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This is a photo of the National Register of Historic Places listing with reference number 7000063

Thursday, May 31, 2012

COURT ENTERS FINAL JUDGEMENT IN DAY TRADING BUSINESS AND PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
May 29, 2012
Securities and Exchange Commission v. New Futures Trading International Corporation and Henry Roche (United States District Court for the District of New Hampshire, Civil Action No. 11-CV-532-JL, Complaint Filed November 16, 2011)
Court Enters Final Judgments Against New Hampshire Futures Day-Trading Business and Canadian Resident In Ponzi Scheme Case

The Securities and Exchange Commission announced today that, on May 24, 2012, the U.S. District Court for the District of New Hampshire entered final judgments by default against New Futures Trading International Corporation (“New Futures”), a New Hampshire business and Henry Roche, a Canadian resident who directed New Futures, in a Ponzi scheme action the Commission filed in November 2011.  Among other things, the court ordered the parties to pay a total of over $2.8 million.

In its complaint, filed on November 16, 2011, the Commission alleged that Roche, through New Futures, had been engaged in an ongoing unregistered offering of securities in the United States through operations in New Hampshire and Ontario, Canada. The Commission alleged that, since December 2010, Roche had raised over $1.3 million from at least 14 investors in nine states through the offer and sale of high yield promissory notes purportedly yielding either 5-10% per month, or a 200% return within 14 months.

According to the Commission’s complaint, Roche represented to some investors that funds supplied would be invested in bonds, Treasury notes and/or 10-year Treasury note futures contracts, and to others that the funds would be invested directly in New Futures, purportedly an on-line futures day-trading training business Roche was operating from Canada. The complaint alleged that, instead of using the funds for either purpose, Roche used approximately $937,000 provided by New Futures investors to make Ponzi “interest” payments to investors in prior Roche-controlled entities.  According to the Commission’s complaint, Roche also misappropriated at least another $359,000 to support his lifestyle, to operate a horse breeding venture, and to buy horses.  At the time the action was originally filed by the Commission, the court issued a temporary restraining order (later converted to a preliminary injunction) that, among other things, froze the assets of New Futures and Roche and prohibited them from continuing to solicit or accept investor funds.

The court, acting on the Commission’s motion for default judgments, entered final judgments: (1) imposing permanent injunctions against both New Futures and Roche enjoining them from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (2) ordering them each to pay disgorgement of their ill-gotten gains in the amount of $1,242,972 plus prejudgment interest of $40,917.47; and (3) ordering Roche to pay a monetary penalty in the amount of $150,000 and New Futures to pay a monetary penalty in the amount of $150,000.

Wednesday, May 30, 2012

MIAMI-BASED HEDGE FUND MAMAGER ACCUSED OF DECEIVING INVESTORS REGARDING EXECUTIVES INVESTMENT'S

Photo:  Miami Beach.  Credit:  Wikimedia.
FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., May 29, 2012 – The Securities and Exchange Commission today charged a Miami-based hedge fund adviser for deceiving investors about whether its executives had personally invested in a Latin America-focused hedge fund.

The SEC’s investigation found that Quantek Asset Management LLC made various misrepresentations about fund managers having “skin in the game” along with investors in the $1 billion Quantek Opportunity Fund. In fact, Quantek’s executives never invested their own money in the fund. The SEC’s investigation also found that Quantek misled investors about the investment process of the funds it managed as well as certain related-party transactions involving its lead executive Javier Guerra and its former parent company Bulltick Capital Markets Holdings LP.

Bulltick, Guerra, and former Quantek operations director Ralph Patino are charged along with Quantek in the SEC’s enforcement action. They agreed to pay more than $3.1 million in total disgorgement and penalties to settle the charges, and Guerra and Patino agreed to securities industry bars.

“When making an investment decision, private fund investors are entitled to the unvarnished truth about material information such as management’s skin in the game or the adviser’s handling of related-party transactions,” said Bruce Karpati, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Quantek’s investors deserved better than the misleading information they received in marketing materials, side letters, and other fund documents.”

According to the SEC’s order instituting settled administrative proceedings, fund investors frequently inquire about the extent of the manager’s personal investment during their due diligence process, and many require it in fund selection. Quantek, particularly Patino, misrepresented to investors from 2006 to 2008 that management had skin in the game. These misstatements were made when responding to specific questions posed in due diligence questionnaires that were used to market the funds to new investors. Quantek made similar misrepresentations in side letter agreements executed by Guerra with two sought-after institutional investors.

The SEC’s order also found that Quantek misled investors about certain related-party loans made by the fund to affiliates of Guerra and Bulltick. Because the fund permitted related-party transactions with Bulltick and other Quantek affiliates, investors were wary of deals that were not properly disclosed. In 2006 and 2007, Quantek caused the fund to make related-party loans to affiliates of Guerra and Bulltick that were not properly documented or secured at the outset. Quantek and Bulltick employees later re-created the missing related-party loan documents, but misstated key terms of the loans and backdated the materials to give the appearance that the loans had been sufficiently documented and secured at all times. Quantek and Guerra provided this misleading loan information to the fund’s investors.

“The related-party transactions were problematic to begin with, and the false deal documents left investors in the dark about the adviser’s conflicts of interest,” said Scott Weisman, Assistant Director in the SEC Enforcement Division’s Asset Management Unit.

According to the SEC’s order, Quantek also repeatedly failed to follow the robust investment approval process it had described to investors in the fund. Quantek concealed this deficiency by providing investors with backdated and misleading investment approval memoranda signed by Guerra and other Quantek principals.

Quantek, Guerra, Bulltick, and Patino settled the charges without admitting or denying the findings. Quantek and Guerra agreed jointly to pay more than $2.2 million in disgorgement and pre-judgment interest, and to pay financial penalties of $375,000 and $150,000 respectively. Bulltick agreed to pay a penalty of $300,000, and Patino agreed to a penalty of $50,000. Guerra consented to a five-year securities industry bar, and Patino consented to a securities industry bar of one year. Quantek and Bulltick agreed to censures. They all consented to orders that they cease and desist from committing or causing violations of certain antifraud, compliance, and recordkeeping provisions of the Investment Advisers Act of 1940 and the Securities Act of 1933.

The SEC’s investigation was conducted by Matthew Rossi in the Enforcement Division’s Asset Management Unit under the supervision of Mr. Weisman.

Monday, May 28, 2012

SEC CHARGES NORTHERN CALIFORNIA FUND MANAGER IN $60 MILLION SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
May 24, 2012
On May 24, 2012, the Securities and Exchange Commission charged an investment adviser in Scotts Valley, Calif., with running a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he had incurred.

The SEC alleges that John A. Geringer, who managed the GLR Growth Fund (Fund), used false and misleading marketing materials to lure investors into believing that the Fund was earning double-digit annual returns by investing 75% of its assets in investments tied to well-known stock indices like the S&P 500, NASDAQ, and Dow Jones. In reality, Geringer’s trading generated consistent losses and he eventually stopped trading entirely. To mask his fraud, Geringer paid millions of dollars in “returns” to investors largely by using money received from newer investors. He also sent investors periodic account statements showing fictitious growth in their investments.

According to the SEC’s complaint filed in federal court in San Jose, Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. Geringer used fraudulent marketing materials claiming that the Fund had between 17 and 25 percent annual returns in every year of the Fund’s operation through investments tied to major stock indices. Although the Fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 – before the Fund even existed. The marketing materials also falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.
The SEC alleges that Geringer’s actual securities trading was unsuccessful, and by mid-2009 the Fund did not invest in publicly traded securities at all. Instead, the Fund invested heavily in illiquid investments in two private startup technology companies. The rest of the money was paid to investors in Ponzi-like fashion and to three entities Geringer controlled that also are charged in the SEC’s complaint.

According to the SEC’s complaint, Geringer further lied to investors on account statements that falsely claimed “MEMBER NASD AND SEC APPROVED.” The SEC does not “approve” funds or investments in funds, nor was the Fund (or any related entity) a member of the NASD (now called the Financial Industry Regulatory Authority – FINRA). Geringer also falsely claimed that the Fund’s financial statements were audited annually by an independent accountant. No such audits were performed.

The SEC’s complaint alleges Geringer and three related entities violated or aided and abetted violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Section 206(1), (2), and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint also alleges the defendants violated or aided and abetted violations of Section 26 of the Exchange Act, which bars persons from claiming the SEC has passed on the merits of a particular investment. The SEC’s complaint names the Fund as a relief defendant. The complaint seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains, civil monetary penalties, and other relief. Geringer, the Fund, and two of the GLR entities consented to the entry of a preliminary injunction and a freeze on the Fund’s bank account.

The SEC’s investigation, which is continuing, has been conducted by Robert J. Durham and Robert S. Leach of the San Francisco Regional Office. The SEC’s litigation will be led by Sheila O’Callaghan of the San Francisco Regional Office.
The SEC thanks the U.S. Attorney’s Office for the Northern District of California, Federal Bureau of Investigation, and FINRA for their assistance in this matter.

