Securities Industry Commentator by Bill Singer Esq

I watched Chair Gensler's appearance before the Senate Banking Committee. Sadly, not much was accomplished by the Committee in terms of holding the SEC Chair accountable. Everyone delivered scripted performances and stayed in character. What we got was five-minutes of each Senator's statements and complaints about unanswered letters and how my staff will get back to your staff at a later date. What we taxpayers, we victims of securities fraud, we advocates for Wall Street reform got from the Senate hearing was an afternoon of Kabuki theater. Not much in the way of governing. Not much in the way of regulation. Just a lot of air time with a preponderance of air . . . hot air, at that. All of which did little more than waste valuable time during which the SEC could pursue an enforcement agenda but for the fact that staff is otherwise assigned to this nonsense.

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Kansas Court of Appeals Reverses Lower Court and Remands to FINRA Arbitration
Jennifer Suchan, Appellee, v. Brent Dome, et al., Appellants (Opinion, Court of Appeals for the State of Kansas, No. 125,673)
https://www.kscourts.org/KSCourts/media/KsCourts/Opinions/125673.pdf?ext=.pdf
As set forth in the Preamble to the Court of Appeals Opinion:

PER CURIAM: Brent Dome and Waddell & Reed Financial Services, Inc. (Waddell & Reed), appeal the denial of their motion to compel arbitration in a negligence suit filed against them by Jennifer Suchan. They claim the district court erred in denying their motion because Suchan and her late husband, Matthew, previously signed valid agreements which contained an arbitration clause and Suchan readily acknowledges doing so. Dome and Waddell & Reed contend an additional error occurred when the district court declined to allow an arbitrator to decide the scope and intent of that undisputed arbitration clause. Following a thorough review of the record and the claims raised, with the controlling legal framework as a backdrop, we conclude the district court's ruling against Dome and Waddell & Reed must be overturned. That outcome is driven by our determination that the district court turned a blind eye to undisputed evidence when it concluded that the arbitration clause set out in the Agreements the couple individually signed was unenforceable in this situation. Our decision also arises out of a finding that the district court erred in refusing to allow an arbitrator to decide whether the dispute between the parties fell within the scope of the arbitration provision. Accordingly, this case is reversed and remanded.

In pertinent part, this is the underlying fact pattern:

Jennifer Suchan's late husband, Matthew, was previously married to Dorothy Gillett-Payne. During that relationship, Matthew purchased a life insurance policy through Genworth Life and Annuity Insurance Company (Genworth Policy) and designated Gillett-Payne as the beneficiary. The Genworth Policy was later brokered and sold to Brent Dome, a registered financial advisor with Waddell & Reed.

The union between Matthew and Gillett-Payne eventually dissolved and several years later Matthew and Jennifer married. The new couple met with Dome for the express purpose of taking the steps required to change the beneficiary designation from GillettPayne to Jennifer (Suchan) on all products Matthew purchased through Dome and Waddell & Reed. At the conclusion of their meeting, Dome assured the couple that all necessary measures were completed to name Suchan the beneficiary.

. . .

The Negligence Lawsuit

Roughly two years after the MAP Agreements were executed, Matthew passed away due to complications from COVID-19. Shortly after his passing, Suchan learned that Gillett-Payne remained listed as the beneficiary on Matthew's life insurance policy, despite Dome's assurances two years earlier that the couple had completed all requirements to ensure Suchan's name replaced Gillett-Payne's in that regard. Suchan later alleged that, because of Dome's failure to change the named beneficiary she was unable to recover the full amount due to her under the policy.

DOJ

Former CEO of Financial Services Firm Pleads Guilty to $150M Investment Fraud Conspiracy (DOJ Release)
https://www.justice.gov/opa/pr/former-ceo-financial-services-firm-pleads-guilty-150m-investment-fraud-conspiracy
In the United States District Court for the Eastern District of New York, Roberto Gustavo Cortes Rapida pled guilty to conspiracy to commit wire fraud; and he agreed to a forfeiture judgment in the amount of $3.4 million. As alleged in part in the DOJ Release:

[I]n 2005, Roberto Gustavo Cortes Ripalda, 56, of Key Biscayne, founded financial services company Biscayne Capital. Between approximately 2013 and 2018, Cortes and others orchestrated a scheme to defraud Biscayne Capital clients through a series of lies regarding how the firm would use client funds. For example, Cortes and his co-conspirators told clients that their investments would finance the development of real estate projects, when in fact, Cortes and his co-conspirators used the money to pay other Biscayne Capital clients, cover Biscayne Capital expenses, and pay themselves millions of dollars. Cortes and his co-conspirators also invested clients’ money without their knowledge, and then attempted to cover their tracks by providing investors with fraudulent account statements. According to the indictment, by September 2018, the scheme collapsed, and Biscayne Capital went into liquidation, causing more than $155 million in losses to Biscayne Capital clients.

Co-Founder Of Multibillion-Dollar Cryptocurrency Scheme “OneCoin” Sentenced To 20 Years In Prison / OneCoin Was a Fraudulent Cryptocurrency Marketed and Sold to Millions of Victims Around the World, Resulting in Billions of Dollars in Losses(DOJ Release)
https://www.justice.gov/usao-sdny/pr/co-founder-multibillion-dollar-cryptocurrency-scheme-onecoin-sentenced-20-years-prison
In the United States District Court for the Southern District of New York, KARL SEBASTIAN GREENWOOD, 46, (the Co-founder of OneCoin with RUJA IGNATOVA, a/k/a “the Cryptoqueen,”) pled guilty to one count of conspiracy to commit wire fraud; one count of wire fraud; and one count of conspiracy to commit money laundering; and he was sentenced to 20 years in prison and ordered to pay approximately $300 million in forfeiture. As alleged in part in the DOJ Release:

GREENWOOD and IGNATOVA co-founded OneCoin Ltd. (“OneCoin”) in 2014. OneCoin was based in Sofia, Bulgaria. OneCoin marketed and sold a fraudulent cryptocurrency by the same name. OneCoin began operating in the United States in or around 2015. Between the fourth quarter of 2014 and the fourth quarter of 2016 alone, the scheme took in more than $4 billion from at least 3.5 million victims.

