CALIFORNIA MAN CHARGED BY CFTC WITH FRAUD RELATED TO PRECIOUS METALS

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

September 11, 2015

CFTC Charges California Resident Hannes Tulving, Jr., through his company, The Tulving Company, Inc., with Misappropriation and Fraudulent Solicitation in a $17.8 Million Precious Metals Scheme

At Least 381 Customers Nationwide Allegedly Defrauded in the Scheme

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today filed a civil Complaint against Defendants Hannes Tulving, Jr. of Newport Beach, California, and his company, The Tulving Company, Inc., charging them with fraudulent solicitation and misappropriation in connection with the precious metals markets. Neither Defendant has ever been registered with the CFTC.

In its enforcement action, the CFTC alleges that the Defendants fraudulently offered contracts of sale of commodities in interstate commerce, namely, contracts for the sale of gold, silver, platinum, and palladium bullion and coin (precious metals). In offering these contracts, the Defendants obtained and misappropriated at least $17.8 million from at least 381 customers located throughout the United States for the purchase and sale of precious metals, according to the Complaint.

In their solicitations, the Defendants allegedly made false and fraudulent representations, including that The Tulving Company was a highly reputable, stable, and established precious metals firm that delivered precious metals to customers; that it bought and sold in excess of $2.1 billion in precious metals from 1999 through March 2013; and that precious metals were shipped quickly to customers after placement of orders and receipt of customer funds. These representations were false, according to the Complaint.

The Defendants allegedly purchased and sold little or no precious metals with the funds they collected from customers. Instead, according to the Complaint, the Defendants defrauded customers by lying to them and misappropriating their funds for improper and unauthorized uses, including for the Defendants’ own financial benefit.

To conceal their fraud, according to the Complaint, the Defendants made false and/or deceptive statements, including falsely representing that (1) customers owned specific amounts of precious metals when, in fact, they did not, (2) customers holdings in precious metals had significant value when, in fact, the non-existent holdings had no value whatsoever, and (3) customers were realizing profits from their investments when, in fact, no profit whatsoever had been realized.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws, as charged.

CFTC Division of Enforcement staff members responsible for this case are Luke B. Marsh, Richard Foelber, Dmitriy Vilensky, and Paul G. Hayeck.

Keynote Address by Commissioner Sharon Y. Bowen before ISDA North America Conference

Keynote Address by Commissioner Sharon Y. Bowen before ISDA North America Conference

SEC ANNOUNCES $6.5 MILLION JUDGEMENT IN CASE INVOLVING STOCK MANIPULATION THROUGH FALSE PRESS RELEASES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23349 / September 16, 2015

Securities and Exchange Commission v. 8000, Inc., Jonathan E. Bryant, Thomas J. Kelly, and Carl N. Duncan, Esq., Civil Action No. 12-civ-7261 (S.D.N.Y., Complaint filed Sept. 27, 2012)

Court Orders Company to Pay More Than $6.5 Million in U.S. Stock Manipulation Scheme

The Securities and Exchange Commission announced today that on September 14, 2015, a federal court in New York entered a final judgment by default against 8000, Inc., a Virginia-based company, that ordered it to pay $6,525,000 in a civil penalty in a stock manipulation case filed by the Commission in 2012. The Commission alleged that the Company issued numerous false press releases to inflate the value of the company so that certain parties could benefit.

