SEC Charges Former Army Financial Counselor Who Defrauded Gold Star Family Members (SEC Release)

SEC Obtains Final Judgments Against Former Public Company Chairman and Two Others in Fraudulent Filings and Pump-And-Dump Scheme (SEC Release)

SEC Obtains Final Judgments Against Operators of Fake Trading Scheme Known as "EmpiresX" (SEC Release)

SEC Denies Whistleblower Award to Two Claimants 
Order Determining Whistleblower Award Claim

Statement Regarding Amicus Brief Filing in Murray v. UBS Securities, LLC by SEC Commissioner Hester Peirce and Commissioner Mark T. Uyeda

Statement on the Expiration of the SEC Staff No-Action Letter re: MiFID II by SEC Commissioner Mark T. Uyeda

The Financial Professionals Coalition, Ltd. Launches "Marketplace"
The Financial Professionals Coalition, Ltd. offers flat-fee 30-day-run advertising for:

• Help Wanted (Employer),
• Position Wanted (Employee),
• Professional Services (Lawyers, CPAs, Consultants), and
• Announcements (Events, New Firms)

VISIT: https://www.finprocoalition.com/marketplace/

Tacoma man sentenced to three years in prison for defrauding union retirement plans / While serving as Third Party Administrator, stole the retirement funds of commercial painter who had paid into plan (DOJ Release)
https://www.justice.gov/usao-wdwa/pr/tacoma-man-sentenced-three-years-prison-defrauding-union-retirement-plans
In the United States District Court for the Western District of Washington, Erik A. Read, 52, pled guilty to wire fraud and aggravated identity theft; and he was sentenced to three years in prison. As alleged in part in the DOJ Release:

[R]ead worked as a third party administrator for three different union plans from which he improperly diverted funds: the Western Washington Painter Defined Contribution Pension Plan, the International Brotherhood of Electrical Workers Local 191 Health and Welfare Plan, as well as the Washington State Plumbing and Pipefitting Industry Plan.

Court records detail how he stole from the account of one of the members of the painters’ union – a person who was listed as a “missing participant,” meaning he was no longer actively participating in the plan. Between April 2018 and May 2019, Read falsified records, forged signatures, and doctored a driver’s license to make it appear that the victim wanted his funds withdrawn from the fund to pay for medical treatment for a terminal illness. Read claimed to his coworkers that he was going to deliver the checks by hand to the victim and his family. In fact, Read deposited the checks into his own bank account. Even as he was earning $150,000 a year, he was improperly taking funds from the pension plans that he worked on. Read has agreed to pay $294,251 to the victim pension plans or their insurers.

In asking for a four-year prison term, prosecutor Brian Wynne wrote to the court, “While the financial impacts of Read’s crimes were great, the non-financial impacts on both individuals Read worked for and on behalf of are unquantifiable. The impacts include the stress on (one victim) upon learning his retirement had been stolen and his efforts to recoup it. The impacts also include the stress experienced by Read’s colleagues who unwittingly helped Read carry out the fraud and the stress and managerial impacts on the trusts whose plans Read administered.”

SEC Obtains Final Judgments Against Former Public Company Chairman and Two Others in Fraudulent Filings and Pump-And-Dump Scheme (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25771.htm
The United States District Court for the Southern District of New York entered a Final Judgment on Consent against

• former Cool Holdings, Inc's Chairman Andrew DeFrancesco permanently enjoining him from violating Sections 5 and 17(a) of the Securities Act and Sections 10(b), 13(d) and 16(a) of the Securities Exchange Act and Rules 10b-5, 13d-1(a) and 16a-3 thereunder; and ordering DeFrancesco pay disgorgement and prejudgment interest in the amount of $1,276,070.49, and a civil penalty of $1,737,224.52; and, further barring him from serving as an officer or director of a public company;
• Nikola Faukovic permanently enjoining her from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and ordering her to pay disgorgement and prejudgment interest in the amount of $14,350.32, and a civil penalty of $111,614; and 
• Catherine DeFrancesco permanently enjoining her from violating Section 13(d) of the Exchange Act and Rule 13d-1(a) thereunder, and ordering her to pay a civil penalty in the amount of $122,782.

