The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
September 13, 2021
SEC Obtains Final Judgment Against Former Consultant and Board Member Charged with Insider Trading (SEC Release)FINRA Announces Retirement of Executive Vice President of Member Supervision Bari Havlik; Greg Ruppert Appointed as Successor (FINRA Release)
SEC Charges Three Media Companies with Illegal Offerings of Stock and Digital Assets / Companies to Pay More Than $539 Million in Settlement for Distribution to Investors (SEC Release)
https://www.sec.gov/news/press-release/2021-175
The SEC charged GTV Media Group Inc., Saraca Media Group Inc., and Voice of Guo Media Inc., with conducting an illegal unregistered offering of GTV common stock; and, further, charged GTV and Saraca for conducting an illegal unregistered offering of a digital asset security referred to as either G-Coins or G-Dollars. Without admitting or denying the findings in an SEC Order that they violated Section 5 of the Securities Act of 1933, https://www.sec.gov/litigation/admin/2021/33-10979.pdf GTV and Saraca agreed to a cease-and-desist order, to pay disgorgement of over $434 million plus prejudgment interest of approximately $16 million on a joint and several basis, and to each pay a civil penalty of $15 million; and Voice of Guo agreed to a cease-and-desist order, to pay disgorgement of more than $52 million plus prejudgment interest of nearly $2 million, and to pay a civil penalty of $5 million. As alleged in part in the SEC Release:
[F]rom April through June 2020, the respondents generally solicited thousands of individuals to invest in the GTV stock offering. During the same period, GTV and Saraca solicited individuals to invest in the digital asset offering. The order finds that the respondents disseminated information about the two offerings to the general public through publicly available videos on GTV's and Saraca's websites, as well as on social media platforms such as YouTube and Twitter. Through these two securities offerings, whose proceeds were commingled, the respondents collectively raised approximately $487 million from more than 5,000 investors, including U.S. investors. As stated in the order, no registration statements were filed or in effect for either offering, and the respondents' offers and sales did not qualify for an exemption from registration.
https://www.ssb.texas.gov/news-publications/recidivist-brad-haycraft-indicted-helium-well-investment-scheme
In an Indictment filed in the State of Texas/Collin County
https://www.ssb.texas.gov/sites/default/files/2021-09/Haycraft_Indictments.pdf,
https://www.ssb.texas.gov/sites/default/files/2021-09/Haycraft_Indictments.pdf,
Bradley Sherman Haycraft was charged with illegally selling investments in the Petrified Forest Prospect, a helium well project in the Petrified Forest National Park in Arizona. In November 2019, the TSSB filed an Emergency Cease and Desist Order https://www.ssb.texas.gov/sites/default/files/Helium_Hunters_ENF-CDO-20-1794.pdfB against Haycraft for soliciting units in the Petrified Forest Prospect. As alleged in the TSSB Release:
The recent indictments, handed up in June, charge Haycraft with violating the agency's order, as well as violating state securities registration laws. The charges are third degree felonies punishable by up to 10 years in prison.Haycraft is also a recidivist. He was previously prosecuted for misdemeanor drug offenses, later convicted of felony robbery, and thereafter sentenced to serve probation. He was also recently prosecuted for felony possession of methamphetamine and ordered to serve a term of community supervision.Haycraft was on probation at the time of the conduct charged in the indictment and his probation is not scheduled for termination until July 2022.
SEC Obtains $15 Million Final Judgment Against Virginia Real Estate Developer (SEC Release)
https://www.sec.gov/litigation/litreleases/2021/lr25201.htm
https://www.sec.gov/litigation/litreleases/2021/lr25201.htm
In a Complaint filed in 2018 in the United States District Court for the Eastern District of Virginia, the SEC alleged that Todd Elliott Hitt solicited investments through public offerings to finance the purchase of an office building at the WMATA Silver Line Metro Station in Northern Virginia and to finance the construction of a number of new homes in the area. As alleged in part in the SEC Release:
[H]itt routinely commingled investor money and project returns among the various corporate and relief defendant entities, misappropriated investor funds to support his extravagant lifestyle, and made Ponzi-like payments to prior investors. The SEC further alleged Hitt also separately raised $2.5 million for one of the relief defendant entities that he managed, but then misappropriated approximately half of the monies invested.Hitt previously agreed to a bifurcated settlement that left to the court the determination of any monetary remedies against him. Separately, Hitt - who acted as an investment adviser with respect to one of the investments - agreed to a permanent securities industry bar.The court's final judgment finds Hitt liable for disgorgement and prejudgment interest of $15,001,498. In light of his conviction and sentence to a 78-month prison term in a parallel criminal case, the SEC dismissed its claim for a civil penalty, thereby concluding this matter in full.
