The Wall Street Legal & Regulatory Feed

Securities Industry Commentator by Bill Singer Esq

July 22, 2022

















https://www.brokeandbroker.com/6568/aegis-frumento-insecurities-fraud/
Industry lawyer Aegis Frumento tries to make sense out of Rule 10b-5 -- a mere 118 words that have bedeviled securities lawyers for years. What is the difference between a "scheme . . . to defraud" and a "practice, or course of business which operates . . . as a fraud or deceit"? Ah, yes, the stuff of lawsuits, opinions, and treatises! Join Aegis as he tries to make sense out of the senseless.

Notice of Annual Meeting of FINRA Firms and Election Proxy (FINRA Election Notice)
https://www.finra.org/rules-guidance/notices/election-notice-072022

FINRA will conduct its Annual Meeting of firms on Friday, August 19, 2022, and the purpose of the meeting is to elect an individual to fill one small firm seat on the FINRA Board of Governors. All eligible small firms should submit a proxy, which must be signed by the executive representative of the firm eligible to vote in the election.

Time to clean house at the FINRA Board of Governors

The "BrokeAndBroker.com Blog" and the "Securities Industry Commentator"
 urge all FINRA Small Firms to vote for:

Stephen A. Kohn, President
DMK Advisors Group, Inc.

Stephen Kohn has been employed in the financial services industry since 1984, to
which he has devoted most of his working life.

Mr. Kohn founded, owned and operated a FINRA small member firm, Stephen A.
Kohn & Associates, Ltd. (SAKL) located in Lakewood, Colorado since 1996. On January 1, 2020 ownership of SAKL was turned over to DMK Advisor Group, Inc. (DMK). He has assumed the role of president of DMK and, will continue as such well into the future.

In 2017, Mr. Kohn was elected by the Small Firm Membership to the FINRA Board
of Governors to represent Small Firm interests and issues at the highest levels. He
served on the Regulatory Policy and Audit Committees.

He has been twice elected to the National Adjudicatory Council (NAC) by FINRA's
small firms, first in 2009 and again in 2014. The NAC is FINRA's appellate division,
hearing appeals to enforcement decisions and other issues.

While on the NAC, Mr. Kohn served on the Sanction Guideline Review and Revision
Sub-Committee. This sub-committee was convened to review the Sanction
Guidelines to ensure that sanctions in appeals that are upheld by the NAC are fair
and appropriate and to recommend revisions as needed. He is also an industry
arbitrator and has served on the District 3 Committee.

Mr. Kohn holds the following securities licenses: Series, 7, 14, 24, 53, 63, 72, 73, 79
and 99. He graduated from C.W. Post College of Long Island University in 1964 with a
BA degree. He has served in the U.S. Coast Guard.

https://www.brokeandbroker.com/6567/stephen-kohn-finra-board/
FINRA Small Firm advocate Stephen Kohn is running for the FINRA 2022 Small Firm Governor. Stephen is supported by many reform voices in the FINRA Small Firm community and is supported by Bill Singer, Esq., an outspoken critic of regulatory incompetency and the publisher of the "Securities Industry Commentator" and the "BrokeAndBroker.com Blog." Stephen offers his supporters the opportunity to join and meet like-minded small firm executives and show FINRA that we are not a rag-tag group of greedy opportunists but a group of members that really care about the well-being of our clients, the investing public. VOTE FOR STEPHEN KOHN!!!!

Chairman Sherman, Ranking Member Huizenga, and Members of the Subcommittee:

Thank you for inviting me to testify today on behalf of the Division of Enforcement ("Enforcement" or the "Division") of the U.S. Securities and Exchange Commission ("SEC" or the "Commission").

Since its founding more than 85 years ago, the SEC has stayed true to its three-part mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. Central to that mission is the work of the SEC's Division of Enforcement. The Division conducts investigations into possible violations of the federal securities laws and prosecutes the Commission's civil suits in the federal courts and in administrative proceedings. And each year, the Commission brings hundreds of civil enforcement actions and obtains meaningful relief, including disgorgement of ill-gotten gains and civil monetary penalties - which are frequently returned to harmed investors - as well as injunctions and other prophylactic relief.

