LexisNexis® Legal Newsroom
The Lee Insider Trading Case: A Critical Element of the SAC Charges

The case against S.A.C. Capital received what appears to have been a critical, last minute boost when Richard Lee agreed to plead guilty to one count of conspiracy to commit securities fraud and one count of securities fraud on July 23, 2013. U.S. v. Lee, 13 Crim 539 (S.D.N.Y. Filed July 23, 2013, unsealed...

Management Company Partner Convicted on Multiple Fraud Counts

A partner in an investment management company was convicted following a jury trial on multiple counts of mail and wire fraud as well as securities fraud. The charges stem from a scheme in which most of the $5 million in investor funds raised were siphoned off by the defendant and others for their personal...

Circuit Court Rejects SEC Position on Section 5 Liability

The Ninth Circuit rejected the SEC’s contention that a stock transfer agent and its principal are necessarily liable “by virtue of their position” for a company whose unregistered shares were sold in violation of Securities Act Section 5. SEC v. CMKM Diamonds, Inc., Nos. 11-17021, 11...

TD Bank Agrees to Pay $52.5M to Settle Charges Related to Rothstein Scheme

WASHINGTON, D.C. — (Mealey’s) TD Bank NA on Sept. 23 agreed to pay $52.5 million to settle federal regulators’ allegations that the bank helped attorney Scott Rothstein run a $1.2 billion Ponzi scheme out of his law firm. The Securities and Exchange Commission announced in a press...

SEC Charges Trader with Insider Trading, Manipulative Short Selling

The SEC filed a settled an insider trading and Rule 105 short selling action against a seasoned trader and his two trading vehicles. SEC v. Langston, Civil Action No. 1:13-cv-324360 (S.D. Fla. Filed Dec. 3, 2013). Defendant Charles Langston is a long time securities trader. He actively trades through...

SEC Files Offering Fraud Action Centered on Three Schemes In Three Years

The SEC brought another in a series of offering fraud cases. This one, however, does not focus on just one offering but three since mid- 2011. Promoters Robert Helms and Janniece Kaelin, their entities and Deven Sellers and Roland Barrera are named as defendants. SEC v. Helms, Civil Action No. 1:13-cv...

SEC Charges Securities Law Recidivist In Fraudulent Trading Scheme

The Commission filed another action against a securities law recidivist, this time centered on a fraudulent trading and investment program. SEC v. Lee, Civil Action No. 14CV0347 (S.D. Cal. Filed Feb. 13, 2014). James Lee is an unregistered investment adviser. Beginning in late 2008 he solicited investors...

SEC Names Company, Eight Directors and Officers in Financial Fraud Actions

Since the market crisis enforcement officials have heard repeated calls to prosecute not just companies but high ranking corporate officials. While the Commission brought a series of market crisis actions against firms and individuals, as part of the new “get tough” policy individuals will...

BAC CEO Pays $10 Million Plus D&O Bar to Settle NYAG Market Crisis Case

Former Bank of America CEO Kenneth Lewis agreed to pay $10 million and to be barred from serving as an officer or director of a public company for three years to settle fraud charges brought by the New York Attorney General based on the firm’s acquisition of Merrill Lynch just prior to the bankruptcy...

This Week In Securities Litigation (Week ending April 11, 2014)

Former hedge fund giant SAC Capital was sentenced this week. This concluded one of the most prominent insider trading cases. Under the terms of the sentence SAC Capital will no longer accept public funds. The DOJ and the SEC filed settled FCPA actions involving Hewlett-Packard and three of its subsidiaries...

SEC Names Recidivist, Claimed Country Music Fund Raiser, In Fraud Order

The Commission directed the institution of an administrative proceeding charging recidivist Stanley Jonathan Fortenberry, an unregistered fund adviser, with fraud in connection with the operation of a fund supposedly tied to a country music talent. In the Matter of Stanley Jonathan Fortenberry, Adm....

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...

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...

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...

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...

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...

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...

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, DOJ Charge Author of False Stock Tweets

“What could you arrest them for?” asked the Scottish tweeter who just made $97 total manipulating two stocks. “@dunragit are you serious? Did you read my post? It’s called securities fraud.” It would be difficult to find the people since they did not use their real name...