OneCoin marketed its fake cryptocurrency through a global MLM network of OneCoin members. GREENWOOD conceived of OneCoin’s use of an MLM structure and was OneCoin’s global master distributor and the leader of the MLM network through which the fraudulent cryptocurrency was marketed and sold. Through the MLM structure, OneCoin members received commissions for recruiting others to purchase cryptocurrency packages. As the top MLM distributor of OneCoin, GREENWOOD earned 5% of monthly OneCoin sales from anywhere in the world, which totaled more than $200 million from the fourth quarter of 2014 through the fourth quarter of 2016 alone and exceeded approximately $300 million in total. GREENWOOD’s mastery as a salesman and the use of the MLM structure helped contribute to OneCoin’s rapid growth and incredible success.

From OneCoin’s inception, GREENWOOD and IGNATOVA used the notoriety of Bitcoin to convince investors that OneCoin was the next “can’t miss” investment opportunity. GREENWOOD and IGNATOVA wanted investors to believe that OneCoin was a legitimate cryptocurrency like Bitcoin and deliberately drew the comparison between the two cryptocurrencies through their representations to investors and their marketing materials. For example, in a OneCoin PowerPoint presentation prepared by GREENWOOD, OneCoin described itself as “a unique and innovative cryptocurrency, that is born on the success of the pioneering and famous cryptocoin, Bitcoin.” In another slide, OneCoin highlighted the explosive growth of Bitcoin, stating that “Bitcoins increased their value 75 times in 2013,” and including the following quote from The Guardian newspaper, “Man buys $27 of bitcoin, forgets that he had bought and finds that they’re now worth $886,000.”

In reality, unlike legitimate cryptocurrencies, OneCoin had no actual value and was conceived of by GREENWOOD and IGNATOVA as a fraud from day one. The misrepresentations made by GREENWOOD and others to OneCoin investors were legion, and the cryptocurrency was worthless. Among other things, OneCoin lied to its members about how its cryptocurrency was valued, claiming that the price of OneCoin was based on market supply and demand, when in fact OneCoin itself arbitrarily set the value of the coin without regard to market forces. The purported value of a OneCoin grew steadily from €0.50 to approximately €29.95 per coin, as of in or about January 2019. The purported price of OneCoins never decreased in value.

GREENWOOD also lied to investors about the utility of the tokens included in trader packages, claiming that they could be used to secure positions in OneCoin’s “mining pools,” depicted in promotional materials as computer hardware used to “mine” OneCoins. But there were no mining pools and no computers to mine OneCoin either. GREENWOOD knew that this lie was essential to convincing investors that OneCoin was a legitimate cryptocurrency. As he wrote in an email to IGNATOVA, “[t]he concept of converting tokens into OneCoin is an important phase for validity and truth behind the OneCoin. The so called ‘mining’ of coins is a concept that is very familiar in the industry and a story we can sell to the members.” However, as GREENWOOD and IGNATOVA both knew, OneCoin was “not mining actually—but telling people shit.” In the same email exchange, GREENWOOD asked IGNATOVA, “how can this be investigated and found out?” and “Can any member (trying to be clever) find out that we actually are not investing in machines to mine but it is merely a piece of software doing this for us?”

OneCoin also claimed to have a private “blockchain,” or a digital ledger identifying OneCoins and recording historical transactions. But, in reality, OneCoin lacked a true blockchain — that is, a public and verifiable blockchain. Indeed, by approximately March 2015, GREENWOOD and IGNATOVA had started allocating to members OneCoins that did not even exist in OneCoin’s purported private blockchain, referring to these coins as “fake coins.” By at least June 2015, GREENWOOD and IGNATOVA began emailing one another models tabulating current and projected future trader package sales volumes along with outstanding tokens and OneCoins. The spreadsheets identified separate lines for “mined coins,” “mined coins (real),” and “fake coins.” The references to “fake coins” in those records referred to OneCoins that had been distributed to members but did not exist on the OneCoin “blockchain.” Two months later, in August 2015, IGNATOVA wrote to GREENWOOD, in an email with the subject line, “I am afraid this is an issue,” “This is the implication from the big sales 4 weeks ago. 1.3 [billion] fake coins. We are fucked, this came unexpected and now needs serious, serious thinking.”

On July 4, 2015, IGNATOVA announced the official opening of the United States market for OneCoin during an online webinar. During the webinar, IGNATOVA said, among other things: “[I]f we want to go and catch Bitcoin, we never can do this without being strong in the U.S. and without being part of the community. So, um, this is actually why I am so excited about the U.S. as the market. It’s something that is about prestige. It’s a huge market. And, um, it is, I think, a place of innovation, of Wall Street, a place where we have to be if we want to be big.”

Many victims in the United States invested in fraudulent OneCoin cryptocurrency packages, including residents of the Southern District of New York. In total, more than 3.5 million victims invested in OneCoin and lost more than $4 billion dollars from the scheme —money that GREENWOOD, IGNATOVA, and others used to fund extravagant lifestyles. As the top MLM distributor of OneCoin, GREENWOOD earned more than $300 million during the scheme, much of which he spent on his own lavish lifestyle. For example, in or around December 2015, GREENWOOD used approximately $10,000 of fraud proceeds to stay at an exclusive five-star resort in Brazil. Later that month, GREENWOOD used an additional $21,000 of fraud proceeds to stay at a luxury villa with a beach view in Koh Samui, Thailand. Later, when GREENWOOD traveled to Barcelona in May 2016, he used investor funds to stay at another luxury five-star hotel and rented a Range Rover for the duration of his trip.

GREENWOOD also used proceeds from the scheme to purchase luxury designer clothes, footwear, and watches totaling approximately $2 million; pay a down payment of approximately 475,000 British Pound Sterling for a Sunseeker yacht; and to purchase real estate properties in various countries, including in Spain, Dubai, and Thailand. Finally, GREENWOOD used investor funds to travel around the world on a private “OneCoin” airplane and posted promotional videos of his travel online.

GREENWOOD was arrested at his residence on the island of Koh Samui, Thailand, in July 2018 and was extradited to the United States to face fraud and money laundering charges in October 2018. GREENWOOD has been detained since his arrest in July 2018.