During fiscal year 2021, which ended on September 30, 2021, despite the challenges presented by the global pandemic and the increasing complexity of our investigations, the SEC filed 434 new enforcement actions, representing a seven percent increase over the prior year. Seventy percent of these new or "stand-alone" actions involved at least one individual defendant or respondent.[1] In addition, the SEC's whistleblower program had a record-breaking year, with the SEC awarding a total of $564 million to 108 whistleblowers, compared to 39 whistleblowers in fiscal year 2020,[2] and surpassing $1 billion in awards over the life of the program.[3]

Since my appointment approximately one year ago, I have been amazed by the talent and unique expertise of the Division's staff of dedicated professionals in our twelve offices across the country. They work tirelessly day in and day out to hold those who violate our securities laws accountable, return money to harmed investors, and protect the fairness and competitiveness of our capital markets. Yet, many Americans' trust in our financial markets and institutions is at near historic lows.[4] While there is no single cause for this decline, repeated lapses by large businesses, gatekeepers, and other market participants, coupled with the perception that we - the regulators - are failing to hold them appropriately accountable have contributed to this decline. And, some believe that there are two sets of rules: one for the big and powerful and another for everyone else. As a result, one of my goals as Director is to help restore the public's trust in our financial markets and institutions and to make clear that there is only one set of rules. The Division aims to enhance Americans' trust through robust enforcement, robust remedies, and robust compliance.

ENFORCEMENT PRIORITIES

Robust Enforcement

Robust enforcement requires the Division to be the cop on the beat and cover the entire securities waterfront, investigating and litigating every type of case within our remit with a sense of urgency. It also requires us to keep pace with new areas of importance for investors, as well as the continually evolving risks facing investors and the markets. For example, the Division is taking proactive steps to police areas such as crypto assets and cybersecurity and brought a number of first-of-their-kind enforcement actions over the past calendar year.[5]

The SEC also recently announced the allocation of 20 additional positions to our Crypto Assets and Cyber Unit.[6] Since its creation in 2017, the unit has brought more than 80 enforcement actions related to fraudulent and unregistered crypto asset offerings and platforms, resulting in monetary relief totaling more than $2 billion, as well as numerous actions against SEC registrants and public companies for failing to maintain adequate cybersecurity controls and appropriately disclose cyber-related risks and incidents. The expanded unit will leverage the agency's expertise to ensure investors are protected in the crypto markets and from cyber-related threats, with a focus on investigating securities law violations related to crypto asset offerings, exchanges, broker-dealers, and lending and staking products; decentralized finance ("DeFi") platforms; non-fungible tokens ("NFTs"); and stablecoins.

Robust enforcement also includes a focus on gatekeeper accountability. Gatekeepers, such as accountants and attorneys, are often the first lines of defense against misconduct. When they fail to live up to their obligations, investors and the integrity of our markets suffer. The SEC has brought enforcement actions against gatekeepers who engaged in wrongdoing themselves or attempted to cover up wrongdoing, engaged in conduct that crossed a clear line, or failed meaningfully to implement compliance programs, policies and procedures for which the gatekeeper had direct responsibility. For example, the SEC recently charged Ernst & Young LLP ("EY") in connection with cheating by a significant number of its audit professionals on exams required to obtain and maintain Certified Public Accountant ("CPA") licenses, and for withholding evidence of this misconduct from the Division during our investigation of the matter. EY admitted the facts underlying the SEC's charges and agreed to pay a $100 million penalty and to undertake extensive remedial measures to fix the firm's ethical issues.[7] We will continue to take a hard look at gatekeepers to ensure that they are fulfilling their own professional responsibilities and not giving cover to corporations or executives engaged in possible misconduct.

Robust Remedies

Restoring trust in our financial markets and institutions also requires the use of robust remedies. In addition to punishing wrongdoers for violations of the securities laws, our remedies must deter those violations from happening in the first place. They must be viewed as more than the cost of doing business. The public must have confidence in knowing that financial institutions and other market participants are being held accountable by regulators such as the SEC when they are not playing by the rules.

The factors that guide our penalty recommendations are no secret - we assess the conduct at issue, in light of the statutory tier factors and judicial opinions, and look to comparable cases. In arriving at our recommendations to the Commission, we are assessing whether penalties in prior comparable cases have been sufficient to appropriately deter the misconduct at issue. Where they have not been, we will seek stiffer penalties, both in settlement negotiations and, if necessary, in litigation. We are also seeking heightened penalties for recidivists because prior penalties clearly have not had the appropriate deterrent effect.

In addition, prophylactic relief - such as officer and director bars, associational bars, suspensions, conduct-based injunctions, and undertakings - is an important part of robust remedies. Such relief directly protects investors and market integrity by preventing a violator of the securities laws from engaging in future misconduct and occupying a core gatekeeper role in the securities markets. These tools also enhance the public's trust that all financial institutions and market participants are playing by the same rule set. We take an especially hard look at whether we need to deploy prophylactic tools if the specific offender is a recidivist.

Although we will continue to recommend no-admit-no-deny settlements in the majority of cases, we will seek admissions from wrongdoers in appropriate cases, where heightened accountability and acceptance of responsibility are in the public interest.[8] When it comes to accountability, few things rival the magnitude of wrongdoers admitting that they broke the law. Admissions also give greater clarity regarding the facts of the violations and send a strong deterrent message to other market participants and are, therefore, important to building public trust.

