Recidivist Fraudster Pleads Guilty To $40 Million Ponzi Scheme / Franklin Ray Also Pled Guilty to SBA Loan Fraud and Another Fraud Scheme (DOJ Release)
https://www.justice.gov/usao-sdny/pr/recidivist-fraudster-pleads-guilty-40-million-ponzi-scheme
In the United States District Court for the Southern District of New York, Franklin Ray pled guilty to four counts of wire fraud, including one count of wire fraud while released under conditions of bail and two counts of wire fraud affecting a financial institution, and one count of aggravated identity theft. Also, Ray agreed to forfeit $42,128,912 and pay restitution. Previously, Ray was convicted in the United States District Court for the Eastern District of Michigan of wire fraud and bank fraud, and was released from prison in 2010. As alleged in part in the DOJ Release:

Beginning in at least June 2021, FRANKLIN RAY began to offer investors an opportunity to invest in his trucking and logistics company, CSA Business Solutions LLC (the “Truck Investment Scheme”).  Specifically, RAY and the investors entered into contracts pursuant to which CSA Business Solutions LLC would procure and operate a truck in its trucking business for each $20,000 contributed by the investor. RAY told investors that the trucks would perform delivery services for a multinational e-commerce company and/or a multinational shipping company and that the investors would be entitled to 77% of the net income of the trucks.  In reality, CSA Business Solutions LLC operated few trucks and had minimal revenues from trucking activities.  Instead, investors in the Truck Investment Scheme received payments from new investments into the scheme or from other sources.  After the investors purchased the rights to trucks from CSA Business Solutions LLC, RAY sent them falsified spreadsheets at regular intervals, purporting to show the performance of their trucks during the relevant period.  RAY ultimately induced approximately 275 investors to invest at least $40 million and fraudulently claimed to have purchased over 2,000 trucks with the investments.

RAY also pled guilty to carrying out fraudulent schemes to obtain over $1.9 million in government-guaranteed loans designed to provide relief to small businesses during the COVID-19 pandemic on behalf of CSA Business Solutions LLC and another Michigan-based trucking company (the “SBA Loan Fraud Schemes”).  In connection with the SBA Loan Fraud Schemes, RAY submitted false information and forged documents to the Small Business Administration and commercial lenders.  RAY claimed that these businesses engaged in significant trucking business, but they had minimal revenues and trucking activity.

Finally, RAY pled guilty to fraudulently inducing a New York City-based real estate company (the “Company”) to pay $175,000 in startup costs for a joint venture (the “Join Venture”) between the Company and CSA Business Solutions LLC.  RAY misrepresented CSA Business Solutions LLC and his own personal business experience to the Company.  Rather than pay for startup costs, RAY spent the funds on personal expenses, including private airplane trips.  The Joint Venture was never formed.

RAY was arrested in early March 2022, and a CSA Business Solutions LLC bank account was seized at that time.  After his arrest, up until his Indictment in April 2022, RAY continued to operate the Truck Investment Scheme.  RAY hid the fact of his arrest and the seizure of the bank account and lied to investors about why he did not make expected payments after his arrest.  During the period after his arrest, RAY opened new bank accounts on behalf of CSA Business Solutions LLC and continued to solicit and accept investor funds for trucks that did not exist.  In the post-arrest period alone, RAY defrauded investors into paying at least $1.9 million into his scheme.

Former Law Firm Partner Arrested For Bankruptcy Fraud / Defendant Submitted Fake Bank Record to Court (DOJ Release)
https://www.justice.gov/usao-sdny/pr/former-law-firm-partner-arrested-bankruptcy-fraud
In the United States District Court for the Southern District of New York, an Indictment was filed charging former attorney John Roesser with one count of falsification of records in bankruptcy and one count of false oaths and claims in bankruptcy.
https://www.justice.gov/usao-sdny/press-release/file/1576611/download
As alleged in part in the DOJ Release:

From in or about March 2013 through in or about January 2018, ROESSER was a partner at three multinational law firms.  During his time as a partner at these law firms, ROESSER earned substantial income — and incurred substantial income tax liability. ROESSER resigned from the New York bar in or about June 2020 after admitting to misappropriating client funds.