Sunday, May 27, 2012

FORMER SEC ASSOCIATE DISTRICT DIRECTOR BANNED FROM PRACTICING BEFORE COMMISSION FOR ONE YEAR

FROM:  SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C., May 24, 2012 – The Securities and Exchange Commission today announced that it has barred Spencer Barasch, a former enforcement official in the Commission’s Fort Worth office, from appearing and practicing before the Commission for one year for violating federal conflict of interest rules.

The bar was imposed in an order instituting an administrative proceeding and resolves allegations involving Barasch’s representation of Stanford Group Company after Barasch went into private practice. Barasch consented to the Commission’s action without admitting or denying the Commission’s allegations.

Earlier this year, Barasch agreed to pay a $50,000 civil fine to the U.S. Justice Department for the same conduct.

Barasch, a Dallas resident, was the Associate District Director for the Division of Enforcement in the Commission’s Fort Worth office from June 1998 to April 2005. According to the Commission’s order, while at the Commission, Barasch took part “personally and substantially” in decisions involving allegations of securities law violations by entities associated with Robert Allen Stanford, including Stanford Group Company.

According to the Commission’s order, when Barasch joined a private law firm in 2005, he contacted the Commission’s Ethics Office about whether he could represent Stanford Group Company before the Commission and was told that he was permanently barred from doing so with respect to any matters on which he had participated while at the Commission. The order finds that Barasch declined to represent Stanford Group Company then, but that in the fall of 2006, he accepted an engagement from the Stanford entity and billed it for 12 hours of legal work related to Stanford matters Barasch had participated in while at the Commission.
During this representation, in violation of 18 U.S.C. § 207(a)(1), Barasch tried to obtain information about the Commission’s Stanford investigation from Commission staff in Fort Worth, but a staff attorney questioned whether Barasch could represent the firm. The staff attorney declined to have any substantive discussions with Barasch and suggested that Barasch contact the Commission’s Ethics Office on the matter. The order finds that Barasch did so and was again told that he was permanently barred from representing Stanford Group Company in the matter, prompting him to end his representation.

U.S. laws prohibit former federal officers and employees from knowingly seeking to influence or appear before any agency on a matter in which they had “participated personally and substantially” during their federal employment. The Commission’s order finds that Barasch violated this conflict of interest rule, which constitutes “improper professional conduct” under Rule 102(e) of the Commission’s rules of practice.

Before Barasch can resume appearing and practicing before the Commission, the Commission must determine that Barasch has truthfully sworn that he has satisfied several conditions that reflect on his character and fitness to practice before the Commission.

“This action shows that the Commission takes seriously ethical lapses by attorneys who appear and practice before it, and that such violations will result in serious disciplinary action,” said SEC Associate General Counsel Richard M. Humes.

The Commission’s case was investigated by Thomas J. Karr, Karen J. Shimp and Sarah E. Hancur of the Office of the General Counsel, following an investigation and report on the Stanford matter by the Commission’s Office of the Inspector General. The Commission acknowledges the assistance of the U.S. Attorney’s Office for the Eastern District of Texas.




Saturday, May 26, 2012

MICHIGAN MAN AND INVESTMENT CLUB MANAGER GETS 12 YEARS FOR FRAUD

FROM:  U.S. JUSTICE DEPARTMENT
Wednesday, May 23, 2012
Investment Club Manager Sentenced in Virginia to 12 Years in Prison for $40 Million Fraud
WASHINGTON – Alan James Watson, 47, of Clinton Township, Mich., was sentenced today to 12 years in prison for fraudulently soliciting and accepting $40 million from more than 900 members of his investment club, Cash Flow Financial LLC (CFF).  Watson subsequently lost nearly all of the investors’ money through non-disclosed, high-risk investments.  Victims were located in Virginia and nationwide.  Watson was also ordered to forfeit $36,615,344.

U.S. District Judge Gerald Bruce Lee in the Eastern District of Virginia also sentenced Watson to three years of supervised release.  Watson pleaded guilty to one count of wire fraud on Sept. 22, 2011.

The sentencing was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Virginia Neil H. MacBride; James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office; and Postal Inspector in Charge of Criminal Investigations Gerald O’Farrell of the U.S. Postal Inspection Service (USPIS).

“Mr. Watson deceived members of his investment club from early on and drove his scheme deeper and deeper while investors remained none the wiser,” said Assistant Attorney General Breuer.  “His lies destroyed lives, and today’s sentence ensures he will pay for his destructive actions.  The 12-year prison sentence handed down today is a signal to fraudsters that criminal deception born from greed will not be tolerated.”
“The pitch Mr. Watson made to investors was a big fat lie, and he kept lying until his scheme collapsed and investors lost nearly everything,” said U.S. Attorney MacBride.  “Based on these lies, investors recommended Mr. Watson’s club to their friends and family, and the damage to these relationships was just as harmful as the financial devastation itself.”

“More than 900 unwitting victims thought they had done their homework and calculated their investment wisely; instead, they were met with false documentation that yielded no return on their investment,” said FBI Assistant Director in Charge McJunkin.  “Investigating white collar crime has been and will continue to be a priority for the FBI and our law enforcement partners, as demonstrated by this case and today’s sentence.”
According to court documents, Watson created CFF in 2004 and served as the club’s chief executive officer.  From 2006 to 2009, Watson received almost $40 million from investors.  Watson purported that the money would be invested through an equities-trading system developed by an expert consultant, Trade LLC, with a promised return on investment of 10 percent per month.  In reality, Watson admitted that only $6 million of the $40 million was ever invested in Trade LLC, while the remaining $34 million was secretly invested in miscellaneous, high-risk ventures without the consent of investment club members.  These high-risk investments resulted in a near complete loss of the $34 million.

According to court documents, despite the losses for the investors, Watson continued to create false monthly account statements showing net gains from their investments.  In addition, Watson included “bonus” items on the account statements that appeared as trading profits, the result of a Ponzi scheme he orchestrated to use new investor funds to pay off earlier investors.

In March of 2009, Watson ceased investing in Trade LLC and re-deposited those funds in separate unauthorized ventures.  In 2010, nearly a year after he had fully withdrawn finances from Trade LLC, Watson informed investment club members that he had not invested their money as promised, and that none of the reported returns had ever materialized.  This resulted in a combined $40 million loss for investment club members.
The Commodity Futures Trading Commission (CFTC) has filed a related civil case in the Eastern District of Michigan.

This case was investigated by the FBI’s Washington Field Office, USPIS, the CFTC and the U.S. Securities and Exchange Commission.  The department thanks these agencies for their substantial assistance in this matter.

Trial Attorney Kevin B. Muhlendorf of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark D. Lytle of the Eastern District of Virginia are prosecuting the case on behalf of the United States.

The investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia.  The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force, an interagency national task force.

President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Friday, May 25, 2012

SEC CHARGES TWO FLORIDA RESIDENTS WITH ALLEGED RUNNING A $157 MILLION PONZI SCHEME

FROM:  SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., May 22, 2012 — The Securities and Exchange Commission today charged two individuals who provided the biggest influx of investor funds into one of the largest-ever Ponzi schemes in South Florida.

The SEC alleges that George Levin and Frank Preve, who live in the Fort Lauderdale area, raised more than $157 million from 173 investors in less than two years by issuing promissory notes from Levin's company and interests in a private investment fund they operated. They used investor funds to purchase discounted legal settlements from former Florida attorney Scott Rothstein through his prominent law firm Rothstein Rosenfeldt and Adler PA. However, the settlements Rothstein sold were not real and the supposed plaintiffs and defendants did not exist. Rothstein simply used the funds in classic Ponzi scheme fashion to make payments due other investors and support his lavish lifestyle. Rothstein's Ponzi scheme collapsed in October 2009, and he is currently serving a 50-year prison sentence.

The SEC alleges that Levin and Preve misrepresented to investors that they had procedural safeguards in place to protect investor money when in fact they often purchased settlements without first seeing any legal documents or doing anything to verify that the settlement proceeds were actually in Rothstein's bank accounts. Moreover, as the Ponzi scheme was collapsing and Rothstein stopped making payments on prior investments, Levin and Preve sought new investor money while falsely touting the continued success of their investment strategy. With their fate tied to Rothstein, Levin and Preve's settlement purchasing business collapsed along with the Ponzi scheme.

"Levin and Preve fueled Rothstein's Ponzi scheme with the false sense of security they gave investors," said Eric I. Bustillo, Director of the SEC's Miami Regional Office. "They promised to safeguard investors' assets, but gave Rothstein money with nothing to show for it."