Robust Compliance

Finally, robust compliance is critical to restoring trust. Robust compliance is a responsibility shared by all market participants. We are in a time of rapid and profound technological change. While this has the potential to amplify the dynamism of our markets and increase access and transparency for our investors, it also creates new avenues for misconduct. Public companies and other market participants therefore need to think rigorously about how their specific business models and products interact with both emerging risks and their obligations under the federal securities laws, and tailor their internal controls and compliance practices and policies accordingly. In other words, they cannot rely on check-the-box compliance policies, but should consider, where appropriate, developing bespoke policies tailored to their businesses and the associated risks. Where they fall short, we have not hesitated in holding them accountable.[9]

Firms also need to respond appropriately to red flags and make timely and accurate required disclosures, which are essential to investor protection and enhancing trust and confidence in the markets. And, gatekeepers must foster a proactive culture of compliance and responsibility - both for themselves and for their clients. The Division will vigorously enforce the securities laws and rules that go to the heart of robust compliance, including those concerning required disclosures, misuse of nonpublic information, cybersecurity, and the violation of record-keeping obligations.[10]

FY 2023 BUDGET REQUEST

Despite the successes and priorities outlined above, the number of Enforcement employees has decreased over time. The Division faces significant and mounting challenges, as described in more detail in the FY 2023 budget request that the SEC submitted to Congress earlier this year.[11] Some of the challenges are obvious, such as the broad spectrum of securities law violations that occur across the United States each year and the unexpected and unprecedented market events such as the global pandemic, market volatility in early 2021, and more recent volatility across crypto assets and offerings that require significant Enforcement resources.

But, others are less obvious, though still highly meaningful, such as the significant growth of the financial markets and the increasing sophistication of securities products and market structure. For example, in the past five years, the number of registered entities has grown by 12 percent (from 26,000 to 29,000).[12] The volatile and speculative crypto marketplace has attracted tens of millions of American investors and traders.[13] Moreover, many of our investigations are becoming more difficult as fraudsters find new ways to communicate that require us to review ever-broader sources of evidence. To protect investors and the markets, we must continuously evolve and adapt as wrongdoers and products, particularly in new and emerging areas - like the crypto markets - become increasingly sophisticated and the related misconduct becomes harder to detect and increasingly complex and international in nature.

Internally, the Division is also required to analyze a massive volume of data each year, including, for example, approximately 46,000 tips, complaints, and referrals from, among others, members of the public during fiscal year 2021.[14] At any given time, the Division has approximately 1,500 open investigations.[15] The Division also handles an expansive docket of difficult and complex litigation and trials, often against well-funded adversaries. We have seen an uptick in the number of cases that are litigating and going to trial, and during fiscal year 2021, the Division had approximately 2,000 pending civil litigations and 1,200 pending administrative proceedings.[16]

These challenges require the Division to constantly assess and re-assess how best to allocate the Division's limited resources in the most effective manner to address the most significant and pressing risks facing investors and the financial markets. The SEC's FY 2023 budget seeks additional staff to enable Enforcement to meet these mounting challenges and to maintain an effective investigative capacity and deterrent presence for the benefit of our markets and investors.

* * *

Through robust enforcement, robust remedies, and robust compliance, we will aim to do our part in restoring public trust in our financial markets and institutions. Thank you for inviting me here today to discuss the Division of Enforcement. I am happy to answer any questions you may have.

[1] Press Release 2021-238, SEC Announces Enforcement Results for FY 2021 (Nov. 18, 2021), available at https://www.sec.gov/news/press-release/2021-238.

[2] See "SEC Division of Enforcement Publishes Annual Report for Fiscal Year 2020" (Nov. 2020),available at https://www.sec.gov/news/press-release/2020-274.

[3] Press Release 2021-238, SEC Announces Enforcement Results for FY 2021 (Nov. 18, 2021), available at https://www.sec.gov/news/press-release/2021-238.

[4] See "Americans' Confidence in Major U.S. Institutions Dips" (July 14, 2021), available at https://news.gallup.com/poll/352316/americans-confidence-major-institutions-dips.aspx (finding that, in 2021, 33% of respondents have "a great deal" or "quite a lot" of confidence in banks; 29% in technology companies; and 18% in big business); "Confidence in Institutions," available at https://news.gallup.com/poll/1597/confidence-institutions.aspx.

[5] See, e.g., Press Release 2022-110, SEC Charges Firm and Five Brokers with Violations of Reg BI (June 16, 2022), available at https://www.sec.gov/news/press-release/2022-110; Press Release 2022-70, SEC Charges Archegos and its Founder with Massive Market Manipulation Scheme (Apr. 27, 2022), available at https://www.sec.gov/news/press-release/2022-70; Press Release 2022-26, BlockFi Agrees to Pay $100 Million in Penalties and Pursue Registration of its Crypto Lending Product (Feb. 14, 2022) (settled), available at https://www.sec.gov/news/press-release/2022-26; Press Release 2021-176, SEC Charges App Annie and its Founder with Securities Fraud (Sept. 14, 2021) (settled), available at https://www.sec.gov/news/press-release/2021-176.

