The Benefits of Shortening the Securities Settlement Cycle

The Benefits of Shortening the Securities Settlement Cycle

SEC CHARGES NON-REGISTERED INVESTMENT ADVISER WITH STEALING CLIENT'S MONEY

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

07/16/2015 02:05 PM EDT

The Securities and Exchange Commission charged a purported investment adviser in San Diego with stealing money from clients for personal use and conducting a Ponzi scheme to pay customers making redemption requests.

In a complaint filed in federal court in San Diego, the SEC alleges that Paul Lee Moore and Coast Capital Management, his purported investment advisory firm, raised $2.6 million from clients.  Instead of investing their money as promised, Moore allegedly siphoned nearly $2 million of client funds to pay travel expenses, buy retail goods, and fund his use of pornographic websites.  The complaint alleges that Moore used the remaining $625,000 in client funds to repay earlier clients with money from new clients in classic Ponzi scheme fashion.  Moore allegedly sent fake account statements to clients showing securities that he never purchased and attracted new clients when existing customers showed the statements to family, friends, and business associates.  Moore also is alleged to have lied to clients about his education, past employment experience, and the amount assets managed by Coast Capital.

Coast Capital, which was not registered as an investment adviser with the SEC or any state regulator, is no longer in business.

In a parallel action, the U.S. Attorney’s Office for the Southern District of California today will announce criminal charges against Moore.

“As alleged in our complaint, Moore betrayed his clients, brazenly stole nearly $2 million for his own activities and conducted a Ponzi scheme with the remaining funds,” said Michele W. Layne, Director of the SEC’s Los Angeles Regional Office.

The SEC’s complaint, filed in federal court in San Diego, charges Moore with violating federal antifraud laws and related SEC rules.  The SEC seeks a permanent injunction, return of allegedly ill-gotten gains plus prejudgment interest and a penalty.

The SEC’s investigation was conducted by David M. Rosen and supervised by Marc J. Blau of the Los Angeles office.  The SEC’s litigation will be led by Gary Leung.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of California and the Federal Bureau of Investigation.

SEC ANNOUNCES MULTI-MILLION DOLLAR PAYMENT TO FRAUD SCHEME WHISTLEBLOWER

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

SEC Pays More Than $3 Million to Whistleblower

07/17/2015 10:54 AM EDT

The Securities and Exchange Commission today announced a whistleblower award of more than $3 million to a company insider whose information helped the SEC crack a complex fraud.  The multi-million dollar payout is the third highest award to date under the SEC’s whistleblower program.

The whistleblower’s specific and detailed information comprehensively laid out the fraudulent scheme which otherwise would have been very difficult for investigators to detect. The whistleblower’s initial tip also led to related actions that increased the whistleblower’s award.

“Insiders may hold the key to helping our investigators unlock intricate fraudulent schemes,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “By providing significant financial incentives for people to come forward, the SEC’s whistleblower program continues to be profoundly effective in helping us protect investors and hold wrongdoers accountable.”

“The award made today is another testament to the agency’s commitment to reward those who provide high-quality information that leads to successful enforcement actions and related actions,” said Sean X. McKessy, Chief of the Office of the Whistleblower.  “Our office continues to receive thousands of whistleblower tips each year.  When those tips bear fruit, those individuals, like today’s whistleblower, may receive significant financial awards.”

Whistleblowers who provide the SEC with unique and useful information that contributes to a successful enforcement action are eligible for awards that can range from 10 percent to 30 percent of the money collected when financial sanctions exceed $1 million.  By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

Since its inception in 2011, the SEC’s whistleblower program has paid more than $50 million to 18 whistleblowers, including a more than $30 million award in 2014 and a more than $14 million award in 2013.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  No money is taken or withheld from harmed investors to pay whistleblower awards.

SEC SAYS TWO DEFENDANTS ADMIT TO TARGETING ASIAN-AMERICAN COMMUNITY IN CKB PYRAMID SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23306 / July 17, 2015

Securities and Exchange Commission v. CKB168 Holdings Ltd., et al., Civil Action No. 13-5584 (E.D.N.Y., filed October 9, 2013)

In the Matter of Chih Hsuan "Kiki" Lin; Administrative Proceeding File No. 3-16694

Two Defendants Admit Liability in CKB Pyramid Scheme Targeting Asian-American Community

The Securities and Exchange Commission (the "SEC") today announced that the United States District Court for the Eastern District of New York entered settled judgments against defendants Rayla Melchor Santos and Chih Hsuan "Kiki" Lin. In 2013, the SEC charged 16 defendants, including Santos and Lin, with perpetrating a worldwide pyramid scheme.

