SEC ANNOUNCES JUDGEMENT AGAINST FORMER CEO FOR INVOLVEMENT IN STOCK MANIPULATION SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23110 / October 10, 2014

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

Judgment Against Former CEO Orders Payment of Over $450,000 in Case Involving Scheme to Manipulate Company's Stock

The Securities and Exchange Commission announced today that on October 9, 2014, the U.S. District Court for the Southern District of New York entered a Final Judgment against Thomas J. Kelly of Levittown, Pennsylvania. Kelly was the Chief Executive Officer of 8000, Inc., a now defunct Virginia-based company whose stock was quoted on OTC Pink operated by OTC Markets Group LLC. Kelly and 8000, Inc. were defendants in a civil fraud action filed by the Commission on September 27, 2012. Also charged were an undisclosed principal in 8000, Inc., Jonathan E. Bryant of Nantwich, United Kingdom, and the company's attorney, Carl N. Duncan of Bethesda, Maryland.

The Commission's complaint alleged that the defendants participated in a scheme to manipulate the trading volume and price of 8000 Inc.'s common stock by disseminating false information about the company and simultaneously selling, or facilitating the sale of its securities which were not for sale to the general public. According to the complaint, from November 2009 through October 2010, Kelly and Bryant disseminated financial reports and press releases falsely representing that 8000, Inc. had millions of dollars in capital financing and revenues when, in fact, the company had neither. As 8000, Inc.'s stock price rose based on the false information they were disseminating, Bryant is alleged to have sold 56.8 million "restricted" shares of 8000, Inc. into the market with the assistance of Duncan who provided false legal opinions removing the restrictions, and Kelly to have bought and sold the company's securities in the secondary market. The complaint alleged that the defendants' scheme increased the volume of trading in 8000, Inc. by 93% and the company's stock price from less than $0.01 per share to $0.42 per share between November 2009 and October 2010.

The Final Judgment orders Kelly to disgorge the $415,592 in profits that he realized from trading in 8000, Inc.'s securities and to pay $ 46,697in pre-judgment interest. The Final Judgment follows the Judgment that the court entered against Kelly on June 6, 2013, with Kelly's consent and without him admitting or denying the allegations in the Commission's Complaint. That Judgment permanently enjoins Kelly from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. It also permanently bars Kelly from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, and permanently bars him from participating in an offering of a penny stock.

CFTC CHAIRMAN MASSAD'S STATEMENT BEFORE GLOBAL MARKETS ADVISORY COMMITTEE OPEN MEETING

FROM:  U.S. COMMODITY FUTURES EXCHANGE COMMISSION  

Opening Statement Chairman Timothy G. Massad before the Global Markets Advisory Committee Open Meeting

October 9, 2014

Thank you, Mark. Commissioner Wetjen and his office, as well as the professional staff have done a tremendous amount of work to support the GMAC and I thank them for that. I also want to thank today’s participants. Your presence and input is very much valued.

Our advisory committees provide a valuable forum for discussion of complex and evolving market issues relevant to our work here at the CFTC. And, it is important for us to listen to a broad variety of viewpoints as we consider these.

The topics of discussion today are both timely and important.

The first session on non-deliverable forwards should be very helpful to us as we consider whether to propose mandatory clearing for NDFs.

As you know, under the law pertaining to swaps clearing, the Commission must consider several factors to determine whether a swap is required to be cleared, which include: whether there is sufficient liquidity to support clearing; whether the necessary rules and infrastructure are in place to support clearing; and what are the effects on the mitigation of systemic risk and on competition.

Now, today’s meeting is not a formal process to consider those factors; but today is an opportunity for us to learn more about the NDF market so that we can consider whether to go forward with a proposed rule. If we decide to propose a rule, there will be an opportunity later for all the public to give their views.

Considering whether to propose a rule for further clearing mandates underscores the importance of working out the cross border issues on clearinghouse regulation and supervision. Europe has not yet recognized our clearinghouses as equivalent. I believe they should because our clearinghouses meet international standards. They believe we should change our regulatory approach to clearinghouses that are located in Europe but are also registered with the U.S. But the existing dual registration regime has worked well for many years. And so I believe this is a situation of, if it ain’t broke, don’t fix it. But we have agreed to look at whether we can further harmonize our rules and regulatory approach. And I am pleased that they have decided to postpone the imposition of higher capital charges on European banks participating in our markets. It was this threat of higher capital charges that was going to fragment the market, not the existence of dual registration, which has existed for years and has actually been the foundation for the growth of the global markets.