On October 12, 2017, IGNATOVA was charged with OneCoin-related fraud and money laundering charges in the U.S. District Court for the Southern District of New York, and a federal warrant was issued for her arrest. On October 25, 2017, IGNATOVA traveled on a commercial flight from Sofia, Bulgaria, to Athens, Greece, and has not been seen publicly since. IGNATOVA was added to the FBI’s Top Ten Most Wanted List in June 2022. The FBI is offering a $100,000 reward for information leading to IGNATOVA’s arrest.

SEC

SEC Charges Nuclear Battery Startup Company and Its CEO with Fraudulently Raising Over $1.2 Million from Investors (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25829
In the United States District Court for the Northern District of California, the SEC filed a Complaint that charges NDB, Inc. and its Chief Executive Officer Nima Golsharifi with violating Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. As alleged in part in the SEC Release:

[NDB] and Golsharifi raised over $1.2 million from investors after falsely claiming in an August 25, 2020, press release that NDB had successfully tested its battery technology at two preeminent laboratories in the United States and United Kingdom, and that NDB had signed its first two beta customers. The complaint alleges that these claims were false and misleading because NDB had not tested its battery technology at either laboratory and NDB had not signed any beta customers at the time of the press release. According to the complaint, NDB received significant investor interest as a result of the press release, raising approximately $660,000 in the month following the press release and approximately $580,000 in additional investor funds in the subsequent 11 months.

SEC Charges Connecticut Advisory Firm GlennCap and its Owner with Cherry-Picking (SEC Release)
https://www.sec.gov/news/press-release/2023-180
Without admitting or denying the findings in an SEC Order https://www.sec.gov/files/litigation/admin/2023/33-11234.pdf of violations of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, Section 17(a) of the Securities Act, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, Jonathan Vincent Glenn and GlennCap LLC consented to the entry of a cease-and-desist order requiring them to pay more than $3 million in civil penalties, disgorgement, and prejudgment interest. As alleged in part in the SEC Release:

[B]etween at least January 2020 and March 2022, Glenn, who was also an investment adviser representative of GlennCap, engaged in block trading, which allowed him to pool funds from multiple clients’ accounts into trades, and then, after seeing whether a position increased or decreased in value, he allocated the more profitable trades to accounts that he favored. The probability that the favored accounts received the more profitable trades by chance was statistically nearly zero. The SEC’s order finds that Glenn and GlennCap received at least $2.7 million in profits from the cherry-picking scheme. Further, the SEC order found that Glenn made false and misleading statements regarding GlennCap’s trading practices in documents it provided to clients and prospective clients.

SEC Charges Minnesota Based Company and Founder in Alleged Fraudulent Securities Offering (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25828
In the United States District Court for the District of Minnesota, the SEC filed a Complaint https://www.sec.gov/files/litigation/complaints/2023/comp25828.pdf that Robyn A. Bowman and her company Phoenix Asset Group, LLC perpetrated a fraudulent offering.

The SEC's complaint alleges that Bowman and Phoenix raised at least $2.7 million by selling Phoenix securities to at least 20 investors by telling them that Phoenix would use their money to purchase portfolios of distressed debt that Phoenix would place with third-party agencies for collection and that Phoenix would use the money generated by the debt collection to pay investors annual returns up to 15%, plus a share in Phoenix's debt collection profits.

To entice investors, the complaint alleges, Bowman and Phoenix lied about the safety of the investments including telling them that investor money would be "used only for business purposes" when, in reality, Bowman commingled her personal finances with Phoenix's and used Phoenix's bank accounts to pay for her own personal expenditures. Bowman and Phoenix likewise diverted money from certain new investors to repay earlier investors according to the complaint.

The complaint further alleges that Bowman and Phoenix told investors that the debt portfolios would be insured and audited, that Bowman and Phoenix had never been sued in a consumer protection lawsuit, and that these statements were untrue. Bowman also allegedly touted her credentials and business acumen to investors while concealing that she had filed for bankruptcy twice before.

The complaint alleges that by April 2020, Phoenix had stopped making payments to investors and that Bowman tried blaming the stopped payments on the COVID pandemic and one of the collection agencies she hired. The complaint further alleges that Bowman continued soliciting new investments despite stopping payments to earlier investors and attempted to placate investors by falsely telling them Phoenix was ready to receive an $8 million cash influx from an Italian hedge fund..

Oral Testimony of Gary Gensler Before the United States Senate Committee on Banking, Housing, and Urban Affairs (Sept. 12, 2023)
https://www.sec.gov/news/testimony/gensler-oral-testimony-091223
-and-
Testimony of Chair Gary Gensler Before the United States Senate
Committee on Banking, Housing, and Urban Affairs (Sept. 12, 2023)
https://www.banking.senate.gov/imo/media/doc/gensler_testimony_9-12-23.pdf
Oh, you didn't know that there was a difference between the old-fashioned "testimony" and the "oral testimony"? Also READ: Kabuki Theater at the Senate Banking Committee Starring SEC Chair Gensler (BrokeAndBroker.com Blog)

SEC Charges Creator of Stoner Cats Web Series for Unregistered Offering of NFTs (SEC Release)
https://www.sec.gov/news/press-release/2023-178
Without admitting or denying the findings in an SEC Order
https://www.sec.gov/litigation/admin/2023/33-11233.pdf, Stoner Cats 2 LLC ("SC2") agreed to a cease-and-desist order and to pay a civil penalty of $1 million. As alleged in part in the SEC Release:

[O]n July 27, 2021, SC2 offered and sold to investors more than 10,000 NFTs for approximately $800 each, selling out in 35 minutes. The order finds that both before and after Stoner Cats NFTs were sold to the public, SC2’s marketing campaign highlighted specific benefits of owning them, including the option for owners to resell their NFTs on the secondary market. In addition, the order finds that, as part of the marketing campaign, the SC2 team emphasized its expertise as Hollywood producers, its knowledge of crypto projects, and the well-known actors involved in the web series, leading investors to expect profits because a successful web series could cause the resale value of the Stoner Cats NFTs in the secondary market to rise. Further, the order finds that SC2 configured the Stoner Cats NFTs to provide SC2 a 2.5 percent royalty for each secondary market transaction in the NFTs and it encouraged individuals to buy and sell the NFTs, leading purchasers to spend more than $20 million in at least 10,000 transactions. According to the SEC’s order, SC2 violated the Securities Act of 1933 by offering and selling these crypto asset securities to the public in an unregistered offering that was not exempt from registration.