In addition to 8000, Inc., the Commission's complaint, filed on September 27, 2012, also charged Jonathan Bryant, a consultant for the company as well as the company's former Chief Executive Officer, Thomas Kelly of Levittown, Pennsylvania, and the company's attorney, Carl N. Duncan of Bethesda, Maryland. The complaint alleged that the defendants participated in a scheme to manipulate the trading volume and price of 8000 Inc.'s common stock by disseminating false information about the company and simultaneously selling or facilitating the sale of its securities which were not supposed to be for sale to the general public. According to the complaint, from November 2009 through October 2010, Bryant and Kelly disseminated financial reports and press releases falsely representing that 8000, Inc. had millions of dollars in capital financing and revenues when, in fact, the company had neither. As 8000, Inc.'s stock price rose based on the false information they were disseminating, Bryant profited by selling 56.8 million "restricted" shares of 8000, Inc. into the market. Because the shares were restricted, they should not have been sold into the market at that time. The complaint alleged that Duncan provided false legal opinions removing the trading restrictions on the stock, and that Kelly profited from the scheme by buying and selling the company's securities in the secondary market. The complaint alleged that the defendants' scheme increased the volume of trading in 8000, Inc. by 93% and the company's stock price from less than $0.01 per share to $0.42 per share between November 2009 and October 2010.

In addition to ordering 8000, Inc. to pay $6.5 million, the final judgment entered by the United States District Court for the Southern District of New York permanently enjoins 8000, Inc. from future violations of various antifraud and securities registration sections of the federal securities laws, including Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder.

The judgment against 8000, Inc. concludes the Commission's case. Defendants Bryant, Kelly, and Duncan all previously settled the Commission's action. Bryant consented to the entry of a final judgment that was entered on April 7, 2015. The final judgment permanently enjoined Bryant from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The final judgment also ordered Bryant to disgorge the $2,969,525 in profits that he realized from selling 8000, Inc.'s restricted securities and to pay $198,659.70 in pre-judgment interest. Additionally, the final judgment barred Bryant from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, and permanently barred him from participating in an offering of a penny stock.

Kelly consented to the entry of a final judgment that was entered on June 6, 2013, which permanently enjoined Kelly from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. It also permanently barred Kelly from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, and permanently barred him from participating in an offering of a penny stock. On September 2, 2014, after a hearing, the court ordered Kelly to pay $415,569 in profits that he realized from trading in 8000 Inc.'s securities in the secondary market and to pay $46,697 in pre-judgment interest.

Duncan agreed to settle the Commission's action at the time it was filed. In December 2012, the court entered a final judgment against Duncan that permanently enjoined Duncan from violating Sections 5(a), 5(c), and 17(a)(2) of the Securities Act, permanently enjoined him from participating in the preparation and issuance of certain opinion letters, bars him from participating in an offering of a penny stock, and ordered him to disgorge $15,570 in unlawful proceeds and to pay $524.98 in prejudgment interest and a $25,000 civil money penalty. Duncan also consented to an administrative order issued pursuant to Rule 102(e)(3) of the Commission's Rules of Practice permanently suspending him from appearing or practicing before the Commission as an attorney.

The SEC would like to thank the Financial Industry Regulatory Authority for their assistance in this matter.

CFTC ANNOUNCES COMMODITY POOL FRAUDSTER SENT TO PRISON FOR 17 YEARS

FROM:  U.S. JUSTICE DEPARTMENT 

September 9, 2015

Commodity Pool Operator Sentenced to 17 Years’ Incarceration for Fraud

Washington, DC — Donovan Davis Jr., one of three Principal Defendants charged by the CFTC for the fraudulent operation of Capital Blu Management, LLC of Melbourne, Florida, was sentenced to 17 years in a federal prison on August 27, 2015.

Davis was convicted on May 14, 2015 of multiple counts of criminal conspiracy, mail fraud, wire fraud, and money laundering in connection with the operation of a fraudulent $17 million commodity pool. The two other Co-Defendants in the CFTC action, Blayne Davis and Damien Bromfield, earlier pleaded guilty to similar criminal charges. B. Davis was sentenced to 9 years in prison; Bromfield’s sentencing is scheduled for September 24.

CFTC Enforcement Director, Aitan Goelman, said “These sentences serve as a strong reminder that those who engage in fraud in the commodities markets face the very real possibility of criminal prosecution and jail time in addition to the civil sanctions sought by the CFTC.”

