Financial Professionals Coalition, Ltd. Offers Historic Clearinghouse of Resources / Industry’s Disenfranchised Men and Women Now Have Solutions (Financial Professionals Coalition Press Release) 

February 21, 2023 —

The Financial Professionals Coalition, Ltd. launched today and is offering free membership to the one-million-plus financial professionals who power the industry. https://www.finprocoalition.com/index.html

The Financial Professionals Coalition was founded by former FINRA Small Firm Governor Stephen Kohn, a 39-year industry veteran, who worked as a registered representative and rose to open his own brokerage firm.

The Coalition is the result of several years of conversations and planning by its Chair Stephen Kohn and veteran industry lawyer Bill Singer, who is a leading advocate for Wall Street reform and the publisher of the “Securities Industry Commentator” and the “BrokeAndBroker.com Blog."

Chair Kohn promises that:

“The Financial Professionals Coalition will elevate the industry by offering a clearinghouse of resources to help our members navigate their careers and better handle their daily personal and professional challenges. The Coalition will be inclusive and diverse; and our Founders’ backgrounds reflect an amazing history of talent, accomplishment, and compassion. As such, we expect that our membership will hold many views and opinions, often at odds with each other. We welcome robust debate and the clash of ideas in the marketplace.”

Membership in the Financial Professionals Coalition is free and our help is available by simply logging on to our website at www.finprocoalition.com and submitting a confidential request.

###

The Financial Professionals Coalition, Ltd. is a corporation registered in the state of Colorado.

© 2023 Financial Professionals Coalition, Ltd.

For more information [PRESS ONLY]:

Stephen Kohn

(303) 880-4304

info@finprocoalition.com 

For more information on Membership

https://www.finprocoalition.com/#contact  

The industry #MeToo forgot / One of Globe Life's top insurance agencies is a toxic cesspool of sexual abuse, hard drugs, and violence, a lawsuit alleges (Insider.com by Susan Antilla)
https://www.insider.com/globe-life-insurance-lawsuit-american-income-arias-agency-toxic-workplace-2023-1
The picture that veteran reporter Susan Antilla paints is an all too familiar one -- particularly reminiscent of an '80s and '90s Wall Street culture that many thought had long-since vanished. Apparently, it has not. Apparently, it is alive and not well. Sadly, the sexism-on-Wall-Street beat is one that Antilla has tirelessly walked and famously revealed in her landmark book "Tales From the Boom-Boom Room: The Landmark Legal Battles That Exposed Wall Street’s Shocking Culture of Sexual Harassment."

SEC Charges Recidivist Alan Shinderman and His Company with Fraud for Misappropriating Investor Assets (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25649.htm
In the United States District Court for the District of Nevada, the SEC filed a Complaint charging Markman Biologics Corp. and Alan Shinderman with violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Aspen Asset Management Services, LLC was named as a Relief Defendant. As alleged in part in the SEC Release:

[F]rom November 2019 to November 2022, Shinderman and Markman Biologics raised approximately $1.276 million from investors using materially false and misleading statements in offering materials and SEC filings, regarding, among other things, the use of investor proceeds, Shinderman's compensation, the existence of related party transactions, and Shinderman's status as a recidivist. Contrary to these statements, Shinderman misappropriated more than a third of investor assets for himself and Aspen.

SEC Charges Georgia Residents in Microcap Fraud Scheme (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25648.htm
Without admitting or denying the allegations in a Complaint filed in the United States District Court for the Northern District of Georgia, Enviro Impact Resources, Inc. f/k/a Industry Source Consulting, Inc. (OTC Pink: INSO); INSO's former Chief Executive Officer Michael Molen; the CEO's son Seth Molen, and Pixel Arcanum, Inc. consented to permanent injunctions from violations of those provisions, and also to payments of disgorgement, prejudgment interest, and civil penalties in amounts to be determined by the court. Also, Michael Molen and Seth Molen consented to the entry of officer and director bars and penny stock bars, and Pixel has consented to the entry of a penny stock bar. The SEC Complaint alleged that the Defendants had violated Sections 5 and 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. As alleged in part in the SEC Release:

[D]efendants made numerous false and misleading statements and engaged in other deceptive conduct during the relevant period, largely for Michael Molen's financial benefit. According to the SEC's complaint, from at least 2014 to 2022, under Michael Molen's direction, INSO publicly posted false and misleading annual and quarterly disclosure reports, including false financial statements, and false and misleading attorney opinion letters relating to INSO's disclosure reports. The complaint also states that the defendants made false and misleading statements to third parties, including brokerage firms and INSO's transfer agent, and engaged in other deceptive conduct, including the creation and use of forged documents, to facilitate Pixel's fraudulent and unregistered transactions in INSO stock and convertible promissory notes.

SEC Denies Whistleblower Awards to Claimant 
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-96971; Whistleblower Award Proc. File No. 2023-38)
https://www.sec.gov/rules/other/2023/34-96971.pdf
The SEC's Claims Review Staff ("CRS") issued Preliminary Determinations recommending the denial of Whistleblower Awards to Claimant. The Commission ordered that CRS's recommendations be approved. The Order asserts in part that [Ed: footnotes omitted]:

There is no evidence in the record that Claimant’s information led to the successful enforcement of any of the Covered Actions.  Claimant’s initial submission was sent to OWB in the form of a letter dated REDACTED Claimant’s information was not submitted on a Form TCR nor did Claimant declare under penalty of perjury that the information in the letter was true and correct to the best of his/her knowledge. Claimant’s letter was uploaded to the  Commission’s TCR system by OWB staff the following month and the letter was assigned a TCR number (the “First TCR”). The record shows that OMI staff closed the First TCR with a disposition of “no further action” because the First TCR was vague and insubstantial. OMI staff did not forward the First TCR to staff assigned to any of the Covered Actions or to staff assigned to any other matter; the staff assigned to each of the three Covered Actions did not receive or review Claimant’s information. 

SEC Denies Whistleblower Award to Claimant 
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-96970; Whistleblower Award Proc. File No. 2023-37)
https://www.sec.gov/rules/other/2023/34-96970.pdf
The SEC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant. The Commission ordered that CRS's recommendations be approved. The Order asserts in part that [Ed: footnotes omitted]:

As an initial matter, the record shows that Claimant’s information did not cause Enforcement staff to open the Investigation, either directly or indirectly. Enforcement staff confirms, in a sworn declaration, which we credit, that the Investigation was opened in REDACTED following a referral from the Commission’s Division of Examinations (“Examinations”), not because of information from Claimant. Examinations staff began an examination of  Respondents in REDACTED and the staff declaration also confirms that that the examination of Respondents was not initiated based on Claimant’s information. While one Examinations staff assigned to the examination of Respondents attended the REDACTED meeting with Claimant, the record shows that the information Claimant provided during the meeting was not new or helpful and did not cause Examinations staff to commence the examination of Respondents. In addition, while one attendee at the meeting (the “Attendee”) was the co-chief of the specialized Enforcement unit that opened the Investigation over one year later, staff assigned to the Investigation confirmed that they did not receive, review, or use information from the Attendee that caused or contributed to the opening of the Investigation. 

