The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
December 10, 2018
READ the testimony of former FBI Director James Comey before the US House of Representatives Committee on the Judiciary and on Government Reform and Oversight (December 7, 2018)
http://brokeandbroker.com/PDF/ComeyTscpt.pdf
In the Matter of CoinAlpha Advisors LLC, Respondent (Order Instituting Cease-And-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-And-Desist Order; '33 Act Rel. No. 10582; Admin. Proc. File No. 3-18913 / December 7, 2018) (the "OIP"). Without admitting or denying the findings, and in anticipation of the institution of SEC proceedings, former SEC-registered investment adviser CoinAlpha Advisors LLC management submitted Offers of Settlement, which the SEC accepted.CoinAlpha Advisors LLC ("CoinAlpha") was formed in July 2017 to act as the managing member of and manager to CoinAlpha Falcon LP. (the "Fund"), which had a $608,491 investment from 22 investors. Neither CoinAlpha Advisors or CoinAlpah Falcon were registered with the SEC. In October 2018, after being contacted by SEC staff concerning the issues herein,CoinAlpha unwound the Fund, pursuant to the authority granted in the Fund's Limited Partnership Agreement. The OIP alleged that CoinAlpha violated Section 5(a) of the Securities Act, which prohibits the sale of securities through interstate commerce or the mails unless a registration statement is in effect, and Section 5(c) of the Securities Act, which prohibits the offer to sell any security through interstate commerce or the mails, unless a registration statement has been filed as to such security with the Commission. In accordance with the terms of teh Settlement, the Respondent CoinAlpha was ordered to cease and desist from committing or causing any violations and any future violations of Sections 5(a) and 5(c) of the Securities Act; and to pay a $50,000 civil money penalty. As set forth in part in the OIP:
4. Respondent filed a Form D Notice of Exempt Offering of Securities with the Commission on November 3, 2017. CoinAlpha did not file or cause to be filed a registration statement with the Commission, and no exemption from registration was available for the securities offering during the Relevant Period.5. Respondent did not have pre-existing substantive relationships with nine of the Fund's investors and engaged in a general solicitation of public interest in the securities offering through CoinAlpha's website, which was generally accessible without password protection. Additionally, Respondent engaged in general solicitation through blog postings, and media interviews and digital asset and blockchain conferences, accessible both via live attendance and through the Internet. Despite collecting accredited investor questionnaires and representations from investors certifying to their accredited investor status, Respondent did not take reasonable steps to verify that investors in the Fund were accredited investors.6. Respondent controlled and directed the investment of the Fund's assets. Pursuant to the terms of its management agreement with the Fund, CoinAlpha earned both management fees from the Fund and was entitled to incentive fees based on the Fund's investment performance. In 2017, Respondent received a distribution of management fees and incentive fees based on the Fund's performance. In 2018, Respondent accrued management and incentive fees, but did not take any distributions from the Fund.7. Respondent immediately halted the offering when contacted by the Commission staff and undertook a review of its website, social media postings, digital asset and blockchain conference marketing materials, and offering procedures. Respondent further voluntarily reimbursed all fees it had already collected, surrendered all rights to future management and incentive fees, unwound the Fund, and made payments to ensure that no Fund investor suffered a loss. During the Commission staff's investigation, Respondent retained a third party who determined that all 22 investors were accredited investors.
FINRA Rule 8210 Demands End With Stockbroker Bar (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4324/finra-awc-8210/
For those caught up in a FINRA investigation, there often comes a moment when you open a letter from Staff and it asks for numerous written explanations and what you envision to be tons of documents. In such a moment, you may feel overwhelmed. It may strike you as an effort to force you out of the industry not for any wrong that you did but simply as a ploy. You may not have the resources to assemble everything needed to respond. FINRA knows that. And you think that they're simply playing hardball and want you to agree to a Bar. No matter how you ask Staff for relief from the onerous production demands, their response is either give us what we want or we'll bar you. Produce or Bar. Produce. Bar. That's the choice it almost always comes down to. Of course, FINRA has a job to do and it often starts with an investigation, and such an inquiry depends upon the cooperation of brokerage firms and their associated persons. You would no more expect FINRA to simply withdraw a demand in the face of a mere objection than you would a criminal prosecutor. It's how the system works. That being said, let's consider a recent FINRA investigation in which a respondent pushed back against Staff production demands.
https://www.sec.gov/litigation/litreleases/2018/lr24369.htm
In the United States District Court for the Central District of California, the SEC filed a subpoena enforcement action against NVC Fund LLC and its principal, Frank Ekejija, seeking an order directing them to comply with an investigative subpoena for documents and testimony. The SEC is investigating whether certain individuals or entities engaged in a potential pump-and-dump scheme in the stock of three penny-stock companies: Cherubim Interests, Inc., PDX Partners, Inc., and Victura Construction Group, Inc. Trading had been suspended by the SEC in the three companies for 10-business days starting February 15, 2018. In June and September 2018, the SEC issued subpoenas to NVC Fund and Ekejija for the production of documents and testimony. According to the SEC's application, NVC Fund and Ekejija produced a limited number of documents, and Ekejija gave limited testimony. Both refused to produce key documents responsive to the subpoenas, and Ekejija refused to testify about matters relevant to his participation in the conduct being investigated.
Jury Finds Former SunTrust Bank Employee Guilty Of Stealing Nearly $172,000 From A Bank Customer (DOJ Release)
https://www.justice.gov/usao-mdfl/pr/jury-finds-former-suntrust-bank-employee-guilty-stealing-nearly-172000-bank-customer
A jury in the United States District Court for the Middle District of Florida found former SunTrust Bank employee Reginald Green, II guilty of five counts of theft or embezzlement by a bank employee. Federal prosecutors had alleged that between 2011 and 2018, Green, stole over $171,000 from a bank customer by withdrawing more funds than the customer had authorized, and then depositing said stolen funds into bank accounts under his control. Green used the stolen funds to pay down his own mortgage and auto loans. Upon discovering the theft, in April 2018, SunTrust immediately fired Green and reimbursed the bank customer for the stolen funds.
https://www.justice.gov/usao-ndga/pr/defendants-sentenced-35-million-sweepstakes-scam-targeting-elderly
Silvia Sanchez Valverde, Rodolfo Orozco Aguilar, Daniel Sibaja, Priscilla Sibaja, and Elpelice Figueroa Rosales were sentenced in the United States District Court for the Northern District of Georgia for their roles in a sweepstakes scam that targeted dozens of elderly individuals and promised the victims that they could receive their sweepstakes winnings after paying various expenses, such as taxes and fees. The victims paid over $3.5 million in alleged expenses to various companies controlled by the defendants, such as J.G. Services, RF Financial Services, and Master Builders but never received their purported winnings. The Court imposed the following sentences:
- Valverde (conspiracy to commit mail fraud guilty plea): five years in prison plus three years of supervised release;
- Aguilar: (conspiracy to commit mail fraud guilty plea): four years in prison plus one year of supervised release;
- Daniel Sibaja (conspiracy to commit mail fraud guilty plea): four years in prison plus three years of supervised release;
- Priscilla Sibaja (conspiracy to commit money laundering guilty plea): three years in prison plus three years of supervised release; and
- Rosales (conspiracy to commit mail fraud guilty plea): two years in prison plus three years of supervised release.