LexisNexis® Legal Newsroom
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...

SEC Security Fraud Charges Against Assisted Living Facilities —Should EB-5 Practitioners Be Concerned?

Assisted living facilities (ALFs) have always been a popular choice for EB-5 investors. On December 3, 2013, the Securities and Exchange Commission (SEC) announced securities fraud charges against top executives at an assisted living facility. What is significant about these charges, is that it draws...

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...

SEC Alleges Wings Network Was $23.5 Million Ponzi and Pyramid Scheme

The Securities and Exchange Commission has filed civil fraud charges against two Massachusetts companies operating as Wings Network, alleging that the purported digital and mobile solutions venture was, in reality, a fraudulent Ponzi and pyramid scheme that took in at least $23.5 million from thousands...

Circuit Splits, Arbitration Clauses, and Other Notes from Around the Web

Circuits Split on Pleading Loss Causation: In a December 16, 2014 opinion written by Judge Milan D. Smith, Jr. for a unanimous three-judge panel of the Ninth Circuit, the appellate court affirmed the dismissal of the securities class action lawsuit that had been filed against Apollo Group and certain...

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...

Seventh Circuit Sets Aside Record $2.46 Billion Judgment in Long-Running Household International Securities Suit

On October 17, 2013, when Northern District of Illinois Judge Ronald Guzman entered a $2.46 billion judgment for the plaintiffs in the long-running Household International securities class action lawsuit , it was according to statements at the time the largest judgment ever in a securities fraud trial...

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...

Investment Advisor Admits Theft to Settle SEC Fraud Charges

The Commission filed another action in which admissions were required as part of the settlement. The action centers on an investment adviser who misappropriated just under $2 million from his clients. As part of the settlement he admitted the theft. SEC v. Donnelly, Civil Action No. 15 6873 (E.D. Pa...

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...

Peabody Energy Agrees to Update SEC Filings to Acknowledge Financial Risks of Climate Change Policies

By Jessica Wentz Associate Director and Fellow On November 8, Peabody Energy Corporation, the world’s largest publicly-traded coal company, reached a settlement with the New York Attorney General’s Office (“NYAG”) in which it agreed to revise its financial disclosures to...

SEC Alleges Jay Peak Owners Engaged in Massive Fraud of EB-5 Investors

The Securities and Exchange Commission has charged and frozen the assets of Ariel Quiros of Miami, FL, William “Bill” Stenger of Newport, VT, Q Resorts Inc. and Jay Peak Inc. in connection with violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section...