Bill Singer's Comment: Sorry but I no longer believe the SEC when it comes to the purported rationale for many -- too many -- of the regulator's declinations of an Award.

  Either there are a lot of morons and imbeciles filing TCRs with the SEC; or, in the alternative, SEC Staff is misleading many Claimants as to the impact that their disclosure had in instigating/furthering an investigation. Then again, there is another more troubling possibility that Staff is downplaying the substantive nature of many tips in an effort to misplace credit.

  If the SEC/s denials of Awards were of a more isolated nature and the affected Claimants espoused a more measured tone on appeal, then I would likely not distrust the SEC and its CRS. On the other hand, as I have reported in recent years, there is a disquieting commonality among too many denials in recent years, which suggests a massive disconnect between what many Claimants believe was the value of their tips and what (often years later -- after fines have been paid) Staff/CRS subsequently claims was the inconsequential nature of those same tips.

= = =
2/23/2023 

Man Pleads Guilty to $55M Investment Fraud Scheme (DOJ Release)
https://www.justice.gov/opa/pr/man-pleads-guilty-55m-investment-fraud-scheme
In the United States District Court for the District of Nebraska, Michael Glaspie pled guilty to one count of wire fraud. Previously, Neil Suresh Chandran was indicted on three counts of wire fraud and two counts of engaging in monetary transactions in criminally derived property for his role in the scheme. As alleged in part in the DOJ Release, Glaspie:

marketed an investment opportunity under the name “CoinDeal” or “Coin Deal.” Glaspie claimed that CoinDeal would yield extremely high returns on the premise that one or more technology companies – operated under the banner of “ViRSE” and allegedly owned by Neil Suresh Chandran – was about to be acquired by a consortium of wealthy buyers. To entice investors to put money into CoinDeal, Glaspie falsely promised that in the event the returns from CoinDeal failed to materialize, he would repay investors their money with seven percent annual interest over three years. In fact, Glaspie knew he had no means of making such repayments.

. . .

To support his false repayment promise, Glaspie deceptively claimed that he had an exclusive and lucrative contract with AT&T to distribute government‑funded phones, and that an app that he developed was being distributed by the Better Business Bureau and would yield over $400 million in revenue, when he had no such contract or distribution agreement. Furthermore, when the promised sale of CoinDeal did not close, Glaspie transmitted investor funds to Chandran after falsely representing to CoinDeal investors that he would not do so. Glaspie also falsely claimed that he never paid himself with CoinDeal investor funds, when in truth, he misappropriated nearly $2.5 million of victim investments for personal purposes, including trading cryptocurrency, paying his employees’ salaries, and buying a life insurance policy for a family member. 

Former Pharma Executive And Cousin Charged With Insider Trading Of Kodak Stock (DOJ Release)
https://www.justice.gov/usao-sdny/pr/former-pharma-executive-and-cousin-charged-insider-trading-kodak-stock
-and-
SEC Charges Cousins for Insider Trading in Kodak Stock Ahead of Company’s Planned Govt. Partnership to Assist in Response to COVID-19 (SEC Release)
https://www.sec.gov/news/press-release/2023-38

In the United States District Court for the Southern District of New York, an Indictment was filed charging James Andrew Stiles a/k/a "Andrew Stiles" and Edward Gray Stiles a/k/a "Gray Stiles"  each with three counts of securities fraud and one count of conspiracy to commit wire fraud and securities fraud. As alleged in part in the DOJ Release:

Between June and July 2020, ANDREW STILES conducted an insider trading scheme in which he misappropriated material, non-public information (“MNPI”) and used it to trade in the stock of the Eastman Kodak Company (“Kodak”) and further provided that MNPI to his cousin, GRAY STILES, so that GRAY would likewise trade on the MNPI.

During that time, ANDREW STILES was an executive at a company (“Company-1”) that was working with Kodak to collaborate on the production of chemicals for pharmaceutical manufacturing in connection with the COVID-19 pandemic. Company-1 was also assisting Kodak in its application for a significant government loan, which ultimately resulted in the news, on July 27, 2020, of a government “letter of interest” to provide Kodak with a loan of $765 million (the “LOI”).  In the following days, Kodak stock rose substantially, at one point increasing to more than 2,500% above the closing price prior to the news of the LOI.

During June and July 2020, ANDREW STILES was kept apprised of Kodak’s efforts to obtain the government loan, and he both traded using that non-public information and passed that information to GRAY STILES.  For example, on July 9, 2020, when Kodak had applied for a loan in the amount of $655 million, ANDREW STILES and GRAY STILES exchanged the following coded text messages:

GRAY:           Any update on the film we sent off a few weeks ago to get developed

ANDREW:     600+.  Maybe 2 weeks out

GRAY:            I can live with that hahaha

Between June 2020, after ANDREW STILES learned about the potential loan to Kodak, and July 27, 2020, the date the LOI was first publicized, ANDREW STILES purchased more than 90,000 shares of Kodak stock, including multiple purchases the day before the LOI was scheduled to be announced.  GRAY STILES purchased more than 30,000 shares, more than half of which were purchased the day prior to the scheduled announcement of the LOI.  In fact, on July 27, 2020, ANDREW STILES texted GRAY STILES, “Tmw,” indicating the expected date of the announcement.  Less than one minute later, GRAY STILES responded, “Hot damn.”  Following that exchange, and before the news was announced, ANDREW and GRAY STILES each purchased more than 10,000 additional shares. 

ANDREW and GRAY STILES each sold the entirety of their shares in the days and weeks after the announcement.  ANDREW STILES realized profits of more than $500,000; GRAY STILES realized profits of more than $700,000.

In the United States District Court for the Southern District of New York, the SEC filed a Complaint charging James Andrew Stiles and Edward Gray Stiles each with violating the antifraud provisions of the securities laws.
https://www.sec.gov/litigation/complaints/2023/comp-pr2023-38.pdf
As alleged in part in the SEC Release:

[A]ndrew Stiles, of Charleston, South Carolina, through his employment at a medicine supply chain company, learned about Kodak’s efforts to obtain a $765 million loan from the federal government to manufacture chemicals to strengthen the domestic supply chain for a number of pharmaceuticals as part of the response to the COVID-19 pandemic. Based on this material nonpublic information, Andrew Stiles allegedly purchased more than 95,000 shares of Kodak stock ahead of the public announcement in July 2020 and tipped his cousin, Gray Stiles, who purchased more than 45,000 shares. After the announcement, Andrew Stiles and Gray Stiles sold their Kodak shares for more than $1.5 million in total profits. The Commission further alleges that, months earlier, while working as a consultant to the pharmaceutical company Novavax, Andrew Stiles purchased 1,844 shares of Novavax stock based on material nonpublic information about the company’s efforts to secure funding to develop a COVID-19 vaccine. This trading garnered Stiles more than $45,000 in illicit profits.

