Securities Industry Commentator by Bill Singer Esq

Three FINRA AWCs and One Mess of an Arbitration Raise Unanswered Questions About Supervision (BrokeAndBroker.com Blog)

Retired FBI Agent Charged With Fraud in $800,000 'Secret Probation' Scheme (DOJ Release)

SEC Charges U.S. Promoters of $2 Billion Global Crypto Lending Securities Offering (SEC Release)

SEC Charges Company and Controlling Shareholder with Securities Fraud (SEC Release)

Order Determining Whistleblower Award Claim (SEC Whistleblower Award)

Order Determining Whistleblower Award Claim (SEC Whistleblower Award)

[I]n November 2015, Mr. Stone allegedly convinced his victim, identified in court documents as C.T., that she was under "secret probation" for drug crimes in "Judge Anderson's court in Austin, Texas."

He allegedly told the victim that the fictious [sic] federal judge had appointed Mr. Stone and another individual to "mentor" and "supervise" C.T., and claimed that her conditions of probation mandated that she report her activities, as well as a list of her assets, to Mr. Stone. Moreover, he said, C.T. was obligated to pay any expenses Mr. Stone incurred while supervising her, and was forbidden from disclosing her probation status to anyone. If she did not comply with the terms of this probation, Mr. Stone said, she would risk imprisonment and the loss of her children.

In order to convince C.T. the probation was real, Mr. Stone allegedly claimed that he had the ability to monitor her cell phone communications, said he discussed C.T.'s probation with a psychiatrist, enlisted another person to leave messages on his own phone purporting to be from the U.S. Drug Enforcement Administration "Intelligence Center," and even placed "spoof" calls between himself, C.T., and the fictious [sic] Judge Anderson. 

He told C.T. that he'd incurred significant expenses traveling to Austin to discuss C.T.'s probation with Judge Anderson, and intimidated her into reimbursing him for expenses associated with those trips. Further, he collected money he claimed was "restitution" for a wronged company which he secretly deposited into his own bank account.  Eventually, he convinced her to hand over large sums of money to purchase a home and cars. At one point, he allegedly proposed to marry her, claiming he would then seek discharge of her probation.

Over the course of several years, C.T. gave Mr. Stone more than $800,000.

[F]rom approximately January 2017 to January 2018, BitConnect used a network of promoters, including U.S.-based Trevon Brown (a.k.a. Trevon James), Craig Grant, Ryan Maasen, and Michael Noble (a.k.a. Michael Crypto) to market and sell securities in its "lending program." The SEC's complaint alleges that these promoters offered and sold the securities without registering the securities offering with the Commission, and without being registered as broker-dealers with the Commission, as required by the federal securities laws.  The promoters advertised the merits of investing in BitConnect's lending program to prospective investors, including by creating "testimonial" style videos and publishing them on YouTube, sometimes multiple times a day. According to the complaint, the promoters received commissions based on their success in soliciting investor funds. Another U.S.-based individual, Joshua Jeppesen, served as a liaison between BitConnect and promoters and represented BitConnect at conferences and promotional events.

[I]n July 2017, Rayat arranged, and caused RenovaCare to pay for, a promotional campaign designed to increase the company's stock price. The complaint alleges that Rayat was closely involved in directing the promotion and editing promotional materials, and arranged to funnel payments to the publisher through consultants to conceal RenovaCare's involvement in the campaign. According to the complaint, in January 2018, OTC Markets Group, Inc. requested RenovaCare issue a press release to explain its relationship to the promotion. The complaint alleges that Rayat and RenovaCare then drafted and issued a press release and a Form 8-K that contained material misrepresentations and omissions denying Rayat's and the company's involvement in the promotion.

[T]he information submitted by Claimant was either already known to the staff based on more than four years of investigative work, or, to the extent any information was new to the staff, that information did not help substantially advance the ongoing investigation, help the Commission bring additional charges or charges against additional individuals or entities, or serve as the basis for any charges included in the Complaint. . . .

. . .

Claimant further argues that because Claimant provided information and assistance to the Other Agency, including in multiple Redacted , and because the Other Agency and the Commission conducted parallel investigations, Claimant is therefore eligible for Redacted an award. Claimant's argument fails for the simple reason that information provided to a different government entity is not information provided to the Commission. As we have explained, "our whistleblower rules require that the individual must provide his or her tip directly to the Commission." Assisting a different enforcement action brought by another agency does not demonstrate that the claimant assisted in the Commission's Covered Action. As discussed above, the information Claimant directly provided to the Commission was not used by Commission staff in the Covered Action, and to the extent Claimant provided additional information to the Other Agency, that information cannot support an award claim for the Covered Action. Finally, Claimant cannot qualify for an award with respect to the Related Action because Claimant is not eligible for an award in connection with the Covered Action. . . .

We are unpersuaded by Claimant's assertion that the untimeliness should be forgiven

because it stemmed from mistakes made by Claimant's former attorney. As noted above, we have acknowledged that attorney misconduct may give rise to extraordinary circumstances. But, the requisite level of attorney misconduct causing the untimely submission must be severe in order for equitable relief to be warranted - ordinary negligence will not suffice. In this case, it appears that Claimant is merely asserting that Claimant's former attorney failed to properly file the award application. This type of attorney error does not constitute an extraordinary circumstance. 

• Securities Industry Commentator
• Bill Singer