His Firm from Participating in Penny Stock Offerings for Twenty-Five Years (SEC Litigation Release No. 24339) https://www.sec.gov/litigation/litreleases/2018/lr24339.htm
In a Complaint filed in the United States District Court for the District of Columbia, the SEC charged Eric P. Lesak and his firms, Global Research, LLC (PA) and Global Research, LLC with selling over $2.8 million in shares of penny stock company Axiom Holdings Inc. to cold-called investors without telling said prospects that  Lesak had been barred by the NASD, or that he had pled guilty to securities and wire fraud. Moreover, Lesak and his firmsdidn't tell prospective investors that they were being paid thousands of dollars each month to promote Axiom stock to investors. The Court permanently prohibits Lesak and his firms from violating the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and orders the defendants to pay, jointly and severally, disgorgement of $767,115 plus interest of $46,644. The judgment also orders Lesak to pay a civil monetary penalty in the amount of $184,767, Global to pay a civil monetary penalty in the amount of $923,831, and prohibits Lesak from participating in any offering of penny stock for twenty-five years.

SEC Charges Florida Man in Day Trading Scheme (SEC Litigation Release No. 24344)
https://www.sec.gov/litigation/litreleases/2018/lr24344.htm
In a Complaint filed in the United States District Court for the Southern District of Florida, the SEC charged Ricardo H. Goldman with violating Sections 10(b), 15(a)(1), and 15(b)(6)(B) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and seeks permanent and conduct-based injunctions, disgorgement of ill-gotten gains with interest, and penalties. The Complaint alleged that Goldman misled dozens of day traders into thinking they were opening individual online securities trading accounts with Goldman's broker-dealer, America Capital Group LLC, which was not registered with the SEC. Allegedly, Goldman raised about $6.9 million from traders and then commingled their funds into a pooled master brokerage account that he controlled, which sustained at least $3.6 million in trading loses. Because funds were commingled, traders were forced to share in the overall losses incurred in the master account. In furtherance of the scheme, Goldman allegedly made material misrepresentations and omissions to traders regarding his background and disciplinary history which includes antifraud and securities and broker-dealer registration injunctions, a broker-dealer bar, and a state court conviction for grand theft and forgery. Without admitting or denying the allegations, Goldman consented to the entry of a judgment that permanently enjoins him from violating the above-mentioned provisions of the federal securities laws, imposes a conduct-based injunction, and directs Goldman to comply with the Commission's Order dated November 19, 2008, In the Matter of Ricardo H. Goldman (Exchange Rel. No. 58976, Admin. Proc. 3-13293). The Judgment also orders Goldman to pay disgorgement of $470,000, prejudgment interest thereon in the amount of $53,497, and a civil penalty in the amount of $320,000.READ the Complaint https://www.sec.gov/litigation/complaints/2018/comp24344.pdf

In a Complaint filed in the United States District Court for the Northern District of Texas, the SEC charged Greenview Investment Partners L.P. and its founder Michael E. Cone with violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Complaint alleged that the Defendants used misleading marketing materials in raising more than $3.3 million from investors. Pointedly, Cone was accused of allegedly employing boiler room sales staff who made cold calls to investors and promised them up to 24% annual returns from investments in Greenview. In an effort to conceal his prior criminal convictions, Cone alleged used an alias and lied about having a former agent from the U.S. Drug Enforcement Administration on staff, and falsely claimed to have a long record of profitably investing millions in cannabis-related businesses. In fact, Greenview had no track record and its sole investment of $400,000 was in a cannabis company that had yet to harvest a crop; moreover, Cone allegedly spent investors' money on designer clothes and luxury cars, and on payments to earlier investors to prolong the alleged scheme. In response to the Complaint, 
Cone agreed to an officer-and-director bar and a permanent injunction. In a parallel criminal proceeding in the United States District Court for the Central District of California, Cone was charged and about $1.4 million in cash/assets has been seized. 
READ the SEC Complaint https://www.sec.gov/litigation/complaints/2018/comp24342.pdf

