FOUR CHARGED BY SEC IN $34 MILLION UNLAWFUL STOCK SALE SCHEME

From:  U.S. Securities and Exchange Commission

SEC Files Charges in International Manipulation Scheme

FOR IMMEDIATE RELEASE

2018-85

Washington D.C., May 15, 2018 —
The Securities and Exchange Commission today charged four individuals for their roles in a fraudulent scheme that generated nearly $34 million from unlawful stock sales and caused significant harm to retail investors.

According to the SEC’s complaint, the defendants manipulated the market for and illegally sold the stock of microcap issuer Biozoom Inc.  As part of the alleged scheme, the defendants hid their ownership and sales of Biozoom shares by using offshore bank accounts, sham legal documents, a network of nominees, anonymizing techniques, and other deceptive practices.  The defendants also allegedly directed a wide-ranging promotional campaign and employed sophisticated, manipulative trading techniques to artificially inflate Biozoom’s share price.  The alleged scheme culminated in the defendants’ illegal sales of Biozoom, which netted them nearly $34 million in unlawful proceeds.

“Manipulative and deceptive conduct undermines the integrity of our markets,” said Antonia Chion, Associate Director in the SEC’s Division of Enforcement.  “The charges announced today demonstrate our commitment to unraveling even the most sophisticated international schemes that exploit retail investors.”

The SEC’s complaint, which was filed in federal district court in the Southern District of New York, charges Francisco Abellan Villena, Guillermo Ciupiak, James B. Panther Jr., and attorney Faiyaz Dean with violating antifraud and registration provisions of the federal securities laws and seeks monetary and equitable relief.  The SEC previously obtained a judgment against Abellan for his role in another market manipulation scheme. In separate actions, the SEC charged two registered representatives for their roles in the unregistered sales of Biozoom stock and a brokerage firm for supervisory and recordkeeping failures.

The SEC obtained a court order in 2013 freezing proceeds from the unlawful Biozoom sales.  It subsequently obtained a default judgment and established a fair fund, which has returned more than $14 million to harmed investors.  The SEC also previously charged a lawyer and officer of Biozoom’s predecessor entity.

The SEC’s continuing investigation is being conducted by Marc E. Johnson and Jennie B. Krasner with the assistance of the Enforcement Division’s Information Technology Forensics Group, and under the supervision of Deborah A. Tarasevich and Ms. Chion.  The litigation is being conducted by Duane K. Thompson and Daniel Maher, and supervised by Cheryl Crumpton.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority, the British Columbia Securities Commission, the Comision Nacional del Mercado de Valores of Spain, the Cyprus Securities and Exchange Commission, the Hong Kong Securities and Futures Commission, the Ontario Securities Commission, and the Supertendencia del Mercado de Valores of Panama.

ALLEGED INFLATION OF PERFORMANCE BY HEDGE FUND ADVISER LEADS TO SEC CHARGES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Press Release

SEC Charges Hedge Fund Adviser With Deceiving Investors by Inflating Fund Performance

FOR IMMEDIATE RELEASE

2018-83

Washington D.C., May 9, 2018 —
The Securities and Exchange Commission today announced that it has charged New York-based investment adviser Premium Point Investments LP with inflating the value of private funds it advised by hundreds of millions of dollars.  The SEC also charged Premium Point’s CEO and chief investment officer Anilesh Ahuja as well as Amin Majidi, a former partner and portfolio manager at the firm, and former trader Jeremy Shor.

According to the SEC’s complaint, the scheme ran from at least September 2015 through March 2016 and relied on a secret deal where in exchange for sending trades to a broker-dealer, Premium Point received inflated broker quotes for mortgage-backed securities (MBS).  In addition, the defendants allegedly used “imputed” mid-point valuations, which were applied in a manner that further inflated the value of securities. This practice allegedly boosted the value of many of Premium Point’s MBS holdings and further exaggerated returns.  The complaint alleges that the defendants overstated the funds’ value in order to conceal poor fund performance and attract and retain investors.