Collecting Enforcement Actions: Statement on Stoner Cats 2, LLC (Statement by SEC Commissioner Hester M. Peirce and SEC Commissioner Mark T. Uyeda)
https://www.sec.gov/news/statement/peirce-uyeda-statement-stonercats-091323

We respectfully dissent from the Commission’s second non-fungible token (NFT) settlement, as we did from the first.[1]The application of the Howey [2] investment contract analysis in this matter lacks any meaningful limiting principle. It carries implications for creators of all kinds. Were we to apply the securities laws to physical collectibles in the same way we apply them to NFTs, artists’ creativity would wither in the shadow of legal ambiguity. Rather than arbitrarily bringing enforcement actions against NFT projects, we ought to lay out some clear guidelines for artists and other creators who want to experiment with NFTs as a way to support their creative efforts and build their fan communities.

Whether an artist is selling numbered versions of physical prints for fans to display on their walls or NFTs for fans to display on social media, she deserves clear guidance about whether and how the securities laws apply. Artists of all kinds have long struggled to support themselves, and NFTs offer a potentially viable way for them to monetize their talents. The fact that money is involved does not transform NFTs into securities.

This enforcement action involves activity that we believe constitutes fan crowdfunding—a common phenomenon in the world of artists, creators, and entertainers.[3] In July 2021, Stoner Cats sold 10,320 NFTs to the public for ether valued at $8.2 million to fund the production of an animated series called Stoner Cats.[4] NFT purchasers received a unique still image of one of the characters in the Stoner Cats series and exclusive access to the series and an online community, as well as access to unspecified, future entertainment content.[5] Several famous writers, animators and voice actors worked on the project.[6]

While updated for the digital age,[7] the Stoner Cats NFTs are not that different from Star Wars collectibles sold in the 1970s. On the heels of the very successful release of Star Wars in 1977, fan excitement was high.[8] To the delight of millions of children that holiday season, the toy company Kenner sold “Early Bird Certificate Packages,”[9] redeemable for future Luke Skywalker, Princess Leia, and R2-D2 action figures and membership in the Star Wars fan club. The sales of these certificates helped to build a die-hard community of Star Wars fans. Would those I.O.U. certificates, which could be re-sold, constitute investment contracts? Using the analysis of today’s enforcement action, the SEC should have parachuted in to save those kids from Star Wars mania.

NFT creators, along with other artists, do not get a free pass from the securities laws. In some instances, sales of NFTs may implicate our securities laws. In applying the securities laws in this space, however, the Commission must take care to preserve the ability of artists to sell their work, build a fan base, and involve that fan base in future creative endeavors. That is what was happening in the 1970s with Star Wars, and that is what was happening here with Stoner Cats. The Stoner Cats NFT purchasers received what they paid for -- a still image of a character from the series, access to all six episodes of the Stoner Cat series, and the excitement of being part of a popular phenomenon. The Commission’s application of the securities laws here makes little sense and discourages content creators from exploring ways to harness social networks to create and distribute content. More generally, it contributes to the legal ambiguity facing artists, writers, musicians, filmmakers, and others seeking to build a loyal, engaged following.

[1] https://www.sec.gov/news/statement/peirce-uyeda-statement-nft-082823.

[2] SEC v. W.J. Howey Co., 328 U.S. 293 (1946).

[3] See, e.g., Crowdfunding artists: beyond match-making on platforms, Socio-Economic Review, Volume 19, Issue 4, October 2021, Pages 1265–1290, https://doi.org/10.1093/ser/mwab006 (“This article analyzes the role that crowdfunding plays for artists who create small-scale projects. We find that artists struggle to reach new audiences and, thus, mainly use this funding tool to transform monetary gifts into reputation for their careers.”).

[4] Order ¶14 and ¶2.

[5] Order ¶2-3.

[6] Order ¶12.

[7] As Yoda said, “Always in motion is the future.”

[8] One of us can speak of this enthusiasm from personal experience.

[9] Star Wars Early Bird Certificate Package 1977 (vintageactionfigures.com); Alex Ben Block, The Real Force Behind “Star Wars”: How George Lucas Built an Empire, The Hollywood Reporter (Feb. 9, 2012), available at https://www.hollywoodreporter.com/news/general-news/george-lucas-star-wars-288513/.

SEC Charges Virtu for False and Misleading Disclosures Relating to Information Barriers / Virtu broker-dealer also charged with failure to establish, maintain, and enforce policies and procedures to protect sensitive customer information (SEC Release)
https://www.sec.gov/news/press-release/2023-176
In the United States District Court for the Southern District of New York , the SEC filed a Complaint
https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-176.pdf alleging that Virtu Financial Incl. and Virtu Americas LLC violated Sections 17(a)(2) and 17(a)(3) of the Securities Act, and that Virtu Americas violated Section 15(g) of the Securities Exchange Act. As alleged in part in the SEC Release:

[V]irtu Americas and its affiliates operated two businesses that it purported to have walled off from each other: an order execution service for large institutional customers, whereby Virtu Americas executed customer orders, typically for a commission, and a proprietary trading business, through which Virtu Americas bought and sold securities for its own accounts and benefit. From approximately January 2018 through the beginning of April 2019, however, Virtu Americas allegedly failed to safeguard a database that contained all post-trade information generated from customer orders routed to, and executed by, Virtu Americas, including customer identifying information and other material nonpublic information. The SEC’s complaint alleges that this database was accessible to practically anyone at Virtu Americas and its affiliates, including their proprietary traders, through two sets of widely known and frequently shared generic usernames and passwords. Virtu Americas’ failure to safeguard this information created significant risk that its proprietary traders could misuse it or share it outside Virtu Americas. For example, a Virtu Americas proprietary trader allegedly could observe that Virtu Americas had executed the orders of a large institutional customer throughout the day, understand that the same customer may follow a similar trading pattern over the next days, and take advantage of such information by trading ahead of the customer’s subsequent orders.

