At the end of each month, the SEC issues a Notice of Covered Action (NOCA) for all recent enforcement actions with penalties greater than $1 million. This month, the SEC released thirteen NOCAs that included more than $293 million in the penalties.
Once a NOCA is published, any whistleblower who has provided information to the SEC about the matter has 90 days to claim a whistleblower award by filing a Form WB-APP. If a whistleblower does not file the WB-APP form in time, he loses his reward. With $293 million in fines recorded this month, there are more than $88 million (30%) in whistleblower award to win.
Here is a summary of this month’s NOCAs that feature; a wedding in a French castle, trips to Disney, luxury cars and a private plane:
According to the SEC, the defendants cold-called potential investors and convinced them to buy stock in the microcap companies. The prices and sales volumes matched those of the shareholders who were paying the defendants to promote the stock. The monetary penalty for this behavior will be decided by the court.
According to the SEC, Charles Schwab operated a robo-advisor portfolio for his investors. Schwab said the robo-advisor would seek “optimum performance[s].” In fact, in most market conditions, liquidity in robo-advisor portfolios would cause clients to earn less money even taking the same risk. Meanwhile, Schwab made money from the strategy by using it to get money from clients he took advantage of by loaning it out. To settle the costs, Schwab agreed to pay $187 million.
According to the SEC, Equitable Financial Life Insurance Company provided account statements to about 1.4 million investors who misled them about the fees they were charged. Equitable agreed to pay $50 million to aggrieved investors, most of whom were teachers and public school staff.
Synchronoss Technologies, Inc. and seven senior executives, including the former chief financial officer, were accused of accounting irregularities; Synchronoss has admitted that it incorrectly accounted for numerous transactions and thus filed misleading financial statements. The company paid the costs of $12.5 million and a number of executives are judged.
The SEC has accused Matthew J. Skinner and five entities he owns and controls (Empire West Equity, Inc.; Bayside Equity, LP; Longacre Estates, LP; Freedom Equity Fund LLC; and Simple Growth, LLC) of conducting fraudulent real estate investment offers. . The SEC argues that Skinner told investors their money would be used to fund specific real estate projects or investments, but was instead spent on personal expenses, such as A European vacation, a Maserati and an Aston Martin. The SEC also alleges that Skinner used the investors’ money to make Ponzi-like payments to other investors. The charges have not been settled and no monetary penalty has been announced.
The SEC has charged husband and wife Zhuobin (“Ben”) Hong and Caixia Jiang in a multi-million dollar insider trading scheme involving the securities of Sagent Pharmaceuticals, Inc. According to the SEC complaint, Hong and Jiang purchased large amounts of Sagent securities ahead of a July 11, 2016 announcement regarding the acquisition of the company. Hong and Jiang, who are now in China, tried to evade detection by trading through accounts held in the names of relatives in China. The charges have not been settled and no monetary penalty has been announced at this time.
The SEC has settled charges against Private Advisor Group, LLC for breach of fiduciary duty to advisory clients. The SEC found that PAG invested clients’ money in higher-cost funds to avoid paying transaction fees it would have to bear. As a result, customers paid more for PAG to pay less. PAG paid the costs of $5.8 million.
According to the SEC, UBS marketed and sold a complex investment product to investors, but failed to provide financial advisors with adequate training and oversight of the strategy. Although UBS recognizes the possibility of significant risk in investments, it has not shared this data with advisors or clients. When investors suffered losses, many of them and their financial advisors expressed surprise and closed their accounts. UBS paid the costs of $25 million.
The SEC accused Health Insurance Innovations (HII) and its former CEO Gavin Southwell of misselling health insurance products and then covering up numerous consumer complaints from investors. The charges were settled for $12 million.
The SEC has accused Sky Group USA LLC and its CEO, Efrain Betancourt, Jr., of fraudulently raising at least $66 million through the sale of promissory notes to retail investors, including members of the community. Venezuelan-American from South Florida. According to the SEC complaint, Sky Group and Betancourt falsely told investors that Sky Group would use investors’ money only to make payday loans when, in fact, Betancourt misappropriated millions for personal gain – including for a sumptuous wedding in a castle on the Côte d’Azur (ooh la la!), vacations to Disney resorts and the Caribbean, the costs associated with buying a luxury condo in Miami, and service on his personal Piper plane. Betancourt also reportedly transferred at least another $3.6 million to friends and family. The charges have not been settled and no monetary penalty has been announced at this time.
According to the SEC, NIT Enterprises, its CEO Gary R. Smith, Jason M. Ganton and James E. Cleary, Jr., raised $4.9 million from investors while making false claims that NIT was collecting funds to finance the company’s development efforts. its radiation protection products. In contrast, the SEC alleges that Smith misappropriated $1.25 million of the funds raised to pay for personal expenses. The SEC complaint further alleges that the defendants made baseless promises about NIT’s future profitability, the impending IPO, and expectations to “double or triple” their investment. Ganton and Cleary, had disciplinary backgrounds and previous SEC actions and bars, which were withheld from investors. The charges have not been settled and no monetary penalty has been announced at this time.
The SEC announced that David P. Godwin, whom the SEC accused in September 2015 of fabricating nearly all of ContinuityX Solutions, Inc.’s revenue, has been sentenced in a parallel criminal case to 13 years in prison. The SEC complaint alleges that Godwin devised a scheme to inflate the company’s earnings. The complaint alleges that from April 2011 to September 2012, 99% of the reported revenues came from fraudulent and fictitious sales. According to the complaint, Godwin used the allegedly fraudulent SEC filings to raise millions of dollars from investors and Godwin enriched himself with $1.3 million in compensation from ContinuityX. The SEC litigation against Godwin is ongoing.
The SEC announced judgments against three defendants accused of participating in a fraudulent scheme to sell stock in microcap company Aureus Inc. The SEC complaint alleges that, at least in 2016, Bahadoorsingh, Wilson and Wall, working with the defendant Luis Carrillo, concealed the fact that they controlled the securities of Aureus, Inc., whose shares were publicly traded on the American stock exchanges. According to the complaint, Bahadoorsingh and Carrillo secretly sold millions of Aureus shares after running promotional campaigns to encourage investors to buy the shares. The complaint alleges that as a result of these actions, what appeared to be ordinary trading by unaffiliated investors was in fact a massive stock dump orchestrated by Carrillo, Bahadoorsingh, Wall and Wilson, who sought to profit at the expense of retail investors. . Combined judgments totaled ~$1.3 million.