The SEC continues its litigation against Defendants Marlio Mauricio Diaz Cardona and Carlos Felipe Rezk. 

• SEC Complaint
• Judgment - Andrew DeFrancesco
• Judgment - Catherine DeFrancesco
• Judgment - Nikola Faukovic

As alleged in part in the SEC Release:

[A]ndrew DeFrancesco was the "chief architect of the scheme" in which the false filings, including misstatements and omissions about a critical business relationship, masked Cool Holdings' perilous financial condition and future prospects. The complaint further alleges that Andrew DeFrancesco and others arranged for the publication of a series of fraudulent promotional articles about Cool Holdings that Andrew DeFrancesco secretly funded. In addition, according to the complaint, with Faukovic's assistance, Andrew DeFrancesco secretly sold hundreds of thousands of Cool Holdings shares, which he held in the name of nominee entities. Andrew DeFrancesco and his ex-wife Catherine DeFrancesco allegedly concealed his ownership of Cool Holdings shares, including by filing false beneficial ownership reports with the SEC.

U.S. Army Financial Counselor Charged with Defrauding Gold Star Families (DOJ Release)
https://www.justice.gov/opa/pr/us-army-financial-counselor-charged-defrauding-gold-star-families

-and-

SEC Charges Former Army Financial Counselor Who Defrauded Gold Star Family Members (SEC Release)
https://www.sec.gov/news/press-release/2023-127

In the United States District Court for the District of New Jersey, an Indictment was filed charging former U.S. Army financial counselor Caz Craffy a/k/a "Carz Craffey"
https://www.justice.gov/media/1304436/dl?inline with six counts of wire fraud, one count of securities fraud,  one count of false statement on loan application, one count of acts affecting personal financial interest, one count of false statements. As alleged in part in the DOJ Release:

When a member of the Armed Services dies during active duty, his or her surviving beneficiary, now a member of a Gold Star family, is entitled to a $100,000 death gratuity and the soldier’s life insurance of up to $400,000. These payments are disbursed to the beneficiary in a matter of weeks or months following the servicemember’s death. To assist the beneficiaries in this time of need, the military provides a number of services to the servicemember’s family, including the assistance of a financial counselor.

From November 2017 to January 2023, Craffy was a civilian employee of the U.S. Army, working as a financial counselor with the Casualty Assistance Office. He was also a major in the U.S. Army Reserves, where he has been enlisted since 2003. Craffy was responsible for providing general financial education to the surviving beneficiaries. He was prohibited from offering any personal opinions regarding the surviving beneficiary’s benefits decisions. Craffy was not permitted to participate personally in any government matter in which he had an outside financial interest. However, without telling the Army, Craffy simultaneously maintained outside employment with two separate financial investment firms.

Craffy used his position as an Army financial counselor to identify and target Gold Star families and other military families. He encouraged the Gold Star families to invest their survivor benefits in investment accounts that he managed in his outside, private employment. Based upon Craffy’s false representations and omissions, the vast majority of the Gold Star families mistakenly believed that Craffy’s management of their money was done on behalf of and with the Army’s authorization.

From May 2018 to November 2022, Craffy obtained more than $9.9 million from Gold Star families to invest in accounts managed by Craffy in his private capacity. Once in control of this money, Craffy repeatedly executed trades, often without the family’s authorization. These unauthorized trades earned Craffy high commissions. During the timeframe of the alleged scheme, the Gold Star family accounts had lost more than $3.4 million, while Craffy personally earned more than $1.4 million in commissions, drawn from the family accounts.