By 2022, ROESSER owed the IRS, and others, over three million dollars.  He also owned a house that he estimated was worth millions of dollars and an Aston Martin Rapide, a luxury sports car. Instead of paying his debts, in February 2022, ROESSER filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of New York.  See In re John Roesser, No. 22 Bk. 22049 (Bankr. S.D.N.Y.) (the “Bankruptcy”).  In a Chapter 11 bankruptcy, a debtor may remain “in possession,” meaning that the debtor keeps possession and control of his assets during the bankruptcy.  But a debtor-in-possession must propose a viable plan of reorganization, which creditors then vote on.  If a debtor fails to comply with the requirements of Chapter 11, a Chapter 11 bankruptcy can be converted to a Chapter 7 bankruptcy or dismissed.  In a Chapter 7 bankruptcy, an appointed trustee usually converts a debtor’s assets into cash for distribution among creditors.  If a bankruptcy is dismissed, the debtor loses the protections of bankruptcy; for example, creditors can take steps to seize a debtor’s assets.

ROESSER told the Bankruptcy Court and the IRS that he would soon receive millions of dollars and be able to pay his debts while keeping his house.  Then, ROESSER filed a false declaration and submitted falsified records in the Bankruptcy indicating that he had received millions of dollars.  This was false.  ROESSER was concealing that he had not received millions of dollars after all, in a fraudulent effort to retain control of his assets while avoiding payment of his debts.

On or about March 3, 2023, after some of the above false statements were withdrawn by ROESSER’s attorney in the Bankruptcy, ROESSER’s Chapter 11 bankruptcy was dismissed. Without the protections of bankruptcy, creditors can now take steps to seize ROESSER’s assets to pay his debts.

Defense Company CEO Pleads Guilty To Conspiracy To Defraud Investors And Creditors (DOJ Release)
https://www.justice.gov/usao-sdny/pr/defense-company-ceo-pleads-guilty-conspiracy-defraud-investors-and-creditors
In the United States District Court for theSouthern District of New York, the former Chief Executive Officer of a defense technology start-up Barend Oberholzer a/k/a "Barry Oberholzer" pled guilty to one count of conspiracy to commit wire fraud. Previously, co-conspirator Jaromy Pittario, a/k/a “Jaromy Jannard-Pittario pled guilty and awaits sentencing.

As alleged in part in the DOJ Release:

Beginning in or around 2018, OBERHOLZER began soliciting investments in Start-Up-1 and a purported security device it had developed (“Security Device-1”) from at least two venture capital firms on false pretenses.  OBERHOLZER sent multiple emails to the firms, posing as a retired, four-star General in the United States Army (“Retired General-1”), who was employed by a prominent private equity firm based in New York, New York (“Private Equity Firm-1”).  Therein, OBERHOLZER, posing as Retired General-1, endorsed and solicited investment in Start-Up-1 and Security Device-1, a smartphone case that purportedly permitted its users to detect at a distance weapons or other dangerous items concealed on another person.

OBERHOLZER and his co-conspirator, JAROMY PITTARIO, a/k/a “Jaromy Jannard-Pittario,” also solicited investments in and loans to Start-Up-1 and Security Device-1 by falsely representing, among other things, their financial solvency, access to cash, and use of investor funds.  For instance, the pair repeatedly provided falsified financial statements to potential creditors to secure funding. 

North Carolina Man Charged with $7 Million Ponzi Scheme (DOJ Release)
https://www.justice.gov/usao-nj/pr/north-carolina-man-charged-7-million-ponzi-scheme
In the United States District Court for theDistrict of New Jersey, an Indictment was filed charing David Schamens with seven counts of wire fraud, one count of securities fraud, and seven counts of money laundering. As alleged in part in the DOJ Release:

Starting in 2014, Schamens fraudulently solicited investments in various entities he controlled, including TD Trading LLC, TFG Trading Fund LLC, Tradestream Analytics LTD, Tradedesk Financial Group Inc., and others, under the promise of annual rates of return of 12 to 30 percent. In 2019, Schamens began to solicit investment in Tradestream Algo Fund, an algorithm-based trading pool that he claimed to have developed. In each instance, Schamens directed investors to wire funds directly or to transfer portions of their Individual Retirement Accounts (IRAs) to bank accounts he controlled.

Schamens often moved victim funds through several different bank accounts before he ultimately used the funds for some non-investment related purpose. Schamens took several steps to keep his customers’ trust, including sending false account statements; posting false monthly account statements to his companies’ websites showing balances for trading accounts that did not exist; and sending false tax documents reporting earnings that did not exist.

