This is a photo of the National Register of Historic Places listing with reference number 7000063
Thursday, March 13, 2014
SEC CHARGES JEFFERIES LLC WITH FAILING TO SUPERVISE EMPLOYEES
FROM: SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today charged global investment bank and brokerage firm Jefferies LLC with failing to supervise employees on its mortgage-backed securities desk who were lying to customers about pricing.
An SEC investigation found that Jefferies representatives including Jesse Litvak, who the SEC charged with securities fraud last year, lied to customers about the prices that the firm paid for certain mortgage-backed securities, thus misleading them about the true amount of profits being earned by the firm in its trading. Jefferies’ policy required supervisors to review the electronic communications of traders and salespeople in order to flag any untrue or misleading information provided customers. However, the policy was not implemented in a way to detect misrepresentations about price.
Jefferies agreed to pay $25 million to settle the SEC’s charges as well as a parallel action announced today by the U.S. Attorney's Office for the District of Connecticut. In a related criminal trial, Litvak was convicted last week of multiple counts of securities fraud and other charges.
“Had Jefferies better targeted its supervision to the risks faced by its mortgage-backed securities desk, many of the misstatements made by its employees could have been caught,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “Other firms trading instruments like mortgage-backed securities should take note of the consequences of failing to do so, and should take this opportunity to tailor their own supervision.”
Paul Levenson, director of the SEC’s Boston Regional Office, added, “Reviewing employees’ communications is a critical part of a brokerage firm’s supervisory responsibilities. This is particularly true when it concerns complex products like mortgage-backed securities in which customers have limited visibility into prices.”
According to the SEC’s order instituting settled administrative proceedings, the supervisory failures occurred on numerous occasions from 2009 to 2011. Jefferies failed to provide direction or tools to supervisors on the mortgage-backed securities desk to meaningfully review communications to customers by Litvak and others about the price that Jefferies paid for mortgage-backed securities. Jefferies supervisors failed to check traders’ communications against actual pricing information, making it difficult to detect misrepresentations to customers. Supervisors on the mortgage-backed securities desk also did not review communications with customers that took place in Bloomberg group chats, where Jefferies traders and salespeople lied about pricing.
The SEC’s order finds that Jefferies failed to reasonably supervise Litvak and other representatives on its mortgage-backed securities desk as required by Section 15(b)(4)(E) of the Securities and Exchange Act of 1934. Jefferies agreed to settle the charges by making payments to customers totaling more than $11 million, which represents not just the ill-gotten gains of $4.2 million but the full amount of profits earned by the firm on these trades. Jefferies also agreed to pay a $4.2 million penalty to the SEC and an additional $9.8 million as part of a non-prosecution agreement with the U.S. Attorney’s office. The firm must retain a compliance consultant to evaluate and recommend improvements to its policies for the mortgage-backed securities desk.
The SEC’s investigation, which is continuing, has been conducted by Kerry Dakin of the Enforcement Division’s Complex Financial Instruments Unit as well as James Goldman, Rachel Hershfang, Rua Kelly, Kathleen Shields, and Kevin Kelcourse of the Boston Regional Office. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Connecticut and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).
The Securities and Exchange Commission today charged global investment bank and brokerage firm Jefferies LLC with failing to supervise employees on its mortgage-backed securities desk who were lying to customers about pricing.
An SEC investigation found that Jefferies representatives including Jesse Litvak, who the SEC charged with securities fraud last year, lied to customers about the prices that the firm paid for certain mortgage-backed securities, thus misleading them about the true amount of profits being earned by the firm in its trading. Jefferies’ policy required supervisors to review the electronic communications of traders and salespeople in order to flag any untrue or misleading information provided customers. However, the policy was not implemented in a way to detect misrepresentations about price.
Jefferies agreed to pay $25 million to settle the SEC’s charges as well as a parallel action announced today by the U.S. Attorney's Office for the District of Connecticut. In a related criminal trial, Litvak was convicted last week of multiple counts of securities fraud and other charges.
“Had Jefferies better targeted its supervision to the risks faced by its mortgage-backed securities desk, many of the misstatements made by its employees could have been caught,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “Other firms trading instruments like mortgage-backed securities should take note of the consequences of failing to do so, and should take this opportunity to tailor their own supervision.”
Paul Levenson, director of the SEC’s Boston Regional Office, added, “Reviewing employees’ communications is a critical part of a brokerage firm’s supervisory responsibilities. This is particularly true when it concerns complex products like mortgage-backed securities in which customers have limited visibility into prices.”