In 2011, the U.S. District Court for the Middle District of Florida found these same Defendants liable for civil violations of the Commodity Exchange Act and CFTC Regulations and ordered them to pay more than $7 million each in restitution and civil monetary penalties and permanently barred them from engaging in any commodity-related activity (see CFTC Press Release, Order, and Judgment 6054-11, June 15, 2011, and CFTC Press Release and Complaint 5643-09, April 7, 2009).

The CFTC subsequently provided material assistance to the U.S. Attorney’s office responsible for the criminal prosecution of these Defendants.

THREE INDICTED IN ALLEGED $54 MILLION "GREEN ENERGY" FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, September 3, 2015

Indictment Charges Three People with Running $54 Million “Green Energy” Ponzi Scheme

An indictment was unsealed today charging three people in an investment scheme, involving a Bala Cynwyd, Pennsylvania-based company, that defrauded more than 300 investors from around the country.  Troy Wragg, 34, a former resident of Philadelphia, Pennsylvania, Amanda Knorr, 32, of Hellertown, Pennsylvania, and Wayde McKelvy, 52, of Colorado, are charged with conspiracy to commit wire fraud, conspiracy to commit securities fraud, securities fraud and seven counts of wire fraud, announced U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania and Special Agent in Charge William F. Sweeney Jr of the FBI’s Philadelphia Division.

As the founders of the Mantria Corporation, Wragg and Knorr allegedly promised investors huge returns for investments in supposedly profitable business ventures in real estate and “green energy.”  According to the indictment, Mantria was a Ponzi scheme in which new investor money was used to pay “earnings” to prior investors since the businesses actually generated meager revenues and no profits.  To induce investors to invest funds, it is alleged that Wragg and Knorr repeatedly made false representations and material omissions about the economic state of their businesses.

Between 2005 and 2009, Wragg, Knorr and McKelvy, through Mantria, intended to raise over $100 million from investors through Private Placement Memorandums (PPMs).  In actuality, they raised $54.5 million.  Wragg and Knorr were allegedly able to raise such a large sum of money through the efforts of McKelvy.  McKelvy operated what he called “Speed of Wealth” clubs which advertised on television, radio and the internet, held seminars for prospective investors and promised to make them rich.  According to the indictment, McKelvy taught investors to liquidate all their assets such as mutual funds and 401k plans, to take out as many loans out as possible, such as home mortgages and credit card debt and invest all those funds in Mantria.  During those seminars and other programs, Wragg, Knorr and McKelvy allegedly lied to prospective investors to dupe them into investing in Mantria and promised investment returns as high as 484 percent.

It is further alleged that Wragg, Knorr and McKelvy spent a considerable amount of the investor money on projects to give investors the impression that they were operating wildly profitable businesses.  Wragg, Knorr and McKelvy allegedly used the remainder of the funds raised for their own personal enrichment.  Wragg, Knorr and McKelvy allegedly continued to defraud investors until November 2009 when the SEC initiated civil securities fraud proceedings against Mantria in Colorado, shut down the company, and obtained an injunction to prevent them from raising any new funds.  A receiver was appointed by the court to liquidate what few assets Mantria owned.

In order to lure prospective investors, it is alleged that Wragg, Knorr and McKelvy lied and omitted material facts to mislead investors as to the true financial status of Mantria, including grossly overstating the financial success of Mantria and promising excessive returns.

“The scheme alleged in this indictment offered investors the best of both worlds – investing in sustainable and clean energy products while also making a profit,” said U.S. Attorney Memeger.  “Unfortunately for the investors, it was all a hoax and they lost precious savings.  These defendants preyed on the emotions of their victims and sold them a scam.  This office will continue to make every effort to deter criminals from engaging in these incredibly damaging financial crimes.”

“As alleged, these defendants lied about their intentions regarding investors’ money, pocketing a substantial portion for personal use,” said Special Agent in Charge Sweeney Jr.  “So long as there are people with money to invest, there will likely be investment swindlers eager to take their money under false pretenses.  The FBI will continue to work with its law enforcement and private sector partners to investigate those whose greed-based schemes rob individuals of their hard-earned money.”