Schamens allegedly misappropriated $7 million from at least 25 different individuals, using some of that money to repay earlier investors in the manner of a Ponzi scheme, and to pay personal expenses.

Queens Man Pleads Guilty to Real Estate Fraud Scheme (DOJ Release)
https://www.justice.gov/usao-edny/pr/queens-man-pleads-guilty-real-estate-fraud-scheme
In the United States District Court for the Eastern District of New York, Rashidun Bokhari pled guilty to wire fraud. As alleged in part in the DOJ Release:

[B]etween September 2015 and April 2018, Bokhari induced the victim to invest approximately $935,000 in four different real estate properties located in Long Island City and Astoria in Queens.  Bokhari falsely claimed that in exchange for his investment in the purported real estate transactions, the victim investor would receive a 50 percent ownership in the properties.  Bokhari fabricated real estate transaction documents which he provided to the victim investor.  After receiving almost $1 million, the defendant misappropriated the money for his own personal use, including transferring funds overseas, making mortgage and life insurance payments, and withdrawing cash from ATMs.  As part of his plea agreement, Bokhari has agreed to pay restitution in the amount of $935,000 to the victim.

The government’s investigation also revealed that between December 20, 2020 and May 2022, Bokhari engaged in a separate scheme to defraud two additional victims in Queens.  As part of his plea agreement, Bohkari has agreed to pay these two victims restitution in the amount of $191,100. 

Bokhari’s victims are of Bengali descent and he exploited their shared ethnic background in furtherance of his schemes.  

Brazilian Mining Company to Pay $55.9 Million to Settle Charges Related to Misleading Disclosures Prior to Deadly Dam Collapse (SEC Release)
https://www.sec.gov/news/press-release/2023-63
In response to a Complaint filed by the SEC in the United States District Court for the Eastern District of New York, Brazilian mining company Vale S.A.agreed to pay a $25 million civil penalty and $30.9 million in disgorgement and pre-judgment interest; and to be permanently restrained and enjoined from violations of the Securities Act and of the Securities Exchange Act. As alleged in part in the SEC Release, the settlement stemmed from 

[T] company’s allegedly false and misleading disclosures about the safety of its dams prior to the January 2019 collapse of the Brumadinho dam that killed 270 people. The SEC’s complaint alleged that, for years, the dam did not meet internationally-recognized safety standards even as Vale’s public sustainability reports assured investors that all of its dams were certified as stable. 

Securities and Exchange Commission Obtains Final Judgment Against Massachusetts Investment Adviser Who Misappropriated Funds from Clients (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25678.htm
The United Sttess District Court for the District of Massachusetts entered a Final Judgment against investment adviser James K. Couture whereby he was permanently enjoined from future violations of the antifraud provisions of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. In a parallel criminal action, Couture pled guilty to ten criminal counts including one count of investment adviser fraud; and he was sentenced to 100 months in prison plus three years of supervised release, and ordered to pay $1,924,585 in restitution and $2,874,585 in forfeiture. As alleged in part in the SEC Release:

FINRA Doesn't Bank On It When It Comes To Wife Of Former UBS Employee (BrokeAndBroker.com Blog)
https://www.brokeandbroker.com/6961/finra-ubs-motherway/
A former UBS rep sued his former UBS investment adviser brokerage firm. Also, the former rep sued UBS Bank. The Bank didn't file an Answer or appear in the proceedings, and the arbitrators declined to make any determination against the Bank. When it came time for the former UBS rep to pay the arbitration Award rendered against him, FINRA pointed a finger at his wife's finances when he argued that he had an inability to pay the arbitration award. Depending on your view, that's an odd consistency or inconsistency.

Foreign National Sentenced for Victimizing U.S. Persons Through Cyber-Enabled Fraud Schemes (DOJ Release)
https://www.justice.gov/opa/pr/foreign-national-sentenced-victimizing-us-persons-through-cyber-enabled-fraud-schemes
In the United States District Court for the District of Arizona Solomon Ekunke Okpe, 31, was sentenced to four years and one month in prison after pleading guilty to pleaded guilty to conspiracy to commit wire, bank, and mail fraud. Previously, co-conspirator Johnson Uke Obogo was sentenced to one year and one day in prison. As alleged in part in the DOJ Release:

[B]etween December 2011 and January 2017, Solomon Ekunke Okpe, 31, of Lagos, and his co-conspirators devised and executed business email compromise (BEC), work-from-home, check-cashing, romance, and credit card scams that targeted unsuspecting individuals, banks, and businesses in the United States and elsewhere, and were intended to cause more than a million dollars in losses to U.S. victims. Among the victims of the scheme were First American Holding Company and MidFirst Bank. 