According to the SEC’s order instituting settled administrative proceedings, the supervisory failures occurred on numerous occasions from 2009 to 2011. Jefferies failed to provide direction or tools to supervisors on the mortgage-backed securities desk to meaningfully review communications to customers by Litvak and others about the price that Jefferies paid for mortgage-backed securities. Jefferies supervisors failed to check traders’ communications against actual pricing information, making it difficult to detect misrepresentations to customers. Supervisors on the mortgage-backed securities desk also did not review communications with customers that took place in Bloomberg group chats, where Jefferies traders and salespeople lied about pricing.
The SEC’s order finds that Jefferies failed to reasonably supervise Litvak and other representatives on its mortgage-backed securities desk as required by Section 15(b)(4)(E) of the Securities and Exchange Act of 1934. Jefferies agreed to settle the charges by making payments to customers totaling more than $11 million, which represents not just the ill-gotten gains of $4.2 million but the full amount of profits earned by the firm on these trades. Jefferies also agreed to pay a $4.2 million penalty to the SEC and an additional $9.8 million as part of a non-prosecution agreement with the U.S. Attorney’s office. The firm must retain a compliance consultant to evaluate and recommend improvements to its policies for the mortgage-backed securities desk.
The SEC’s investigation, which is continuing, has been conducted by Kerry Dakin of the Enforcement Division’s Complex Financial Instruments Unit as well as James Goldman, Rachel Hershfang, Rua Kelly, Kathleen Shields, and Kevin Kelcourse of the Boston Regional Office. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Connecticut and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).
Tuesday, March 11, 2014
COMMODITY POOL FRAUDSTER RECEIVES SANCTIONS, PRISON TIME FOR MISREPRESENTING PERFORMANCE RECORDS
FROM: COMMODITY FUTURES TRADING COMMISSION
Federal Court in Illinois Imposes over $3.5 Million in Sanctions against Dimitry Vishnevetsky and his Company, Oxford Capital, for Orchestrating Commodity Fraud Schemes and Misappropriation
In a Related Criminal Action, Vishnevetsky Sentenced to Six Years in Prison
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court Order requiring Defendants Dimitry Vishnevetsky formerly of Chicago, Illinois, and his company, Oxford Capital, LLC (Oxford) to pay a civil monetary penalty of $1,910,982 and restitution for defrauded customers totaling $1,608,327. The default judgment Order, entered by the Honorable Ruben Castillo of the U.S. District Court for the Northern District of Illinois on February 26, 2014, stems from a CFTC enforcement action filed on May 1, 2012, that charged the Defendants with fraud in connection with operating two commodity pools and an additional fraudulent commodity trading scheme (see CFTC Press Release 6249-12). The court’s Order also imposes permanent trading and registration bans against Vishnevetsky and Oxford and prohibits them from violating provisions of the Commodity Exchange Act, as charged.
As a result of a parallel criminal action brought by the US Attorney’s Office, Judge Castillo on March 4, 2013 sentenced Vishnevetsky to serve six years in prison. Vishnevetsky is currently incarcerated in the Federal Prison Camp in Duluth, Minnesota.
Specifically, the Order finds that, from at least the fall of 2006 through April 2012, the Defendants fraudulently solicited approximately $1.74 million from commodity pool participants and commodity customers. Vishnevetsky and Oxford defrauded pool participants by representing that their commodity pools had profitable performance records based on audited results when, in fact, they never conducted any trading for the pools, the Order finds. Furthermore, the Order finds that Vishnevetsky, individually and doing business as Hodges Trading LLC and Hodges Court Trading, defrauded other pool participants by misrepresenting that Hodges Trading issued Libor Notes and invested in commodity futures contracts to enhance the value of the purported Libor Notes. Vishnevetsky and Oxford also issued false account statements to pool participants and defrauded other customers by not opening and funding commodity trading accounts for them and issuing them fictitious account statements, the Order finds.
Defendants misappropriated at least $637,000 of customer and pool participant funds
While engaging in these fraudulent schemes, the Order finds that the Defendants misappropriated at least nearly $637,000 from pool participants and customers, which Defendants used for their own benefit.
The CFTC appreciates the assistance of the Federal Bureau of Investigation and the United States Attorney’s Office for the Northern District of Illinois.
CFTC Division of Enforcement staff members responsible for this case are Diane M. Romaniuk, Ava M. Gould, Heather Johnson, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner.