In the United States District Court for the District of New Jersey, the SEC filed a Complaint charging former U.S. Army financial counselor Caz L. Craffy with violating the antifraud provisions of the federal securities laws and Regulation Best Interest
https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-127.pdf . As alleged in part in the SEC Complaint, Craffy:

was permitted to provide general financial education to service members’ families through his job as a U.S. Army financial counselor. However, as alleged, between May 2018 and November 2022, Craffy used his position and access to manipulate grieving family members by directing them to transfer their benefits into brokerage accounts he managed outside of his official duties with the U.S. Army. Once the funds were deposited, Craffy engaged in unauthorized trading and trading that did not match his customers’ risk profiles and investment objectives and exposed them to higher risks of loss from excessive trading, concentration and lack of diversification. In that 54-month span, Craffy’s customers incurred more than $1.64 million in commissions and fees, most of which Craffy pocketed, while the accounts he managed suffered approximately $1.79 million in realized losses and faced additional unrealized losses of approximately $1.8 million. In one particularly egregious offense, Craffy misappropriated $50,000 from the IRA account of a minor child whose parent had died on active duty.

FINRA Expels Monmouth Capital Management LLC
In the Matter of Monmouth Capital Management LLC, Respondent (FINRA AWC 2022076459303)
https://www.finra.org/sites/default/files/2023-07/MonmouthCapital-AWC-No-2022076459303.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 Monmouth Capital Management LLC submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Monmouth Capital Management LLC has been a FINRA member firm since 2018 with under 10 registered representatives at one branch. In accordance with the terms of the AWC, FINRA expelled Monmouth Capital Management LLC from membership. The AWC discloses in part in the "Overview" section that [Ed: footnotes omitted]:

Statement Regarding Amicus Brief Filing in Murray v. UBS Securities, LLC by SEC Commissioner Hester Peirce and Commissioner Mark T. Uyeda
https://www.sec.gov/news/statement/peirce-uyeda-murray-v-ubs-20230706

On May 1, 2023, the Supreme Court of the United States granted certiorari in Murray v. UBS   Securities, LLC.[1]  Yesterday, the Commission joined an amicus brief filed by the Solicitor General in the Supreme Court, which supports the petitioner in that case.[2] We dissent from the decision to join the amicus brief for the reasons set forth below.

Murray v. UBS  involves the whistleblower protection provision of the Sarbanes-Oxley Act of 2002 (“SOX”).[3]  In a decision by the U.S. Court of Appeals for the Second Circuit that vacated the jury verdict,[4] the Second Circuit held that a SOX anti-retaliation claim “requires a whistleblower-employee…to prove by a preponderance of the evidence that the employer took the adverse employment action against the whistleblower-employee with retaliatory intent—i.e., an intent to ‘discriminate against an employee…because of’ lawful whistleblowing activity.”[5]

Murray v. UBS  poses a difficult legal question.  An earnest attempt at arriving at a reasoned conclusion requires significant research, analysis, and understanding.  In a similar context, the Commission’s Canons of Ethics counsels that a member of the Commission should show “a full understanding of the matter before him, [avoid] the suspicion of arbitrary conclusion, [and promote] confidence in his intellectual integrity…”[6]  In the case of the amicus brief, we were unable to fulfill that duty.

In our view, the Commission’s process for deciding whether to join the Solicitor General’s amicus brief did not facilitate full and careful consideration of the recommendation.  Some context should be provided.  At the same time the Commission was asked to review the amicus brief, the Commissioners were asked to consider and provide feedback on two major rulemakings that will be considered at an open meeting to be held on July 12, 2023, which is one week from the date that the amicus brief was filed.[7] 

The two major rulemaking initiatives are: (1) the adoption of money market fund reforms, and (2) the proposal of amendments to Rule 15c3-3 under the Securities Exchange Act of 1934, which is the broker-dealer customer protection rule.[8]  Together, these rulemakings amount to more than 500 pages.  In the case of the money market fund reforms, Commissioners have the obligation to consider public comments on the proposal, a process that is complicated by the highly technical and complex aspects of the matter being considered.

A robust deliberative process is an essential component of proper agency action.  Because the Commission has limited resources, it can engage in only so many robust deliberative processes at one time.  Therefore, the Commission cannot pursue every item on its wish list all at once, but instead it must prioritize.  It is not clear to us that such prioritization is taking place.