According to the SEC's complaint filed in federal court in Miami, Levin and Preve began raising money to purchase Rothstein settlements in 2007 by offering investors short-term promissory notes issued by Levin's company - Banyon 1030-32 LLC. In 2009, seeking additional funds from investors, they formed a private investment fund called Banyon Income Fund LP that invested exclusively in Rothstein's settlements. Banyon 1030-32 served as the general partner of the fund, and its profit was generated from the amount by which the settlement discounts obtained from Rothstein exceeded the rate of return promised to investors.

The SEC alleges that the offering materials for the promissory notes and the private fund contained material misrepresentations and omissions. They misrepresented to investors that prior to any settlement purchase, Banyon 1030-32 would obtain certain documentation about the settlements to ensure the safety of the investments. Levin and Preve, however, knew or were reckless in not knowing that Banyon 1030-32 often purchased settlements from Rothstein without obtaining any documentation whatsoever.

Furthermore, the SEC alleges that Banyon Income Fund's private placement memorandum misrepresented that the fund would be a continuation of a successful business strategy pursued by Banyon 1030-32 during the prior two-and-a-half years. Levin and Preve failed to disclose that by the time the Banyon Income Fund offering began in May 2009, Rothstein had already ceased making payments on a majority of the prior settlements Levin and his entities had purchased. They also failed to inform investors that Levin's ability to recover his prior investments from Rothstein was contingent on his ability to raise at least $100 million of additional funding to purchase more settlements from Rothstein.

The SEC's complaint seeks disgorgement of ill gotten gains, financial penalties, and permanent injunctive relief against Levin and Preve to enjoin them from future violations of the federal securities laws.

The SEC's investigation, which is continuing, has been conducted by senior counsels D. Corey Lawson and Steven J. Meiner and staff accountant Tonya T. Tullis under the supervision of Assistant Regional Director Chad Alan Earnst. Senior trial counsels James M. Carlson and C. Ian Anderson are leading the litigation.

The SEC acknowledges the assistance of the U.S. Attorney's Office for the Southern District of Florida, the Federal Bureau of Investigation, and the Internal Revenue Service.

Thursday, May 24, 2012

TWO INDIVIDUALS TO PAY $7.5 MILLION FOR FOREX PONZI SCHEME

FROM:  U.S  CFTC
Federal Court in South Carolina Orders Ronald E. Satterfield and Nicholas and Patricia Bos to Pay over $7.5 Million for Fraud in Connection with a Forex Ponzi Scheme
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) obtained two federal court consent orders of permanent injunction, one order requiring defendant Ronald E. Satterfield, of Charleston, S.C., to pay $957,146 of restitution and a $2,871,438 civil monetary penalty, and the other order requiring defendant Nicholas Bos (Bos) of Ludington, Mich., to pay $849,146 of restitution and a $2,547,438 civil monetary penalty, for operating a foreign currency (forex) Ponzi scheme.  The Bos order also requires Patricia Bos (P. Bos), a relief defendant and Bos’ wife, to disgorge $295,000 in ill-gotten gains.  The orders also impose permanent trading and registration bans against Satterfield and Bos.

The consent orders, entered by Judge Richard M. Gergel, of the U.S. District Court for the District of South Carolina, Charleston Division, arise from a CFTC complaint filed on November 8, 2010, that charged the defendants with operating a forex Ponzi scheme involving the fraudulent solicitation of at least $3.3 million from at least 70 individuals – residing in South Carolina, North Carolina, Michigan, and Maryland – to engage in leveraged or margined forex transactions (see CFTC Press Release 5935-10, November 15, 2010).

The Satterfield order, entered on May 9, 2012, finds that Satterfield fraudulently solicited customers by representing that his forex trading was profitable and that customers could receive monthly returns ranging from two to four percent.  The order also finds that Satterfield issued false account statements reflecting the promised returns when, in fact, a large amount of customer deposits were used to pay purported returns to other customers, rather than to trade forex.  The forex trading Satterfield actually did, according to the order, resulted in losses in almost every month.

The Bos order, entered on April 25, 2012, finds that Bos fraudulently solicited customers to trade forex through accounts managed by Satterfield.  The order also finds that Bos falsely represented to customers that there would be no risk to their deposits and failed to disclose that he was collecting commissions and fees paid from customer funds and that he misappropriated $295,000 in customer funds to purchase a house in Ludington, Mich., titled in his name and in that of his wife.

Default order entered against corporate defendants in June 2011
Earlier, on June 14, 2011, the CFTC obtained a default judgment order from Judge Gergel against the corporate defendants in this action: Graham Street Forex Group, LLC and Shore-2-Summit Financial, LLC.  The default order requires the corporate defendants jointly and severally to pay over $5.6 million in equitable relief and a monetary sanction and imposes permanent trading and registration bans against them.
The CFTC appreciates the assistance of the U.S. Attorney’s Office, District of South Carolina, and the South Carolina Attorney General’s Office.
CFTC Division of Enforcement staff members responsible for this case are Eugene Smith, Patricia Gomersall, Christine Ryall, Paul G. Hayeck, and Joan Manley.

Wednesday, May 23, 2012

SEC CHARGES CHINA NATURAL GAS AND ITS CHAIRMAN FOR CONCEALING LOANS TO BENEFIT HIS FAMILY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
May 14, 2012
The Securities and Exchange Commission today filed suit in U.S. District Court for the Southern District of New York against China-based China Natural Gas, Inc. and its chairman and former CEO Qinan Ji for defrauding investors by secretly loaning company funds to benefit Ji’s son and nephew while failing to disclose the true nature of the loans.

The SEC alleges that Ji coordinated two short-term loans totaling more than $14 million in January 2010. One loan went to a real estate firm co-owned by Ji’s son and nephew through a sham borrower. The other loan went to a business partner of the real estate firm. Ji signed the company’s SEC filings that falsely stated the loans were made to third parties. Ji then lied about the true borrower to China Natural Gas’s board, investors, and auditors as well as during the company’s internal investigation.

According to the SEC’s complaint, Ji’s nephew approached China Natural Gas in late 2009 to obtain a loan for a large real estate development project being run by Demaoxing Real Estate Co., a firm that was 90 percent owned by Ji’s son and 10 percent owned by Ji’s nephew. Ji recognized it was inappropriate for China Natural Gas to loan money directly to his nephew, so he asked his niece’s husband, who was the company’s internal audit chief, to use a sham borrower. The internal audit chief located an individual named Taoxiang Wang, and fabricated notes of a meeting with her to discuss loan terms. Wang signed a loan agreement for $9.9 million, and the money was wired directly into a Demaoxing bank account with a note stating that the amount was for “raw material expenses.”

The SEC alleges that around the same time, China Natural Gas made a $4.4 million loan to Shaanxi Juntai Housing Purchase Co., a business partner on Demaoxing’s real estate development project. Shaanxi Juntai’s then-general manager was Ji’s friend. The internal audit chief talked with Ji’s nephew about the project when arranging the loan, which directly benefitted Demaoxing.

According to the SEC’s complaint, Ji was the company CEO until he resigned in October 2011. He approved both loans without obtaining prior authorization from the board or informing the CFO. Ji repeatedly lied to conceal the related party nature of both loans. When questioned about the loans by the China Natural Gas board, Ji falsely stated that the loans involved senior Chinese government officers who were in charge of the company’s liquid natural gas project. During a May 10, 2010 conference call about quarterly earnings, Ji responded to a question about the loans by again stating that they were made to obtain approvals from government officials. He later told the board that he made the loans to earn quick and lucrative interest, and lied about the true nature of the loans during the company’s internal investigation. Ji also lied to the company’s auditors by signing a letter stating that the two loans were for business purposes and the borrowers were not related parties.

The SEC also alleges that in the fourth quarter of 2008, China Natural Gas paid $19.6 million to acquire a natural gas company but did not timely and properly report the transaction in its SEC filings. As with the loans, Ji approved the acquisition without obtaining prior authorization from the board.

The complaint alleges that China Natural Gas and Ji violated or aided and abetted violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, and 14a-9. The complaint further alleges that Ji violated Exchange Act Section 13(b)(5) and Rules 13a-14, 13b2-1 and 13b2-2. Ji also is charged with violating provisions of the Sarbanes-Oxley Act that require him to repay China Natural Gas the bonuses and stock sale profits he received after the company filed false reports with the SEC. The SEC’s complaint seeks a final judgment that imposes financial penalties, bars Ji from acting as an officer or director of a public company, and permanently enjoins Ji and China Natural Gas from future violations of these provisions.

Tuesday, May 22, 2012

SEC CHARGES SEATTLE-BASED FUND MANAGER FOR SECRETLY DIVERTING CLIENT FUNDS TO HIS OWN START-UP COMPANIES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
May 18, 2012
On May 17 2012, the Securities and Exchange Commission charged a Seattle-based financial adviser and his firm with defrauding clients by secretly investing their money in two risky start-up companies he co-founded.