Federal Court in Illinois Imposes over $3.5 Million in Sanctions against Dimitry Vishnevetsky and his Company, Oxford Capital, for Orchestrating Commodity Fraud Schemes and Misappropriation
In a Related Criminal Action, Vishnevetsky Sentenced to Six Years in Prison
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court Order requiring Defendants Dimitry Vishnevetsky formerly of Chicago, Illinois, and his company, Oxford Capital, LLC (Oxford) to pay a civil monetary penalty of $1,910,982 and restitution for defrauded customers totaling $1,608,327. The default judgment Order, entered by the Honorable Ruben Castillo of the U.S. District Court for the Northern District of Illinois on February 26, 2014, stems from a CFTC enforcement action filed on May 1, 2012, that charged the Defendants with fraud in connection with operating two commodity pools and an additional fraudulent commodity trading scheme (see CFTC Press Release 6249-12). The court’s Order also imposes permanent trading and registration bans against Vishnevetsky and Oxford and prohibits them from violating provisions of the Commodity Exchange Act, as charged.
As a result of a parallel criminal action brought by the US Attorney’s Office, Judge Castillo on March 4, 2013 sentenced Vishnevetsky to serve six years in prison. Vishnevetsky is currently incarcerated in the Federal Prison Camp in Duluth, Minnesota.
Specifically, the Order finds that, from at least the fall of 2006 through April 2012, the Defendants fraudulently solicited approximately $1.74 million from commodity pool participants and commodity customers. Vishnevetsky and Oxford defrauded pool participants by representing that their commodity pools had profitable performance records based on audited results when, in fact, they never conducted any trading for the pools, the Order finds. Furthermore, the Order finds that Vishnevetsky, individually and doing business as Hodges Trading LLC and Hodges Court Trading, defrauded other pool participants by misrepresenting that Hodges Trading issued Libor Notes and invested in commodity futures contracts to enhance the value of the purported Libor Notes. Vishnevetsky and Oxford also issued false account statements to pool participants and defrauded other customers by not opening and funding commodity trading accounts for them and issuing them fictitious account statements, the Order finds.
Defendants misappropriated at least $637,000 of customer and pool participant funds
While engaging in these fraudulent schemes, the Order finds that the Defendants misappropriated at least nearly $637,000 from pool participants and customers, which Defendants used for their own benefit.
The CFTC appreciates the assistance of the Federal Bureau of Investigation and the United States Attorney’s Office for the Northern District of Illinois.
CFTC Division of Enforcement staff members responsible for this case are Diane M. Romaniuk, Ava M. Gould, Heather Johnson, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner.
Sunday, March 9, 2014
COURT ORDERS DEFENDANTS TO PAY $16 MILLION IN CFTC FRAUD CASE
FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Obtains Default Judgment against Altamont Global Partners LLC and John G. Wilkins for Commodity Pool Fraud, Misappropriation, and Making False Statements to National Futures Association
U.S. District Court in Florida Orders Defendants to Pay More than $15.8 Million in CFTC Anti-Fraud Action
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Gregory A. Presnell of the U.S. District Court for the Middle District of Florida entered a default judgment and permanent injunction Order against Defendants Altamont Global Partners LLC (AGP) of Longwood, Florida, and its owner, John G. Wilkins, formerly of Chuluota, Florida. The Order requires AGP to pay $10,969,843 in disgorgement and Wilkins to pay $1,214,902 in disgorgement and a $3,644,706 civil monetary penalty. The Order also imposes permanent trading and registration bans against them and prohibits them from violating the Commodity Exchange Act and a CFTC regulation, as charged.
The court’s Order, entered on February 20, 2014, stems from a CFTC Complaint filed on July 16, 2012 against AGP and Wilkins, as well as Defendants Philip Leon and Paul Rangel (see CFTC Press Release 6315-12). The Order confirmed and adopted U.S. Magistrate Judge Thomas B. Smith’s Report and Recommendation of January 31, 2014, which stated that from approximately March 2009 to at least June 22, 2012, AGP and Wilkins operated a fraudulent scheme that solicited at least $13 million from approximately 198 commodity pool participants to trade, among other things, commodity futures contracts, options on futures, and off-exchange foreign currency contracts.
The Order states that AGP and Wilkins, along with the other Defendants, misappropriated more than $5.2 million of pool participants’ funds in “loans” and “advances” to Defendants, which were sham transactions designed to disguise Defendants’ misappropriation, and issued false statements to pool participants regarding the profitability and value of their accounts. In addition, the Order states that AGP and Wilkins provided false information and documentation to the National Futures Association (NFA).