Unfortunately, the simultaneous consideration of numerous complex items – many of them rulemaking initiatives – has become commonplace within the Commission.  On June 13, 2023, the Commission published its Spring 2023 Regulatory Agenda, which includes 55 total rules – 18 of which are at the proposed rule stage and 37 of which are at the final rule stage.[9]  As the Supreme Court has previously observed, “[i]t is fair to assume generally that Congress contemplates administrative action with the effect of law when it provides for a relatively formal administrative procedure tending to foster the fairness and deliberation that should underlie a pronouncement of such force.”[10]  The Commission can do much better at this process and, for the sake of investors, ought to do so.

[1] See Murray v. UBS Sec., LLC, U.S., No. 22-660, cert. granted 5/1/2023, available at https://www.supremecourt.gov/docket/docketfiles/html/public/22-660.html.

[2] See Brief for United States as Amicus Curiae Supporting Petitioner, Murray v. UBS Sec., LLC, U.S., No. 22-660 (filed July 5, 2023), available at https://www.supremecourt.gov/DocketPDF/22/22-660/270414/20230705142518131_22-660tsacUnitedStates.pdf.

[3] See 18 U.S.C. § 1514A.

[4] See Murray v. UBS Securities, No. 20-4202 (2d Cir. 2022), available at https://law.justia.com/cases/federal/appellate-courts/ca2/20-4202/20-4202-2022-08-05.html.

[5] Id. The question before the Supreme Court is whether the Second Circuit correctly held that liability for retaliation under SOX requires the whistleblower-employee to prove retaliatory intent by the employer.

[6] See 17 CFR 200.63.

[7] See Sunshine Act Notice, Securities and Exchange Commission (July 5, 2023), available at https://www.sec.gov/os/sunshine-act-notices/sunshine-act-notice-open-071223.

[8] Id.

[9] See Agency Rule List – Spring 2023, Securities and Exchange Commission, available at https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST¤tPub=true&agencyCode&showStage=active&agencyCd=3235.

[10] See United States v. Mead Corp., 533 U.S. 218, 230 (2001) (emphasis added), available at https://tile.loc.gov/storage-services/service/ll/usrep/usrep533/usrep533218/usrep533218.pdf.

CFTC Charges Unregistered Michigan Commodity Pool Operator and its President with $13 Million Fraud (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8744-23
In the United States District Court for the Eastern District of Michigan, the CFTC filed a Complaint against Dwight A. Foster and K.E.L. Enterprises, Inc. charging them with fraud,registration, and books and records violations.
https://www.cftc.gov/media/8896/enfkelenterprisescomplaint062823/download As alleged in part in the CFTC Release:

[F]rom approximately January 1, 2017 to the present (relevant period), Foster and KEL solicited members of the public to participate in a commodity pool to trade in commodity interests, including foreign currency (forex) pairs and forex futures contracts, on a leveraged, margined, or financed basis with participants who are not eligible contract participants. 

During the relevant period, instead of trading pool participants’ funds as promised, Foster and KEL misappropriated all of the pool participants’ funds by depositing them into KEL’s corporate bank accounts rather than depositing them into an account in the name of the pool at a futures commission merchant and/or a retail foreign exchange dealer. Foster and KEL misappropriated, and continue to misappropriate, participants’ funds to pay Fosters’ personal expenses, including a car loan, insurance, credit cards, and other daily living expenses. Additionally, Foster and KEL used approximately $10.1 million of later-in-time participants’ funds to pay earlier-in-time participants purported “profits” and/or “redemptions” in a Ponzi-like scheme.

The complaint further charges that throughout the relevant period, KEL acted at all times as a commodity pool operator (CPO) without being registered with the CFTC as required, and Foster acted at all times as an associated person of a CPO without being registered with the CFTC as required. Also, KEL failed to make disclosures and keep and maintain books and records as required by a CPO.