To execute the scheme, Okpe and his co-conspirators launched email phishing attacks to steal victim login credentials and other sensitive information, hacked into victim online accounts, impersonated people, and assumed fake identities to defraud individuals, banks, and businesses, and trafficked, possessed, and used stolen credit cards in furtherance of the scheme. For instance, in BEC scams, Okpe and his co-conspirators posed as trusted individuals in order to deceive banks and companies into making unauthorized wire transfers to bank accounts specified by the co-conspirators. The co-conspirators also falsely posed as online employers on job websites and forums and purported to “hire” individuals in Arizona and elsewhere to positions that were marketed as legitimate. In reality, these work-from-home “employees” were often unwittingly directed to perform tasks that would facilitate the co-conspirators’ fraud schemes. Some of these tasks included creating bank and payment processing accounts, transferring/withdrawing money from these accounts, or cashing/depositing counterfeit checks. 

Okpe and his co-conspirators additionally conducted romance scams by creating accounts on dating websites, feigning interest in romantic relationships with individuals under fictitious identities, and causing these victims to transfer their moneys overseas and/or receive money from wire-transfer scams. Okpe caused and intended to cause individual romance scam victims to suffer tens of thousands of dollars of losses.

Okpe was previously arrested in Malaysia at the request of the United States and detained for over two years as he contested extradition to the United States. 

Queens Investment Advisor Indicted for Multi-Million Dollar Securities Fraud Scheme / Victim Gave the Defendant More than $4 Million to Purchase Securities Which He Used to Pay Personal Expenses and for Day Trading (DOJ Release)
https://www.justice.gov/usao-edny/pr/queens-investment-advisor-indicted-multi-million-dollar-securities-fraud-scheme
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SEC Obtains Emergency Relief Against Long Island Investment Adviser and Firm Charged with Fraud (SEC Release)
https://www.sec.gov/news/press-release/2023-62

In the United States District Court for the Eastern District of New York, a 16-count Indictment was filed charing Janues Capital, Inc.'s Founder/Executive Director Surage Roshan Perera was charged with securities fraud, investment advisor fraud, wire fraud, and money laundering. https://www.justice.gov/d9/2023-03/perera.indictment.pdf. As alleged in part in the DOJ Release:

[B]etween February 2022 and March 2023, Perera contacted Jane Doe via telephone calls, emails and text messages to solicit her to purchase stock in companies that traded on the NASDAQ and NYSE, in exchange for a fee.  Perera falsely told Jane Doe that he had relationships with large institutions, and could purchase shares of those publicly-traded companies at discounted prices.  The defendant also told Jane Doe that her investment was a low risk venture and he would use her investment capital to purchase shares in those public-traded companies.  As a result, Jane Doe gave Perera more than $4.2 million.  However, instead of investing Jane Doe’s money in those securities, Perera misappropriated those funds by, among other things: (1) paying redemptions to Jane Doe, (2) paying personal expenses, and (3) funding his day trading.  To conceal his fraudulent scheme, Perera sent fraudulent confirmation notices and account statements to Jane Doe.

In the United States District Court for the Eastern District of New York, the SEC filed a Complaint charging Janues Capital, Inc. and the firm's former broker Surage Roshan Perera with violating antifraud provisions of the federal securities laws; and, further, charging Perera with aiding and abetting Janues’ alleged violations.
https://www.sec.gov/litigation/complaints/2023/comp-pr2023-62.pdf The Complaint names Relief Defendant Nishani Alahakoon. The Court granted emergency relief including a temporary restraining order and an asset freeze. As alleged in part in the DOJ Release:

[F]rom February 2022 until March 2023, Perera, a Long Island, NY resident, falsely told an investor, not named in the complaint, that Janues had access to specific restricted securities at discounted prices though connections with large, institutional investors. He allegedly claimed to also exercise a trading strategy, which he referred to as ‘Options Straddles,’ that would not only prevent any trading losses but also guarantee returns on some of the investments of up to 9 percent with the potential for returns of 50 percent. According to the complaint, Perera and Janues misappropriated at least $3.5 million of the investor’s funds to engage in highly speculative and leveraged trading. In total, Perera engaged in more than $2.5 billion in securities transactions, with nearly $3 million in trading losses. Perera then allegedly concealed the misappropriation and losses by providing the investor with phony confirmations and account statements that falsely showed the expected returns. The complaint also alleges that Perera further attempted to hide the losses by using funds received from other sources to make Ponzi-like payments to the investor.