The SEC alleges that Mark Spangler, a former chairman of the National Association of Personal Financial Advisors, funneled approximately $47.7 million of client money into these private ventures despite representing that he would invest primarily in publicly traded securities. Spangler served as chairman and CEO of one of the companies, which is now bankrupt. Such risky investments were inconsistent with the investment strategies that Spangler promised his clients and contrary to their investment objectives.
The U.S. Attorney’s Office for the Western District of Washington also announced parallel criminal charges against Spangler.

According to the SEC’s complaint filed in federal court in Seattle, Spangler raised more than $56 million from his clients since 1998 for several private investment funds he managed. Beginning around 2003, without notifying investors in the funds, Spangler and his advisory firm The Spangler Group (TSG) began diverting the majority of client money into two private technology companies he created. One of the companies received nearly $42 million from the funds before shutting down operations. It had long been a cash-poor company with a history of net losses, generating less than $100,000 in revenue during its 11-year history. Yet Spangler continued to treat the funds as the company’s piggy bank.
The SEC alleges that Spangler also did not tell investors that TSG collected fees for “financial and operational support” from these companies, which were essentially paying these fees with the client money they had received from the funds. Therefore, Spangler and his firm secretly reaped $830,000 from the companies in addition to any management fees that TSG received from clients.

According to the SEC’s complaint, Spangler concealed his diversion of client funds for years. He disclosed it only after he placed TSG and the funds he managed into state court receivership in 2011.

The SEC’s complaint charges Spangler and TSG with violating, among other things, the antifraud provisions of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. The complaint seeks injunctive relief, disgorgement with prejudgment interest, and financial penalties.

The SEC’s investigation was conducted by Karen Kreuzkamp and Robert S. Leach of the San Francisco Regional Office with assistance from Michael Tomars, Peter Bloom, and Christine Pelham of the investment adviser/investment company examination program. Robert L. Tashjian will lead the SEC’s litigation.

The SEC thanks the U.S. Attorney’s Office for the Western District of Washington, the Federal Bureau of Investigation, and the Internal Revenue Service for their assistance in this matter.



YAHOO, AMERIPRISE FORMER EXECS CHARGE WITH INSIDER TRADING BY SEC

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., May 21, 2012 — The Securities and Exchange Commission today charged a former executive at Yahoo! Inc. and a former mutual fund manager at a subsidiary of Ameriprise Financial Inc. with insider trading on confidential information about a search engine partnership between Yahoo and Microsoft Corporation.

The SEC alleges that Robert W. Kwok, who was Yahoo's senior director of business management, breached his duty to the company when he told Reema D. Shah in July 2009 that a deal between Yahoo and Microsoft would be announced soon. Shah had reached out to Kwok amid market rumors of an impending partnership between the two companies, and Kwok told her the information was kept quiet at Yahoo and only a few people knew of the coming announcement. Based on Kwok's illegal tip, Shah prompted the mutual funds she managed to buy more than 700,000 shares of Yahoo stock that were later sold for profits of approximately $389,000.

The SEC further alleges that a year earlier, the roles were reversed. Shah tipped Kwok with material nonpublic information about an impending acquisition announcement between two other companies. Kwok traded in a personal account based on the confidential information for profits of $4,754.

Kwok and Shah, who each live in California, have agreed to settle the SEC's charges. Financial penalties and disgorgement will be determined by the court at a later date. Under the settlements, Shah will be permanently barred from the securities industry and Kwok will be permanently barred from serving as an officer or director of a public company.
"Kwok and Shah played a game of you scratch my back and I'll scratch yours," said Scott W. Friestad, Associate Director in the SEC's Division of Enforcement. "When corporate executives and mutual fund professionals misuse their access to confidential information, they undermine the integrity of our markets and violate the trust placed in them by investors."

In a parallel criminal case announced today by the U.S. Attorney's Office for the Southern District of New York, Kwok has pled guilty to conspiracy to commit securities fraud, and Shah has pled guilty to both a primary and conspiracy charge. Both are awaiting sentencing.

According to the SEC's complaint filed in U.S. District Court for the Southern District of New York, Shah and Kwok first met in January 2008 when Shah was attending a real estate conference in California at the same facility where Yahoo was holding a meeting. The two met in a hallway and began discussing their respective businesses, and thereafter they spoke frequently by phone or in person. Kwok provided Shah with information about Yahoo, including whether Yahoo's quarterly financial performance was expected to be in line with market estimates. In return, Shah provided Kwok with information she learned in the course of her work, and he used it to help make his personal investment decisions. Both Shah and Kwok benefitted from this exchange of information.

The SEC alleges that in early 2008, shortly after their initial meeting, Shah told Kwok that she had learned through an inside source at Autodesk Inc. that it intended to acquire Moldflow Corporation. Based on this illegal tip that Kwok received from Shah, he purchased 1,500 shares of Moldflow in a personal account from April 7 to April 25. Autodesk and Moldflow announced the acquisition on May 1, and the price of Moldflow stock increased 11 percent. Kwok then sold his shares for a profit.

According to the SEC's complaint, Shah followed Yahoo closely as a portfolio manager at Ameriprise subsidiary RiverSource Investments LLC and previously at J. & W. Seligman & Co. She believed that the announcement of a partnership between Yahoo and Microsoft would have a positive impact on Yahoo's stock. In July 2009, when certain media began reporting that a deal could be forthcoming with Microsoft making a large up-front payment to Yahoo, Shah reached out to Kwok for inside information. Both Kwok and Shah knew that Kwok was tipping Shah in breach of his duty to Yahoo. Based on the confidential information she received from Kwok, Shah prompted certain RiverSource funds she helped managed to purchase 700,300 shares of Yahoo on July 16. The largest purchase was made in the Seligman Communications and Information Fund, which alone added approximately 450,000 shares of Yahoo to its holdings. On July 28, the shares were sold and a profit was realized.

The SEC's complaint charges Kwok and Shah with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In the settlements that are subject to court approval, Kwok and Shah acknowledged the facts to which they pled guilty and consented to judgments that impose permanent injunctions. The settlements also include the bars and to-be-determined financial sanctions.

The SEC's investigation, which is continuing, has been conducted by Brian O. Quinn and Brian D. Vann in the SEC's Division of Enforcement. The SEC thanks the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation for their assistance in this matter.

Monday, May 21, 2012

Testimony of Deputy Assistant Secretary Lance Auer before the House Financial Services Financial Institutions Subcommittee on Implementing Title I of the Dodd-Frank Act: Regulating Ssystemically Important Nonbank Financial Institutions

Testimony of Deputy Assistant Secretary Lance Auer before the House Financial Services Financial Institutions Subcommittee on Implementing Title I of the Dodd-Frank Act: Regulating Ssystemically Important Nonbank Financial Institutions

FORMER CEO OF PRESSTEK, INC. SETTLES REGULATION FD CHARGES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
May 15, 2012
The Securities and Exchange Commission announced today that Edward J. Marino of Boston, Massachusetts, the former chief executive officer of Connecticut-based Presstek, Inc., has agreed to settle previously-filed charges that he aided and abetted Presstek’s violations of Section 13(a) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Regulation FD. Regulation FD generally prohibits public companies from selectively disclosing material non-public information to certain investors without simultaneously disclosing it to all investors. Among other things, Marino has agreed to pay a $50,000 civil penalty.

On March 9, 2010, the Commission filed a civil injunctive action against Marino and Presstek, a manufacturer and distributor of high-technology digital imaging equipment. The Commission's complaint alleged that on September 28, 2006, while acting on behalf of Presstek, Marino selectively disclosed material non-public information regarding Presstek's financial performance during the third quarter of 2006 to partner of a registered investment adviser. According to the complaint, within minutes of receiving the information from Marino, the partner decided to sell all of the shares of Presstek stock managed by the investment adviser. The complaint alleged that Presstek violated of Section 13(a) of the Exchange Act and Regulation FD when it did not simultaneously disclose to the public the information provided by Marino to the partner, and that Marino aided and abetted those violations.

Without admitting or denying the Commission’s allegations, Marino has consented to the entry of a civil judgment requiring him to pay a $50,000 civil penalty. The civil judgment is subject to approval of the U.S. District Court for the District of Massachusetts. Marino also consented to the issuance of an administrative order making findings that he caused Presstek’s violations and ordering him to cease and desist from committing or causing any violations and any future violations of Section 13(a) of the Exchange Act and Regulation FD.

At the time the case was originally filed in March 2010, Presstek agreed to settle the Commission's charges by consenting to a judgment that enjoins Presstek from further violations of Section 13(a) of the Exchange Act and Regulation FD and ordered it to pay a $400,000 civil penalty.

Sunday, May 20, 2012

SEC CHARGES U.S. PERPETRATORS IN $35 MILLION INTERNATIONAL BOILER ROOM SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
May 16, 2012
The Securities and Exchange Commission announced that the SEC filed an action today against SEC recidivist Nicholas Louis Geranio, Keith Michael Field, The Good One, Inc. and Kaleidoscope Real Estate, Inc. for their roles in a $35 million scheme to manipulate the market and to profit from the issuance and sale of certain U.S. companies’ (“Issuers’”) stock through offshore boiler rooms. The scheme ran from approximately April 2007 to October 2009.

