FROM: COMMODITY FUTURES TRADING COMMISSION
Federal Court Orders North Carolina Residents Timothy Bailey and Michael Hudspeth, and their Company, PMC Strategy, LLC, to Pay over $1.8 Million for Fraud in Foreign Currency Ponzi Scheme
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained federal court orders requiring Defendants Timothy Bailey of Monroe, North Carolina, Michael Hudspeth, formerly of Statesville, North Carolina, and their company, PMC Strategy, LLC (PMC), to pay over $1.8 million for solicitation fraud and misappropriation in connection with an off-exchange foreign currency (forex) Ponzi scheme that solicited at least $669,000 from more than 22 individuals
Judge Graham C. Mullen of the U.S. District Court for the Western District of North Carolina entered an Order of Default Judgment and Permanent Injunction against Defendants PMC and Bailey on October 18, 2012, requiring PMC and Bailey jointly to pay over $429,700 in restitution to defrauded pool participants. The Order also imposes a civil monetary penalty of $560,000 on PMC and $420,000 on Bailey and permanently bans them from trading and registering with the CFTC. The Order finds that PMC and Bailey violated the anti-fraud provisions of the Commodity Exchange Act (CEA) by fraudulently soliciting pool participants to trade forex, misappropriating pool participant funds, issuing false account statements, and refusing to return pool participant funds. PMC claimed to have earned a profit of $160,000 from January through June 2008 as a result of its forex trading, according to the Order. However, these representations were false, as PMC was not formed until June 18, 2008, and engaged in no forex trading until July 2008. Furthermore, PMC and Bailey sent false monthly profit checks to pool participants purporting to represent profits earned, when in fact PMC incurred trading losses in 15 of the 22 months it traded, and was overall net negative from October 2008 onward, according to the Order.
Subsequently, on April 3, 2013, Judge Mullen granted Summary Judgment against Defendant Hudspeth finding him liable for the same violations of the CEA as Bailey and PMC, and making Hudspeth jointly and severally liable with Bailey and PMC for the $429,700 restitution award previously ordered by the Court. The Order also imposes a $420,000 civil monetary penalty against Hudspeth and permanently bans him from the commodities industry.
The CFTC Division of Enforcement staff members responsible for this case are Eugenia Vroustouris, Michael Loconte, Daniel Jordan, Rick Glaser, and Richard B. Wagner.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Former "Teach Me to Trade" Saleswoman and Infomercial Personality Linda (Knudsen) Woolf Agrees to Settle Securities Fraud Charges and Pay a $225,000 Penalty
The Securities and Exchange Commission announced that on April 16, 2013 the United States District Court for the Eastern District of Virginia entered settled final judgments against Linda (Knudsen) Woolf and Hands On Capital, Inc. Securities and Exchange Commission v. Linda Woolf, Hands On Capital, Inc., et al, Civil Action No. 1:08cv235 (E.D.Va. filed March 11, 2008). The final judgments resolve the Commission’s case against Woolf and Hands On Capital.
Woolf sold securities trading products and services such as classes, mentoring, and software called "Teach Me to Trade" to investors who wanted to learn how to trade securities. The Commission’s complaint alleges that Woolf told investors at Teach Me to Trade workshops that she had purchased mentoring, classes and software to learn to trade and had quickly turned profits by trading securities using Teach Me to Trade methods. The Commission alleges that Woolf’s tales of making money by trading were untrue; she was not a successful securities trader. Woolf sold the products and services pursuant to an independent contractor agreement between Hands On Capital and Teach Me to Trade
Under the terms of the settlement, Woolf (who filed for bankruptcy while this action was pending) agreed to pay a civil penalty of $225,000. Without admitting or denying the Commission’s allegations, Woolf and Hands On Capital also consented to the entry of final judgments permanently enjoining them from future violations of Section 10(b) of the Securities Exchange Act of 1934. Additionally, the final judgments will permanently enjoin Woolf and Hands On Capital from receiving compensation for participating in the development, presentation, promotion, marketing, or sale of any classes, workshops, or seminars (and from receiving compensation for any sales of connected products or services) given to actual or prospective securities investors concerning securities trading.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Former Investment Bank Analyst and His College Friend Plead Guilty to Insider Trading Scheme
The Securities and Exchange Commission announced that on April 16, 2013, Jauyo "Jason" Lee, 29, of New York, and Victor Chen, 29, of Sunnyvale, Calif., both pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud for their roles in an insider trading scheme.
The criminal charges filed by the U.S. Attorney for the Northern District of California arose out of the same facts that were the subject of a civil action that the SEC filed against Lee and Chen on September 27, 2012. The SEC’s complaint alleged that Lee, who worked in the San Francisco office of Leerink Swann LLC, gleaned sensitive, nonpublic information about two upcoming deals from unsuspecting co-workers involved with those clients and by reviewing various internal documents about the transactions, which involved medical device companies. Lee tipped Chen, his longtime college friend with the confidential information, and Chen traded heavily on the basis of the nonpublic details that Lee had a duty to protect. Chen made more than $600,000 in illicit profits, which was a 237 percent return on his initial investment. Bank records reveal a pattern of large cash withdrawals by Lee followed by large cash deposits by Chen, who then used the money for the insider trading.