CFTC Previously Settled with Defendants Leon and Rangel
Previously, on December 17, 2013, the court entered consent Orders of permanent injunction against Defendants Leon and Rangel, requiring them to pay a combined total of over $8 million in disgorgement and civil monetary penalties, among other sanctions, to settle the CFTC action (see CFTC Press Release 6797-13).
With the entry of the Order against AGP and Wilkins, the CFTC’s litigation is concluded; however, the court-appointed receiver, Mark Silverio, continues his efforts to marshal and distribute Defendants’ assets to their fraud victims.
A Related Criminal Action
In a related criminal action, on August 22, 2013, Wilkins pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud (see United States v. Wilkins, No. 13-cr-181 (M.D. Fla. July 19, 2013)). Wilkins was sentenced to 108 months in federal prison and ordered to pay $17,042,026.89 in restitution, jointly and severally with defendant Leon, who received the same prison sentence.
The CFTC thanks the NFA for its assistance.
CFTC Division of Enforcement staff members responsible for this case are Rachel Hayes, Peter Riggs, Stephen Turley, Charles Marvine, Rick Glaser, and Richard Wagner.
* * * * * *
CFTC’s Commodity Pool Fraud Advisory
CFTC Obtains Default Judgment against Altamont Global Partners LLC and John G. Wilkins for Commodity Pool Fraud, Misappropriation, and Making False Statements to National Futures Association
U.S. District Court in Florida Orders Defendants to Pay More than $15.8 Million in CFTC Anti-Fraud Action
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Gregory A. Presnell of the U.S. District Court for the Middle District of Florida entered a default judgment and permanent injunction Order against Defendants Altamont Global Partners LLC (AGP) of Longwood, Florida, and its owner, John G. Wilkins, formerly of Chuluota, Florida. The Order requires AGP to pay $10,969,843 in disgorgement and Wilkins to pay $1,214,902 in disgorgement and a $3,644,706 civil monetary penalty. The Order also imposes permanent trading and registration bans against them and prohibits them from violating the Commodity Exchange Act and a CFTC regulation, as charged.
The court’s Order, entered on February 20, 2014, stems from a CFTC Complaint filed on July 16, 2012 against AGP and Wilkins, as well as Defendants Philip Leon and Paul Rangel (see CFTC Press Release 6315-12). The Order confirmed and adopted U.S. Magistrate Judge Thomas B. Smith’s Report and Recommendation of January 31, 2014, which stated that from approximately March 2009 to at least June 22, 2012, AGP and Wilkins operated a fraudulent scheme that solicited at least $13 million from approximately 198 commodity pool participants to trade, among other things, commodity futures contracts, options on futures, and off-exchange foreign currency contracts.
The Order states that AGP and Wilkins, along with the other Defendants, misappropriated more than $5.2 million of pool participants’ funds in “loans” and “advances” to Defendants, which were sham transactions designed to disguise Defendants’ misappropriation, and issued false statements to pool participants regarding the profitability and value of their accounts. In addition, the Order states that AGP and Wilkins provided false information and documentation to the National Futures Association (NFA).
CFTC Previously Settled with Defendants Leon and Rangel
Previously, on December 17, 2013, the court entered consent Orders of permanent injunction against Defendants Leon and Rangel, requiring them to pay a combined total of over $8 million in disgorgement and civil monetary penalties, among other sanctions, to settle the CFTC action (see CFTC Press Release 6797-13).
With the entry of the Order against AGP and Wilkins, the CFTC’s litigation is concluded; however, the court-appointed receiver, Mark Silverio, continues his efforts to marshal and distribute Defendants’ assets to their fraud victims.
A Related Criminal Action
In a related criminal action, on August 22, 2013, Wilkins pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud (see United States v. Wilkins, No. 13-cr-181 (M.D. Fla. July 19, 2013)). Wilkins was sentenced to 108 months in federal prison and ordered to pay $17,042,026.89 in restitution, jointly and severally with defendant Leon, who received the same prison sentence.
The CFTC thanks the NFA for its assistance.
CFTC Division of Enforcement staff members responsible for this case are Rachel Hayes, Peter Riggs, Stephen Turley, Charles Marvine, Rick Glaser, and Richard Wagner.