According to the SEC’s complaint, the scheme worked as follows:  Geranio organized eight U.S. Issuers, installed management (including Field), and entered into consulting agreements with them through his alter-ego entities The Good One and Kaleidoscope.  Geranio then allegedly set up a common system to raise money through the Issuers’ sale of Regulation S shares to offshore investors by boiler rooms that Geranio recruited.  Field allegedly drafted materially misleading business plans, marketing materials, and website material for the Issuers, which the offshore boiler rooms provided to investors as part of their fraudulent solicitation efforts.

The complaint further alleges that Geranio directed traders, including Field, to engage in matched orders and manipulative trades to establish artificially high prices for at least five of the Issuers’ stock and to deceptively convey to the market the impression that legitimate transactions had created bona fide prices for the stock.  According to the complaint, this manipulation of the publicly-traded stock price allowed the boiler rooms to sell the Regulation S shares at a higher price to the overseas investors.   The complaint alleges that the boiler rooms, teams of unregistered telemarketers operating mostly from Spain, used high-pressure sales tactics and materially false statements and omissions to induce the investors (many of them elderly and located in the United Kingdom) to buy the Issuers’ Regulation S stock.  Investors then sent their money to U.S.-based escrow agents, who paid 60% to 75% of the approximately $35 million in proceeds to the boiler rooms as their sales markups, kept 2.5% as their fee, and paid the remaining proceeds to the Issuers.  The Issuers (or in some cases the escrow agents) then funneled approximately $2.135 million of the proceeds of the Regulation S sales to Geranio, through The Good One and Kaleidoscope, and paid Field approximately $279,000.

The SEC filed its action in the U.S. District Court for the Central District of California, alleging that: Geranio, Field, The Good One and Kaleidoscope violated Sections 17(a)(1) and (3) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5(a) and (c) thereunder; Field also violated Section 17(a)(2) of the Securities Act and aided and abetted the Issuers’ violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder; and Geranio also is liable as a control person of The Good One and Kaleidoscope under Exchange Act Section 20(a). The SEC seeks in its action permanent injunctions, disgorgement plus prejudgment interest, civil penalties, and penny stock bars against all defendants, and also officer and director bars against Geranio and Field. The complaint further seeks disgorgement and prejudgment interest against relief defendant BWRE Hawaii, LLC based on its alleged receipt of investor funds.

The Issuers from April 2007 through October 2009 were: Green Energy Live, Inc.; Spectrum Acquisition Holdings, Inc.; United States Oil & Gas Corp.; Mundus Group, Inc.; Blu Vu Deep Oil & Gas Exploration, Inc.; Wyncrest Group, Inc.; Microresearch Corp.; and Power Nanotech, Inc.



Saturday, May 19, 2012

379 DORMANT COMPANIES ARE SUSPENDED BY THE SEC

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., May 14, 2012 — The Securities and Exchange Commission suspended trading in the securities of 379 dormant companies before they could be hijacked by fraudsters and used to harm investors through reverse mergers or pump-and-dump schemes. The trading suspension marks the most companies ever suspended in a single day by the agency as it ramps up its crackdown against fraud involving microcap shell companies that are dormant and delinquent in their public disclosures.

Microcap companies typically have limited assets and low-priced stock that trades in low volumes. An initiative tabbed Operation Shell-Expel by the SEC's Microcap Fraud Working Group utilized various agency resources including the enhanced intelligence technology of the Enforcement Division's Office of Market Intelligence to scrutinize microcap stocks in the markets nationwide and identify clearly dormant shell companies in 32 states and six foreign countries that were ripe for potential fraud.

"Empty shell companies are to stock manipulators and pump-and-dump schemers what guns are to bank robbers — the tools by which they ply their illegal trade," said Robert Khuzami, Director of the SEC's Division of Enforcement. "This massive trading suspension unmasks these empty shell companies and deprives unscrupulous scam artists of the opportunity to profit at the expense of unsuspecting retail investors."

Thomas Sporkin, Director of the SEC's Office of Market Intelligence, added, "It's critical to assess risks to investors in the capital markets and, through strategic planning, develop ways to neutralize them. We were able to conduct a detailed review of the microcap issuers quoted in the over-the-counter market and cull out these high-risk shell companies."

The SEC's previously largest trading suspension was an order in September 2005 that involved 39 companies. The federal securities laws allow the SEC to suspend trading in any stock for up to 10 business days. Subject to certain exceptions and exemptions, once a company is suspended from trading, it cannot be quoted again until it provides updated information including accurate financial statements.

Pump-and-dump schemes are among the most common types of fraud involving microcap companies. Perpetrators will tout a thinly-traded microcap stock through false and misleading statements about the company to the marketplace. After purchasing low and pumping the stock price higher by creating the appearance of market activity, they dump the stock to make huge profits by selling it into the market at the higher price.

The existence of empty shell companies can be a financial boon to stock manipulators who will pay as much as $750,000 to assume control of the company in order to pump and dump the stock for illegal proceeds to the detriment of investors. But with this trading suspension's obligation to provide updated financial information, these shell companies have been rendered essentially worthless and useless to scam artists.

"This mass trading suspension is an effective and novel way for the SEC to neutralize potential threats to investors," said Chris Ehrman, Co-National Coordinator of the SEC's Microcap Fraud Working Group. "With the ability to leverage staff expertise throughout the agency's offices and divisions, the Working Group is uniquely positioned to take on risk-based matters like these and focus resources where they are needed most." This SEC enforcement effort has been led by Mr. Ehrman, Robert Bernstein, Jessica P. Regan, Leigh Barrett, and Megan Alcorn in the Office of Market Intelligence along with Microcap Fraud Working Group staff from each of the SEC's regional offices: Tanya Beard, David Berman, Sharon Binger, Melissa Buckhalter-Honore, Lisa Cuifolo, Tracy Davis, Elisha Frank, Kurt Gottschall, Lucy Graetz, Jennifer Hieb, C.J. Kerstetter, Victoria Levin, Aaron Lipson, Michael Paley, Farolito Parco, Jonathan Scott, and Lauchlan Wash. The SEC appreciates the assistance and cooperation of the Federal Bureau of Investigation's Economic Crimes Unit.

Friday, May 18, 2012

SEC CHARGED HAWAII RESIDENT WITH BOILERROOM BUSINESS

FROM:  SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., May 16, 2012 — The Securities and Exchange Commission today charged a Hawaii resident and two firms he used to orchestrate a scheme in which he covertly founded small companies, installed management, and recruited overseas boiler rooms that pressured investors into buying their stock while he pocketed more than $2 million in consulting fees from proceeds of the fraudulent stock sales.

The SEC alleges that Nicholas Louis Geranio worked behind the scenes to create eight U.S.-based companies used to raise money through the sale of Regulation S stock, which is exempt from SEC registration under the securities laws because it is offered solely to investors located outside the United States. Geranio handpicked the management for the companies, primarily Keith Michael Field of Sherman Oaks, Calif., who served as an officer, director, or investor relations representative for each company and also is charged in the SEC’s complaint. Geranio then set up consulting arrangements through his firms — The Good One Inc. and Kaleidoscope Real Estate Inc. — so he could instruct management on how to run the companies and raise money offshore. Geranio extracted consulting fees from the companies, which generally had few or no employees, little or no office space, and no sales or customers.

The SEC alleges that Field drafted misleading business plans, marketing materials, and website information about the companies that were provided to investors as part of fraudulent solicitation efforts by teams of telemarketers operating in boiler rooms that Geranio recruited primarily in Spain. The boiler rooms used high-pressure sales tactics and false statements about the companies to raise more than $35 million from investors. Meanwhile, Geranio instructed Field and others to buy and sell shares in some of the companies to create an illusion of trading activity and manipulate upwards the price of the publicly-traded stock.

“Geranio covertly set up companies and manipulated the market for their stock to profit from aggressive offshore boiler room activity,” said Stephen L. Cohen, Associate Director in the SEC’s Division of Enforcement. “Geranio pulled the strings while Field scripted the show for the boiler rooms to bring a payday to everyone but the investors.”

According to the SEC’s complaint filed in the U.S. District Court for the Central District of California, Geranio was the subject of a previous SEC enforcement action in 2000. In his latest misconduct, he concealed his role from investors and the public at all times by acting through The Good One and Kaleidoscope. The scheme lasted from April 2007 to September 2009. Geranio began by locating and acquiring shell companies to create the issuers used in the scheme: Blu Vu Deep Oil & Gas Exploration Inc., Green Energy Live Inc., Microresearch Corp., Mundus Group Inc., Power Nanotech Inc., Spectrum Acquisition Holdings Inc., United States Oil & Gas Corp., and Wyncrest Group Inc. Geranio then appointed management for these companies, in some cases turning to business associates, friends, or others. For example, the former CEO of Blu Vu was someone Geranio met while kite surfing in Malibu.

