CFTC CHARGES MAN, COMPANIES WITH COMMODITY POOL FRAUD,

FROM:  U.S. COMMODITY FUTURES 

April 30, 2015

CFTC Charges North Carolina Resident Barry C. Taylor and His Companies with Commodity Pool Fraud in a Multi-Million Dollar Fraudulent Forex Scheme and with Registration Violations

Federal Court Enters Emergency Order Freezing Defendants’ Assets and Protecting Books and Records

Defendants’ Fraudulent Scheme Allegedly Solicited over $2.4 Million from Approximately 24 Members of the Public

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement Complaint against Barry C. Taylor of Franklin, North Carolina, charging him with operating a multi-million dollar fraudulent scheme through his firms, OTC Investments LLC and Forex Currency Trade Advisors, LLC (collectively, Defendants). On April 22, 2015, Judge Martin Reidinger of the U.S. District Court for the Western District of North Carolina, Asheville Division entered an emergency restraining Order freezing Defendants’ assets and prohibiting the destruction or concealment of their books and records. None of the Defendants has ever been registered with the CFTC, as is required.

The CFTC Complaint, filed under seal on April 21, 2015, alleges that from at least August 1, 2011 through the present, the Defendants engaged in a fraudulent scheme that solicited more than $2.4 million from approximately 24 members of the public in North Carolina and other states within the United States and in Canada to participate in a commodity pool that traded leveraged or margined retail off-exchange foreign currency (forex) contracts.

The Complaint further alleges that Taylor misappropriated pool participant funds for personal and other business uses, and to conceal his fraudulent scheme and misappropriation. Also, as alleged, Taylor issued or caused to be issued false account statements to one or more pool participants to cover up his fraudulent scheme.

Taylor, among other things, allegedly made material misrepresentations and omissions to commodity pool participants that 1) Defendants were engaged in profitable forex trading and 2) failed to disclose that Defendants traded only a portion of pool participant funds and misappropriated the remainder through a combination of personal expenditures and partial distributions of diminishing commodity pool funds to pool participants to lull and deceive them.

The Complaint also charges that the Defendants used pool participant funds to pay purported trading profits and supposedly returned pool participants’ principal in the manner of a Ponzi scheme.

In its continuing litigation, the CFTC seeks a return of ill-gotten gains, restitution, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws, as charged.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC appreciates the assistance of the U.S. Attorney's Office for the Western District of North Carolina and the Federal Bureau of Investigation.

CFTC Division of Enforcement staff members responsible for this case are JonMarc P. Buffa, Peter M. Haas, Patricia A. Gomersall, Tashieka Taylor, and Paul G. Hayeck.

SEC.gov | Statement at the Inaugural Meeting of the Market Structure Advisory Committee

SEC.gov | Statement at the Inaugural Meeting of the Market Structure Advisory Committee

TWO CHARGED BY SEC FOR INSIDER TRADING CHINESE INTERNET COMPANY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23249 / April 29, 2015

Securities and Exchange Commission v. Xiaoyu Xia and Yanting Hu, Civil Action No. 15-CV-3320

SEC Charges Two with Insider Trading On Chinese Internet Company 58.Com Merger News

The Securities and Exchange Commission today announced insider trading charges and an emergency asset freeze based on trading prior to the announcement of a merger between two Chinese e-commerce companies, 58.com and ganji.com. When the merger was reported on April 14, 2015, the share price of 58.com increased by more than a third, and trading volume increased more than twenty-fold.

The SEC alleges that Dr. Xiaoyu Xia and Ms. Yanting Hu, residents of Beijing, China, each purchased out-of-the-money call options in 58.com in the time period between when 58.com, ganji.com, and 58.com's largest shareholder, Tencent Holdings, agreed to the merger and when the merger was first reported on April 14, 2015. The defendants each traded through U.S. brokerage accounts and their purchase of speculative, out-of-the-money call options in 58.com resulted in combined realized and unrealized profits totaling over $2 million. Defendants are both connected to the financial industry in China.