SEC Charges Texas Resident with Orchestrating Three Separate Schemes Defrauding Investors Out of Over $8.4 Million (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25677.htm
In the United States District Court for the Northern District of Texas, the SEC fled a Complaint charging Aaron Cain McKnight and others with allegedly orchestrating investment schemes that defrauded at least 28 investors. As alleged in part in the SEC Release:

[B]etween March 2018 and September 2021, McKnight ran three schemes that, while separate, followed a similar pattern. In each scheme, McKnight allegedly portrayed himself as an experienced professional controlling financial services firms, through which he offered investment opportunities that promised extraordinary returns but that, in reality, did not exist. Using his fabricated credentials, he allegedly raised funds from numerous investors only to then use the investors' money for non-investment purposes, including personal expenses, operation of his outside business, and/or Ponzi-like payments to earlier investors.

The SEC further alleges that lawyer Kenneth Miller and his law firm, Frost & Miller, LLP ("F&M"), substantially assisted McKnight's first scheme by receiving and immediately distributing over $2 million of investor funds at McKnight's direction. According to the SEC, Miller and F&M provided this assistance despite not having a clear understanding of why the funds were sent to F&M, who the funds had come from or were going to, or what function the investors expected F&M to serve.

The SEC's complaint, filed in Texas federal court, charges McKnight and two entities he employed in one of the schemes, BPM Global Investments, LLC ("BPM Global") and BPM Asset Management, LLC ("BPMAM"), with violating various antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder. The complaint also charges Sherry Rebekka Sims, Harmony Brooke McKnight, Miller, and F&M with aiding and abetting certain of these violations, and names Timothy Neher and his company, Accelerated Venture Partners, LLC, as relief defendants. Additionally, the complaint charges McKnight and Harmony McKnight as control persons under Section 20(a) of the Exchange Act for the violations of BPM Global and BPMAM. The SEC's complaint seeks permanent injunctions, including conduct-based injunctions, disgorgement of ill-gotten gains, civil penalties, and officer and director bars.

Without admitting or denying the SEC's allegations, Sims consented to a bifurcated settlement, agreeing to the entry of a final judgment that, among other things, permanently enjoins her 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, and from soliciting, or issuing guarantees in connection with, the purchase or sale of securities. Civil penalties will be determined by the court at a later date upon motion of the Commission.

SEC Denies Whistleblower Award to Claimant
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-97205; Whistleblower Award Proc. File No. 2023-43)
https://www.sec.gov/rules/other/2023/34-97205.pdf
The Office of the Whistleblower ("OWB") issued a Preliminary Determination Disposition recommending the denial of a Whistleblower Award to Claimant 2. The Commission ordered that OWBs recommendations be approved. The Order asserts in part that [Ed: footnotes omitted]:

First, the record shows that Claimant 2 did not provide the Commission with information that caused the staff to open an examination or investigation or caused the staff to inquire into different conduct. According to a supplemental staff declaration, the Investigation was opened by Enforcement staff in REDACTED based upon an REDACTED referral (the “Referral”) from the Commission’s Office of Compliance Inspections and Examinations, now the Division of Examinations, and not based upon any information from Claimant 2. Commission staff have confirmed, in a supplemental declaration, which we credit, that the Referral was based on an examination (the “Exam”) begun in REDACTED approximately five months before Claimant 2 contacted the Other Organization. The supplemental declaration also confirms that the Exam was initiated based on information from sources within the Commission. And while the Referral indicates that staff assigned to the Exam communicated with Other Organization staff prior to commencing the Exam REDACTED in those communications occurred at least five months before Claimant 2 contacted Other Organization with his/her information. Accordingly, the record demonstrates that Claimant 2’s information did not cause Commission staff to commence an examination or open the Investigation. 