Nonetheless, during this fifteen-month period when Virtu Americas failed to establish, maintain, and enforce policies and procedures reasonably designed to prevent the misuse of that information, Virtu misled customers about the existence and adequacy of such information barriers. As alleged in the SEC’s complaint, in some instances Virtu overstated the controls, barriers and processes it had in place to secure its institutional customers’ post-execution trade data, and in others falsely represented to those customers that only employees with a need to see such information – a group that did not include proprietary traders – could do so. Following these false and misleading statements, a number of institutional customers continued to use Virtu Americas to execute their orders, resulting in significant commissions for Virtu Americas.

SEC Files Settled Fraud Charges Against Los Angeles-Based "Smart Ring" Company and Its Principal (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25826
Without admitting or denying the allegations in an SEC Complaint
https://www.sec.gov/files/litigation/complaints/2023/comp25826.pdf, Esos Rings, Inc., and its Principal Michelle Silverstein a/k/a Michelle Silverstein Bisnoff consented to the entry of final judgments that would permanently enjoin them from violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Act and Rule 10b-5 thereunder and hold them jointly and severally liable to pay disgorgement of $566,483 in disgorgement and $46,836 in prejudgment interest. Further, Bisnoff consented to an officer-and-director bar, a $233,229 civil penalty, and a permanent injunction prohibiting her from directly or indirectly, including, but not limited to, through any entity owned or controlled by her, participating in the issuance, purchase, offer, or sale of any security in an unregistered offering, provided, however, that such injunction shall not prevent Bisnoff from purchasing or selling securities listed on a national securities exchange for her own personal account. As alleged in part in the SEC Release:

[F]rom February 2017 to June 2022, Esos and Bisnoff fraudulently raised $1.95 million from investors. The complaint alleges that Esos was purportedly in the business of manufacturing and selling smart rings, which were wearable rings that functioned as a debit card. As alleged in the complaint, Esos and Bisnoff raised money from investors through false statements, including that Esos owned the patents for the smart rings and that Esos was being acquired by Apple. The complaint also alleges that Esos and Bisnoff operated a Ponzi-like scheme by using new investor money to pay off previous investors.

SEC Charges North Carolina Man and Entities He Controlled with Fraud (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25825
In the United States District Court for the Eastern District of North Carolina, the SEC fled a Complaint that charges Dharma Teja Nukarapu and SharkDreams, Inc. with violating Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act, and Rule 10b-5 thereunder, and, in the alternative, charges that Nukarapu was liable as a control person for violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by SharkDreams and D Dollar, pursuant to Section 20(a) of the Exchange Act. Additionally, the Complaint charges D Dollar Inc. with violations of Sections 17(a)(1) and (3) of the Securities Act, Section 10(b) of the Exchange Act, and Rules 10b-5(a) and (c) thereunder. As alleged in part in the SEC Release:

[S]harkDreams and Nukarapu made multiple false and misleading statements to current and prospective investors in connection with the offer and sale of SharkDreams securities, including that prior investors had doubled their money in a year, that SharkDreams was valued at as much as $7 million to $30 million, that SharkDreams had customer orders for its LIVIT products, and that it had a large investor who would buy out all of the remaining SharkDreams shares to infuse capital. Allegedly, none of this was true. The SEC's complaint further alleges that SharkDreams never received any revenue from any LIVIT product sales, there was no factual basis for a valuation in the range Nukarapu touted, and there was never a bona fide offer to buy out SharkDreams shares. The SEC's complaint also alleges that, in 2019 and 2020, D Dollar raised at least $650,000 from investors. According to the SEC's complaint, investors were told that the funds would be used for a purported D Dollar subsidiary; but Nukarapu misappropriated approximately $595,000 of investor proceeds to fund SharkDreams operations and for his personal uses.

SEC Obtains Final Judgment Against Canadian Individual in Fraudulent Microcap Scheme (SEC Release)
https://www.sec.gov/litigation/litreleases/lr-25824
The United States District Court for the Southern District of New York entered a Final Judgment
https://www.sec.gov/files/litigation/litreleases/2023/judg25824.pdf against George Stubos that orders him to pay over $6 million. As alleged in part in the SEC Release:

[S]tubos secretly gained control of several thinly traded microcap companies whose stock was publicly traded in the U.S. securities markets, hired stock promoters to create demand for his stock, and generated substantial illicit profits by selling the stock to unsuspecting investors. Stubos allegedly hid the fact that he controlled the majority of the stock of the publicly traded companies. He allegedly misled investors, brokers, and transfer agents (companies that maintain records of stock ownership) in order to convince these parties that his stock shares were eligible for trading in the public markets, when in fact he did not register his sales of those stock with the Commission and did not disclose accurate information about his control over the companies. Stubos also engaged in manipulative trading to create the appearance of active market trading and thus increased investor demand for the stock. The court entered the final judgment against Stubos by consent. Stubos, without admitting or denying the allegations in the SEC's complaint, consented to a final judgment that permanently enjoins him from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and the market manipulation provisions of Section 9(a) of the Exchange Act. Stubos' judgment orders him to pay disgorgement of $5,367,926 and prejudgment interest of $806,108 and it imposes a penny stock bar and a conduct-based injunction that prohibits Stubos from participating in the issuance, purchase, offer, or sale of any security other than for his own personal accounts. The complaint also seeks relief from Dori-Ann Stubos, George Stubos' wife, who allegedly received illicit proceeds from Stubos' fraudulent scheme, and that action remains ongoing.

SEC Charges Alternative Investment Platform YieldStreet for Misleading Investors (SEC Release)
https://www.sec.gov/news/press-release/2023-175
Without admitting or denying the findings in an SEC Order
https://www.sec.gov/files/litigation/admin/2023/33-11230.pdf that it had violated certain antifraud and other provisions of the federal securities laws, YieldStreet Inc. and its registered investment adviser YieldStreet Management LLC. agreed to cease and desist from the alleged violations and to pay over $1.9 million in penalties, disgorgement, and interest. As alleged in part in the SEC Release:

[A]ccording to the SEC’s order, in September 2019, YieldStreet offered securities to finance a loan a YieldStreet affiliate made to a group of companies to transport a retired ship and arrange its deconstruction. The SEC’s order finds that the collateral for the loan was the ship to be deconstructed and that YieldStreet’s right to the ship was the most important security for the loan and the securities that YieldStreet sold to investors.