* * * * * *
CFTC’s Commodity Pool Fraud Advisory
Saturday, March 8, 2014
DEFENDANTS IN FOREX FRAUD CASE TO PAY $907,000
FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Obtains Permanent Injunction Orders and Monetary Sanctions against Susan G. Davis, David E. Howard II, and Joseph Burgos for Fraudulent Solicitation of Managed Foreign Currency Trading Accounts
Court orders Defendants to pay nearly $907,600 in equitable relief and a monetary sanction and permanently bars them from the commodities industry
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York entered Consent Orders for permanent injunction against Defendants Susan G. Davis of Jersey City, N.J. and David E. Howard II of New York, N.Y., and a Supplemental Order assessing monetary damages against Defendant Joseph Burgos of Rutherford, N.J. Previously, on October 29, 2013, the court entered a permanent injunction Order against Burgos that imposed permanent trading and registration bans against him. The court’s Orders require Davis, Howard, and Burgos jointly and severally to pay restitution of $407,599.87 for the benefit of defrauded customers and a $500,000 civil monetary penalty, with Davis’s and Howard’s individual liability for the civil monetary penalty limited to $250,000. The Orders also impose permanent trading and registration bans against Davis and Howard and prohibit them from violating the Commodity Exchange Act and CFTC regulations, as charged.
The court’s Orders, entered on February 26, 2014, stem from a CFTC anti-fraud enforcement action filed on July 27, 2011 against Forex Capital Trading Group, Inc. (Forex Group) and Forex Capital Trading Partners, Inc. (Forex Partners), both of New York, N.Y., and Highland Stone Capital Management, L.L.C. (Highland Stone) of Rutherford, N.J., and Davis and Howard, principals of Forex Group and Forex Partners, and Burgos, principal of Highland Stone (see CFTC Press Release 6083-11). The court entered a default judgment against the three companies on November 30, 2012, which ordered them to pay $450,764 for the benefit of defrauded customers and assessed a civil monetary penalty against them of three times that amount, $1,352,293 (see CFTC Press Release 6444-12).
The court’s Orders find that Davis, Howard, and Burgos fraudulently solicited 106 customers, who invested almost $2.9 million to trade foreign currency (forex) through accounts that the Defendants managed at one of two foreign retail forex dealers. In soliciting customers, Defendants falsely claimed on their websites and elsewhere that profits had been made for their customers for a period of several years, including, for example, a false reported gain of 51.94 percent in 2010 when, in fact, their customers lost more than $1.2 million that year. In the end, their customers ended up losing more than 93 percent of their overall invested principal through forex trading, according to the Orders. The court’s Orders also find that the Defendants distributed falsified account statements showing profitable trading to prospective customers. In addition, the court found that Davis, Howard, and Burgos acted in capacities requiring registration with the CFTC, but were not registered.
The CFTC appreciates the assistance of the U.K.’s Financial Conduct Authority.
CFTC Division of Enforcement staff members responsible for this action are Susan B. Padove, Joy McCormack, Elizabeth Streit, Michael Geiser, Janine Gargiulo, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.
* * * * * *
CFTC’s Foreign Currency (Forex) Fraud Advisory
CFTC Obtains Permanent Injunction Orders and Monetary Sanctions against Susan G. Davis, David E. Howard II, and Joseph Burgos for Fraudulent Solicitation of Managed Foreign Currency Trading Accounts
Court orders Defendants to pay nearly $907,600 in equitable relief and a monetary sanction and permanently bars them from the commodities industry
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York entered Consent Orders for permanent injunction against Defendants Susan G. Davis of Jersey City, N.J. and David E. Howard II of New York, N.Y., and a Supplemental Order assessing monetary damages against Defendant Joseph Burgos of Rutherford, N.J. Previously, on October 29, 2013, the court entered a permanent injunction Order against Burgos that imposed permanent trading and registration bans against him. The court’s Orders require Davis, Howard, and Burgos jointly and severally to pay restitution of $407,599.87 for the benefit of defrauded customers and a $500,000 civil monetary penalty, with Davis’s and Howard’s individual liability for the civil monetary penalty limited to $250,000. The Orders also impose permanent trading and registration bans against Davis and Howard and prohibit them from violating the Commodity Exchange Act and CFTC regulations, as charged.