According to the SEC’s complaint, Geranio worked behind the scenes to keep the companies’ publicly-traded shares trading at prices conducive to the boiler room sales. He did this by directing Field, personal friends, and others to open accounts and buy or sell shares in at least five of the companies as part of matched orders and manipulative trades that created the false impression of active trading and market value in these stocks. The manipulative trades allowed the boiler rooms to sell the Regulation S shares to overseas investors at higher prices.

The SEC alleges that boiler room representatives recruited by Geranio induced investors by using aggressive techniques consistent with boiler room activity. For instance, they promised immediate and substantial investment returns, convinced investors that they needed to purchase the shares immediately or miss the grand opportunity altogether, and threatened legal action if an investor did not agree to purchase shares that the representatives believed the investor had already agreed to purchase. The boiler rooms also used “advance fee” solicitations, telling investors that only if they purchased shares in one of these companies would the boiler room agree to sell their other shares. Many of the investors were elderly and living in the United Kingdom.

According to the SEC’s complaint, investors were directed to pay for their Regulation S stock by sending money to U.S.-based escrow agents. As arranged by Geranio, the escrow agents paid 60 to 75 percent of the approximately $35 million raised from investors to the boiler rooms as their sales markups, kept 2.5 percent as their own fee, and paid the remaining proceeds back to the companies that Geranio created. The companies (or in some cases the escrow agents) then funneled approximately $2.135 million of the proceeds back to Geranio through The Good One and Kaleidoscope in the form of consulting fees, and paid Field approximately $279,000.

The SEC alleges that Geranio also assisted in diverting $240,000 in investor funds toward an undisclosed down payment on a property to start a Hawaiian wedding planning company.

The SEC’s complaint alleges that Geranio, Field, The Good One and Kaleidoscope violated Sections 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. The complaint alleges that Field also violated Section 17(a)(2) of the Securities Act and aided and abetted the companies’ violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, and Geranio is liable as a control person of The Good One and Kaleidoscope under Exchange Act Section 20(a). The SEC is seeking financial penalties, disgorgement of ill-gotten gains plus prejudgment interest, penny stock bars, and permanent injunctions against all of the defendants, as well as officer and director bars against Geranio and Field. The complaint seeks disgorgement and prejudgment interest against relief defendant BWRE Hawaii LLC based on its alleged receipt of investor funds.
The SEC's investigation, which is continuing, has been conducted by Ricky Sachar, Carolyn Kurr, and Wendy Kong under the supervision of Josh Felker with assistance from Jim Daly in the Office of International Affairs. Richard Simpson will lead the litigation. The SEC acknowledges the assistance of the City of London Police, Macedonian Securities and Exchange Commission, Macedonian Public Prosecutor, Lithuanian Securities Commission, Australian Securities and Investments Commission, Comision Nacional del Mercado de Valores (Spain), and Financial Market Supervisory Authority (Switzerland).

Thursday, May 17, 2012

SEC CHARGES MAN WITH HAVING A REAL ESTATE INVESTMENT PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., May 17, 2012 – The Securities and Exchange Commission today charged a New Jersey man with operating a Ponzi-like scheme involving a series of investment vehicles formed for the purported purpose of purchasing and managing rental apartment buildings in New Jersey and Pennsylvania.

The SEC alleges that David M. Connolly induced investors to buy shares in real estate investment vehicles he created through his firm Connolly Properties Inc. He promised investors monthly dividends based on cash-flow profits from rental income at the apartment buildings as well as the growth of their principal from the appreciation of the property. However, the real estate investments did not produce the projected dividends, and Connolly instead made Ponzi-like dividend payments to earlier investors using money from new investors. Connolly, who lives in Watchung, N.J., also siphoned off at least $2 million in investor funds for his personal use.

“David Connolly presented himself to investors as a successful real estate investment manager with a track record of paying consistent, high returns,” said George S. Canellos, Director of the SEC’s New York Regional Office. “In truth, Connolly’s operation was essentially a shell game intended to raise additional funds from new or existing investors in order to perpetuate his fraudulent scheme.”

The U.S. Attorney’s Office for the District of New Jersey, which conducted a parallel investigation of the matter, today announced that Connolly was indicted on one count of securities fraud among other criminal charges.
According to the SEC’s complaint filed in federal court in New Jersey, none of Connolly’s securities offerings in the investment vehicles were registered with the SEC as required under the federal securities laws. He began offering the investments in 1996 and ultimately raised in excess of $50 million from more than 200 investors in more than 25 investment vehicles. However, beginning in at least 2006, Connolly misrepresented to investors that their funds would be used exclusively for the property related to the particular vehicle in which they invested. Connolly instead commingled the funds in bank accounts that he alone controlled and used for a variety of purposes that weren’t disclosed to investors, including $2 million in payments he made to himself that vastly exceeded any dividends to which he would be entitled through his ownership stake. Between 2007 and 2010, Connolly also wrote checks to “cash” in excess of $2.5 million. Even after Connolly stopped making dividend payments to investors in April 2009, he still continued to pay himself dividends as well as a $250,000 “salary” out of investor funds.

The SEC alleges that Connolly lacked sufficient revenues from rental income at the apartment buildings, so he continued to raise millions of dollars for new investment vehicles. He used the funds to pay purported monthly cash-flow dividends in excess of 10 percent to investors in older investment vehicles. Connolly refinanced properties and improperly used the cash proceeds to continue the scheme, which ultimately collapsed in 2009 when new investor funds dried up and rental income was insufficient to support payments on the mortgages. The properties owned by the investment vehicles were forced into foreclosure, wiping out the equity of the investors.
The SEC’s complaint charges Connolly with violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC’s complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

The SEC’s investigation was conducted by Justin Smith and William Edwards in the New York Regional Office. Jack Kaufman will lead the litigation.

The SEC thanks the U.S. Attorney’s Office for the District of New Jersey, the Federal Bureau of Investigation, 
and the Internal Revenue Service for their assistance in this matter.





Sunday, May 13, 2012

COURT ENTERS FINAL JUDGMENT AGAINST GLOBAL DEVELOPMENT & ENVIRONMENTAL RESOURCES, INC.

FROM:  SEC
May 11, 2012
The Commission announced that on April 23, 2012, the United States District Court for the Middle District of Florida entered a Final Judgment against Defendants Philip Pritchard, Pietro Cimino, and Global Development & Environmental Resources, Inc. The Final Judgment orders Pritchard, Cimino, and Global to pay, jointly and severally, disgorgement in the amount of $2,122,625, plus $523,173.27 in prejudgment interest. The Final Judgment also orders Pritchard and Cimino to each pay a civil penalty of $130,000.
The Commission commenced this action by filing its complaint on May 22, 2008. The complaint alleged defendants participated in a fraudulent "pump and dump" scheme to evade the registration provisions of the federal securities laws and then sell purportedly unrestricted Global shares during a fraudulent promotional campaign.

The Commission previously announced on March 8, 2010 that following a five day trial, a seven member jury in the U.S. District Court in Tampa, Florida found Darko S. Mrakuzic liable for violating the anti-fraud and registration provisions of the federal securities laws in connection with the above scheme that netted Mrakuzic more than $6 million in profits in violation of Sections 5(a) and (c) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. On February 7, 2011, the Court ordered Mrakuzic to pay a total of $9,135,089 which included disgorgement of $6,568,568, pre-judgment interest of $2,306,521 and a civil penalty of $260,000.

Global, Pritchard, Cimino, and Defendants Carmine J. Bua, Anthony M. Cimini, Sr., and Dante M. Panella, all previously settled the Commission’s anti-fraud and securities registration charges against them by consenting, without admitting or denying the Commission’s allegations, to permanent injunctions. All the individuals consented to penny stock bars, and Cimini, Pritchard, and Cimino consented to officer-and-director bars. The Court also previously ordered disgorgement and civil penalties against Cimini, Bua, and Panella. The Commission’s claim for a civil penalty against Global Development has been voluntarily dismissed.

SEC BRINGS ENFORCEMENT ACTION AGAINST SHANGHAI-BASED DELOITTE TOUCHE TOHMATSU CPA LTD.

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., May 9, 2012 — The Securities and Exchange Commission today announced an enforcement action against Shanghai-based Deloitte Touche Tohmatsu CPA Ltd. for its refusal to provide the agency with audit work papers related to a China-based company under investigation for potential accounting fraud against U.S. investors.

According to the SEC’s order instituting administrative proceedings against D&T Shanghai, the agency has been making extensive efforts for more than two years to obtain documents related to the firm’s work for the company, which issues U.S. securities registered with the SEC. The firm is charged with violating the Sarbanes-Oxley Act, which requires foreign public accounting firms to provide audit work papers concerning U.S. issuers to the SEC upon request. D&T Shanghai has nonetheless failed to provide the documents, citing Chinese law as the reason for its refusal.