According to the order, YieldStreet failed to disclose to investors a heightened risk that it would be unable to seize the ship in the event of a default. The order finds that, prior to the offering, YieldStreet personnel had information showing that ships securing other loans that YieldStreet affiliates had made to the same borrowing group were reported as deconstructed without any notice or repayment or could not be located because their tracking systems were off. According to the order, YieldStreet proceeded with the offering without disclosing this material information to investors. The order states that YieldStreet later concluded that the borrowing group caused the ship securing the September 2019 offering to be deconstructed, but it stole the deconstruction proceeds by not repaying the loan from YieldStreet, leaving investors facing millions of dollars of losses.

Investment Adviser Charged for Acting as an Unregistered Broker (SEC Release)
https://www.sec.gov/enforce/34-98354-s
Without admitting or denying the findings in an SEC Order https://www.sec.gov/files/litigation/admin/2023/34-98354.pdf
that it violated the broker-dealer registration provisions of Section 15(a)(1) of the Securities Exchange Act, True Capital Management, LLC agreed to a cease-and-desist order, a censure, disgorgement of $594,897 plus prejudgment interest of $76,896, and a $150,000 civil penalty to settle the charges. As alleged in part in the SEC Release:

[T]rue Capital created and was the investment adviser to funds in which its individual clients invested. For at least nine years, the order finds, True Capital regularly received transaction-based compensation for arranging sales of real estate investments to its individual and fund clients. The order further finds that True Capital solicited its individual clients to buy real estate investments, gave them advice about the investments, negotiated the terms of the investments, and sometimes sent the investors' money to the sellers. Between September 2017 and June 2021, according to the order, True Capital was paid by sellers or by its own fund clients for performing these brokerage activities in at least 27 transactions. The order finds that True Capital charged advisory fees to its clients in addition to this transaction-based compensation.

SEC Charges National Office Partner at Marcum for Causing Widespread Quality Control Deficiencies (SEC Release)
https://www.sec.gov/news/press-release/2023-174
Without admitting or denying the findings in an SEC Order
https://www.sec.gov/files/litigation/admin/2023/34-98352.pdf that he had engaged in improper professional conduct within the meaning of Section 4C(a)(2) of the Securities Exchange Act of 1934 and Rule 102(e) of the SEC’s Rules of Practice and that he had caused Marcum LLP to violate Rule 2-02(b)(1) of Regulation S-X., former Marcum LLP National Assurance Services Leader Alfonse Gregory Giugliano consented to cease and desist from committing or causing any violations and any future violations of Rule 2-02(b) of Regulation S-X and to pay a civil penalty of $75,000; and, further, he agreed to a Censure and to comply with certain undertakings for a period of three years, including having no leadership, management, oversight, or supervisory position at any registered public accounting firm. As alleged in part in the SEC Release:

[G]iugliano oversaw quality control for Marcum’s public company practice, including the firm’s relevant quality control policies, procedures, and monitoring, and directly or indirectly supervised all personnel working within Marcum’s quality control functions. The SEC’s order finds that exponential growth in Marcum’s public company practice exposed substantial deficiencies in these functions. Moreover, according to the SEC’s order, Giugliano was aware that inspections by the Public Company Accounting Oversight Board (PCAOB) and by Marcum itself revealed numerous deficiencies in Marcum’s quality control system. The SEC’s order finds that Giugliano did not sufficiently address and remediate these deficiencies, leading to quality control and audit standard violations throughout Marcum’s audit work, such as client acceptance, engagement partner supervision and review, audit documentation, and technical consultations. In addition, under Giugliano’s leadership of Marcum’s quality control system, the firm did not sufficiently monitor the effectiveness of many policies and procedures and, in many areas, did not adequately communicate those policies and procedures to relevant personnel.

SEC Charges Maximus for Reporting and Proxy Violations (SEC Release)
https://www.sec.gov/enforce/34-98351-s
Without admitting or denying the findings in an SEC Order
https://www.sec.gov/files/litigation/admin/2023/34-98351.pdf that it violated Sections 13(a) and 14(a) of the Securities Exchange Act and Rules 13a-1 and 14a-3 thereunder, Maximus Inc. agreed to pay a civil money penalty of $500,000. As alleged in part in the SEC Release:

[M]aximus appointed a business segment leader and longtime employee as an executive officer in 2019. The officer's two siblings were also employees of Maximus who received annual compensation in excess of the threshold specified by SEC regulations regarding the disclosure of transactions with related persons. Maximus was therefore required to disclose the employment of the officer's siblings in its annual filings. However, Maximus filed annual reports and proxy statements for fiscal years 2019 through 2021 that did not include these required disclosures.

SEC Sweep into Marketing Rule Violations Results in Charges Against Nine Investment Advisers (SEC Release)
https://www.sec.gov/news/press-release/2023-173
Without admitting or denying the findings in an SEC Orders,

agreed to be censured, cease and desist from violating the charged provisions, comply with undertakings not to advertise hypothetical performance without having the requisite policies and procedures, and pay civil penalties ranging from $50,000 to $175,000. As alleged in part in the SEC Release:

Registered investment advisers are prohibited from including any hypothetical performance in their advertisements unless they have adopted and implemented policies and procedures reasonably designed to ensure that the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience of the advertisement. The SEC’s orders find that each of the charged firms advertised hypothetical performance to mass audiences on their websites without having the required policies and procedures. In addition, two of the advisers, Macroclimate LLC and MRA Advisory Group, failed to maintain required copies of their advertisements.