Ozy Media and Its Founder Carlos Watson Indicted in a Years-Long Multi-Million Dollar Fraud Scheme / Watson and Ozy Senior Executives Allegedly Defrauded Investors of Tens of Millions of Dollars Through Fraudulent Misrepresentations and Impersonated Media Company Executives During Negotiations (DOJ Release)
https://www.justice.gov/usao-edny/pr/ozy-media-and-its-founder-carlos-watson-indicted-years-long-multi-million-dollar-fraud
-and-
SEC Charges Ozy Media and its CEO Carlos Watson with Widespread Scheme to Defraud Investors / Former COO and chief of staff also charged in $50 million fraud (SEC Release)
https://www.sec.gov/news/press-release/2023-37

In the United States District Court for the Eastern District of New York, an Indictment was filed charging Ozy Media Inc. and its Chief Executive Officer Carlos R. Watson, Jr. with conspiracy to commit securities fraud and conspiracy to commit wire fraud; and, additionally, Watson was charged with aggravated identity theft. 
https://www.justice.gov/usao-edny/press-release/file/1569631/download
Watson’s co-conspirators Samir Rao, Ozy’s Chief Operating Officer, and Suzee Han, Ozy’s Chief of Staff from June 2019 to October 2021, previously pled guilty to charges relating to their roles in the scheme. Al alleged in part in the DOJ Release:.

The Scheme

As alleged in the indictment and court documents, Ozy is a media and entertainment company whose businesses include digital newsletters, television production, podcasts, and live events, the most prominent of which is a live festival known as “Ozy Fest.”  Watson founded Ozy in 2012 and has served as the company’s Chief Executive Officer since its inception.

Between approximately 2018 and 2021, Watson and his co-conspirators, including Rao and Han, orchestrated a scheme to defraud investors in and lenders to Ozy of tens of millions of dollars through fraudulent misrepresentations and omissions about key aspects of Ozy’s business, including Ozy’s financial results, debts, and audience size.  In addition, Watson and his co-conspirators lied to prospective investors about who else might be investing in Ozy, the existence and size of acquisition offers received by Ozy, the existence and timing of “Series C” and “Series D” financing rounds by Ozy, and the existence and terms of Ozy’s business contracts — going so far as to direct Ozy employees to create fake contracts with forged signatures to provide in due diligence.  On multiple occasions, when faced with questions from lenders or potential investors, Watson and his co-conspirators assumed the identities of and impersonated actual media company executives to cover up their prior fraudulent misrepresentations. 

Forged Cable Television Contract and Impersonation of Media Executive

In December 2019, Watson and his co-conspirators attempted to induce a bank to lend Ozy money based on misrepresentations and omissions about Ozy’s business.  Watson and his co-conspirators sought to secure the loan with anticipated revenues from a second season of an Ozy television show.  However, the contract between Ozy and the show’s cable network for the second season of the show was still under negotiation.  To induce the bank to make the loan sooner, Watson directed Ozy’s then-Chief Financial Officer (CFO) to send the bank a fake signed contract between Ozy and the cable network purporting to be for the second season.  When the then-CFO refused, Rao, with Watson’s approval, sent the fake contract — which contained terms favorable to Ozy and a forged signature — to the bank, copying the then-CFO.  Later that day, the then-CFO emailed Watson and Rao to say that she was resigning effective immediately.  She explained, “this . . . is illegal.  This is fraud.  This is forging someone’s signature with the intent of getting an advance from a publicly traded bank.”  She continued, “To be crystal clear, what you see as a measured risk — I see as a felony.”

In subsequent months, Watson and his co-conspirators continued to attempt to induce the bank to lend Ozy several million dollars based on misrepresentations and omissions, including regarding the expected revenue from the second season of the Ozy television show.  During these discussions, the bank requested to speak to a representative of the cable network.  To conceal the lies about Ozy’s relationship with the cable network and the status and terms of their agreement, Rao, with Watson’s approval, created a fake email address in the name of an actual executive of the cable network, which Rao used to impersonate the executive and communicate with the bank about the potential loan.

Attempted Fraudulent Investment and Impersonation of Another Media Executive

From approximately November 2020 through February 2021, Watson and his co-conspirators attempted to induce a financial institution to invest up to $45 million in Ozy by means of material misrepresentations and omissions regarding Ozy’s historical and projected financial results, debts, and business relationships.  Had the full $45 million investment occurred as intended, $6 million of the $45 million would have been paid to Watson personally. 

As part of its due diligence process, the financial institution asked Watson and Rao to arrange a meeting with someone from a well-known online video service that Watson and his co-conspirators claimed had paid Ozy nearly $6 million in licensing revenue for “The Carlos Watson Show.”  This was another misrepresentation — Ozy was never paid by this online video service for Ozy content.  Because Ozy did not in fact have any business relationship with the online video service, Watson and Rao agreed that Rao would impersonate a media executive at the online video service in communications with the financial institution.  On or about January 28, 2021, Rao, with Watson’s agreement, created a fake email address in the name of the media executive, which he used to correspond with representatives of the financial institution.

On or about February 2, 2021, Rao had a call with employees of the financial institution during which he impersonated a media executive from the online video service using a voice alteration application that he downloaded onto his cellular telephone to mask his voice during the call.  During the call, Watson was in the same room as Rao, and texted Rao instructions about what to say and what not to say on the call.  Shortly after the call, one of the employees of the financial institution contacted the actual media executive of the online video service, who confirmed that he had not been on the call and that the online video service had no role in the production of The Carlos Watson Show.  When members of the financial institution later spoke with Watson, he falsely claimed that Rao had acted alone and as a result of a mental breakdown.

In the United States District Court for the Eastern District of New York, the SEC filed a Complaint charging Ozy Media Inc., its Chief Executive Officer Carlos R. Watson, Jr., its former Chief Operating Officer Samir Rao, and its former Chief of Staff Suzee Han with violations of the anti-fraud provisions of the federal securities laws and related rules.
https://www.sec.gov/litigation/complaints/2023/comp-pr2023-37.pdf Rao consented to the entry of a judgment enjoining him from violating the charged provisions and from serving, for a period of ten years, as an officer or director of a publicly traded company, with civil monetary penalties to be determined by the court at a later date. Han consented to the entry of a judgment permanently enjoining her from violating the charged provisions, with civil monetary penalties to be determined by the court at a later date. As alleged in part in the SEC Release:

[F]rom at least January 2019 through September 2021, the defendants routinely and purposely presented prospective investors with false financial information that grossly inflated Ozy Media’s annual revenue by at least 100 percent. Watson and Rao also allegedly solicited investments by repeatedly and falsely telling prospective investors that well-known and sophisticated investors would be investing in Ozy Media in some capacity.

The SEC’s complaint further alleges that Watson and Rao orchestrated a scheme in which Rao impersonated an executive from YouTube in an effort to support Ozy Media’s false claims to a prospective investor at the time that the company was receiving licensing revenue from YouTube when it was not. According to the SEC’s complaint, when the prospective investor discovered the ruse, Watson falsely attributed Rao’s impersonation to Rao suffering from a “mental health crisis.” He made these claims to both the prospective investor and Ozy Media’s Board of Directors. 