“As a voluntarily registered U.S. public accounting firm, D&T Shanghai cannot benefit from the financial and reputational rewards that come with auditing U.S. issuers without also meeting its U.S. legal obligations,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.  “Foreign firms auditing U.S. issuers should not be permitted to shield themselves from regulatory scrutiny to the detriment of U.S. investors.”
Scott Friestad, Associate Director of the SEC’s Division of Enforcement, added, “Without access to work papers of foreign public accounting firms, our investigators are unable to test the quality of the underlying audits and fulfill our responsibilities to investors.”

In a separate matter last year, the SEC filed a subpoena enforcement action against D&T Shanghai in federal court after the firm failed to produce documents in response to a subpoena related to an SEC investigation into possible fraud by one of its longtime clients, Longtop Financial Technologies Limited. The SEC later filed charges against Longtop for alleged reporting failures.

According to the SEC’s order in this latest enforcement action, D&T Shanghai is a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB). In April 2010, SEC staff began seeking D&T Shanghai’s audit work papers related to its independent audit work for the client involved in an SEC investigation. The SEC served Deloitte LLP, the U.S. member firm, with a subpoena requesting various related documents. Counsel for Deloitte LLP informed the staff that the U.S. firm did not perform any audit work for the client and therefore did not possess the documents related to the subpoena.

According to the SEC’s order, in the SEC staff’s continuing quest for the audit work papers in D&T Shanghai’s possession, they were later informed by counsel for Deloitte’s global firm that the agency’s request for audit work papers had been specifically communicated to D&T Shanghai. Subsequently, the staff served D&T Shanghai with a request through Deloitte LLP for the audit work papers pursuant to Section 106 of the Sarbanes-Oxley Act. D&T Shanghai would not produce the relevant audit work papers because of its interpretation that it is prevented from doing so by Chinese law. SEC staff also has sought to obtain the relevant audit work papers through international sharing mechanisms, yet these efforts have been unsuccessful.

This is the first time the Commission has brought an enforcement action against a foreign audit firm failing to comply with a Section 106 request.

In the SEC’s order, the Enforcement Division alleges that D&T Shanghai willfully violated the Sarbanes-Oxley Act and the Securities Exchange Act of 1934 by failing to provide the SEC with the audit work papers. The administrative proceeding will be assigned to an Administrative Law Judge at the agency. The judge would determine the appropriate remedial sanctions if the judge finds in favor of the SEC staff.

Saturday, May 12, 2012

JUDGEMENT RENDERED ON OFF-EXCHANGE FOREX SCAM

FROM:  CFTC

CFTC Obtains Default Judgment against Former Florida Resident Juvenal E. Machado and His Company, Invers Forex, LLC, for Off-Exchange Forex Scam

Court orders defendants to pay more than $4 million in customer restitution and penalty and permanently bars them from the commodities industry

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Marcia G. Cook, of the U.S. District Court for the Southern District of Florida, entered an order of default judgment and permanent injunction against Juvenal Eduardo Machado (Machado) (aka Juvenal Eduardo Machado Bogadi, Edward Kaufman, and Eduardo Machado), whose last known address in the United States is Miami, Fla., and his company, Invers Forex, LLC. Neither defendant has ever been registered with the CFTC.
The order stems from a CFTC enforcement action filed on June 23, 2011, that charged the defendants with defrauding customers in an off-exchange foreign currency (forex) scam and with misappropriating customer funds (see CFTC Press Release 6057-11).
The order requires Machado and Invers Forex jointly and severally to pay a $3.92 million civil monetary penalty and restitution of $201,613. The order also imposes permanent trading and registration bans against the defendants and prohibits them from violating the Commodity Exchange Act, as charged.
The order finds that beginning in December 2008, and continuing to at least March 2010, Machado and Invers Forex fraudulently solicited least $717,100 from at least 28 persons, including Machado’s friends, neighbors, and church members, to trade forex on their behalf. According to the order, many of Machado’s prospective customers attended prayer meetings in his home, where Machado touted his forex trading experience and ability. The order finds that Machado told customers and prospective customers that God had put him on the earth to help people financially, or words to that effect, and that by trading forex contracts for them, he could give them financial freedom for the rest of their lives.
The order also finds that as part of his solicitation, Machado offered prospective customers guaranteed “interest” (i.e., profits) on their investments of five percent or more per month and falsely represented to at least one prospective customer that he had never lost money trading forex.
Of the $717,100 that customers provided to the defendants to trade forex, the defendants lost $120,117 trading forex, returned $395,370 to customers as purported profits, and misappropriated the remaining $201,613, the order finds.
In May or June 2010, without returning all of the customers’ remaining funds, Machado moved from his home in Miami, Fla., to Ontario, Canada, and his customers have not been able to contact him, according to the order.
The CFTC appreciates the assistance of the United Kingdom’s Financial Services Authority.
The CFTC Division of Enforcement staff members responsible for this case are Matthew Elkan, Michael Loconte, Erica Bodin, Dan Jordan, Rick Glaser, and Richard Wagner.

Friday, May 11, 2012

FINAL JUDGEMENT ENTERED AGAINST MARKET TIMERS

FROM:  SECURITIES AND EXCHANGE COMMISSION 
May 8, 2012
Court Enters Final Judgments Against Defendants in Market Timing Case
The Commission announced that a Massachusetts federal court entered final judgments by consent against James Tambone and Robert Hussey, defendants in a case filed by the Commission on May 19, 2006. The Commission alleged in its complaint that from 1998 through 2003, Tambone and Hussey, two senior executives at Columbia Funds Distributor, Inc., the underwriter for the Columbia complex of mutual funds, allowed certain preferred customers to engage in frequent short-term trading in certain Columbia mutual funds in contravention of the prospectuses that represented that the funds did not permit, or were otherwise hostile to, market timing or other short-term or excessive trading.

Without admitting or denying the allegations in the Commission’s complaint, Hussey consented to a final judgment entered by the Court on April 13, 2012 and Tambone consented to a final judgment entered by the Court on May 7, 2012. The final judgment ordered Hussey to pay disgorgement in the amount of $37,500, plus prejudgment interest in the amount of $20,980, and a civil penalty of $75,000, for a total amount of $133,480. The final judgment ordered Tambone to pay disgorgement in the amount of $26,687, plus prejudgment interest in the amount of $15,344.38, and a civil penalty of $75,000, for a total amount of $117,031.38.

On March 19, 2012, the parties stipulated to dismiss the claim in the complaint alleging that Tambone and Hussey aided and abetted violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The claim in the complaint alleging direct violations of Section 10(b) and Rule 10b-5 was dismissed earlier in the litigation.

Thursday, May 10, 2012

SEC OBTAINS FINAL JUDGEMENT IN ILLEGAL TIPPING OF HEDGE FUND CASE

FROM:  SEC
 May 8, 2012
SEC Obtains Final Judgment on Consent Against James Fleishman
The SEC announced that, on May 7, 2012, the Honorable Jed S. Rakoff, United States District Judge, United States District Court for the Southern District of New York, entered a Final Judgment on consent as to James Fleishman in the SEC’s insider trading case, entitled SEC v. Mark Anthony Longoria, et al., 11-CV-0753 (SDNY) (JSR).

This case alleges insider trading by ten individuals and one investment adviser entity, all of whom are consultants, employees, or clients of the so-called “expert network” firm, Primary Global Research LLC (“PGR”). The SEC filed its Complaint on February 3, 2011, charging two PGR employees and four consultants with insider trading for illegally tipping hedge funds and other investors. On February 8, 2011, the SEC filed an Amended Complaint, charging a New York-based hedge fund and four hedge fund portfolio managers and analysts who illegally traded on confidential information obtained from technology company employees moonlighting as expert network consultants. The scheme netted more than $30 million from trades based on material, nonpublic information about such companies as Advanced Micro Devices, Seagate Technology and Western Digital. The charges were the first against traders in the SEC's ongoing investigation of insider trading involving expert networks.

The SEC alleged that Fleishman was a vice president of sales at PGR who facilitated the transfer of material nonpublic information from PGR consultants to PGR clients and, in certain instances, acted as a conduit by receiving material nonpublic information from PGR consultants and passing that information directly to PGR clients.

The Final Judgment entered against Fleishman permanently enjoins him from violations of Section 10(b) of the Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rule 10b-5 and orders him liable for disgorgement of ill-gotten gains of $49,150, which is to be deemed satisfied by the order of forfeiture of $49,150 entered against Fleishman in a parallel criminal action against him. In the parallel criminal action, Fleishman was also sentenced to a 30-month term of imprisonment, which he is currently serving. In light of this, the Commission did not seek a civil penalty from Fleishman in this settlement.

Separately, Fleishman has also consented to the entry of an order by the SEC instituting administrative proceedings pursuant to Section 15(b) of the Exchange Act barring Fleishman from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock.