SEC Obtains Final Judgment Against Former Consultant and Board Member Charged with Insider Trading (SEC Release)
https://www.sec.gov/litigation/litreleases/2021/lr25202.htm
In a Complaint filed in the United States District Court for the District of Massachusetts, the SEC charged Mark Ahn with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder; and in April 2021, the Court entered a partial judgment that enjoins Ahn from violating the above statutes and bars him from serving as an officer or director of any SEC reporting company. In a parallel criminal action, was sentenced to six months in prison plus six months of home detention and two years of supervised release, a fine of $5,500, forfeiture of $49,421 and restitution to be determined. On September 8, 2021, the Court entered a Final Judgment on behalf of the SEC against Ahn https://www.sec.gov/litigation/litreleases/2021/judgment25202.pdf
based upon allegations of insider trading in the securities of a Massachusetts-based pharmaceutical company, Dimension Therapeutics, Inc., in advance of an August 2017 merger announcement.
https://www.sec.gov/litigation/litreleases/2021/lr25200.htm
Without admitting or denying the allegations in an SEC Complaint:
- Nelson Gomes consented to the entry of a final judgment enjoining him from violating the securities registration and antifraud provisions of Sections 5(a), 5(c), 17(a)(1) and 17(a)(3) of the Securities Act and the antifraud and beneficial ownership reporting provisions of Sections 10(b) and 13(d) of the Securities Exchange Act and Rules 10b-5(a), 10b-5(c) and 13d-1 thereunder, and also imposing a conduct-based injunction restricting Gomes's future trading in any stock, and ordering him to pay $1,153,058 in disgorgement and prejudgment interest and a civil penalty of $390,094. In addition, Gomes consented to a five-year penny stock bar.
- Shane Schmidt consented to the entry of a partial judgment enjoining him from violating the antifraud provisions of Sections 17(a)(1) and 17(a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and 10b-5(c) thereunder, and imposing a permanent penny stock bar. Schmidt also consented to paying disgorgement and prejudgment interest, and a civil penalty, in amounts to be determined by the Court.
The settlements arose from a previously filed SEC Complaint involving 11 defendants
https://www.sec.gov/litigation/complaints/2020/comp24839.pdf, of which an ongoing case remains against Douglas Roe, Kelly Warawa, and Atlantean Management Corporation. As alleged in part in the SEC Release:
https://www.sec.gov/litigation/complaints/2020/comp24839.pdf, of which an ongoing case remains against Douglas Roe, Kelly Warawa, and Atlantean Management Corporation. As alleged in part in the SEC Release:
[G]omes, a Canadian citizen, began working with others around January 2018 to run a fraudulent business through which corporate control persons could conceal their identities while illegally dumping their companies' stock into the market for purchase by unsuspecting investors. The complaint alleges that these illegal stock sales were often boosted by promotional campaigns that, in some instances, included false and misleading information designed fraudulently to capitalize on the COVID-19 pandemic, such as false claims that a company being promoted could produce medical quality facemasks. Schmidt allegedly participated in the fraudulent scheme by posing as the owner of a public company and facilitating the distribution of its shares to his associates who in turn sold the shares during a false and misleading promotional campaign.
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-92929; Whistleblower Award Proc. File No. 2021-88)
https://www.sec.gov/rules/other/2021/34-92929.pdf
The SEC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a related action award to Claimant, and recommending a Whistleblower Award of a redacted percent to Claimant, which the Order states will result in over $700,000. The Commission ordered that CRS' recommendations be approved. The Order asserts in part that:
(i) Claimant provided substantial, ongoing assistance that conserved significant Commission time and resources; and (ii) there was substantial law enforcement interest in the information provided, as it related to detecting an ongoing fraud involving the misappropriation of investor funds.