SEC Charges Chicago-Based Broker-Dealer with Violations of Regulation SHO (SEC Release)
https://www.sec.gov/enforce/34-98346-s
Without admitting or denying the findings in an SEC Order
https://www.sec.gov/files//litigation/admin/2023/34-98346.pdf that it willfully violated Rule 203(b)(1) of Regulation SHO, Simplex Trading, LLC agreed to a cease-and-desist order, a censure and to pay a civil money penalty of $200,000. As alleged in part in the SEC Release:

[F]rom at least October 2018 through December 2020, Simplex violated Regulation SHO by engaging in opportunistic, proprietary options trading and executing short sales of millions of shares of the underlying stocks to hedge that trading without locating shares of those stocks to borrow in improper reliance upon the bona-fide market making exception to the locate requirement set forth in Regulation SHO. As described in the order, Simplex did not qualify for the bona-fide market making exception to the locate requirement because Simplex was not engaged in bona-fide options market making activity at the time of its short sales in the underlying stock. In particular, the order finds, Simplex did not post continuous options quotations at or near both sides of the market and incurred limited economic or market risk because its options quotes were very rarely at or near the national best bid and offer. In addition, the order finds that Simplex's short selling in the underlying stock was not bona-fide market making because it was done to hedge Simplex's speculative, proprietary options trading strategies.

SEC Denies Whistleblower Award to Claimant
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-98340; Whistleblower Award Proc. File No. 2023-83)
https://www.sec.gov/files/rules/other/2023/34-98340.pdf
The Office of the Whistleblower ("OWB") issued a Preliminary Final Summary Disposition ("PFSD") recommending the denial of a Whistleblower Award to Claimant 2. The Commission ordered that OWB's recommendations be approved. The Order asserts in part that:

As an initial matter, the record shows that Claimant 2’s information did not cause Enforcement staff to open the investigation. Enforcement staff confirms, in a sworn declaration, which we credit, that the Matter Under Inquiry that resulted in the Covered Action was opened in Redacted based on an initiative of Enforcement staff and not due to any information provided by Claimant 2, whose first tip to the Commission was submitted more than a year later . . .

Ugh and Awe: Remarks before the IFC-Milken Institute’s Capital Markets Scholars Program by SEC Commissioner Hester M. Peirce
https://www.sec.gov/news/speech/peirce-remarks-ifc-milken-091223

Welcome to the United States Securities and Exchange Commission. Thank you to the International Finance Corporation, the George Washington University School of Business, and the Milken Institute for your work in bringing together financial regulators and central bankers in this training program. Over the sessions here today and in the weeks to come, you will hear much about the capital markets in the United States and our approach to regulating them. The subject matter is fascinating because of the importance of the capital markets. I hope that you will find all of the sessions informative and thought-provoking.

Capital markets bring companies—large and small—together with investors in a mutually beneficial relationship. The companies want to serve their customers by providing them with products and services, and the investors want to build their wealth so they can pour it into improving their own lives and those of their families and communities. This relationship between providers and users of capital is not only mutually beneficial, but societally beneficial; healthy capital markets support economic growth, which helps societies flourish. Regulating the capital markets well is, therefore, a delicate and essential task.

Because getting regulation of the securities markets right is so important, I am glad to be able to share the job with four other Commissioners. I enjoy being able to draw upon their wisdom in the same kinds of wide-ranging conversations that I anticipate you will have during this program. We jointly make all of the Commission’s rulemaking and enforcement decisions, and none of us is able to speak for the Commission as a whole. Accordingly, although I know my colleagues would join me in wholeheartedly welcoming you, I must inform you that these remarks reflect my own views as a Commissioner and not necessarily those of the Commission or my fellow Commissioners.

It is such an honor to have all of you here. You are seasoned regulators and central bankers, but I hope you will nevertheless benefit from getting an in-depth view into how we at the Securities and Exchange Commission approach our mission. Before turning it over to the first substantive session, I would like to share with you today some of the things I think about as I approach my job as a capital markets regulator.

First, I try to approach my job with a keen realization of my limitations. Regulators cannot know everything. Even as collecting and analyzing data gets easier, faster, and cheaper, we cannot know the countless facts on the ground. No matter how fast and sophisticated our computers are and how complicated our economic models, we cannot capture the complexity of the human decision-making that drives our markets. Our sophisticated data analytics tools cannot see the hungry stomach, dreaming heart, inquisitive brain, or muscular arm that drives economic activity. Despite all its recent glamor, artificial intelligence is no match for humanity’s perplexing diversity of thought and action, which responds to cues that are invisible to even the most perceptive of machines. So we regulators need to stay humble. We should not attempt to impose our preferences on the market or plan economic activity; we should limit ourselves to setting up reasonable parameters within which people can make the decisions and take the actions that they deem best for themselves and their families. Restraint does not come naturally to regulators, but it is essential to our ultimate utility.

Second, the rule of law is the regulator’s friend. We cannot build the trust of the people we serve unless we behave lawfully. Developing and enforcing rules with care and integrity draws people to the markets we regulate. For an agency like mine, a key responsibility is not to stray outside the bounds of the mandate Congress gave us. Sometimes that is hard, especially when we see bad conduct outside of the securities markets or outside of the United States. We might like to jump in and punish the bad actors or write rules to curtail the activity, but we do not have the authority to do so.

In carrying out the responsibilities entrusted to us by Congress, the rule of law also comes into play. A key feature of our rulemaking process is to seek public input when proposing a new rule. This step in the process is designed to ensure that the public – the people a regulation will affect and protect – have a say in writing the regulation. With this input, it is more likely that our rules will benefit the capital markets and avoid unforeseen side effects. Regulatory forbearance also requires that we wait to bring enforcement actions until we have set forth the rules clearly and given people sufficient time to come into compliance with them. A commitment to the rule of law precludes arbitrary enforcement of the law. Everyone has to play by the same rules. That maxim does not mean that regulators never make exceptions. Congress, appreciating the diversity of facts and circumstances we would face over time, gave the Commission tremendous power to exempt transactions and entities from the securities laws or aspects of them when doing so would be in the public interest. But those exemptions should be made available to everyone who can meet the conditions.