CFTC Charges Alleged Bitcoin Seller and Former Attorney with Multi-Million Dollar Bitcoin Fraud, Imposes Over $5 Million in Restitution (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8743-23
The CFTC filed Orders settling charges against Randy Craig Levine
https://www.cftc.gov/media/8891/enfrandycraiglevinelorder070623/download and Philip Reichenthal
https://www.cftc.gov/media/8886/enfphilipreichenthalorder070623/download. The Orders charged Levine and Reichenthal with engaging in a deceptive and fraudulent scheme, and imposed restitution, and permanent trading/registration bans. As alleged in part in the CFTC Release:

The orders find that, in or about 2018, Levine and Reichenthal induced two separate groups of investors to send Reichenthal a combined total of over $5.3 million to buy bitcoin from Levine. Reichenthal used his position as a licensed attorney to pose as an escrow agent for the contemplated transactions, and investors were promised that Reichenthal would hold their funds in his attorney trust accounts in escrow until the investors received the bitcoin they were expecting to purchase from Levine. Reichenthal and Levine knew these representations were false. After Reichenthal received the investors’ funds, he transferred the funds to accounts controlled by Levine and no bitcoin was delivered to investors. In truth, Reichenthal and Levine never intended for the bitcoin to be delivered to the investors and failed to return the investors’ funds as promised when no bitcoin was delivered.  

. . .

Related Criminal Action 

In a related criminal action, U.S. District Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York accepted guilty a plea from Reichenthal, on February 11, 2022, and Levine on November 9, 2022. [See United States v. Levine and Reichenthal, No. 20 Cr. 578.] The court sentenced Reichenthal and Levine on November 28, 2022 and March 21, 2023, respectively. The court sentenced Levine to 70 months in prison and Reichenthal to time served, and forfeiture commensurate with the amount of restitution in the CFTC’s orders. 

[I]n February 2020, shortly before a securities offering in which it raised millions of dollars, Co-Diagnostics issued two press releases concerning a screening test that it had developed to detect COVID-19.  Both press releases—which were drafted by Egan (CEO) and Andrew B. Benson (Head of Corporate Communications and Investor Relations) and also approved by Egan—misleadingly suggested that the test could be used by consumers to detect COVID-19 when in fact, at that time, the test could not be sold for clinical diagnostic purposes. According to the SEC’s orders, the Food and Drug Administration (FDA) contacted Co-Diagnostics to express concerns about the accuracy of the language used in the two press releases soon after they were published, but Co-Diagnostics did not correct them until after the FDA contacted the company again, approximately two weeks later.  The SEC’s order also finds that, in Co-Diagnostics’s annual reports for fiscal years 2018 through 2020 and in its proxy statements filed in 2019 through 2021, Co-Diagnostics failed to disclose compensation paid to the sons of Egan (CEO) and Reed L. Benson (former CFO, Secretary, and General Counsel), even though the compensation was required to be reported under Item 404 of Regulation S-K.  Egan signed the annual reports for fiscal years 2018 through 2020 and solicited proxies relating to the definitive proxy statements filed in 2019 through 2021.  Reed L. Benson signed the company’s annual reports for fiscal years 2018 and 2019. 

The SEC’s orders find that Co-Diagnostics, Egan, Andrew B. Benson, and Reed L. Benson violated the following provisions of the securities laws, and orders each to cease and desist from committing any future violations of those provisions:

• • Co-Diagnostics:  Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Sections 13(a), 13(b)(2)(A), and 14(a) of the Securities Exchange Act of 1934 and Rules 13a-1, 12b-20, 13a-15(a), and 14a-3 thereunder;
  • Egan:  Sections 17(a)(2) and 17(a)(3) of the Securities Act and Section 14(a) of the Exchange Act and Rules 14a-3 and 13a-14 thereunder, and causing Co-Diagnostics’s violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 13a-1 and 12b-20 thereunder;
  • Andrew B. Benson:  Sections 17(a)(2) and 17(a)(3) of the Securities Act; and
  • Reed L. Benson:  Rule 13a-14 of the Exchange Act, and causing Co-Diagnostics’s violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 13a-1 and 12b-20 thereunder.