Puerto Rican Company and Managing Member Settle Fraud Charges (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25646.htm
Without admitting or denying the allegations in a Complaint filed in the United States District Court for the District of Puerto Rico
https://www.sec.gov/litigation/litreleases/2021/lr25214.htm, Back to Green Mining, LLC and Jose  Jiménez Crua consented to entry of a Final Judgment permanently enjoining each of them from future violations of Sections 17(a), 5(a), and 5(c) of the Securities Act, Section 10(b) of the Securities Exchange Act, and Exchange Act Rule 10b-5; permanently enjoining Jiménez from participating in securities offerings not registered with the SEC; ordering Back to Green and Jiménez to pay, on a joint and several basis, $1,995,538 in disgorgement, plus prejudgment interest of $X; and ordering Back to Green and Jiménez to pay civil penalties of $1,035,909 and $207,183, respectively. In September 2022, the Court entered a Consent Judgment against Manuel Portalatin. As alleged in part in the SEC Release:

[F]rom August 2016 until at least 2020, Back to Green, Jiménez, and Portalatin offered and sold to retail investors in Puerto Rico and at least five U.S. states the opportunity to share in the profits of a purported Colombian gold mining operation. According to the complaint, the offering, which was not registered with the Commission, was part of a fraudulent scheme that raised approximately $2.7 million. Jiménez and Back to Green allegedly placed advertisements promising investors exorbitant returns, and each of the defendants presented investors with materials that falsely stated that all permits necessary to mine in Colombia had been obtained. 

SEC Charges Former Private Equity Firm Consultant and Close Friend with Insider Trading (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25645.htm
In the United States District Court for the Southern District of New York, the SEC filed a Complaint charging Kevin Van de Grift and Gil Friedman with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
https://www.sec.gov/litigation/complaints/2023/comp25645.pdf. As alleged in part in the SEC Release:

[F]riedman - a former Francisco Partners consultant - tipped his close friend, Van de Grift - a day-trader and licensed accountant - with material, nonpublic information concerning Francisco Partners' potential acquisition of Verifone. The SEC alleges that based on Friedman's tip, Van de Grift purchased 60,000 shares of Verifone stock from March 5, 2018 through March 9, 2018, and subsequently sold all of these shares the day after the acquisition announcement for a profit of approximately $300,000.

CFTC Charges Several People and Companies in a $145 Million Ponzi Scheme / Charges Include Lying to the National Futures Association to Conceal the Fraud (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8665-23
In the United States District Court for the Southern District of Texas, the CFTC filed a Complaint charging fraud and misappropriation against Marcus Todd Brisco; Yas Castellum LLC ;Yas Castellum Financial LLC; Tin Quoc Tran; Francisco Story; Fredirick “Ted” Safranko; Michael Shannon Sims; and SAEG Capital General Management LP (SAEG). The Court entered a statutory restraining order against the defendants, freezing their assets, and giving the CFTC immediate access to their books and records. As alleged in part in the CFTC Release:

[T]ran operated a fraudulent scheme from approximately April 2020 to the present. He directly accepted at least $144,043,883 from approximately 913 pool participants. Some, if not all, of the funds were intended for trading either forex or margined or leveraged gold-U.S. dollar pairs. However, Tran did not send any pool participant funds to a trading firm; rather, he misappropriated some of the pool participant funds by using them to pay invoices, a loan, individuals not involved with the commodity pool, and to subsidize his unrelated businesses. 

Further, as alleged in the complaint, from approximately October 2020 to May 2022, Brisco and Yas Castellum LLC misrepresented to potential pool participants Yas Castellum LLC ’s historical trading records; how they would trade pool participant funds; where they would maintain pool participant funds; and who would do the trading. Based on these material misrepresentations and omissions, at least 43 pool participants transferred no less than $470,780 to Yas Castellum LLC to participate in its purported commodity pool. Rather than trade pool participant funds, Brisco and Yas Castellum LLC, with the direction and assistance of Sims, transferred the funds to entities Tran controlled.

The complaint further alleges that Brisco closed Yas Castellum LLC and then launched Yas Castellum Financial LLC in June 2022. Brisco and this new company engaged in many of the same misrepresentations and omissions as the former company. Based on these material misrepresentations and omissions, at least 57 pool participants transferred approximately $1,585,261 to participate in Yas Castellum Financial LLC’s purported commodity pool. However, Yas Castellum Financial LLC also misappropriated pool participant funds by transferring most of the funds to a Tran-controlled entity, and by Brisco paying himself for purported trading profits that did not exist.  

According to the complaint, to conceal Tran’s scheme from regulators, Story, Safranko, and SAEG knowingly submitted falsified bank statements to the NFA during an examination of SAEG.

Cybersecurity Alert - Ongoing Phishing Campaign (FINRA Guidance)
https://www.finra.org/rules-guidance/guidance/cybersecurity-alert-ongoing-phishing-campaign-20230223

This notification is to warn member firms of an ongoing phishing campaign that involves fraudulent emails purporting to be from FINRA and using either the domain name “@finra.eu” and “@finrarec.com”. Samples of both emails are provided in Appendices 1 and 2.

The domains of “finra.eu” and “finrarec.com” are not connected to FINRA, and member firms or their customers may receive similar phishing emails from other domain names in addition to those identified in this Alert.

FINRA has requested that the Internet domain registrars suspend services for "finra.eu" and “finrarec.com”.

Member firms, or their customers, receiving phishing emails should consider:

• deleting all emails originating from these domains; and
• verifying the legitimacy of any suspicious email prior to responding to it, opening any attachments or clicking on any embedded links.

Staff also recommends that firms and their customers do not call phone numbers listed in suspicious emails or text messages, as threat actors use these as a method of establishing contact with a targeted victim to extract personal information or solicit a fraudulent payment (this tactic is known as Callback phishing).

For more information, member firms should review the resources provided on FINRA’s Cybersecurity topic page, including the Phishing section of our Report on Cybersecurity Practices - 2018.

Questions regarding this alert should be directed to FINRA’s Cyber and Analytics Unit (CAU) at cybertech@finra.org.

Appendix 1 – Email from “finra.eu”

Cordial saludo señora Name, adjunto documento para el proceso de retiro del capital, por favor devolver a este correo el documento diligenciado con los datos faltantes de la tabla y firmar si está interesada en continuar con este proceso, gracias quedo atenta a su respuesta para dar continuidad.

Buen dia,    
FINRA Logo    
Senior Officer
Name
investigation@finra.eu
Investor protection. Market integrity.
1735 K Street, NW
Washington, DC 20006-1506
www.finra.org
© 2023 FINRA. All rights reserved. FINRA and other trademarks of the Financial Industry Regulatory Authority, Inc. may not be used without permission.

Appendix 2 – Email from “finrarec.com” 

Dear Name

I'm contacting you from Financial Industry Regulatory Authority (Finra), case XXXXXX regarding the funds which we've received from Blockchain under your name as Blockchain System is automatically blocking going out transfers from illegal platforms due to suspicious activities. The form of the money is in Bitcoins and it's frozen and under control of Finra. We are sending you an email that includes the following information: who are we and what is the main purpose of our job, how you should be verified to first of all find out what kind of information we hold about you - how much exactly is a sum of money which was stolen from you plus the profits that were made by the fraudulent platform, as they were trading and tried to withdraw it). What kind of steps exactly you will be needed to pass for withdrawing the blocked funds. We are the one and only organization that is capable of unblock money which is declared as stolen from people all over the World. Finra is as well one of organizations who has straight connection to Blockchain and as Finra is regulating and controlling its sphere of activity that includes brokerage firms and exchange markets. First of all you have to verify your personality, we must be sure that we are having the communication with the correct person. If you are interested in claiming back, please inform me. I'm sending you the instructions how to unfreeze the amount: 1. Transaction history from your bank to trading account (if it's possible) 2. You have to download Exodus hardware wallet (frozen amount is holding on new whitelisted Exodus wallet) 3. Latest month statement from your bank account (Your full name and address should be visible) 4. Statement of crypto exchange wallet (e.g. binance, coinbase... which is verified under your name) In transaction history even one transfer will be accepted and for the withdrawal request we are going to do it from our side. Hardware crypto wallet is the most important because otherwise we won't be able to send you Bitcoins directly to your bank account. We hope you will reach the desired destination point and you will do the withdrawal, it has been used and experienced by thousands of humans so we will be glad if you will also be the one of them. 