SEC ALLEGES A FRAUDULENT "PRIME BANK" SCHEME

FROM:  SECURITIES AND EXCHANGE COMMISSION
May 8, 2012
SEC Charges Arizona Resident with Securities Fraud
The Securities and Exchange Commission (“Commission”) filed a civil injunctive action in Atlanta, Georgia on May 8, 2102, alleging that Gerald D. Kegley (“Kegley”) and the company he operates, Prism Financial Services, LLC (“Prism”), participated in a fraudulent “Prime Bank” scheme that violated the antifraud and securities and broker dealer registration provisions of the federal securities laws.

The Commission’s complaint alleges that from at least April 8, 2010 through at least August 20, 2010, the defendants were directly responsible for introducing six individuals, who invested $1.95 million, to the fraudulent scheme. The complaint alleges that in furtherance of the scheme, the defendants forwarded misrepresentations made by others to investors. These misrepresentations included: 1) that investors could draw upon bank issued guarantees worth millions of dollars without having to repay the withdrawn funds; and 2) that investor funds would be held in escrow until the bank guarantees were issued. The complaint alleges that defendants knew or were reckless in not knowing that both of these representations were false because no such bank guarantees existed and investor funds were misappropriated immediately upon receipt.

Defendants also misrepresented that they would be paid commissions only once the investor received the bank guarantee. In fact, defendants were paid commissions relatively soon after the investors transferred the money. Defendants further told investors that they had previously worked on a successful bank guarantee program. Defendants, however, had actually reported this purportedly successful bank guarantee program to the Federal Bureau of Investigation because they believed it was a fraud.

In its Complaint, the Commission alleges that the defendants violated Sections 5(a) and (c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Commission also alleges that defendants aided and abetted violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

Wednesday, May 9, 2012

SEC CHARGES MOVIE PRODUCER AND RING OF RELATIVES AND BUSINESS PARTNERS WITH INSIDER TRADING

FROM:  SECURITIES AND EXCHANGE COMMISSION
May 8, 2012
The Securities and Exchange Commission today charged a Hollywood movie producer along with his brother, cousin, and three others in his circle of friends and business partners with insider trading in the stock of a company for which he served on the board of directors.

The SEC alleges that Mohammed Mark Amin, prior to a company board meeting, learned confidential information about expanding business opportunities for DuPont Fabros Technology Inc., which develops and manages highly-specialized and secure facilities that maintain large computer servers for technology companies through long-term leases with them. The SEC alleges that Amin tipped his brother Robert Reza Amin, cousin Michael Mahmood Amin, and long-time friend and business manager Sam Saeed Pirnazar with nonpublic details about three new leases that DuPont Fabros was negotiating and three loans it was obtaining to develop new facilities.  The SEC also alleges that the three illegally traded on the basis of that inside information.  Reza Amin went on to tip his friends and business associates Mary Coley and Ali Tashakori, who also illegally traded.  Together they made more than $618,000 in insider trading profits when DuPont Fabros stock rose 36 percent after the company issued an earnings release highlighting the development of these new facilities.
Mark Amin and the five others agreed to settle the SEC’s charges by collectively paying nearly $2 million.

According to the SEC’s complaint filed in U.S. District Court for the Central District of California, Mark Amin is a motion picture executive with his own production company.  He lives in Los Angeles and is credited as the producer or executive producer for more than 75 Hollywood movies including Frida,Eve’s Bayou, and four movies in the Leprechaun series.  In 2007, Amin began serving on the board of directors at DuPont Fabros, a real estate investment trust (REIT) whose common stock is listed on the New York Stock Exchange.  DuPont Fabros develops and operates wholesale data centers that maintain computer servers for such companies as Microsoft, Facebook, and Google. Amin resigned from the board in February 2011.

The SEC alleges that Mark Amin first learned nonpublic information about new leases and loans pending for DuPont Fabros during a board meeting in December 2008, and he further discussed their status in a phone conversation with the company’s CEO on Jan. 7, 2009.  According to the SEC’s complaint, that same day, Mark Amin tipped his cousin Michael Amin of Los Angeles and his friend and business manager Pirnazar of Manhattan Beach, Calif.  The SEC alleges that in fact, Mark Amin initially asked Michael to lend him money and discussed Michael’s purchasing DuPont Fabros stock for both of them in Michael’s name.

On February 4, Mark Amin received materials for a special board meeting to approve the three new loans.  The SEC alleges that the next morning, he tipped this inside information to his brother Reza Amin of Los Angeles, who began buying DuPont Fabros stock just 17 minutes after receiving the tip.  The board approved the three new loans later that day.
According to the SEC’s complaint, Reza Amin tipped Coley, a British citizen who lives in Los Angeles with whom he has a daughter.  They are also business partners in a small chain of video stores.  On February 6, he brought Coley into the local E*Trade branch office where he maintained a brokerage account so she could open a new brokerage account to purchase DuPont Fabros shares.  The SEC alleges that Reza Amin also tipped his friend Tashakori, who lives in Rolling Hills, Calif. and as a self-employed licensed general contractor was engaged in various construction projects for both Mark and Reza Amin.  The SEC also alleges that Tashakori purchased DuPont Fabros stock based on Reza Amin’s tip.

According to the SEC’s complaint, DuPont Fabros issued its 2008 earnings release after the market closed on February 11, 2009, and highlighted that it had obtained the three new loans and entered into the three new leases.  The SEC alleges that from January 8 to February 10, Michael Amin had purchased 145,000 DuPont Fabros shares that yielded him $318,646 in insider trading profits when the stock price soared upon news of the earnings release.  The SEC also alleges that Pirnazar purchased 10,500 shares and made $19,915 in illicit profits.  From February 5 to February 11, Reza Amin purchased 214,600 DuPont Fabros shares for an eventual illegal profit of $241,767.  Coley purchased 20,050 shares and realized insider trading profits of $23,690.  Tashakori purchased 15,000 shares and profited $14,479.

The SEC’s complaint charges the Amins, Pirnazar, Coley, and Tashakori with violating Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5(a) and (c) thereunder.  They have agreed to collectively pay disgorgement of $618,497, prejudgment interest of $78,000, and penalties totaling $1,236,994.  They also have agreed to the entry of a final judgment permanently enjoining them from violating Section 10(b) of the Exchange Act and Rule 10b-5.  Mark Amin has additionally agreed to a bar from serving as an officer or director of a public company for 10 years.  The settlement is subject to court approval.

The SEC’s investigation was conducted by Los Angeles Regional Office enforcement attorney John Britt.  The SEC thanks the Financial Industry Regulatory Authority (FINRA) for its assistance in this matter.

Tuesday, May 8, 2012

PARALEGAL AND DAD CHARGED WITH INSIDER TRADING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Montana-Based Paralegal and Her Father in Insider Trading Scheme
Washington, D.C., May 7, 2012 — The Securities and Exchange Commission today charged a former paralegal at a Kalispell, Mont.-based semiconductor company and her father with insider trading on confidential information about the 2009 acquisition of the company.

The SEC alleges that Angela Milliard wired money to her boyfriend’s brokerage account so she could illegally trade on nonpublic details she learned while working as a legal assistant on Semitool Inc.’s then-secret deal with a Silicon Valley company. She also tipped her father Kenneth Milliard with the confidential information. He then traded on the nonpublic information and tipped his sons, who also made trades. The morning the acquisition was announced, the Milliards sold their shares for illicit profits of more than $67,000.

Angela and Kenneth Milliard have agreed to settle the SEC’s charges by paying more than $175,000.  “Angela Milliard exploited her access to confidential merger and acquisition information to illicitly enrich herself and her family,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “As a member of a legal department entrusted with sensitive deal documents, she had a duty to safeguard that information, not trade on it.”

According to the SEC’s complaint filed in federal court in Montana, Angela Milliard first gained access to confidential deal information in October 2009, when she learned that Semitool and the acquiring company – Applied Materials Inc. – had entered into advanced merger negotiations. After learning that the tender offer was to happen in mid-November at a nearly 30 percent premium over Semitool’s then-trading price, she wired money to her boyfriend’s brokerage account and used it to surreptitiously buy shares of Semitool.
The SEC alleges that Angela Milliard tipped her father, who also purchased Semitool shares and encouraged his sons to do the same, which they did. They reaped their illegal insider trading profits following the public announcement of the merger on Nov. 17, 2009.

The Milliards settled the SEC’s charges without admitting or denying the allegations. Angela Milliard agreed to pay full disgorgement of her trading profits totaling $20,355 plus prejudgment interest of $1,614.60 and a penalty of $54,022.11. Kenneth Milliard agreed to pay full disgorgement of his and his sons’ trading profits totaling $47,805 plus prejudgment interest of $3,765.19 and a penalty of $47,805.11.
The SEC’s investigation was conducted by Jennifer J. Lee and Jina L. Choi of the San Francisco Regional Office.

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