Co-Diagnostics, Egan, Andrew B. Benson, and Reed L. Benson also agreed to pay penalties of $250,000, $75,000, $40,000, and $40,000, respectively.  Each consented to entry of the order against them without admitting or denying the SEC’s findings.

SEC Denies Whistleblower Award to Claimant
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-97838; Whistleblower Award Proc. File No. 2023-73)
https://www.sec.gov/rules/other/2023/34-97838.pdf
The Office of the Whistleblower issued a Preliminary Summary Determination ("PSD") recommending the denial of a Whistleblower Award to Claimant 2. The Commission ordered that the PSD recommendations be approved. The Order asserts in part that:

[OWB] noted that the information provided by Claimant 2 was never provided to or used by staff handling the Covered Action or underlying investigation, and those staff members otherwise had no contact with Claimant 2. Therefore, Claimant 2 did not provide information that led to the successful enforcement of the above-referenced Covered Action within the meaning of Section
21F(b)(1) of the Exchange Act and Rules 21F-3(a)(3) and 21F-4(c) thereunder because the information provided did not: (1) cause the Commission to (i) commence an examination, (ii) open or reopen an investigation, or (iii) inquire into different conduct as part of a current Commission examination or investigation under Rule 21F-4(c)(1) of the Exchange Act; or (2) significantly contribute to the success of a Commission judicial or administrative enforcement
action under Rule 21F-4(c)(2) of the Exchange Act. OWB also noted that Commission staff responsible for the underlying investigation in the Covered Action never received any information from Claimant 2 or had any communications with Claimant 2. As such, Claimant 2 did not provide any information that was used in, or otherwise had any impact on, the investigation or resulting Covered Action. 

Statement on the Expiration of the SEC Staff No-Action Letter re: MiFID II by SEC Commissioner Mark T. Uyeda
https://www.sec.gov/news/statement/uyeda-statement-staff-no-action-letter-07-05-2023

Broker-dealer investment research serves an important function by contributing to a richer information environment for market participants, particularly by providing analysis that can assist investors in digesting the increasing amount of regulatory disclosures from public companies.  In so doing, sell-side research plays a role in the efficient market hypothesis and promotes price discovery.    

In the United States, asset managers typically pay for sell-side research through bundled client payments for brokerage commissions and research, i.e., “soft dollar arrangements.”  However, in 2018, the European Union’s Markets in Financial Instruments package (“MiFID II”) generally required European and U.K. asset managers to change how they paid for sell-side research.  Instead of using soft dollar arrangements, these managers were required to pay for this research from their own assets, or from a research payment account funded with client assets, or some combination.

Capital markets financial services are increasingly a global business and MiFID II presented challenging conflicts of law issues as to how U.S. broker-dealers could be paid for research.  To this end, the SEC staff issued relief in the form of a no-action letter to permit broker-dealers to receive separate payments for research without being subjected to regulation as investment advisers (“MiFID II Relief”).[1]  The MiFID II Relief expired on July 3, 2023.  However, unintended effects resulting from MiFID II have prompted the European Union and the United Kingdom to consider whether to ease the unbundling requirements to help facilitate capital formation for smaller companies, among other considerations.  

I am disappointed that the SEC staff has decided not to extend the MiFID II Relief for a modest additional period to accommodate these potential changes.  The MiFID II Relief sought to resolve a conflicts of law issue caused extraterritorially, and an extension would have been consistent with that approach.

I am also concerned that the expiration of the MiFID Relief will make it more difficult for U.S. broker-dealers to provide research.  While sell-side research has its inherent conflicts of interest, significant restrictions that result in a dearth of sell-side research can result in the outsized prominence of other less credible sources, such as internet speculation, that can impact market prices and increase volatility and for which SEC oversight may be limited.  This result can have adverse consequences for mid-sized and smaller public companies. 