Kind regards, 
Name
Recovery Department of Finra 
Senior recovery manager 
The Financial Industry Regulatory Authority 
Website: Finra.org 
Mobile: Phone Number

= = =
2/22/2023

New Coalition Focuses on Industry’s Individuals / The Financial Professional Coalition will cater to the "rank-and file" of the industry by offering specific, non-legal assistance for reps and support staff (WealthManagement.com by Patrick Donachie)
https://www.wealthmanagement.com/industry/new-coalition-focuses-industry-s-individuals
Wealth Management's Patrick Donachie does a wonderful job capturing the essence of the Financial Professionals Coalition's recent launch. As Donachie accurately notes in part:

The Financial Professional Coalition wants to be a one-stop-shop for answering questions and allaying the anxieties of individuals in the industry ranging from registered reps to back-office staff. 

United States Supreme Court Precludes Bankruptcy Discharge of Debt Obtained By Fraud Regardless of Petitioner's Culpability
Kate Marie Bartenwerfer, Petitioner, v. Kieran Buckley (Opinion, United States Supreme Court, No. 21-908, 598 U.S. ___(2023) /February 22, 2023)
https://www.supremecourt.gov/opinions/22pdf/21-908_n6io.pdf
As set forth in the Syllabus:

Kate and David Bartenwerfer decided to remodel the house they jointly owned in San Francisco and to sell it for a profit. David took charge of the project, while Kate remained largely uninvolved. They eventually sold the house to respondent Kieran Buckley. In conjunction with the sale, Kate and David attested that they had disclosed all material facts related to the property. After the purchase, Buckley discovered several defects that the Bartenwerfers had failed to disclose. Buckley sued in California state court and won, leaving the Bartenwerfers jointly responsible for more than $200,000 in damages. Unable to pay that judgment or their other creditors, the Bartenwerfers filed for Chapter 7 bankruptcy. Buckley then filed an adversary complaint in the bankruptcy proceeding, alleging that the debt owed him on the state-court judgment was nondischargeable under the Bankruptcy Code’s exception to discharge of “any debt . . . for money . . . to the extent obtained by . . . false pretenses, a false representation, or actual fraud.” 11 U. S. C. §523(a)(2)(A). The Bankruptcy Court found that David had committed fraud and imputed his fraudulent intent to Kate because the two had formed a legal partnership to renovate and sell the property. The Bankruptcy Appellate Panel disagreed as to Kate’s culpability, holding that §523(a)(2)(A) barred her from discharging the debt only if she knew or had reason to know of David’s fraud. On remand, the Bankruptcy Court determined that Kate lacked such knowledge and could therefore discharge her debt to Buckley. The Bankruptcy Appellate Panel affirmed. The Ninth Circuit reversed in relevant part. Invoking Strang v. Bradner, 114 U. S. 555, the court held that a debtor who is liable for her partner’s fraud cannot discharge that debt in bankruptcy, regardless of her own culpability.

Held: Section 523(a)(2)(A) precludes Kate Bartenwerfer from discharging in bankruptcy a debt obtained by fraud, regardless of her own culpability. Pp. 3–12.

(a) Kate (hereinafter, Bartenwerfer) disputes a straightforward reading of §523(a)(2)(A)’s text. Bartenwerfer argues that an ordinary English speaker would understand that “money obtained by fraud” means money obtained by the individual debtor’s fraud. This Court disagrees. The passive voice in §523(a)(2)(A) does not hide the relevant actor in plain sight, as Bartenwerfer suggests—it removes the actor altogether. Congress framed §523(a)(2)(A) to “focu[s] on an event that occurs without respect to a specific actor, and therefore without respect to any actor’s intent or culpability.” Dean v. United States, 556 U. S. 568, 572. It is true that context can confine a passive-voice sentence to a likely set of actors. See, e.g., E. I. du Pont de Nemours & Co. v. Train, 430 U. S. 112, 128–129. But the legal context relevant to §523(a)(2)(A)—the common law of fraud—has long maintained that fraud liability is not limited to the wrongdoer. Understanding §523(a)(2)(A) to reflect “agnosticism” as to the identity of the wrongdoer is consistent with the age-old rule of fraud liability.

Bartenwerfer points out that “ ‘exceptions to discharge should be confined to those plainly expressed.’ ” Bullock v. BankChampaign, N. A., 569 U. S. 267, 275. The Court, however, has never used this principle to artificially narrow ordinary meaning, invoking it instead to stress that exceptions should not extend beyond their stated terms. See, e.g., Gleason v. Thaw, 236 U. S. 558, 559–562.

Bartenwerfer also seeks support from §523(a)(2)(A)’s neighboring provisions in subparagraphs (B) and (C), both of which require some culpable action by the debtor herself. Bartenwerfer claims that these neighboring provisions make explicit what is unstated in (A). This argument turns on its head the rule that “ ‘[w]hen Congress includes particular language in one section . . . but omits it in another section of the same Act,’ ” the Court generally takes “the choice to be deliberate.” Badgerow v. Walters, 596 U. S. ___, ___. If there is an inference to be drawn here, the more likely one is that (A) excludes debtor culpability from consideration given that (B) and (C) expressly hinge on it. Bartenwerfer suggests it would defy credulity to think that Congress would bar debtors from discharging liability for fraud they did not personally commit under (A) while allowing debtors to discharge debt for (potentially more serious) fraudulent statements they did not personally make under (B). But the Court offered a possible answer for this disparity in Field v. Mans, 516 U. S. 59, 76–77. Whatever the rationale, it does not defy credulity to think that Congress established differing rules for (A) and (B). Pp. 3–8.

(b) Any remaining doubt about the textual analysis is eliminated by this Court’s precedent and Congress’s response to it. In Strang v. Bradner, 114 U. S. 555, the Court held that the fraud of one partner should be imputed to the other partners, who “received and appropriated the fruits of the fraudulent conduct.” Id., at 561. The Court so held despite the fact that the relevant 19th-century discharge exception for fraud disallowed the discharge of debts “created by the fraud or embezzlement of the bankrupt.” 14 Stat. 533 (emphasis added). And when Congress next overhauled bankruptcy law, it deleted the phrase “of the bankrupt” from the discharge exception for fraud. The unmistakable implication is that Congress embraced Strang’s holding. See Ysleta Del Sur Pueblo v. Texas, 596 U. S. ___, ___. Pp. 8–10.