[6] Press Release 2022-78, SEC Nearly Doubles Size of Enforcement's Crypto Assets and Cyber Unit (May 3, 2022), available at https://www.sec.gov/news/press-release/2022-78.

[7] Press Release 2022-114, Ernst & Young to Pay $100 Million Penalty for Employees Cheating on CPA Ethics Exams and Misleading Investigation (June 28, 2022) (settled), available at https://www.sec.gov/news/press-release/2022-114.

[8] See, e.g., Press Release 2022-84, SEC Charges Allianz Global Investors and Three Former Senior Portfolio Managers with Multibillion Dollar Securities Fraud (May 17, 2022) (settled as to Allianz Global Investors and litigating against three former senior portfolio managers), available at https://www.sec.gov/news/press-release/2022-84; Press Release 2021-262, JPMorgan Admits to Widespread Recordkeeping Failures and Agrees to Pay $125 Million Penalty to Resolve SEC Charges (Dec. 17, 2021) (settled), available at https://www.sec.gov/news/press-release/2021-262.

[9] See, e.g., Press Release 2021-241, McKinsey Affiliate to Pay $18 Million for Compliance Failures in Handling of Nonpublic Information (Nov. 19, 2021) (settled), available at https://www.sec.gov/news/press-release/2021-241; Press Release 2022-114, Ernst & Young to Pay $100 Million Penalty for Employees Cheating on CPA Ethics Exams and Misleading Investigation (June 28, 2022) (settled), available at https://www.sec.gov/news/press-release/2022-114.

[10] See, e.g., 15 U.S.C. § 80b-4a; 15 U.S.C. § 78q(a).

[11] See "Fiscal Year 2023CongressionalBudget Justification, Annual Performance Plan; Fiscal Year 2021 Annual Performance Report" (p. 25),available athttps://www.sec.gov/files/FY%202023%20Congressional%20Budget%20Justification%20Annual%20Performance%20Plan_FINAL.pdf.

[12] See Testimony at Hearing before the Subcommittee on Financial Services and General Government U.S. House Appropriations Committee (May 17, 2022), available at https://www.sec.gov/news/testimony/gensler-testimony-fsgg-subcommittee#_ftn3.

[13] See Testimony at Hearing before the Subcommittee on Financial Services and General Government U.S. House Appropriations Committee (May 17, 2022), available at https://www.sec.gov/news/testimony/gensler-testimony-fsgg-subcommittee#_ftn3(citing Andrew Perrin/Pew Research Center, "16% of Americans say they have ever invested in, traded or used cryptocurrency" (Nov. 11, 2021),available at https://www.pewresearch.org/fact-tank/2021/11/11/16-of-americans-say-they-have-ever-invested-in-traded-or-used-cryptocurrency/).

[14] See "Fiscal Year 2023CongressionalBudget Justification, Annual Performance Plan; Fiscal Year 2021 Annual Performance Report" (p. 25),available athttps://www.sec.gov/files/FY%202023%20Congressional%20Budget%20Justification%20Annual%20Performance%20Plan_FINAL.pdf.

[15] See id.

[16] See id.

https://www.justice.gov/usao-sdny/pr/three-charged-first-ever-cryptocurrency-insider-trading-tipping-scheme
-and-
https://www.sec.gov/news/press-release/2022-127

In an Indictment filed in the United States District Court for the Southern District of New York the following charges were made:

ISHAN WAHI:  two counts of wire fraud conspiracy and two counts of wire fraud

NIKHIL WAHI: one count of wire fraud conspiracy and one count of wire fraud,

SAMEER RAMANI: one count of wire fraud conspiracy and one count of wire fraud

As alleged in the DOJ Release involving Coinbase Global, Inc.: 

At all relevant times, Coinbase was one of the largest cryptocurrency exchanges in the world.  Coinbase users could acquire, exchange, and sell various crypto assets through online user accounts with Coinbase.  Periodically, Coinbase added new crypto assets to those that could be traded through its exchange, and the market value of crypto assets typically significantly increased after Coinbase announced that it would be listing a particular crypto asset.  Accordingly, Coinbase kept such information strictly confidential and prohibited its employees from sharing that information with others, including by providing a "tip" to any person who might trade based on that information.

