LexisNexis® Legal Newsroom
A Step Toward Credibility – SEC Wins in the Wyly Case

The SEC won a significant courtroom verdict Monday when a jury in New York returned a verdict in favor of the agency in the complex, high profile trading action brought almost four years ago against Samuel Wyly and the estate of his late brother Charles Wyly, Jr. who passed away during the case. Samuel...

Supreme Court Refuses To Overrule Basic v. Levinson Presumption in Securities Fraud Suits

WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court today found that Halliburton Co. has not shown a “special justification” for overruling the reliance presumption of Basic v. Levinson , 485 US. 224 (1988) in securities fraud cases ( Halliburton Co., et al. v. Erica F. John...

Halliburton: Assessing Its Impact on Securities Class Actions

The Supreme Court declined to scrap the way in which securities class actions are typically brought in Halliburton Co. v. Erica P. John Fund, No. 13-317 (Decided June 23, 2014) [lexis.com subscribers may access Supreme Court briefs and the opinion for this case]. At the same time it may have rewritten...

Microcap Fraud: An FBI Controlled Shell Company

Five men came together to plan the manipulation of an over-the-counter traded shell. What they did not know was that the shell was controlled by the FBI. SEC v. Affa, Civil Action No. 1:14-cv-12959 (D. Mass. Filed July 11, 2014). The action names as defendants Michael Affa, Andrew Affa, Mitchell Brown...

Jury Convicts Investment Adviser on Multiple Counts of Fraud

James Tagliaferri, the former President of TAG Virgin Islands, a registered investment adviser, was found guilty by a jury of one count of investment adviser fraud, six counts of violating the Travel Act, one count of securities fraud and four counts of wire fraud. The jury was unable to reach a verdict...

SEC Obtains Nearly $70 Million Judgment Based on Prior Jury Verdict

The SEC obtained a judgment for nearly $70 million in a fraud action based on a jury verdict obtained last fall. SEC v. AIC, Inc., Civil Action No. 3:11-cv-00176 (E.D. Tenn.). The action named as defendants the AIC, Community Bankers Securities, LLC, Nicholas Skaltsounis, John Guyettte and John Graves...

SEC Brings an Offering Fraud Action Against a Claimed App Maker

The SEC brought an action against a reputed “app” manufacturer who sold shares in two different entities beginning first in Colorado and later from Georgia. From each location, and for each entity, the sales pitch was essentially the same. Indeed, investors were told that the second company...

Loss Causation in a Securities Fraud Case From a Stream of Small Disclosures

A critical element in a Section 10(b) and Rule 10b-5 securities fraud claim for damages is loss causation. Mandated as a key component of such a claim by the PSLRA, the element provides the essential link between the alleged injury and the claimed damages. It is not enough that the plaintiff claim the...

SEC Charges City Mayor as a Control Person in Allen Park, Michigan, Enforcement Action

by M. Norman Goldberger, John C. Grugan, and Tesia N. Stanley Last Thursday, the Securities and Exchange Commission (SEC) announced fraud charges against the City of Allen Park, Michigan (City), and two of its former officials—the former City Mayor and former City Administrator. It is the first...

SEC Files Offering Fraud Action Against Sellers of Over $10M Worth of Bonds to Public

A business man, a real estate company he acquired from his grandfather, a registered representative who has now been barred by FINRA from the securities business and Maryland Division of Securities from the advisory business and an unnamed broker teamed-up to sell millions of dollars of bonds to the...

SEC Files Action Based on Misappropriation of Pre-IPO Shares

The SEC filed a fraud action based on the misappropriation of shares of a private firm held by investors through an LLC. The shares were then resold and reissued to other investors. SEC v. Kumar, Civil Action No. 23145 (N.D. Cal. Filed December 2, 2014). Defendant Vinay Kumar Nevatia solicited real...

How Falsifying Compliance With a Lease Became Securities Fraud

The CEO and CFO of a successful senior living firm sought to expand the business by acquiring the operations of another firm and leasing its facilities. Despite warnings that the lease terms were far to onerous, the deal was concluded. The result was securities fraud, according to a proceeding filed...