Our second topic pertains to bitcoin.  While the development of digital payment systems raises many issues outside our jurisdiction, one area within our responsibility is derivative contracts traded on SEFs or DCMs that are based on bitcoin. Today, we have the opportunity to hear about that.

I think about this area in the following way: Innovation is a vital part of our markets that our regulatory framework is designed to encourage. At the same time, our regulatory framework is intended to prevent manipulation and fraud, and to make sure our markets operate with transparency and integrity. Our responsibilities at the CFTC in this regard are ongoing. Of course, the fact that a contract exists doesn’t mean the CFTC endorses it, as the staff will explain more fully later today. As with all new developments, we must remain vigilant and will continue to evaluate these new contracts over time. And of course, we will coordinate with our colleagues at other regulatory authorities as appropriate. I think it is helpful to keep these points in mind whenever we consider a new innovation in our markets.

Thank you again for being here and contributing your ideas. I look forward to a productive discussion.

CFTC CHARGES FLORIDA FIRM AND OTHERS WITH FOREX POOL FRAUD

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

October 7, 2014

CFTC Charges Florida-based Forex Monthly Income Fund, LLC and its Principals Jean Chauvel, Renaud Pierre-Charles, and Employee and Agent Robert Tripode with Forex Pool Fraud and Other Violations

Federal Court issues emergency order freezing assets and records

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced that on September 30, 2014, Judge William Dimitrouleas of the U.S. District Court for the Southern District of Florida issued under seal an emergency Order freezing and preserving assets under the control of Jean Chauvel, Renaud Pierre-Charles, and Robert Tripode and their company Forex Monthly Income Fund, LLC (FMIF) (collectively, Defendants), a commodity pool operator based in the Miami, Florida area. The Order also prohibits the Defendants from destroying books and records and allows the CFTC immediate access to those records. The court scheduled a hearing for October 10, 2014, on the CFTC’s motion for a preliminary injunction.

Defendants allegedly misappropriated more than $1 million of customer funds

The emergency Order is part of a CFTC civil enforcement action also filed under seal on September 30, 2014. The CFTC Complaint alleges that from as early as January 2011, Defendants fraudulently solicited more than $1.4 million from members of the public to trade foreign currency (forex) in a commodity pool by, among other things, guaranteeing pool participants a monthly return on their investment based on profits purportedly earned from forex trading. Some of the Defendants’ victims were unsophisticated investors, including senior citizens, who sought higher monthly income on their retirement savings, according to the Complaint. The Complaint also alleges that the Defendants never traded or generated any income from trading forex, but rather misappropriated more than $1 million of the pool participants’ funds.

In its continuing litigation, the CFTC seeks full restitution to defrauded pool participants, disgorgement of ill-gotten gains, the payment of appropriate civil monetary penalties, permanent registration and trading bans, and a permanent injunction from future violations of federal commodities laws, as charged.

CFTC Division of Enforcement staff members responsible for this case are Kim Bruno, Michael Loconte, Daniel Jordan, and Rick Glaser.

Readout of the President's Meeting with Independent Financial Regulators | The White House

Readout of the President's Meeting with Independent Financial Regulators | The White House

4 INSURANCE AGENTS CHARGED BY SEC WITH SECURITIES FRAUD WHICH TARGETED THE ELDERLY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

SEC Charges Four Insurance Agents in Securities Fraud Targeting Elderly Investors

09/26/2014 01:21 PM EDT

The Securities and Exchange Commission announced charges against four insurance agents for unlawfully selling securities in what turned out to be a multi-million dollar offering fraud targeting elderly investors.

The SEC previously charged a Colorado man who allegedly orchestrated the scheme and recruited active insurance agents to help him solicit investors in Colorado and several other states.  The scheme raised approximately $4.3 million during a nearly 18-month period.  The SEC’s investigation further found that the four insurance agents charged today solicited funds without registering with the SEC as a broker-dealer as required under the federal securities laws.