Beginning in approximately October 2020, ISHAN WAHI worked at Coinbase as a product manager assigned to a Coinbase asset listing team. In that role, ISHAN WAHI was involved in the highly confidential process of listing crypto assets on Coinbase's exchanges and had detailed and advanced knowledge of which crypto assets Coinbase was planning to list and the timing of public announcements about those crypto asset listings.  Beginning at least in August 2021 and continuing through May 2022, ISHAN WAHI was a member of a private Coinbase messaging channel reserved for a small number of Coinbase employees with direct involvement in the Coinbase asset listing process.  The private channel was used to discuss, among other things, "exact announcement / launch dates + timelines" that Coinbase did not wish to share with all of its employees.

The Insider Trading Scheme

On at least 14 occasions beginning at least in June 2021 and continuing through April 2022, ISHAN WAHI knew in advance both that Coinbase planned to list particular crypto assets and the timing of Coinbase's public announcements of those asset listings and misappropriated that Coinbase confidential information by tipping either his brother, NIKHIL WAHI, or ISHAN WAHI's friend and associate, SAMEER RAMANI, so that they could place profitable trades in those crypto assets in advance of Coinbase's public listing announcements. 

After getting tips from ISHAN WAHI, NIKHIL WAHI and RAMANI used anonymous Ethereum blockchain wallets to acquire crypto assets shortly before Coinbase publicly announced that it was listing or considering listing these crypto assets on its exchanges.  Following Coinbase public listing announcements, NIKHIL WAHI and RAMANI sold the crypto assets for a profit.  Based on confidential information provided by ISHAN WAHI, NIKHIL WAHI and RAMANI collectively traded shortly in advance of at least 14 separate Coinbase public listing announcements concerning at least 25 different crypto assets.  As a result of the insider trading scheme, NIKHIL WAHI and RAMANI collectively generated realized and unrealized gains totaling at least approximately $1.5 million.

To conceal their purchases of crypto assets in advance of Coinbase listing announcements, NIKHIL WAHI and RAMANI used accounts at centralized exchanges held in the names of others, and transferred funds, crypto assets, and proceeds of their scheme through multiple anonymous Ethereum blockchain wallets.  NIKHIL WAHI and RAMANI also regularly created and used new Ethereum blockchain wallets without any prior transaction history in order to further conceal their involvement in the scheme.

ISHAN WAHI's Attempt to Flee the United States

On April 11, 2022, Coinbase announced that it was considering potentially listing dozens of crypto assets on its exchanges. Based on Coinbase confidential information provided by ISHAN WAHI, RAMANI caused multiple anonymous Ethereum blockchain wallets to purchase large quantities of at least six of the crypto assets that were to be included in Coinbase's April 11, 2022 listing announcement. 

Shortly after RAMANI traded in advance of Coinbase's April 11 listing announcement, on April 12, 2022, a Twitter account that is well known in the crypto community tweeted regarding an Ethereum blockchain wallet "that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published."  The trading activity referenced in the April 12 tweet was the trading caused by RAMANI.  Coinbase thereafter publicly replied on Twitter noting that it had already begun investigating the matter and a few weeks later stated in a public blog post that any Coinbase employee who leaked confidential company information would be "immediately terminated and referred to relevant authorities (potentially for criminal prosecution)." 

On May 11, 2022, Coinbase's director of security operations emailed ISHAN WAHI to inform him that he should appear for an in-person meeting relating to Coinbase's asset listing process at Coinbase's Seattle, Washington office on Monday, May 16, 2022. ISHAN WAHI confirmed he would attend the meeting.

On the evening of Sunday, May 15, 2022, ISHAN WAHI purchased a one-way flight to India that was scheduled to depart the next day shortly before ISHAN WAHI was supposed to be interviewed by Coinbase.  Prior to boarding the flight, ISHAN WAHI falsely told Coinbase employees that he had already departed for India when he had not.  In the hours between booking the flight and his scheduled departure, ISHAN WAHI called and texted NIKHIL WAHI and RAMANI about Coinbase's investigation, and sent both of them a photograph of the messages he had received on May 11, 2022, from Coinbase's director of security operations.  Prior to boarding the May 16, 2022 flight to India, ISHAN WAHI was stopped by law enforcement and prevented from leaving the country.

https://www.sec.gov/litigation/complaints/2022/comp-pr2022-127.pdf, the SEC charged Ishan Wahi, Nikhil Wahi, and Ramani with violating the antifraud provisions of the securities laws. As alleged in part in the SEC Release:

[W]hile employed at Coinbase, Ishan Wahi helped to coordinate the platform's public listing announcements that included what crypto assets or tokens would be made available for trading. According to the SEC's complaint, Coinbase treated such information as confidential and warned its employees not to trade on the basis of, or tip others with, that information. However, from at least June 2021 to April 2022, in breach of his duties, Ishan repeatedly tipped the timing and content of upcoming listing announcements to his brother, Nikhil Wahi, and his friend, Sameer Ramani. Ahead of those announcements, which usually resulted in an increase in the assets' prices, Nikhil Wahi and Ramani allegedly purchased at least 25 crypto assets, at least nine of which were securities, and then typically sold them shortly after the announcements for a profit. The long-running insider trading scheme generated illicit profits totaling more than $1.1 million.
https://www.justice.gov/usao-ct/pr/south-windsor-man-sentenced-federal-prison-defrauding-grandparents-679k
Douglas Senerth, 33, pled guilty in the United States District Court for the District of Connecticut to one count of wire fraud; and he was sentenced to 18 months in prison plus three years of supervised release (the first six months in home confinement) and ordered to pay $679,944 in restitution. As alleged in part in the DOJ Release:

[B]etween 2011 and 2019, Senerth defrauded his grandmother and his late grandfather by falsely claiming to be a college student and inducing them to give him approximately $419,000 to pay for nonexistent college tuition and other related expenses, and an additional approximately $260,000 by falsely claiming that he would invest their money into an investment fund run by one of his nonexistent professors.  As part of the scheme, Senerth created fraudulent college transcripts, letters and email accounts that he used to corroborate his lies.

https://www.justice.gov/usao-ma/pr/my-big-coin-founder-convicted-cryptocurrency-fraud-scheme
Randall Crater, the founder of My Big Coin Pay Inc., was convicted by a jury in the United States District Court for the District of Massachusetts of four counts of wire fraud, three counts of unlawful monetary transactions, and one count of operating an unlicensed money transmitting business. As alleged in part in the DOJ Release:

Crater founded My Big Coin in 2013, offering virtual payment services through a fraudulent digital currency, "My Big Coins," which he marketed to investors between 2014 and 2017 using misrepresentations about the nature and value of Coins. Crater and his associates falsely claimed that Coins were a fully functioning cryptocurrency backed by $300 million in gold, oil and other valuable assets. Crater also falsely told investors that My Big Coin has a partnership with MasterCard and that Coins could readily be exchanged for government-backed paper currency or other virtual currencies. Crater promulgated these misrepresentations through social media, the internet, email and text messages.

In reality, Coins were not backed by gold or other valuable assets, did not have a partnership with MasterCard and were not readily transferable. Over the course of the scheme, Crater misappropriated over $6 million of investor funds for his own personal gain and spending on goods, including hundreds of thousands of dollars' worth of expenses on antiques, artwork and jewelry.

In January 2018, the Commodity Futures Trading Commission (CFTC) announced commodity fraud charges against Crater and My Big Coin Inc. The CFTC also filed civil charges against the Chief Executive Officer of My Big Coin, John Roche, and two of Crater's associates Mark Gillespie and Michael Kruger. The civil action was stayed on March 8, 2019, pending resolution of the criminal case.

https://www.justice.gov/usao-ndga/pr/atlanta-film-producer-pleads-guilty-25-million-cryptocurrency-based-investment-scams
On the fourth day of a jury trial in the United States District Court for the Northern District of Georgia, Ryan Felton pled guilty to twelve counts of wire fraud, ten counts of money laundering, and two counts of securities fraud. As alleged in part in the DOJ Release:

[I]n 2017, Felton promoted an initial coin offering (ICO) for a new entertainment streaming platform, FLiK, which he promised would surpass Netflix.  ICOs are fundraising events during which the issuers of a unique cryptocurrency "token" or "coin" set an amount they want to raise, offer it to the public in a crowd sale, and receive cryptocurrency from investors in exchange.

In order to increase, or pump, the price of FLiK coins, Felton falsely represented to investors that a prominent Atlanta rapper and actor was a co-owner of FLiK, the United States military had agreed to distribute the streaming platform to service members, and FLiK was finalizing licensing deals with major film and television studios. In reality, the rapper had no role in the company beyond authorizing a promotional social media post, FLiK had no military contract, and Felton never had discussions with any studio about licensing content. Felton further claimed that he was actively developing the platform and would use all funds raised in the ICO to launch FLiK. After the ICO closed, Felton dumped more than 40 million FLiK coins on trading markets, causing the value of FLiK coins to plummet.

Instead of using investor funds to develop the platform, Felton diverted approximately $2.4 million in investor proceeds from the ICO and trading markets to his personal account. He used the vast majority of the investor proceeds to fund his extravagant lifestyle, including all-cash purchases of a $1.5 million residence, a $180,000 red 2007 Ferrari 599 GTB Fioran Coupe, a new $58,250 Chevy Tahoe, and approximately $30,000 in diamond jewelry.

In 2018, Felton promoted a second ICO for a new company, CoinSpark, which was a cryptocurrency trading exchange.  In order to attract investors to the ICO, Felton promised that Spark coin investors would receive 25% of the trading exchange's profits in the form of dividends. Felton further claimed that a global accounting firm would audit CoinSpark's finances on a quarterly basis, but, in reality, he never spoke with the accounting firm. Felton also posed as a potential investor, using fake names, on various internet forums and social media sites to further promote false information and build up excitement in CoinSpark.