https://www.sec.gov/litigation/litreleases/2018/lr24341.htm
In a Complaint filed in the United States District Court for the Southern District of New York, the SEC charged SeeThruEquity LLC and its Chief Executive Officer Ajay Tandon with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and charges Ajay's brother Amit Tandon with aiding and abetting those violations. It also charges SeeThru with violating the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act of 1933 ("Securities Act") and the antitouting provisions of Section 17(b) of the Securities Act; charges Ajay with violating the antifraud and antitouting provisions of Sections 17(a) and (b) of the Securities Act; charges Amit with violating the antitouting provisions of Section 17(b) of the Securities Act; and charges Ajay with aiding and abetting certain of SeeThru's antifraud and antitouting violations. The SEC seeks permanent injunctions, a conduct-based injunction that would bar Ajay, Amit, and SeeThru from promoting the issuer of any security, disgorgement, civil penalties, and officer and director and penny stock bars. The Complaint alleges that the Defendants received thousands of dollars from issuers as a condition to providing each report for the issuance of purportedly "unbiased" and "not paid for" research. The payments were camouflaged by inviting companies to make a "presentation" at an investor conference in order to receive a research report for free. Allegedly, issuers regularly had input into the substance of the supposedly unbiased research reports, even including the price targets at times. The Complaint alleges that the Tandons often instructed SeeThru analysts to use different, higher price targets for covered issuers than those yielded through purported quantitative analysis, and the price targets contained in SeeThru's reports were typically more than 300 percent above the current trading price of the stock. Further, despite stating that neither the firm nor its principals traded in covered securities, Ajay Tandon frequently did so, and he also scalped stocked recommendations.READ the Complaint 
https://www.sec.gov/litigation/complaints/2018/comp24341.pdf

https://www.sec.gov/news/press-release/2018-258
In what the SEC Release describes as the regulator's "first enforcement action based on findings that such a platform operated as an unregistered national securities exchange," without admitting or denying the findings, Zahary Coburn, founder of the digital token online trading platform EtherDelta, consented to an SEC Order and agreed to pay $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty. Over an 18-month period, EtherDelta's users allegedly executed over 3.6 million orders for ERC20 tokens, including tokens that are securities under the federal securities laws; and virtually all such orders were traded after the SEC's 2017 DAO Report, which concluded that certain digital assets, such as DAO tokens, were securities requiring trading on registered exchanges or exchanges operating under an an exemption -- and. EtherDelta failed to satisfy either option. READ the Order https://www.sec.gov/litigation/admin/2018/34-84553.pdf

https://www.sec.gov/litigation/litreleases/2018/lr24345.htm
In a Complaint filed in the United States District Court for the Central District of California, the SEC charges Eric J. "EJ" Dalius, Professional Realty Enterprises, Inc., Saivian LLC, Savings Network App LLC, Saving Network App Limited, Saivian International Limited, Saivian INT Limited, and Realty Share Network LLC with violating the registration provisions of Sections 5(a) and (c) of the Securities Act of 1933 and the antifraud provisions of Section 17(a) of the Securities Act, Section10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The Complaint alleges that Dalius is liable for the conduct of the Saivian corporate entities as their control person and seeks injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties. Several relief defendants are named for the purpose of recovering funds that were unlawfully obtained. The Complaint alleges that Dalius, who had pled guilty in 2001 to criminal charges in connection with a long distance phone card scam, and the companies he controlled under the umbrella name "Saivian," sold securities that entitled holders to receive 20% cash back on their shopping purchases in exchange for paying a fee of $125 every 28 days, and submission of receipts. Thereafter, Defendants falsely claimed that Saivian funded its cash back payments to members by monetizing the point-of-sale receipt data submitted by its members; however, said payments were allegedly funded via the Ponzi-like use of other investors' funds. In furtherance of the alleged fraud,  Dalius allegedly hid his creation and ownership of the Saivian scheme and failed to disclose his 2001 criminal conviction in connection with the earlier multi-level marketing fraud. The Complaint alleges that Dalius stole a large portion of the more than $165 million of investor contributions and the accumulation in value of Bitcoin that investors paid Dalius to purchase memberships; and that he used such funds forpersonal investment accounts, private jet travel, luxury vacations, sports and entertainment tickets, multimillion dollar properties in Miami Beach and New York City, and an exotic sports car. READ the Complaint https://www.sec.gov/litigation/complaints/2018/comp24345.pdf

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