In this regard, the SEC is long overdue for a holistic review of the regulatory framework for investment research.  Such an effort should include consideration of rules to replace the global research analyst settlement with 12 major broker-dealer firms, which was instituted 20 years ago.  The SEC should also consider harmonizing, where appropriate, the different rules for research analysts for various communications with a view to facilitating investment research.  Inappropriate and poorly-designed restrictions on investment research resulting in a more ill-informed marketplace serve neither investors nor public companies.

 
[1] See Securities Industry and Financial Markets Association, SEC Staff No-Action Letter (Oct. 26, 2017), available at https://www.sec.gov/divisions/investment/noaction/2017/sifma-102617-202a.htm and Securities Industry and Financial Markets Association, SEC Staff No-Action Letter (Nov. 4, 2019), available at https://www.sec.gov/investment/sifma-110419 (extension of relief to July 3, 2023).

Federal Court Orders Four Feeder Fund Operators and Their Principals to Pay Over $10 Million in Restitution and Penalties for Forex Fraud (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8742-23
The United States District Court for the Middle District of Florida entered Consent Orders against Surujpal Sahdeo, Daniel Cologero, Randy Rosseau, Hemraj Singh, and their respective companies SR&B Investment Enterprises, Inc., Green Knight Investments, LLC, Bull Run Advantage, LLC, and King Royalty, LLC. The Consent Orders require payment of restitution:

• Singh and King Royalty: $5,478,837;
• Sahdeo and SR&B $711,877;
• Rosseau and Bull Run $215,719; and
• Cologero and Green Knight $175,378.

Further, the Orders assess civil monetary penalties of $1,500,000 against Singh and King Royalty; $1,750,000 against Sahdeo and SR&B; $500,000 against Cologero and Green Knight; and $75,000 against Rosseau and Bull Run; and each are enjoined from further violations of the CEA and CFTC regulations, as charged, and subject to permanent trading and registration bans. As alleged in part in the CFTC Release:

The orders find the four individuals and their companies operated “feeder” funds that solicited funds from retail pool participants, pooled those funds in company bank accounts, and sent some or all of the funds to a master pool to trade forex on their behalf. The master pool collected almost $58 million from investors and feeder funds, but used less than $2.5 million for actual forex trading. The master pool sent statements to investors and feeder funds falsely showing profits and no losses. The feeder funds, in turn, issued statements to their investors based on the master pool statements they received showing fictitious profits; thus, their feeder funds operated as frauds.

SEC Charges “Smart” Window Manufacturer, View Inc., with Failing to Disclose $28 Million Liability / SEC declines to impose civil penalties because of company’s self-report, remediation, and cooperation (SEC Release)
https://www.sec.gov/news/press-release/2023-126
Without admitting or denying the findings that View had violated negligence-based antifraud, proxy disclosure, reporting, books and records, internal accounting controls, and disclosure controls provisions of the federal securities laws, the company agreed to cease and desist from future violations of the charged securities laws.
https://www.sec.gov/litigation/admin/2023/33-11208.pdf As alleged in part in the SEC Release:

[I]n a series of reports and statements filed with the SEC from December 2020 to May 2021, View disclosed warranty liabilities of $22 million to $25 million, consisting largely of projected costs to manufacture replacements for certain defective windows. However, View failed to include in its disclosures the additional cost to ship and install the new windows, which View had decided to cover and which therefore should have been disclosed under generally accepted accounting principles in the United States. Including those costs, View should have disclosed total warranty liabilities of $48-$53 million. As a result, the SEC order finds, View materially misstated its warranty liability for fiscal years 2019 and 2020 and the first quarter of 2021.