(c) Finally, Bartenwerfer insists that the preclusion of faultless debtors from discharging liabilities run up by their associates is inconsistent with bankruptcy law’s “fresh start” policy. But the Bankruptcy Code is not focused on the unadulterated pursuit of the debtor’s interest, and instead seeks to balance multiple, often competing interests. Bartenwerfer’s fairness-based critiques also miss the fact that §523(a)(2)(A) does not define the scope of one’s liability for another’s fraud. Section 523(a)(2)(A) takes the debt as it finds it, so if California did not extend liability to honest partners, §523(a)(2)(A) would have no role here. And while Bartenwerfer paints a picture of liability being imposed on hapless bystanders, fraud liability generally requires a special relationship to the wrongdoer and, even then, defenses to liability are available. Pp. 10–12.

860 Fed. Appx. 544, affirmed. 

BARRETT, J., filed an opinion for a unanimous Court. SOTOMAYOR, J., filed a concurring opinion, in which JACKSON, J., joined. YY 

Forsage Founders Indicted in $340M DeFi Crypto Scheme / First Charged Criminal Fraud Case Involving a DeFi Ponzi Scheme (DOJ Release)
https://www.justice.gov/opa/pr/forsage-founders-indicted-340m-defi-crypto-scheme
In an Indictment filed in the United States District Court for the District of Oregon, Vladimir Okhotnikov, aka Lado; Olena Oblamska, a/k/a Lola Ferrari; Mikhail Sergeev, a/k/a  Mike Mooney, a/k/a Gleb, a/k/a  Gleb Million; and Sergey Maslakov (the founders of Forsage, a purportedly decentralized finance (DeFi) cryptocurrency investment platform) were each charged with conspiracy to commit wire fraud. As alleged in part in the DOJ Release:

[D]efendants aggressively promoted Forsage to the public through social media as a legitimate and lucrative business opportunity, but in reality, the defendants operated Forsage as a Ponzi and pyramid investment scheme that took in approximately $340 million from victim-investors around the world.

. . .

[D]efendants allegedly coded and deployed smart contracts that systematized their combined Ponzi-pyramid scheme on the Ethereum (ETH), Binance Smart Chain, and Tron blockchains. Analysis of the computer code underlying Forsage’s smart contracts allegedly revealed that, consistent with a Ponzi scheme, as soon as an investor invested in Forsage by purchasing a “slot” in a Forsage smart contract, the smart contract automatically diverted the investor’s funds to other Forsage investors, such that earlier investors were paid with funds from later investors. 

. . .

[D]efendants falsely promoted Forsage to the public as a legitimate, low-risk, and lucrative investment opportunity through Forsage’s website and various social-media platforms. However, blockchain analytics confirmed that over 80% of Forsage investors received fewer ETH back than they had invested in Forsage’s Ethereum program, with over 50% of investors never receiving a single payout. Additionally, according to court documents, the defendants coded at least one of Forsage’s accounts (known as the “xGold” smart contract on the Ethereum blockchain) in a way that fraudulently siphoned investors’ funds out of the Forsage investment network and into cryptocurrency accounts under the founders’ control, which was contrary to representations made to Forsage investors that “100% of the [Forsage] income goes directly and transparently to the members of the project with zero risk.”

SEC Charges African Gold Acquisition Corp. with Internal Controls, Reporting, and Recordkeeping Failures / Control failures enabled former CFO to misappropriate approximately $1.2 million from the SPAC’s operating bank account (SEC Release)
https://www.sec.gov/news/press-release/2023-36
Without admitting or denying the findings in an SEC Order, African Gold Acquisition Corp agreed to a cease-and-desist order and to pay a $103,591 civil monetary penalty. On January 3, 2023, the SEC charged African Gold’s former Chief Financial Officer, Cooper J. Morgenthau, with violating several provisions of the federal securities laws related to misappropriating money from African Gold’s operating bank account and for lying to African Gold’s accountants and auditor, circumventing and/or knowingly failing to implement internal accounting controls, falsifying African Gold’s books and records, and filing false certifications with the Commission. As alleged in part in the SEC Release:

[A]frican Gold’s only liquid asset was the money held in its operating bank account, and thus potential fraud by management posed one of the company’s most significant risks of material misstatement in its financial statements. The SEC’s order alleges that, despite this risk, African Gold gave its former CFO control over nearly all aspects of its operating bank account and financial reporting process with little to no oversight. According to the order, this enabled the CFO to make unauthorized withdrawals from African Gold’s operating bank account to himself without detection for more than one year and to alter the company’s bank account statements to conceal his fraud. As a result, according to the SEC’s order, African Gold materially misstated information in several required financial filings with the Commission and failed to maintain accurate books and records. On February 13, 2023, African Gold filed a preliminary proxy statement seeking shareholder approval to extend its liquidation date from March 2, 2023 to June 2, 2023 and to allow African Gold, without another shareholder vote, to further extend the liquidation date until March 2, 2024, among other proposals.

CFTC Charges Unregistered Commodity Trading Advisor with Fraud, Misappropriation, and Unregistered Commodity Pool Operator with Misappropriation (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8663-23
In the United States District Court for the District of Minnesota, the CFTC filed a Complaint charging Richard “Rick” Miller and Flip 2 Futures Trading Company LLC (F2F) with fraud, misappropriation, and unregistered activity related to trading on behalf of a commodity pool run by Justin Dendinger and Punch Drunk Marketing LLC (PDM) of Somerset, Wisconsin. As alleged in part in the CFTC Release:

[D]endinger and PDM pooled investor funds in accounts in their names and transferred the funds to F2F and Miller for trading. As alleged in the complaint, from approximately July 2019 through November 2020, F2F acted as an unregistered commodity trading advisory (CTA) by soliciting funds from and engaging in discretionary trading on behalf of PDM. Miller acted as an unregistered associated person (AP) of F2F. 

F2F and Miller are also charged with illegally collecting funds from the pooled investment vehicle in F2F’s or Miller’s bank and trading accounts, failing to provide a required disclosure document to PDM, and failing to maintain required records. In soliciting funds for and operating the pooled investment vehicle, PDM acted as an unregistered commodity pool operator (CPO) and Dendinger acted as an unregistered AP of PDM. PDM and Dendinger are also charged with illegally commingling pool participant funds with the funds of PDM and Dendinger and failing to provide pool participants with required disclosure documents. Dendinger, individually, is charged with making false or misleading statements of a material fact to the CFTC.

The CFTC alleges Miller made material misrepresentations about Miller’s futures trading performance and having other assets under management to persuade PDM and Dendinger to transfer funds to F2F and Miller for the purpose of trading futures contracts. In fact, according to the complaint, Miller did not trade as successfully as he claimed and did not have millions under management. Moreover, the complaint alleges F2F and Miller misappropriated some of PDM’s funds by failing to transfer all of PDM’s funds to Miller’s trading account and failing to transfer to PDM funds withdrawn from Miller’s trading account. 

The CFTC complaint further alleges PDM and Dendinger solicited and accepted $400,000 from nine pool participants residing in Minnesota and Wisconsin. The complaint also alleges PDM and Dendinger misappropriated pool participants’ investment funds by failing to transfer all funds provided to PDM by pool participants for the purpose of futures trading to F2F and Miller for trading as provided in PDM’s agreements with pool participants and by failing to return to pool participants funds repaid by F2F.