After raising more than $200,000 in the ICO, Felton announced that CoinSpark would not pay Spark investors a dividend and offered ICO investors a refund. Felton then repeatedly rejected or ignored investor requests for refunds. The CoinSpark exchange ultimately launched months after its promised delivery date but had significant technical issues and minimal trading activity. Instead of applying ICO proceeds to CoinSpark, Felton again diverted significant funds to his personal bank account.  

Financial Planning's Nathan Place published a concise primer on the warning signs of a retirement scam. 

Once, there were many. Now, only a few. The numbers of knowledgeable journalists covering the Wall Street beat has dwindled. It's sad and it does a disservice to the investing public but it is what it is. Among the few savvy voices is that of Susan Antilla. In her most recent foray, Susan blows the lid off the Street's horrific track record when it comes to sexual harassment. Here's a sample of what's in her "Capital & Main" article;

Last spring, Goldman was pushed by shareholders to investigate its arbitration policy and determine how its use of a private justice system impacted employees. In December, Goldman reported that while there had been concerns that arbitration may "allow harassment and discrimination to go unseen and unaddressed," its review found that those concerns simply didn't apply to Goldman. The law firm that represented Jeffrey Epstein and Roman Polanski in their sexual assault cases conducted the investigation, assisted by a scholar who is on the panels of two arbitration providers.

https://www.reuters.com/world/mexican-beauty-queen-romanian-dutch-man-arrested-after-chase-across-europe-over-2022-07-20/
You may be unaware of the fact that the Securities Industry Commentator's publisher Bill Singer was the third generation of his family in the wine business before he embarked upon a 40 year career as a dashing and debonair Wall Street lawyer. All of which may explain why this story got posted here. After all, how could Bill not have been enthralled by this lede:

A former Mexican beauty queen and a Romanian-Dutch accomplice have been arrested in Croatia over the theft of $1.7 million worth of prestige bottles of wine in Spain after a nine-month chase across Europe, police said on Wednesday.

In a statement, Spanish national police said that on Oct. 27, 2021 in the western city of Caceres, 45 wine bottles worth a total of 1.65 million euros, including one "unique" 19th-century vintage worth 310,000 euros, were spirited out in a meticulously planned theft from the cellars of the famous hotel-restaurant El Atrio.

Bill Singer's Comment (and tasting notes): Being the oenophile that I am, I actually located El Atrio's online winelist: https://restauranteatrio.com/wp-content/uploads/2018/01/carta-vinos-2018.pdf

Without admitting or denying the findings and allegations in an SEC Order
https://www.sec.gov/litigation/admin/2022/33-11084.pdf, Health Insurance Innovations ("HII") and its former Chief Executive Officer Gavin Southwell agreed to a cease and desist order, HII agreed to pay an $11 million penalty, and Southwell agreed to pay more than $1 million in penalties, disgorgement, and interest. As alleged in part in the SEC Release:

[F]rom March 2017 through March 2020, HII and Southwell falsely told investors that HII held its insurance distributors to high compliance standards, which prohibited distributors from making misrepresentations to consumers about health insurance products offered by HII. HII and Southwell also told investors in earnings calls and investor presentations that HII's consumer satisfaction was 99.99 percent and state insurance regulators received very few consumer complaints regarding HII. In reality, HII tracked tens of thousands of dissatisfied consumers who complained that HII's distributors made misrepresentations to sell the health insurance products, charged consumers for products they did not authorize, and failed to cancel plans upon consumers' requests. The order finds that the products provided minimal health benefits, did not cover pre-existing conditions, prescriptions, and hospital care, and were not considered qualifying health coverage under the Affordable Care Act, leaving many consumers with unpaid medical bills when they sought treatment.

https://www.finra.org/sites/default/files/fda_documents/2017053210201
%20Sagetrader%2C%20LLC%20CRD%20137862%20AWC%20gg.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, Sagetrader, LLC submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Sagetrader, LLC has been a FINRA member firm since 2006 with eight registered representatives at two offices. In accordance with the terms of the AWC, FINRA imposed upon the firm a Censure, $775,000 fine ($83,333.33 payable to FINRA), and an undertaking to review/revise the firm's supervisory system inclusive of written supervisory procedures. As alleged in part in the "Overview' portion of the AWC [Ed: footnotes omitted]:

From 2013 through 2019 (the "Relevant Period"), Sagetrader failed to reasonably supervise for potentially manipulative trading on its platforms. Throughout the Relevant Period, Sagetrader provided routing and execution services to domestic and foreign entities, which were comprised of hundreds to thousands of individual day traders. Prior to 2015, the Firm lacked a supervisory system to detect potentially manipulative trading such as layering, spoofing, wash trades, or marking the close. In 2015, Sagetrader implemented an automated surveillance system that generated alerts to monitor for various forms of potential manipulation. However, the system failed to capture 70 traders of a client for five months. In addition, the Firm's review of the surveillance alerts was unreasonable. Sagetrader had limited staff and other resources to sufficiently review and resolve alerts for potentially manipulative trading, which, by 2018, totaled more than 500,000 alerts per year. Further, the Firm's guidance to and supervision of the assigned reviewers was unreasonable.