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-92931; Whistleblower Award Proc. File No. 2021-89)
https://www.sec.gov/rules/other/2021/34-92931.pdf
The SEC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a related action award to Claimant, and recommending a Whistleblower Award of a redacted percent to Claimant, which the Order states will result in over $400,000. Also, the CRS recommended the denial of an award to a second Claimant. The Commission ordered that CRS' recommendations be approved. The Order asserts in part that:
Claimant, a harmed investor, provided information that prompted the opening of the investigation and thereafter provided substantial ongoing assistance throughout the course of the investigation, meeting with Commission staff in person, communicating with staff dozens of times, and providing the information that led to the recovery of the sole assets used to compensate harmed investors.
https://www.finra.org/sites/default/files/fda_documents/2019061061001
%20SogoTrade%2C%20Inc.%20CRD%2017912%20AWC%20jlg.pdf
%20SogoTrade%2C%20Inc.%20CRD%2017912%20AWC%20jlg.pdf
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, SogoTrade, Inc. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that SogoTrade, Inc. has been a member since 1986 with 19 registered representatives at two branches. In accordance with the terms of the AWC, FINRA imposed upon SogoTrade a Censure and $10,000 fine. The AWC asserts in part that:
From October 2018 through the present, and August 2020 through the present, respectively, two of SogoTrade's associated persons supervised customer trading activity, including by reviewing surveillance exceptions related to SEC Regulations NMS and SHO and potentially manipulative trading activity.2 Despite their direct supervision of customer trading activity, neither individual was qualified and registered with FINRA as a Securities Trader. Therefore, Respondent violated FINRA Rules 1220(b)(4) and 2010.= = = = =Footnote 2: One of the individuals was registered with FINRA as a General Securities Principal, and both were registered with FINRA as General Securities Representatives.
https://www.finra.org/sites/default/files/fda_documents/2020066718901
%20Jacob%20Popek%20CRD%206815448%20AWC%20jlg.pdf
%20Jacob%20Popek%20CRD%206815448%20AWC%20jlg.pdf
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Jacob Popek submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Jacob Popek entered the industry in 2017 and by November 2018, he was registered with Wells Fargo Clearing Services, LLC. In accordance with the terms of the AWC, FINRA imposed upon Popek a $2,500 fine and a three-month suspension from associating with any FINRA member in all capacities. The AWC asserts in part that:
During October 2018, after Popek informed the firm that he maintained three outside brokerage accounts at two other member firms, the firm directed Popek to close those accounts. Despite receiving this instruction, and multiple subsequent instructions from the firm to close the accounts during 2019, Popek maintained each of these accounts until July 2019, December 2019, and April 2020, respectively. Popek effected multiple trades in one of these accounts during 2019 and 2020. Additionally, from November 2018 until his termination, without the firm's consent, Respondent maintained two additional outside brokerage accounts that he failed to disclose to the firm.During December 2019, Popek falsely attested on a firm compliance questionnaire that he had no outside brokerage accounts, although he continued to maintain three of his outside accounts at that time.Therefore, Respondent violated FINRA Rules 3210 and 2010.
https://www.finra.org/media-center/newsreleases/2021/finra-announces-retirement-executive-vice-president-member
On November 1, 2020, Bari Havlik, EVP and Head of the Department of Member Supervision will retire, and FINRA announced that she will be succeeded by Greg Ruppert, EVP and leader of FINRA's National Cause and Financial Crimes Detection Program. The FINRA Release states in part that:
Greg Ruppert previously was Senior Vice President and Chief of the Financial Crimes Risk Management Group at Charles Schwab. Prior to that role, he was a Special Agent with the FBI for 17 years, working on complex financial investigations, terrorist financing, terrorism, and cyber threats. Ruppert is also Professor of Practice for the University of the Pacific, School of Engineering and Computer Science's Data Science Master's Program. Ruppert holds a Juris Doctorate and B.A. from the University of the Pacific.