SEC Awards Whistleblower Award to Claimants 1, 2 and 4 But Denies Award to Claimant 3
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-97202; Whistleblower Award Proc. File No. 2023-42)
https://www.sec.gov/rules/other/2023/34-97202.pdf
The SEC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending a Whistleblower Award to Claimant 1 and Claimant 2, and the denial of an Award to Claimant 3 and Claimant 4. The Commission found Claimant 4 eligible for an Award (reversing CMS), reallocated the 30% among Claimants 1, 2, and 4; and denied an Award to Claimant 3. The Order asserts in part that [Ed: footnotes omitted]:

We also disagree with Claimant 1’s argument that the award should be based on any amounts collected in the Bankruptcy Action. As we noted in connection with the adoption of several rule amendments, “our statutory authority does not extend to paying whistleblower awards for recoveries in bankruptcy proceedings or other proceedings that may in some way ‘result from’ the Commission’s enforcement action and the activities of the whistleblower.” Under Section 21F of the Exchange Act, the Commission is authorized to pay whistleblower awards only on the basis of monetary sanctions that are imposed in a covered judicial or administrative action or related action. A covered judicial or administrative action means an “action brought by the Commission under the securities laws that results in monetary sanctions
exceeding $1,000,000.”  A related action must be brought by one of the authorities specified in the statute.Bankruptcy proceedings are not brought by either the Commission acting under the securities laws or by one of the designated related-action authorities, and orders to pay money that result from bankruptcy proceedings are not imposed in Commission covered actions or related actions. 

. . .

Claimant 3’s lack of awareness of the NoCA posting or of the 90-day deadline is not an “extraordinary circumstance” that would excuse his/her failure to submit a timely Form WBAPP. Nothing interfered with his/her ability to monitor the Commission’s web page or submit an application by the 90-day deadline. Furthermore, there are no unique circumstances here that might support the Commission’s exercise of its separate, discretionary authority under Section 36(a) of the Exchange Act to exempt Claimant 3 from the 90-day filing deadline.

CFTC Charges Binance and Its Founder, Changpeng Zhao, with Willful Evasion of Federal Law and Operating an Illegal Digital Asset Derivatives Exchange (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8680-23
March 27, 2023
In the United States District Court for the Northern District of Illinois, the CFTC filed a Complaint charging Changpeng Zhao and Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited (together, "Binance") with numerous violations of the Commodity Exchange Act (CEA) and CFTC regulations; and also charging Binance's former Chief Compliance Officer Samuel Lim with aiding and abetting Binance’s violations. In part the CFTC Release alleges that:

According to the complaint, Binance has offered and executed commodity derivatives transactions to and for U.S. persons from July 2019 through the present. As alleged, Binance’s compliance program has been ineffective and, at Zhao’s direction, Binance has instructed its employees and customers to circumvent compliance controls in order to maximize corporate profits.

The complaint charges that for much of the relevant period, Binance did not require its customers to provide any identity-verifying information before trading on the platform, despite the legal duty that entities like Binance functioning as futures commission merchants (FCMs) collect such information, and failed to implement basic compliance procedures designed to prevent and detect terrorist financing and money laundering.

The complaint further alleges that even after Binance purported to restrict U.S. customers from trading on its platform, Binance instructed its customers – in particular its commercially valuable U.S.-based VIP customers – on the best methods for evading Binance’s compliance controls. In addition, the complaint charges Binance with acting as a designated contract market or swap execution facility based on its role in facilitating derivatives transactions without registering with the CFTC, as required.

The complaint also charges the entity defendants with failing to diligently supervise Binance’s activities as an FCM. Among the numerous supervisory failures detailed in the complaint is Binance’s instruction to employees to communicate with U.S.-based customers concerning control evasion through a messaging application that was set to automatically delete written communications. According to the complaint, the reason Binance used that communication method was to avoid leaving any evidence of their efforts to retain U.S.-based customers. 

The complaint further charges the Binance, Zhao and Lim with willful evasion of the requirements of the CEA. As alleged, the defendants conducted certain activities outside the U.S. designed to avoid CFTC regulation, such as intentionally structuring their entities and transactions to avoid registration requirements and instructing U.S. customers as well as other customers as to how to evade Binance’s compliance controls.

As alleged, Zhao is liable for Binance’s violations based on his control over Binance and his long-running failure to act in good faith concerning Binance’s misconduct. According to the complaint, Zhao owned and controlled dozens of entities that operate the Binance platform as a common enterprise. Zhao is alleged to have been responsible for all major strategic decisions at Binance, including devising the secret plot to instruct U.S.-based VIP customers to evade Binance’s compliance controls and instructing Binance employees to ensure all communications about their control subversion took place over applications that facilitated the automatic destruction of evidence. 

