The Division continues to respond to the Supreme Court's June 2018 decision in Lucia v. SEC, which held that the appointment of the SEC's Administrative Law Judges (ALJs) violated the U.S. Constitution's Appointments Clause and requiring a new hearing in front of a different fact finder. After Lucia, the Commission stayed all pending administrative proceedings. The Commission lifted the stay on August 22, 2018, and approximately 200 administrative proceedings were reassigned. In Fiscal Year 2019, many of the matters resolved without the need to have a rehearing. Three matters were the subject of full rehearings before new ALJs and we anticipate additional rehearings in Fiscal Year 2020. 

The Supreme Court's June 2017 decision in Kokesh v. SEC continues to impact adversely the Commission's ability to disgorge and return funds to investors injured by long-running frauds, such as Ponzi schemes, that often directly impact retail investors. In Kokesh, the Supreme Court held that Commission claims for disgorgement are subject to a five-year statute of limitations. The Kokesh decision has had a significant impact, as many securities frauds are complex, well-concealed, and are not discovered until investors have been victimized over many years. The Division estimates that the Kokesh ruling has caused the Commission to forgo approximately $1.1 billion dollars in disgorgement in filed cases. The actual impacts of Kokesh are likely far greater than this number reflects, however, because-since the Kokesh decision-the Division has shifted its resources to those investigations which hold the most promise for returning funds to investors. Thus, although the Division has seen some improvement this year in its effort to uncover, investigate, and bring cases as quickly as possible, it is likely that Kokesh will continue to impact our ability to recover for harmed investors in long-running frauds. 

Office of the Whistleblower 

Since its enactment in 2011, the SEC's whistleblower program has been very successful. Whistleblowers have made meaningful contributions to significant cases: whistleblower tips have resulted in high-quality SEC enforcement actions covering a broad range of misconduct and led to more than $2 billion in financial remedies ordered by the Commission since inception of the program. The Commission has recognized the importance of these tips by awarding 66 whistleblowers approximately $387 million. Success begets success. As a result, we again received thousands of whistleblower tips and a record number of whistleblower claims in Fiscal Year 2019. In response, we have been working to streamline and substantially accelerate the evaluation of claims for whistleblower awards and we expect to see substantial improvement in this regard in Fiscal Year 2020.

[R]uless Pierre ran an investment club called the Amongst Friends Investment Group that operated as a fraudulent Ponzi scheme. From at least March 2017, Pierre allegedly raised over $2 million from at least 100 investors, predominately Haitian New Yorkers, who purchased high-yield promissory notes through Amongst Friends.  As alleged, Pierre induced investors by promising unrealistically high rates of return of at least 20 percent every 60 days. In reality, the complaint alleges that Pierre incurred heavy losses trading securities and concealed them by using new investor funds to pay older investors and issuing false account statements showing investment gains. Pierre allegedly further financed the fraud by using money that he embezzled from a former employer to make interest payments to investors.

The SEC's complaint also alleges that Pierre fraudulently raised at least $375,000 from more than 15 investors related to a scheme involving the sale of partnership interests in a fast food chain. In or about November 2018, Pierre began to sell partnership interests in a fast food franchise, with agreements that falsely guaranteed monthly returns of 10 percent (60 percent per year) plus quarterly profit sharing. As alleged, at the time he sold these interests, Pierre knew that the franchise could not provide sufficient profits to pay investors the promised returns.