“Investors rely on their investment advisers to fairly and accurately value securities, and that is especially true when the securities trade in opaque markets,” said Daniel Michael, Chief of the Enforcement Division’s Complex Financial Instruments Unit.  “As we allege, Premium Point masked its true performance, which denied investors the opportunity to make informed investment decisions.”

The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, charges the defendants with fraud, with aiding and abetting fraud, or both.  The SEC complaint seeks permanent injunctions, return of allegedly ill-gotten gains with interest, and civil penalties.

The U.S. Attorney’s Office for the Southern District of New York, which conducted a parallel investigation of this matter, today announced charges against Ahuja, Majidi, and Shor.

The SEC’s investigation, which is continuing, was conducted by H. Gregory Baker and Brian Fitzpatrick of the Asset Management Unit, Osman Nawaz of the Complex Financial Instruments Unit, and Preethi Krishnamurthy of the New York Regional Office under the supervision of Mark D. Salzberg of the Asset Management Unit.  The litigation is being conducted by Ms. Krishnamurthy, Mr. Baker, and Mr. Nawaz.  The SEC acknowledges the assistance and cooperation of the U.S. Attorney’s Office and the FBI in this matter.

SEC CHARGES PANASONIC CORPORATION WITH VIOLATING FOREIGN CORRUPT PRACTICES ACT (FCPA)

FROM:  U.S. SECURITIES AND EXCHANGE WEBSITE

Panasonic Charged With FCPA and Accounting Fraud Violations

FOR IMMEDIATE RELEASE

2018-73

Washington D.C., April 30, 2018 —
The Securities and Exchange Commission today announced that Japan-based Panasonic Corp. will pay more than $143 million to resolve charges of Foreign Corrupt Practices Act (FCPA) and accounting fraud violations involving its global avionics business.

According to the SEC’s order, Panasonic’s U.S. subsidiary, Panasonic Avionics Corp. (PAC), a provider of in-flight entertainment and communication systems, offered a lucrative consulting position to a government official at a state-owned airline to induce the official to help PAC in obtaining and retaining business from the airline.  At the time it orchestrated the bribery scheme, PAC was negotiating two agreements with the airline valued at more than $700 million.  PAC ultimately retained the official and paid approximately $875,000 for a position that required little to no work, using an unrelated third-party vendor to conceal the payments.

The SEC’s order also found that Panasonic fraudulently overstated pre-tax and net income by prematurely recognizing more than $82 million in revenue for the fiscal quarter ending June 30, 2012.  The fraud was accomplished by PAC backdating an agreement with the airline and providing misleading information to PAC’s auditor. 

The SEC order further found that Panasonic lacked sufficient internal accounting controls and failed to make and keep accurate books and records in connection with purported consultants retained by PAC, as well as sales agents used to solicit business from state-owned airlines and other customers throughout the Middle East and Asia.

“Investors rightfully expect that the companies they invest in will not engage in bribery or fraud,” said Antonia Chion, Associate Director of the SEC’s Enforcement Division. “Issuers must implement effective controls for the selection and engagement of consultants and agents to ensure compliance with anti-bribery statutes.”

“Issuers need to ensure that their rules and controls address the specific bribery and corruption risks they face when operating in global markets with customers that are state-owned entities,” said Charles Cain, Chief of the Enforcement Division’s FCPA Unit.  “It is not enough for a company merely to set up policies and procedures that are not enforced or are easily circumvented by employees.”

Panasonic consented to the SEC’s order finding that it violated the anti-bribery, anti-fraud, books and records, internal accounting controls, and reporting provisions of the Securities Exchange Act of 1934, and ordering it to pay approximately $143 million in disgorgement and pre-judgement interest.  In a related matter, the U.S. Department of Justice today announced that PAC would pay a criminal penalty of more than $137 million as part of a deferred prosecution agreement related to causing books and records violations of the FCPA.

The SEC’s investigation was conducted by Anik Shah, Dmitry Lukovsky, Mark Yost, Gregory Bockin, and Sonali Singh, and supervised by Mr. Cain, Ms. Chion, Stacy Bogert, and Kristen Dieter.  The SEC appreciates the assistance of the Department of Justice Criminal Division’s Fraud Section as well as the Swiss Financial Market Supervisory Authority, Ontario Securities Commission, Securities and Commodities Authority of the United Arab Emirates, Financial Services Agency of Japan, Monetary Authority of Singapore, Securities Commission of Malaysia, Australian Securities & Investments Commission, and the Securities and Exchange Commission of Pakistan.