The United States District Court for the Southern District of New York granted the SEC's request for an asset freeze against monies held in Xia and Hu's United States brokerage accounts, and issued an order to show cause why an injunction and other miscellaneous relief should not issue. A hearing has been scheduled for May 6, 2015.

The SEC's complaint charges the defendants with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, disgorgement, civil money penalties, and other relief.

The SEC's investigation, which is continuing, has been conducted by L. James Lyman and Jeffrey D. Felder of the Denver Regional Office, with supervision by Ian S. Karpel. The SEC's litigation is led by Dugan Bliss with supervision by Gregory Kasper.

Optimizing Our Equity Market StructureOpening Remarks at the Inaugural Meeting of the Equity Market Structure Advisory Committee

Optimizing Our Equity Market StructureOpening Remarks at the Inaugural Meeting of the Equity Market Structure Advisory Committee

Remarks at the Inaugural SEC Equity Market Structure Advisory Committee Meeting

Remarks at the Inaugural SEC Equity Market Structure Advisory Committee Meeting

SEC CHARGES FORMER BANK HOLDING COMPANY OFFICERS WITH DISCLOSURE FRAUD

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23254 / May 7, 2015

Securities and Exchange Commission v. David R. Gibson, et al., Civil Action No. 15-cv-00363 (D. Del., May 6, 2015)

SEC Charges Four Former Officers of Delaware Bank Holding Company with Disclosure Fraud

On May 6, 2015, the Securities and Exchange Commission filed fraud charges against four former officers of Wilmington Trust for intentionally understating past due bank loans during the financial crisis.  The former Delaware-based bank holding company was acquired by M&T Bank in May 2011 and paid $18.5 million in September 2014 to settle related SEC charges of improper accounting and disclosure fraud.

The SEC’s complaint, filed in federal district court in Wilmington, Delaware, alleges the four took part in a scheme to mask the impact of real estate market declines on the bank’s portfolio of commercial real estate loans.  According to the SEC’s complaint, the former officials improperly excluded hundreds of millions of dollars of past due real estate loans from financial reports filed by Wilmington Trust in 2009 and 2010, violating a requirement to fully disclose the amount of loans 90 or more days past due.

The complaint names the bank’s former Chief Financial Officer David R. Gibson, former Chief Operating Officer and President Robert V.A. Harra, former Controller Kevyn N. Rakowski, and former Chief Credit Officer William B. North.  The complaint alleges that Gibson, Rakowski, and North omitted approximately $351 million of matured loans 90 days or more past due from Wilmington Trust’s disclosures in the third quarter of 2009, so that the bank disclosed only $38.7 million of such loans.  The four former officials allegedly omitted approximately $330.2 million of these loans in the fourth quarter of 2009, so that the bank’s annual report disclosed just $30.6 million in matured loans 90 days or more past due.

In addition, the complaint alleges that Gibson, Rakowski and North schemed to materially misreport this category of past due loans in the first half of 2010.  Gibson also is alleged to have materially understated the amount of non-accruing loans in Wilmington Trust’s portfolio in the third quarter of 2009 and the bank’s loan loss provision and allowance for loan losses in the fourth quarter of 2009.  Gibson, Harra, Rakowski and North are each charged with violating or aiding and abetting violations of the antifraud provisions of the federal securities laws.  Each also is charged with aiding and abetting violations of the reporting, recordkeeping, and internal controls provision of the federal securities laws.  The SEC is seeking to have all four return allegedly ill-gotten gains with interest and pay civil monetary penalties, and to have Gibson and Harra barred from serving as corporate officers or directors.

In a related action, the U.S. Attorney’s Office for the District of Delaware today announced criminal charges against Rakowski and North.

The SEC’s investigation has been conducted by Margaret Spillane, James Addison, and Thomas P. Smith, Jr. of the New York Regional Office.  Jack Kaufman and Ms. Spillane will lead the SEC’s litigation.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Delaware, Federal Bureau of Investigation, Federal Reserve, and Office of the Special Inspector General for the Troubled Asset Relief Program.