Finally, the complaint alleges that in response to a records subpoena and in response to a CFTC staff letter, Dendinger, via his attorney, falsely stated he had no trading accounts in his name with a registered futures commission merchant and had not engaged in any trading of specified financial products.

Attorney General James Sues Cryptocurrency Platform for Failing to Register in New York / CoinEx Allowed Investors in New York to Buy and Sell Crypto without Registering with the State (New York State Attorney General Release)
https://ag.ny.gov/press-release/2023/attorney-general-james-sues-cryptocurrency-platform-failing-register-new-york/ 
In the New York State Supreme Court, the New York State Attorney General sued cryptocurrency platform COINEX (CoinEx) for allegedly failing to register as a securities and commodities broker-dealer and for falsely representing itself as a crypto exchange.  As alleged in part in the NYAG Release:

CoinEx is a virtual currency trading platform that allows investors to buy and sell cryptocurrency through its website and app. On its platform, CoinEx investors can buy and sell popular virtual currencies, including AMP, LUNA, LBC, and $RLY, which are securities and commodities. New York law requires securities and commodities brokers to register with the state, which CoinEx failed to do. The OAG was able to create an account with CoinEx using a computer with a New York based IP address to buy and sell digital tokens, which CoinEx charged a fee for.

In addition, CoinEx claimed to be an exchange, but is not registered with the Securities and Exchange Commission (SEC) as a national securities exchange or appropriately designated by the Commodity Futures Trading Commission (CFTC) as is required under New York law. CoinEx also failed to comply with a subpoena issued by OAG to provide more information about its digital asset trading activities in the state.

FINRA Arbitration Panel Awards Former Aegis Capital Associated Person Customers Over $186,000
In the Matter of the Arbitration Between Juan Angel Seoane, Claimant, v. Aegis Capital Corp, Respondent (FINRA Arbitration Award 20-03946)
https://www.finra.org/sites/default/files/aao_documents/20-03946.pdf
In a FINRA Arbitration Statement of Claim filed in December 2020, associated person Claimant Seoane asserted breach of contract
and warranties; promissory estoppel; and fraudulent inducement. Claimant sought $133,333.33 in compensatory damages, punitive damages, consequential damages, interest, fees, and costs.

Respondent Aegis Capital generally denied the allegations, asserted affirmative defenses, and filed a Counterclaim seeking $26,666.67 plus interest. 

The FINRA Arbitration Panel found Respondent Aegis Capital liable and ordered it to pay to Claimant Seoane $133,333.33 in compensatory damages plus interest and $53,333.33 in attorneys' fees. 

FINRA Arbitration Panel Awards Customers over $60,000 in Damages Against No-Show Associated Person
In the Matter of the Arbitration Between Germon G. Medeiros and Jennifer L. Medeiros,Individually and as Joint Tenants, and the Germon G. Medeiros Trust, Claimants, v. Centaurus Financial, Inc. and Joseph Michael Todd, Respondents (FINRA Arbitration Award 22-01019)
https://www.finra.org/sites/default/files/aao_documents/22-01019.pdf
In a FINRA Arbitration Statement of Claim filed in May 2022, public customer Claimants asserted "outside business activities, selling away and private securities transactions; unsuitable investments and negligent account management; negligence and negligent supervision; bogus statement summaries; conversion; violations of the Florida Securities Act; sale of unregistered and non-exempt  securities; breach of fiduciary duty and constructive fraud; violations of FINRA Conduct Rules and NYSE Board Rules; violations of statutes and industry rules related to senior investors, elderly persons, and disabled adults; and respondeat superior.".The causes of action allegedly relate to:

allegedly inappropriate dealings between Respondents and Claimants related to the sale of a mortgage fund outside of Respondent Centaurus, as well as numerous substantial sales of illiquid securities which were allegedly misrepresented to Claimants as safe.

Claimants requested $100,000 to $500,00 in damages, punitive damages, interest, recission, costs, fees.

In October 2022, Claimant dismissed with prejudice Respondent Centaurus; and, accordingly, the FINRA Arbitration Panel made no determination against that party.

Respondent Todd did not file a Statement of Answer or appear at the hearing. 

The FINRA Arbitration Panel found Respondent Todd liable and ordered him to pay to Claimants $60,000 in compensatory damages, $37,500 in attorneys' fee, and a $300 filing fee.

 = = =
2/21/2023 

Industry vets form organization to stand up for individual advisors (Financial Planning by Dan Shaw)
https://www.financial-planning.com/news/new-industry-group-forms-for-individual-financial-advisors
Financial Planning's Dan Shaw reports in part that the "founders of the Financial Professionals Coalition contend that most industry groups back firms and big players. They plan to stand up for the little guy."

SEC Obtains Final Judgments Against Two Participants in International Microcap Fraud Schemes (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25644.htm
Without admitting or denying the allegations in an SEC Complaint filed in the United States District Court for the District of Massachusetts:

• Graham R. Taylor consented to a Final Judgment
  https://www.sec.gov/litigation/litreleases/2023/judg25644-taylor.pdf
  that permanently enjoins him from violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act, and Rule 10b-5 thereunder, and the registration provisions of Section 5 of the Securities Act. Taylor's judgment orders him to pay disgorgement of $3,432,412, prejudgment interest of $1,285,272, and a civil penalty of $207,183; and
• William T. Kaitz consented to a Final Judgment
  https://www.sec.gov/litigation/litreleases/2023/judg25644-kaitz.pdf
  that permanently enjoins him from violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Kaitz's judgment orders him to pay disgorgement of $812,854, prejudgment interest of $279,014, and a civil penalty of $215,000.

Both Final Judgments impose penny stock bars against Taylor and Kaitz. The court previously entered a judgment by default against Frederick Sharp that, among other relief, ordered him to pay more than $50 million. As alleged in part in the SEC Release:

Canadian resident Frederick Sharp masterminded a complex scheme from 2011 to 2019 in which he and his associates enabled control persons of microcap companies, whose stock was publicly traded in the U.S. securities markets, to conceal their control and ownership of huge amounts of the stock and then surreptitiously dump the stock into the U.S. markets, in violation of federal securities laws.  The services Sharp and his associates allegedly provided included furnishing networks of offshore shell companies to conceal stock ownership, arranging stock transfers and money transmittals, and providing encrypted accounting and communications systems.

The complaint alleges that one group of control persons comprised of three defendants frequently collaborated with Sharp to sell massive stock positions while hiding their control positions and stock promotional activities from the investing public. Taylor allegedly coordinated with these defendants to sell shares fraudulently and he received a significant cut of the illegal stock sale proceeds. According to the complaint, Kaitz worked as a promoter and touted stocks that the control group simultaneously planned to sell, while concealing their roles.