The court’s Orders, entered on February 26, 2014, stem from a CFTC anti-fraud enforcement action filed on July 27, 2011 against Forex Capital Trading Group, Inc. (Forex Group) and Forex Capital Trading Partners, Inc. (Forex Partners), both of New York, N.Y., and Highland Stone Capital Management, L.L.C. (Highland Stone) of Rutherford, N.J., and Davis and Howard, principals of Forex Group and Forex Partners, and Burgos, principal of Highland Stone (see CFTC Press Release 6083-11). The court entered a default judgment against the three companies on November 30, 2012, which ordered them to pay $450,764 for the benefit of defrauded customers and assessed a civil monetary penalty against them of three times that amount, $1,352,293 (see CFTC Press Release 6444-12).
The court’s Orders find that Davis, Howard, and Burgos fraudulently solicited 106 customers, who invested almost $2.9 million to trade foreign currency (forex) through accounts that the Defendants managed at one of two foreign retail forex dealers. In soliciting customers, Defendants falsely claimed on their websites and elsewhere that profits had been made for their customers for a period of several years, including, for example, a false reported gain of 51.94 percent in 2010 when, in fact, their customers lost more than $1.2 million that year. In the end, their customers ended up losing more than 93 percent of their overall invested principal through forex trading, according to the Orders. The court’s Orders also find that the Defendants distributed falsified account statements showing profitable trading to prospective customers. In addition, the court found that Davis, Howard, and Burgos acted in capacities requiring registration with the CFTC, but were not registered.
The CFTC appreciates the assistance of the U.K.’s Financial Conduct Authority.
CFTC Division of Enforcement staff members responsible for this action are Susan B. Padove, Joy McCormack, Elizabeth Streit, Michael Geiser, Janine Gargiulo, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.
* * * * * *
CFTC’s Foreign Currency (Forex) Fraud Advisory
Friday, March 7, 2014
SEC OBTAINS WIN IN PENNY STOCK FRAUD CASE
FROM: SECURITIES AND EXCHANGE COMMISSION
SEC Obtains Summary Judgment Win On Liability Against All Defendants in a Penny Stock Fraud Case
On February 19, 2014, the United States District Court for the Northern District of New York in Albany, New York granted the Securities and Exchange Commission's motion for summary judgment on liability against all defendants, StratoComm Corporation; its CEO Roger D. Shearer; and its former Director of Investor Relations, Craig Danzig, on all charges against them, including violations of the antifraud provisions and registration requirements of the federal securities laws.
The SEC alleged that StratoComm, acting at Shearer's direction and with Danzig's assistance, issued and distributed public statements falsely portraying the penny stock company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries, particularly Africa. In reality, the company had no product and no revenue. The SEC argued that StratoComm, Shearer and Danzig sold investors more than $4 million worth of StratoComm stock in unregistered transactions. The SEC also alleged that Shearer used much of that money for his own purposes, including to help pay restitution he owed in connection with his guilty plea in a prior criminal proceeding.
In granting summary judgment in favor of the SEC, the court found that StratoComm violated 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 court also found that Shearer violated Sections 5(a) and 5(c) of the Securities Act, aided and abetted StratoComm's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and found him liable as a control person for StratoComm's violations. Finally, the court found that Danzig violated Sections 5(a), 5(c), and 17(a) of the Securities Act, violated Section 15(a) of the Exchange Act, and aided and abetted StratoComm's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
SEC Obtains Summary Judgment Win On Liability Against All Defendants in a Penny Stock Fraud Case
On February 19, 2014, the United States District Court for the Northern District of New York in Albany, New York granted the Securities and Exchange Commission's motion for summary judgment on liability against all defendants, StratoComm Corporation; its CEO Roger D. Shearer; and its former Director of Investor Relations, Craig Danzig, on all charges against them, including violations of the antifraud provisions and registration requirements of the federal securities laws.
The SEC alleged that StratoComm, acting at Shearer's direction and with Danzig's assistance, issued and distributed public statements falsely portraying the penny stock company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries, particularly Africa. In reality, the company had no product and no revenue. The SEC argued that StratoComm, Shearer and Danzig sold investors more than $4 million worth of StratoComm stock in unregistered transactions. The SEC also alleged that Shearer used much of that money for his own purposes, including to help pay restitution he owed in connection with his guilty plea in a prior criminal proceeding.
In granting summary judgment in favor of the SEC, the court found that StratoComm violated 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 court also found that Shearer violated Sections 5(a) and 5(c) of the Securities Act, aided and abetted StratoComm's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and found him liable as a control person for StratoComm's violations. Finally, the court found that Danzig violated Sections 5(a), 5(c), and 17(a) of the Securities Act, violated Section 15(a) of the Exchange Act, and aided and abetted StratoComm's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
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