Third, I approach my job with a sense of awe. An appreciation for the treasure that our capital markets drew me to the SEC, first as an employee and then as a Commissioner. A free economy is an amazing tool for fostering prosperity in our society. I never tire of watching that economy work. Sometimes the admiration of how well it functions just stops me in my tracks with a sense of wonder. Thinking about the company that produced the engines on the airplane I am flying in, the company that made the pretzels I am eating, or the company that made the cleaning agent that the flight attendants just used to get the gum off the seat in front of me—the economy somehow pulls it all together in such a seemingly effortless way. Companies, of course, are just collections of people. People are constantly watching to see what others want and need and are building the factories to produce those things or setting up companies to provide those services. These products and services miraculously transform to meet changing needs and wants. People on their own are amazing, but when people with diverse talents join together to form companies, their accomplishments are even more breathtaking. As regulators, we need to recognize the unparalleled ability of private industry to serve human needs. As capital markets regulators, we strive to make it easier for companies that are good at meeting society’s needs to obtain funding. As we play our important, but limited, role, we must once in a while stop and marvel at the ability of an unplanned economy to serve people and to empower people to serve other people.[1]

Free markets are not perfect, but they are better than the alternative. Bono of the band U2 explained it nicely recently. He observed that, much to his dismay, he had discovered that “The off-ramp out of extreme poverty is, ugh, commerce, it’s entrepreneurial capitalism.”[2] He went on to explain:

[G]lobalization has brought more people out of poverty than any other -ism. If somebody comes to me with a better idea, I’ll sign up. I didn’t grow up to like the idea that we’ve made heroes out of businesspeople, but if you’re bringing jobs to a community and treating people well, then you are a hero.[3]

I do not have the same aversion to lauding people in the private sector, but I share Bono’s belief that we all benefit when we tie our economies together and allow them to unleash people’s talent. You all are part of that story: by building the regulatory framework for well-functioning capital markets in your countries, you enable your fellow citizens to put their intelligence, expertise, and creativity to work for society.

We can all learn from one another as we approach this important, delicate task of regulating the capital markets. Together, we can build better global capital markets, which in turn will foster a thriving, integrated global economy. If we undertake this task with the appropriate humility, commitment to the rule of law, and wonder for the power of private human effort, we will be able to enjoy the fruits of our collective and collaborative efforts: more children getting well fed and educated, more families living healthy and safe lives, and more people finding fulfilling ways to contribute their talents to improve the lives of their brothers and sisters across the world.

[1] Many others far more eloquent than I have described this process. See, e.g., Leonard E. Read, “I, Pencil: My Family Tree as told to Leonard E. Read,” Foundation for Economic Education (1958).

[2] David Marchese, “Bono Is Still Trying to Figure Out U2 and Himself,” New York Times, October 24, 2022, https://www.nytimes.com/interactive/2022/10/24/magazine/bono-interview.html#:~:text=I%20didn't%20grow%20up,where%20I've%20ended%20up.

[3] Id.

FINRA

FINRA Fines and Suspends Rep for Signing Customers' Signatures
In the Matter of Andrew Maynerich, Respondent (FINRA AWC 021070498101)
https://www.finra.org/sites/default/files/fda_documents/2021070498101
%20Gustavo%20Rodrigo%20III%20%20CRD%203031284%20AWC%20lp.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, Andrew Maynerich submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Andrew Maynerich was first registered in 2012, and in November 2017, he was registered with LPL Financial LLC. In accordance with the terms of the AWC, FINRA imposed upon Andrew Maynerich a $5,000 fine and a two-month suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC:

From April through August 2021, Maynerich electronically signed, with prior permission, a total of 20 documents - three account transfer forms, three new account forms, three brokerage to advisory change forms, eight move money forms, two journal forms, and one duplicate statement authorization - on behalf of eight customers, three of whom were seniors. LPL's policies and procedures prohibited signing a customer's name regardless of the customer's knowledge or consent. Maynerich also falsely attested in a September 2021 compliance questionnaire that he had not signed or affixed another person's signature on a document.

By falsifying customer signatures, Maynerich violated FINRA Rule 2010.

In addition, by causing LPL to maintain inaccurate books and records, Maynerich violated FINRA Rules 4511 and 2010.

FINRA Fines and Suspends Rep for Discretionary Trading
In the Matter of Gustavo Rodrigo III, Respondent (FINRA AWC 021070498101)
https://www.finra.org/sites/default/files/fda_documents/2021070498101
%20Gustavo%20Rodrigo%20III%20%20CRD%203031284%20AWC%20lp.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, Gustavo Rodrigo III submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Gustavo Rodrigo III was first registered in 1997 and from November 2014 through January 2021, he was registered with Westpark Capital, Inc. In accordance with the terms of the AWC, FINRA imposed upon Gustavo Rodrigo III a $2,500 fine and a 10-business-day suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC:

From January 1, 2019 through December 31, 2020, Respondent effected at least 98 trades in the brokerage account of a Westpark customer without speaking to the customer prior to execution on the date of the transactions. Respondent did not have written authorization to exercise discretion in the account. Moreover, Westpark did not accept the account as discretionary.

Therefore, Respondent violated FINRA Rules 3260(b), NASD Rule 2510(b), and FINRA Rule 2010

FINRA Censures and Fines Citigroup Global Markets, Inc. for Inaccurate Trade Capacity
In the Matter of Citigroup Global Markets Inc., Respondent (FINRA AWC 2019062946601)
https://www.finra.org/sites/default/files/fda_documents/2019062946601
%20Citigroup%20Global%20Markets%2C%20Inc.%20CRD%207059%20AWC%20lp.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, Citigroup Global Markets Inc. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In accordance with the terms of the AWC, FINRA imposed upon Citigroup Global Markets Inc. a Censure and $250,00 fine. As alleged in part in the AWC:

From October 2016 to July 2020, the firm incorrectly designated CitiBLOC ATS customer orders that crossed with the firm's principal orders as "Cross as Agent" trades when they should have been designated as principal trades^.2 Accordingly, the firm disclosed inaccurate trade capacity codes on approximately 37,000 trade confirmations.Therefore, Respondent violated Exchange Act Rule 10b-10, Exchange Act Section 17(a), Exchange Act Rule I 7a-3(a)(8), and FINRA Rules 2232, 4511, and 2010.

= = =

Footnote 2: CGMI remedied this issue with a logic correction implemented on July 13, 2020.

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