Lim, Binance’s CCO from 2018 through 2022, is charged with willfully aiding and abetting Binance’s violations through intentional conduct that undermined Binance’s compliance program. Lim is also charged with conducting activities to willfully evade or attempt to evade applicable provisions of the CEA, including promoting the use of “creative means” to assist customers in circumventing Binance’s compliance controls and implementing a corporate policy that instructed Binance’s U.S. customers to access the trading facility through a virtual private network to avoid Binance’s IP address-based controls or create “new” accounts through off-shore shell companies to evade Binance’s KYC-based controls.

FINRA Sanction Newbridge Securities Corporation for Alternative Mutual Fund Supervision
In the Matter of Newbridge Securities Corporation, Respondent (FINRA AWC 2019061764901)
https://www.finra.org/sites/default/files/fda_documents/2019061764901
%20Newbridge%20Securities%20Corporation%20CRD%20104065%20AWC%20lp.pdf
%20Jason%20Adams%20CRD%202690575%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, Newbridge Securities Corporation submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Newbridge Securities Corporation has been a FINRA member firm since 2000 with 195 registered representatives at 49 branches. In accordance with the terms of the AWC, FINRA imposed upon Newbridge Securities Corporation a Censure, $50,000 fine, $114,025.24 in restitution plus interest, and an undertaking to certify compliance with the cited issues. As alleged in the "Overview" of the AWC [Ed: footnote omitted]:

Between October 25, 2016 and February 8, 2018, Newbridge failed to reasonably supervise representatives’ recommendations of an alternative mutual fund—the LJM Preservation & Growth Fund (LJM). Newbridge permitted the sale of LJM on its platform without conducting reasonable due diligence and without a sufficient
understanding of its risks and features, including the fact that the fund pursued a risky strategy that relied, in part, on purchasing uncovered options. Newbridge also lacked a reasonable supervisory system to review representatives’ LJM recommendations. Newbridge representatives sold approximately $323,000 in LJM to customers. LJM’s value dropped 80% during an extreme volatility event in February 2018 and the fund ultimately liquidated and closed, resulting in thousands of dollars in losses for
Newbridge’s customers. By virtue of the foregoing, Newbridge violated FINRA Rules 3110 and 2010. 

FINRA Sanction NatAlliance Securities and Supervisor for Traders' Bond Marks
In the Matter of NatAlliance Securities, LLC and Jason Adams, Respondents (FINRA AWC  2020068495402)
https://www.finra.org/sites/default/files/fda_documents/2020068495402
%20NatAlliance%20Securities%2C%20LLC%20CRD%2039455%20and
%20Jason%20Adams%20CRD%202690575%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, NatAlliance Securities, LLC and Jason Adams submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that NatAlliance Securities, LLC has been a FINRA member firm since 1997 with 66 registered representatives at 13 branches; and Jason Adams was first registered in 1996 and by 2019, he was registered with NatAlliance. In accordance with the terms of the AWC, FINRA imposed upon 

• NatAlliance Securities, LLC Censure, a $40,000 fine, and an undertaking to certify compliance with the issues cited; and

• Jason Adams a $5,000 fine, two-month suspension from associating with any FINRA member in Principal-only capacities, and an undertaking to complete 20 hours of continuing education concerning supervisory responsibilities.

 As alleged in the "Overview" of the AWC [Ed: footnote omitted]:

From January 2019 through the present, NatAlliance failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to review its traders’ bond marks to ensure accurate books and records, in violation of FINRA Rules 3110 and 2010. From April 2020 through September 2020, Trader A, a former NatAlliance proprietary corporate bond trader, inaccurately marked the value of numerous bonds in his trading book. Due to Trader A’s mismarking, NatAlliance failed to make and keep accurate books and records of the firm’s net capital, thereby filing four inaccurate monthly FOCUS reports between April 2020 and July 2020, in violation of Section 17(a) of the Exchange Act, Exchange Act Rules 17a-3 and 17a-5, and FINRA Rules 4511 and 2010. From April 2020 through September 2020, Adams failed to reasonably supervise Trader A, in violation of FINRA Rules 3110 and 2010.

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Footnote 3: In October 2022, Trader A entered into an AWC for violating FINRA Rules 4511 and 2010, for which he was suspended for four months in all capacities and fined $5,000.