If convicted of all charges, the defendants each face possible prison terms, fines, up to five years of supervised release and a $1,000 special assessment.

The criminal case was investigated by the FBI and is being prosecuted by Assistant U.S. Attorney Robert J. Livermore.  The SEC in Colorado investigated and litigated the civil securities fraud charges which formed the basis of the criminal prosecution.      

An indictment is an accusation.  A defendant is presumed innocent unless and until proven guilty.

SEC CHARGES FORMER BANK ANALYST AND OTHERS WITH INSIDER TRADING IN FRONT OF CLIENTS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

SEC Charges Former Investment Bank Analyst and Two Others With Insider Trading in Advance of Client Deals

08/25/2015 01:45 PM EDT

The Securities and Exchange Commission today charged a former investment bank analyst with illegally tipping his close friend with confidential information about clients involved in impending mergers and acquisitions of technology companies.  The SEC also charged his friend and another individual with trading on the inside information.

The SEC alleges that Ashish Aggarwal, who worked in J.P. Morgan’s San Francisco office, gleaned sensitive nonpublic information about two acquisition deals from colleagues who were working on them.  Aggarwal tipped Shahriyar Bolandian, who traded on the basis of the illegal tips in his own accounts as well as accounts belonging to his father and sister.  Bolandian also tipped his friend Kevan Sadigh so he could trade on the confidential information.  Bolandian worked at Sadigh’s e-commerce company, and together they made more than $672,000 in combined profits from their insider trading.

The SEC Enforcement Division’s Market Abuse Unit detected the insider trading through trading data analysis tools in its Analysis and Detection Center.

“We allege that Aggarwal, Bolandian, and Sadigh misused an investment bank’s confidential information for their personal benefit and victimized the bank, its clients, and investors,” said Robert A. Cohen, Acting Co-Chief of the SEC Enforcement Division’s Market Abuse Unit.  “We will continue to proactively identify and combat serial insider trading schemes, particularly when it involves industry professionals.”

In a parallel action, the U.S. Department of Justice today announced criminal charges against Aggarwal, who lives in San Francisco, as well as Bolandian and Sadigh, who each live in Los Angeles.

According to the SEC’s complaint filed in U.S. District Court for the Central District of California:

Aggarwal misappropriated confidential information about two J.P. Morgan-advised deals: Integrated Device Technology’s planned acquisition of PLX Technology in 2012 and salesforce.com’s acquisition of ExactTarget in 2013.
Aggarwal repeatedly communicated with Bolandian, his friend since college, in the days and weeks leading up to public announcements about the deals.

Bolandian and Sadigh bought the same series of call options in PLX Technology and ExactTarget.  Their trades were often within hours or even minutes of each other, and typically were 100 percent of the daily trading volume of those option series.
One of the brokerage accounts used by Bolandian was located offshore in the Bahamas.  He opened and funded the account with his credit card a week before the ExactTarget deal was announced.

Bolandian conducted various trades in his accounts on Aggarwal’s behalf in an arrangement that enabled Aggarwal to circumvent J.P. Morgan’s pre-clearance rules and potentially share in any profits.

The SEC’s complaint charges Aggarwal, Bolandian, and Sadigh with violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3.  The complaint seeks a final judgment ordering Aggarwal, Bolandian, and Sadigh to pay disgorgement of their ill-gotten gains plus prejudgment interest and penalties, and permanent injunctions from future violations of these provisions of the federal securities laws.

The SEC’s continuing investigation is being conducted by Paul E. Kim and Deborah A. Tarasevich of the Market Abuse Unit with assistance from John Rymas in the unit’s Analysis and Detection Center.  The case is being supervised by Mr. Cohen and fellow Acting Co-Chief Joseph Sansone.  The SEC’s litigation will be led by David S. Mendel and Matthew P. Cohen.

The SEC appreciates the assistance of the Criminal Fraud Section of the U.S. Department of Justice, the U.S. Attorney’s Office for the Central District of California, and the Federal Bureau of Investigation.