As a result, Sagetrader violated NASD Rule 3010 and FINRA Rules 3110 and 2010. 

https://www.finra.org/sites/default/files/fda_documents/2021071506202
%20James%20Daniel%20Kent%20CRD%202255753%20AWC%20va.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, James Daniel Kent submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that James Daniel Kent was first registered in 1992 and from September 2016 to may 2021, he was registered with Emerson Equity LLC. By way of background, the AWC asserts in part that [Ed: footnote omitted]:

On February 1, 2021, FINRA issued an AWC against Kent in which FINRA found that between February 2017 and December 2018, Kent failed to timely amend his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose that he was the subject of a federal tax lien in the amount of $131,952.45. Without admitting or denying the findings, Kent consented to a suspension of 30 days and a $3,500 fine. 

In 1999, a New York Stock Exchange Panel (NYSE) accepted Kent's consent to a censure and 10-week bar for unsuitable and excessive trades in a customer's account, mismarking order tickets as "unsolicited" in that account, and unsuitable trades and an unauthorized trade in another customer's account.2 In 2000, the Illinois Securities Department revoked his registration in Illinois based on the NYSE decision.

As alleged in part in the AWC [Ed: footnotes omitted]:

On August 9, 2020, Kent was charged with the felony of Driving Under the Influence (DUI). He was aware of the felony charge and was required to amend his Form U4 within 30 days to disclose the charge (i.e., by September 8, 2020).4

On August 11, 2020, two days after being charged with the felony DUI, Kent updated his Form U4, which included disclosure of a past felony battery charge from 2008. He did not, however, disclose the 2020 felony DUI charge at that time or at any time thereafter. 

Therefore, Respondent willfully violated Article V, Section 2(c) of the FINRA By-Laws, and FINRA Rules 1122 and 2010.

. . .

On June 29, 2021, FINRA staff sent a request, pursuant to FINRA Rule 8210, to Kent for the production of information and documents on or before July 14, 2021 relating to his 2020 felony DUI charge. Kent did not respond to the request. On July 21, 2021, FINRA sent a second request letter to Kent, pursuant to FINRA Rule 8210, again seeking the production of the previously requested information and documents by August 4, 2021. Kent did not respond to the second request either. As a result, and pursuant to FINRA Rule 9552, FINRA suspended Kent effective September 27, 2021. Kent, thereafter, produced the information and documents requested on January 18, 2022, and he was reinstated on January 24, 2022. 

By failing to timely produce the information and documents as requested, Respondent violated FINRA Rules 8210 and 2010. . . .

= = = = =
Footnote 4: 4 On February 8, 2021, Kent pleaded guilty in the case to three misdemeanors (misdemeanor DUI, obstruction or resisting arrest without violence, and refusal to submit to testing).

In accordance with the terms of the AWC, FINRA imposed upon Kent a $5,000 fine and an eight-month suspension from associating with any FINRA member in all capacities. Notably, the AWC admonishes that:

Respondent understands that this settlement includes a finding that he willfully misrepresented a material fact on a Form U4, and that under Section 3(a)(39)(F) of the Securities Exchange Act of 1934 and Article III, Section 4 of FINRA's By-Laws, this misrepresentation makes him subject to a statutory disqualification with respect to association with a member.

https://www.brokeandbroker.com/6565/albertsson-golf-bankruptcy/
Today's featured lawsuit is about a guy who almost made it onto the PGA tour, but then wound up playing through at Merrill Lynch, Lehman Brothers, UBS; and, among the divots in his life was an $850,000 debt owed to UBS and a $1 million debt owed to a family office. Upon filing for Chapter 7 in April 2019, our golfer apparently failed to schedule on his petition two sets of golf clubs and his Winged Foot Golf Club membership. Ah yes, the stuff of federal lawsuits!

https://www.brokeandbroker.com/6564/easterly-bassinger-sightline/
What happens when you have a FINRA Arbitration Award that combines circular logic with a nested loop and a Mobius strip? Well, you sort of wind up with a Respondent, who, if he were acting as an independent contractor, he would be covered under the Independent Contractor Agreement at issue; however, if he's not acting as an IC, then he's not covered under the IC Agreement because there wasn't any non-IC transaction in which Respondent participated, and, as such, he's not entitled to non-IC commissions for not having participated in any non-IC transactions, which didn't arise anyway.

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