SEC Charges Former CFO of "Smart" Window Manufacturer, View Inc., for Failure to Disclose Company's $28 Million Liability (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25766.htm
In the United States District Court for the Northern District of California, the SEC filed a Complaint charging View Inc.'s Chief Financial Officer Vidul Prakash with with violating Section 17(a)(3) of the Securities Act of 1933, Section 14(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rules 14a-9 and 13b2-1. https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-126.pdf  As alleged in part in the SEC Release:

[I]n a series of reports and statements filed with the SEC from December 2020 to May 2021, View disclosed warranty liabilities of $22 million to $25 million, consisting largely of projected costs to manufacture replacements for certain defective windows. According to the complaint, Prakash approved the amounts disclosed despite knowing that those amounts excluded additional costs which View had decided to incur to pay to ship and install the replacement windows. The complaint alleges that, including those additional costs, View should have disclosed total warranty liabilities of $48-$53 million and, as a result, View materially misstated its warranty liability for fiscal years 2019 and 2020 and the first quarter of 2021.

SEC Denies Whistleblower Award to Two Claimants 
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-97831; Whistleblower Award Proc. File No. 2023-72)
https://www.sec.gov/rules/other/2023/34-97831.pdf
The Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant 3 and Claimant 5. The Commission ordered that CRS's recommendations be approved. The Order asserts in part that:

In addition, the record does not show that Claimant 3’s information caused the staff to inquire into different conduct or significantly contributed to the Investigation. Claimant 3’s TCR was not forwarded to staff assigned to the Investigation, nor did staff assigned to the Investigation receive any information from or communicate with Claimant 3 before or during the Investigation. Lastly, the staff confirms in the supplemental declaration that it did not receive, review, or use any information related to Claimant 3 from Other Agency A before or during the Investigation. 

. . .

Claimant 5 does not meet that “demanding showing” here. While Claimant 5 states that he/she is suffering a significant illness, the record does not demonstrate that Claimant 5’s illness prevented him/her from submitting a whistleblower application in a timely manner. Further, Claimant 5’s lack of awareness of the submission deadline does not rise to the level of an “extraordinary circumstance.” . . .

Federal Court Orders Two Delaware Companies to Pay Nearly $146 Million for Misappropriation and Fraud Related to a Precious Metals Scheme / Court Also Enters Judgment Against the Owner of the Companies (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8741-23
The United States District Court for the District of Delaware entered a Consent Order against Argent Asset Group LLC and First State Depository Company, LLC ("FSD")  and a Default Judgment and Permanent Injunction against Robert Higgins (Higgins). The Defendants are ordered to pay $112,700,000 in restitution and a $33 million civil monetary penalty; enjoined from further violations of the Commodity Exchange Act and CFTC regulations, as charged; permanently banned from trading in any CFTC-regulated markets; and subject to registration bans.

• June 20, 2023, Consent Order/Permanent Injunction
  https://www.cftc.gov/media/8841/enffirststatedepositoryconsentorder062023/download
  
• June 30, 2023, Order for Final Judgment
  https://www.cftc.gov/media/8836/enffirststatedepositoryorder063023/download
  

 As alleged in part in the CFTC Release:

The orders find from approximately January 2014 through October 2022, Higgins, Argent and FSD, acting as a common enterprise, engaged in a fraudulent and deceptive scheme to solicit and misappropriate tens of millions of dollars in funds and silver from approximately 200 customers in connection with a fraudulent silver leasing program known as the “Maximus Program.”

As the orders state, the Maximus Program purported to offer customers guaranteed monthly lease payments in exchange for the use of silver purportedly purchased from Argent or silver owned by customers. Customers were told they would earn a monthly “lease” payment based on a sliding scale that, in part, depended on the amount of silver the Maximus customers leased to Argent. Customers were falsely told, among other things, that Argent would acquire silver on their behalf, their silver was securely stored by FSD in a storage facility, and their investments were guaranteed and fully insured. 

In reality, customers’ precious metals were not securely stored at FSD, but instead were misappropriated by the defendants. Moreover, on several occasions, the defendants also misappropriated funds intended to be used to purchase metals.

As the orders state, the defendants’ fraudulent scheme was not limited to the Maximus Program. The defendants misappropriated other client assets and misled and deceived those clients when they attempted to withdraw their assets or transfer them to another depository. In addition, the defendants lied about the insurance coverage FSD maintained and failed to adequately insure its clients’ assets despite representations and guarantees it made to the contrary.