In settling the SEC's charges against her, Santos admitted that CKB was a pyramid scheme and that she was one of its three primary founders. Santos also admitted that she travelled to the United States and worked with other CKB founders and promoters to convince investors to join CKB by falsely telling them that CKB was a legitimate multi-level marketing company that sold online education courses for children when, in fact, Santos knew that CKB sold its products only to investors and had no significant retail sales.

In settling the SEC's charges against her, Kiki Lin admitted that CKB was an unlawful scheme and that she worked with CKB's founders and others to promote CKB to investors across the United States. Kiki Lin also admitted that she made false and misleading statements to investors and potential investors in order to induce them to join CKB. For instance, Kiki Lin admitted that she falsely told CKB investors and potential investors that they would receive profit reward points ("Prpts") with a value in U.S. dollars that would increase exponentially over time when, in fact, she knew that Prpts could not be converted to actual money.

Defendants Santos and Kiki Lin consented to the entry of Judgments, which: (i) permanently enjoin each of them from violating the unregistered offering provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act"), and the anti-fraud provisions of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5(a) and (c) thereunder. Kiki Lin also consented to the entry of the Judgment against her which permanently enjoins her from violating the antifraud provisions of the Section 17(a)(2) of the Securities Act and Rule 10b-5(b) under the Exchange Act and the unregistered broker-dealer provisions of Section 15(a) of the Exchange Act. Santos and Kiki Lin also agreed to conduct-based injunctions that prohibit each of them from participating in an illegal pyramid scheme disguised as a multi-level marketing program. Santos and Kiki Lin have agreed to pay disgorgement of ill-gotten gains, prejudgment interest, and civil penalties in amounts to be determined at a later date by the court upon motion of the Commission. Kiki Lin has also agreed that her wholly-controlled Relief Defendant, USA Trade Group, Inc. will pay disgorgement of ill-gotten gains and prejudgment interest in amounts to be determined at a later date by the court upon motion of the Commission.

As part of the settlement, Kiki Lin also agreed to the issuance of a Commission Order Instituting Administrative Proceedings Pursuant to Section 15(b)(6) of the Exchange Act Making Findings, and Imposition Remedial Sanctions ("Order"), which was issued today. This Order permanently bars Kiki Lin from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or national recognized statistical rating organization, and from participating in any offering of a penny stock.

The Commission's litigation in this matter continues against the remaining Defendants Hung Wai ("Howard") Shern, Rui Ling ("Florence") Leung, Daliang ("David") Guo, Yao Lin, Wen Chen Hwang (aka "Wen Chen Lee" and "Wendy Lee"), Joan Congyi Ma (aka "JC Ma"), Toni Tong Chen, Cheongwha ("Heywood") Chang, Heidi Mao Liu (aka "Heidi Mao"), CKB168 Holdings Ltd., WIN168 Biz Solutions Ltd., CKB168 Ltd., CKB168 Biz Solution, Inc., and Cyber Kids Best Education Ltd.

Opening Remarks at the Compliance Outreach Program for Broker-Dealers

Opening Remarks at the Compliance Outreach Program for Broker-Dealers

SEC CHAIR WHITE LEADS EVENT SUPPORTING MILITARY CONSUMER PROTECTION DAY 2015

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

07/15/2015 05:00 PM EDT

Securities and Exchange Commission Chair Mary Jo White led a multi-agency event today to support Military Consumer Protection Day 2015, highlighting how service members can best protect themselves and their finances from fraud and identity theft.

Chair White was joined at the Joint Base McGuire-Dix-Lakehurst event by officials from the U.S. Postal Inspection Service, the Department of Justice’s Service Members and Veterans Initiative, the U.S. Attorneys' Housing and Civil Enforcement Section of the Fair Housing Program, the FBI’s Securities Fraud Program and the U.S. Secret Service.

“Taking control of your finances starts with access to information about financial products and services and the people who sell them,” said SEC Chair Mary Jo White. “We want to ensure the men and women of our armed forces who protect us are themselves protected in the financial marketplace.”

White took questions from the base commander, Col. Frederick Thaden, as well as other senior base leadership, before an audience of several hundred at JBMDL’s Timmerman Center in New Jersey, consisting of service members and their families.

“We find that most people, service members included, want more information on how to better manage their finances and check out financial professionals, so they can make the best decisions for their families and for their future.” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy.

Questions ranged from what service members should consider before investing to how to avoid becoming victims of investment fraud. Both Chair White and Ms. Schock cautioned service members about offers that sound too good to be true, high-pressure sales tactics, and fraudulent opportunities that appear on social media.  Chair White also discussed cases the SEC has brought to halt frauds that targeted service members and advised the audience on how to best protect themselves from such scams.

Service members and their families are frequent targets for financial fraud and identity theft.  Military Consumer Protection Day aims to provide men and women in uniform with the knowledge and skills to better understand their finances so they can invest wisely and avoid fraud.