SEC Charges Investment Adviser Hite Hedge Asset Management LLC with Violating a Trading Rule (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25643.htm
In the United States District Court for the District of Massachusetts, the SEC filed a Complaint charging HITE Hedge Asset Management LLC with violating Rule 105 of Regulation M under the Securities Exchange Act of 1934. Without admitting or denying the allegations in the SEC Complaint:

• Defendant HITE Hedge Asset Management consented to the entry of a final judgment ordering it to pay a penalty of $103,591,and agreed to the entry of a related order in SEC administrative proceedings finding that it violated Rule 105 and to cease and desist from committing or causing violations of Rule 105; 
• Relief Defendant HITE Hedge LP consented to the entry of a final judgment ordering it to disgorge profits of $18,236 and pay interest of $806; 
• Relief Defendant HITE Hedge II LP agreed to the entry of a final judgment ordering it to disgorge profits of $39,975 and pay interest of $1,768; and
• Relief Defendant HITE Hedge Offshore Ltd. agreed to the entry of a final judgment ordering it to disgorge profits of $53,417 and pay interest of $2,362. 
  

As alleged in part in the SEC Release:

[I]n May 2021 HITE Hedge Asset Management violated Rule 105, which prohibits short selling an equity security during a restricted period (generally five business days before a covered public offering) and then purchasing the same security in the covered offering, absent an exception. The Rule applies regardless of the trader's intent, and is designed to prevent potentially manipulative short selling before the pricing of covered offerings.

According to the SEC's complaint, at the time of its unlawful trading, HITE Hedge Asset Management did not have any formal written policies relating to Rule 105. The SEC's complaint alleges that it was not until after the SEC began its investigation into the illegal trading that HITE Hedge Asset Management implemented a written Rule 105 policy, conducted a review of its trading history to determine if other Rule 105 violations had occurred, and otherwise enhanced its compliance measures. 

SEC Charges The Church of Jesus Christ of Latter-day Saints and Its Investment Management Company for Disclosure Failures and Misstated Filings (SEC Release)
https://www.sec.gov/news/press-release/2023-35
Ensign Peak Advisers Inc. (a non-profit entity operated by The Church of Jesus Christ of Latter-day Saints to manage the Church’s investments) agreed to settle allegations in an SEC Order that it violated Section 13(f) of the Securities Exchange Act and Rule 13f-1 thereunder by failing to file Forms 13F and for misstating information in these forms.
https://www.sec.gov/litigation/admin/2023/34-96951.pdf. Further, the Church agreed to settle the SEC’s allegation that it caused Ensign Peak’s violations through its knowledge and approval of Ensign Peak’s use of the shell LLCs. The SEC Release asserts Ensign Peak agreed to pay a $4 million penalty and the Church agreed to pay a $1 million penalty. As alleged in part in the SEC Release:

[F]rom 1997 through 2019, Ensign Peak failed to file Forms 13F, the forms on which investment managers are required to disclose the value of certain securities they manage. According to the order, the Church was concerned that disclosure of its portfolio, which by 2018 grew to approximately $32 billion, would lead to negative consequences. To obscure the amount of the Church’s portfolio, and with the Church’s knowledge and approval, Ensign Peak created thirteen shell LLCs, ostensibly with locations throughout the U.S., and filed Forms 13F in the names of these LLCs rather than in Ensign Peak’s name. The order finds that Ensign Peak maintained investment discretion over all relevant securities, that it controlled the shell companies, and that it directed nominee “business managers,” most of whom were employed by the Church, to sign the Commission filings. The shell LLCs’ Forms 13F misstated, among other things, that the LLCs had sole investment and voting discretion over the securities. In reality, the SEC’s order finds, Ensign Peak retained control over all investment and voting decisions.

Bill Singer's Comment: Not disclosed in the SEC Release is that the settlements were entered into "without admitting or denying the findings," as set forth in the underlying SEC Order.

SEC Charges Investment Adviser Candlestick Capital Management LP with Violating a Trading Rule (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25642.htm
In a Complaint filed in the United States District Court for the District of Connecticut, the SEC charged Candlestick Capital Management LP with violating Rule 105 of Regulation M under the Securities Exchange Act. Without admitting or denying the allegations in the SEC Complaint:

• Defendant Candlestick Capital consented to the entry of a final judgment ordering it to pay a penalty of $810,000, to cease and desist from committing or causing violations of Rule 105; and to a finding in a related Order that it violated Rule 105; 
• Relief Defendant Candlestick Master Fund LP agreed to the entry of a final judgment ordering it to disgorge profits of $1,565,305 and to pay interest of $89,439, and
• Relief Defendant Candlestick US F&F Fund LP agreed to the entry of a final judgement ordering it to pay disgorgement of $55,092 and to pay interest of $3,147.

As alleged in part in the SEC Release:

[I]n June 2020 Candlestick Capital violated Rule 105, which prohibits short selling an equity security during a restricted period (generally five business days before a covered public offering) and then purchasing the same security in the offering, absent an exception. The Rule applies regardless of the trader's intent, and is designed to prevent potentially manipulative short selling before the pricing of covered offerings.

According to the SEC's complaint, after concluding it had violated Rule 105, Candlestick Capital did not initiate a formal review of its trading history or self-report its violation to the Commission. The complaint alleges that Candlestick Capital only acknowledged the violation after Commission staff asked about it during a routine examination in 2021. According to the complaint, Candlestick Capital has since undertaken remedial steps, including revising its Rule 105 policies and procedures.

CFTC Denies Whistleblower Awards to Five Claimants 
Order Determining Whistleblower Award Claims (Whistleblower Award Determ. No. 23-WB-03)
https://www.whistleblower.gov/sites/whistleblower/files/2023-02/No.%2023-WB-03.pdf
The CFTC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to five Claimants. The Commission ordered that CRS's recommendations be approved. 

CFTC Approves Whistleblower Award to Claimant 
Order Determining Whistleblower Award Claims (Whistleblower Award Determ. No. 23-WB-02)
https://www.whistleblower.gov/sites/whistleblower/files/2023-02/No.%2023-WB-02.pdf
The CFTC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant. The Commission ordered that CRS's recommendations be approved. 

CFTC Approves Whistleblower Award to Claimant 1 and Denies Award to Claimants 2, 3, and 4.
Order Determining Whistleblower Award Claims (Whistleblower Award Determ. No. 23-WB-01)
https://www.whistleblower.gov/sites/whistleblower/files/2023-02/No.%2023-WB-01.pdf
The CFTC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending a Whistleblower Award to Claimant 1 (redacted percentage) and the denial of Awards to Claimants 2, 3, and 4. The Commission ordered that CRS's recommendations be approved. 

FINRA Fines and Suspends Rep For Working as Tax Preparer
In the Matter of Jeremy Jefferson, Respondent (FINRA AWC 2022075246601)
https://www.finra.org/sites/default/files/fda_documents/2022075246601
%20Jeremy%20Jefferson%20CRD%20%204444433%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, Jeremy Jefferson submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Jeremy Jefferson was first registered in 2004 with Morgan Stanley. In accordance with the terms of the AWC, FINRA imposed upon Jeremy Jefferson a $5,000 fine and a three-month suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC:

From January 2008 to April 2022, Jefferson worked as a tax preparer outside of his employment at Morgan Stanley without disclosing his tax preparation work to Morgan Stanley.

Additionally, from 2019 to 2021, Jefferson submitted inaccurate responses to Morgan Stanley’s annual compliance questionnaires indicating that he was not engaged in any outside business activity.

Therefore, Jefferson violated NASD Rules 3030 and 2110 and FINRA Rules 3270 and 2010.