According to the SEC’s complaint, Lee was first privy to information about Leerink’s client Syneron Medical Ltd., which was negotiating an acquisition of Candela Corporation in 2009. He later learned that Leerink’s client Somanetics Corporation was in the process of being acquired by Covidien plc. in 2010. As Lee collected nonpublic details about each of the deals, he communicated with Chen repeatedly and exchanged dozens of phone calls and text messages. Some of the calls took place from Lee’s office telephone at Leerink. Lee had a duty to preserve the confidentiality of the information that he received in the course of his employment at Leerink.
The SEC alleged that in the days leading up to the public announcements of each of these deals, Chen made sizeable purchases of stock and call options in Candela and Somanetics and made unusual trades in the securities of each of these acquisition targets. Chen had never previously bought securities in these companies, yet he suddenly spent a significant portion of his available cash to buy the Candela and Somanetics securities. Chen proceeded to sell most of his Candela and Somanetics holdings once public announcements were made about the transactions. Because Chen made some of his trades in his sister Jennifer Chen’s account, the SEC’s complaint also names her as a relief defendant for the purposes of recovering the illegal profits in her account.
As a result of their conduct, the SEC’s complaint charged Lee and Chen with violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. The SEC, whose case is still pending, is seeking disgorgement of ill-gotten gains with prejudgment interest, civil penalties, and permanent injunctions against Lee and Chen.
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Parker Drilling Company with Violating the Foreign Corrupt Practices Act
The Securities and Exchange Commission today charged Parker Drilling Company, a worldwide drilling services and project management firm, with violating the Foreign Corrupt Practices Act (FCPA) by authorizing improper payments to a third-party intermediary retained to assist the company in resolving customs disputes.
The SEC's complaint, filed in federal district court in Alexandria, Virginia, alleges that in 2004 Parker Drilling authorized payments to a Nigerian agent totaling $1.25 million. The company did so despite former senior executives knowing that the agent intended to use the funds to "entertain" Nigerian officials involved in resolving Parker Drilling's ongoing customs problems. Following the Nigerian agent's work, the company received an unexplained $3,050,000 reduction of a previously assessed customs fine, and the company was permitted to nationalize and sell its Nigerian rigs.
To settle the SEC's charges, Parker Drilling will pay disgorgement of $3,050,000 plus pre-judgment interest of $1,040,818. Parker Drilling consented to the entry of a final judgment permanently enjoining it from violating Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act. The proposed settlement is subject to court approval.
In the parallel criminal proceedings, the Department of Justice entered into a Deferred Prosecution Agreement with Parker Drilling in which the company will pay an $11,760,000 penalty.
The SEC acknowledges the assistance of the Department of Justice's Fraud Section, the Federal Bureau of Investigation, and the United Kingdom's Crown Prosecution Service and Metropolitan Police Service.
FROM: U.S. DEPARTMENT OF JUSTICE
April 17, 2013
Federal Court in Florida Orders Michael Alcocer and His Panama-based Company, InovaTrade, Inc., to Pay More than $38 Million in Foreign Currency Fraud Action
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court Order requiring Defendants Michael Alcocer (a U.S. citizen) and his company, InovaTrade, Inc., formerly of Miami and Orlando, Florida and later Panama City, Panama, to pay, jointly and severally, restitution of over $9.6 million and a civil monetary penalty of more than $28.8 million. The Order also imposes permanent trading and registration bans against Alcocer and InovaTrade and permanently prohibits them from further violations of federal commodities law, as charged. Neither Defendant has ever been registered with the CFTC.
The Default Judgment and Permanent Injunction Order was entered on April 5, 2013, by Judge Joan A. Lenard of the U.S. District Court for the Southern District of Florida, and stems from a CFTC Complaint filed on September 21, 2012, that charged Alcocer and InovaTrade with solicitation fraud, providing customers with false statements, and misappropriation in connection with an off-exchange foreign currency (forex) trading scheme.
The Order finds that Alcocer and InovaTrade orchestrated a fraudulent scheme that, between November 2008 and September 2011, induced more than 400 customers to deposit more than $10.6 million with InovaTrade, a purported Retail Foreign Exchange Dealer (RFED), to trade forex. Using its website, as well as certain third-party introducing brokers, InovaTrade fraudulently solicited customers, both within and outside the United States, to open retail forex trading accounts — some of which InovaTrade managed and some of which it did not, the Order finds. The Order also finds that Defendants sent InovaTrade customers false statements of trading activity and misappropriated more than $9.6 million of customer funds.
As part of a nationwide forex sweep, the CFTC filed a prior lawsuit against InovaTrade in January 2011, in the U.S. District Court for the Western District of Missouri for its failure to register as an RFED. In July 2011, the U.S. District Court for the Western District of Missouri issued a permanent injunction enjoining InovaTrade from continuing to operate as an RFED with U.S. customers. The April 5, 2013, Order further finds that InovaTrade falsely represented to its customers that the InovaTrade sued by the CFTC in January 2011 was a different entity. In addition, that same Order finds that beginning in or around August 2011, InovaTrade refused to honor any customer withdrawal requests, and in October 2011, Defendants closed InovaTrade’s operations.
The CFTC appreciates the assistance of the Panama Superintendencia del Mercado de Valores (SMV).
CFTC Division of Enforcement staff responsible for this case are Margaret Aisenbrey, Jenny Chapin, Stephen Turley, Mary Lutz, Charles Marvine, Rick Glaser, and Richard Wagner.
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