Second Circuit Splits With Ninth Circuit, Holds Item 303 Omissions Can Be Actionable in Section 10(b) Claims

On January 12, 2015, the Second Circuit ruled, “as a matter of first impression” for the appellate court, that a failure to make a disclosure required by Item 303 of Reg. S-K is an omission that can serve as a basis for a Section 10(b) securities fraud claim, but only if the other requirements...

The SEC Increases Focus on Digital Currencies

It is clear that the SEC has been focusing on securities fraud involving digital currencies. In July 2013 , the SEC charged Trendon T. Shavers, the founder and operator of Bitcoin Savings and Trust, with defrauding investors in a Ponzi scheme involving Bitcoin. In June 2014 , the SEC charged a Bitcoin...

The Business Court Rules Again on Claims Under the North Carolina Securities Act

Last week's decision in Atkinson v. Lackey , 2015 NCBC 13 doesn't tell you everything you wanted to know about the North Carolina Securities Act (the "NCSA"), but it comes pretty close [ an enhanced version of this opinion is available to lexis.com subscribers ]. The lawsuit was...

Cooperation by Broker Mitigates SEC Sanctions

Cooperation was a key factor in the resolution of an action involving a minority owner of a broker-dealer that is alleged to have facilitated a fraudulent scheme to conceal losses at a major Japanese company. In the Matter of Hajime Sagawa, Adm. Proc. File No. 3-16412 (February 27, 2015). Hajime Sagawa...

Manhattan U.S. Attorney Prevails in Securities Fraud, RICO Case

The SEC has brought a series of investment fund fraud and Ponzi schemes. Indeed, the Commission has brought so many of these cases in recent years they have become a staple. None of those cases, however, involved securities fraud tied to an investment scheme, a racketeering charge centered on an automobile...

Underwriter, Two Employees Charged By SEC

The SEC brought another case tied to Chinese reverse mergers. This one differs from many earlier actions which focused on the company and or the executives. This action names as defendants one broker-dealer and two of its employees as defendants. It centers on two public offerings of the shares of Puda...

Star Investment Manager, Advisers Charged With Fraud by SEC

The SEC issued an Order which charged investment manager Lynn Tilton, known as the Diva of Distressed Debt according to news reports, and her entities with fraud. Specifically, the Order Instituting Proceedings issued by the SEC, claims that Ms. Tilton overvalued certain funds in a manner which was contrary...

SEC Files Offering Fraud Action

The Commission filed another offering fraud action tied to the sale of interests in the development of oil and gas wells prior to the recent downturn in the price of oil. Beginning in 2010 the defendants raised about $4.4 million from 60 investors through a nationwide offering. The defendants largely...

SEC Files Two Offering Fraud Actions Tied to a Horse Farm

The Commission filed two settled offering fraud actions centered in part around an entity engaged in the purchase and sale of thoroughbred horses called Raintree Racing. A second involved an offering of interests in a real estate investment firm known as Atlanta Rehab which had invested in Raintree Racing...

Father-Daughter Conclude Settlement With SEC

The SEC concluded its litigation with a father – daughter combination that solicited investors to purchase promissory notes based on representations that there would be risk free returns from forex trading. There were no returns, however, and most of the funds went to the father daughter tandem...

SEC Files Fraud Action Centered on Student Loans

Student loans, and the debt burdening many students at graduation, is an important political topic. It is not generally a subject for the Securities and Exchange Commission. Nevertheless, at the center of is most recent enforcement action is an educational institution that was forced to restate its financial...

SEC Charges Three For Six Microcap Fraud Manipulations

Microcap fraud has been a priority of SEC Enforcement since at least the formation of the Microcap Task Force about two years ago. The Commission has brought a series of cases focused largely on pump-and-dump schemes. Now the Commission has brought an action against three individuals who are alleged...

SEC Files Another Fraud Action Based on EB-5 Program

The EB-5 program is supposed to provide a path to a permanent green card. The program was designed to create that path for foreign national who invest specified sums in the U.S. that create jobs – a win win for everyone. Unfortunately, in some instances there is no win. The SEC has brought a number...