“When individuals act as a broker and sell securities to the public, they must comply with registration, supervision, and compliance requirements that exist to protect investors,” said Julie K. Lutz, Director of the SEC’s Denver Regional Office.  “These insurance agents improperly operated outside of that regulatory framework and thereby placed their clients at risk.”

According to the SEC’s order instituting administrative proceedings, the scheme primarily targeted retired annuity holders by using insurance agents to sell interests in a company called Arete LLC, which was controlled by the Colorado man orchestrating the scheme: Gary Snisky.  The insurance agents told investors that their funds would be used by Snisky to purchase government-backed agency bonds at a discount.  However, Snisky did not purchase bonds or conduct any such trading, and he misappropriated approximately $2.8 million of investor funds to pay commissions and make personal mortgage payments.

The SEC’s Enforcement Division alleges that the following three brokers raised approximately $1.5 million for Snisky and received almost $90,000 in commissions:

 Without admitting or denying the findings, Sorrells consented to an order finding that he violated Section 15(a) of the Securities Exchange Act of 1934.  He agreed to be barred from the securities industry, cease and desist from future violations of Section 15(a), and pay disgorgement of $207,213.34.  He also is subject to an additional financial penalty.  The settlement reflects substantial assistance that Sorrells provided in the SEC’s investigation.

The SEC’s Enforcement Division alleges that Meissner, Scott, and Tomich violated Section 15(a) of the Exchange Act, and is seeking disgorgement, penalties, and securities industry bars in the matter, which will be litigated before an administrative law judge.  The SEC’s case against Snisky, filed in November 2013, is still pending in federal court in Colorado.

The SEC’s investigation was conducted by Scott Mascianica, Kerry M. Matticks, and Jay A. Scoggins of the Denver office.  The SEC’s litigation will be led by Polly A. Atkinson and Leslie Hughes.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Colorado, Internal Revenue Service, Federal Bureau of Investigation, and U.S. Postal Inspection Service.

BITCOIN PONZI-SCHEMER ORDERED BY U.S. DISTRICT COURT TO PAY $40 MILLION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23090 / September 22, 2014

Securities and Exchange Commission v. Trendon T. Shavers and Bitcoin Savings and Trust, Civil Action No. Civil Action No. 4:13-CV-416

Final Judgment Entered Against Trendon T. Shavers, A/K/A/ "Pirateat40" - Operator of Bitcoin Ponzi Scheme Ordered to Pay More Than $40 Million in Disgorgement and Penalties

The Securities and Exchange Commission announced that, on September 18, 2014, a United States District Court in Sherman, Texas entered final judgment against Trendon T. Shavers and Bitcoin Savings and Trust ("BTCST"), the online entity Shavers created and used to operate his Ponzi scheme, and through which he defrauded investors out of more than 700,000 bitcoins. The Court's judgment requires Shavers and BTCST to pay more than $40 million in disgorgement and prejudgment interest, and orders each Defendant to pay a civil penalty of $150,000.

The Commission established, and the Court found, that from February 2011 through August 2012, Shavers offered and sold investments in BTCST over the internet. Shavers solicited all investments, and paid all purported returns, in bitcoins. 

Operating under the internet name, "pirateat40," Shavers solicited investors in online chat rooms and on the Bitcoin Forum, an online forum dedicated to Bitcoin, promising them up to 7% returns weekly based on his claimed trading of bitcoin against the U.S. dollar, including selling bitcoins to individuals who wanted to buy them "off the radar." In reality, Shavers used new bitcoins received from BTCST investors to pay purported returns on outstanding BTCST investments, and diverted BTCST investors' bitcoins for his personal use. The Court further found that, even as he publicly denied the Ponzi scheme on the Bitcoin Forum, Shavers knowingly and intentionally operated BTCST as a sham and a Ponzi scheme, and repeatedly made materially false and misleading representations to BTCST investors and potential investors concerning the use of their bitcoins, how he would generate the promised returns, and the safety of their investments.

The Court's judgment permanently enjoins Shavers and BTCST from future violations of Sections 5 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; orders them to disgorge, on a joint and several basis, $39,638,569, plus $1,766,098 prejudgment interest thereon, for a total of $40,404,667; and orders Shavers and BTCST each to pay a $150,000 penalty.