WHISTLEBLOWER RECEIVES $2.2 MILLION AWARD

From U.S. Securities and Exchange Commission 

Press Release
SEC Awards More Than $2.2 Million to Whistleblower Who First Reported Information to Another Federal Agency Before SEC
FOR IMMEDIATE RELEASE
2018-58

Washington D.C., April 5, 2018 —
The Securities and Exchange Commission today announced a whistleblower award of more than $2.2 million to a former company insider whose tips helped the agency open an investigation that led to an enforcement action.  The whistleblower first reported the information to another federal agency and later provided the same information to the SEC.

This is the first award paid under the “safe harbor” of Exchange Act Rule 21F-4(b)(7), which provides that if a whistleblower submits information to another federal agency and submits the same information to the SEC within 120 days, then the SEC will treat the information as though it had been submitted to the SEC at the same time that it was submitted to the other agency.

The whistleblower voluntarily reported information to a federal agency covered by the rule, which referred the matter to the SEC.  The SEC then opened an investigation.  Within 120 days of the initial report, the whistleblower provided the same information to the SEC and later provided substantial cooperation in the investigation.  Although the SEC report came after the staff had opened its investigation, the SEC treated the submission as though it had been made when the whistleblower provided the information to the other agency.

SEC ANNOUNCING MORE BROKERS CHARGED FOR FRAUD

The following press release comes from the U.S. Securities and Exchange Commission

Press Release

SEC Continues Crackdown on Brokers Defrauding Customers

FOR IMMEDIATE RELEASE

2017-223

Washington D.C., Dec. 6, 2017 —
The Securities and Exchange Commission today continued its crackdown on brokers who defraud customers, charging two New York-based brokers with making unsuitable trades that were costly for customers and lucrative for the brokers.  The case follows similar charges of excessive trading by brokers brought in January, April, and September.

The SEC’s complaint, filed in federal court in Manhattan, alleges that Zachary S. Berkey of Centerreach, New York, and Daniel T. Fischer of Greenwich, Connecticut, conducted in-and-out trading that was almost certain to lose money for customers while yielding commissions for themselves.  According to the complaint, 10 customers of Four Points Capital Partners LLC, where Berkey and Fischer previously worked, lost a total of $573,867 while Berkey and Fischer received approximately $106,000 and $175,000, respectively, in commissions.

“We’re intensifying our focus on unscrupulous brokers and their harmful practices,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office.  “As alleged in our complaint, Berkey and Fischer did grave harm to their customers by providing unsuitable recommendations and siphoning money in the form of high commissions and costs.”

According to the SEC’s complaint, since the customers incurred significant costs with every transaction and the securities were held briefly, the price of the securities had to rise significantly for customers to realize even a minimal profit.  The complaint also alleges that Berkey and Fischer churned customer accounts and concealed material information from their customers, namely that the costs associated with their recommendations, including commissions and fees, would almost certainly exceed any potential gains on the trades.  The complaint further alleges that Fischer engaged in unauthorized trading.

Without admitting or denying the SEC’s allegations, Fischer consented to a final judgment that permanently enjoins him from similar violations in the future and orders him to return his allegedly ill-gotten gains with interest and pay a $160,000 penalty.  The settlement is subject to court approval.  Fischer separately agreed to an SEC order barring him from the securities industry and penny stock trading.  The SEC’s litigation against Berkey will proceed in federal district court in Manhattan.

The SEC’s investigation was conducted by Hane L. Kim, Karen Lee, David Stoelting, and Gerald A. Gross.  The litigation will be led by Mr. Stoelting, Ms. Kim, and Ms. Lee.  The case is being supervised by Mr. Wadhwa.  The SEC examination that led to the investigation was conducted by Rosanne R. Smith, Terrence P. Bohan, William D. Ostrow, and Doreen Piccirillo.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority and the Office of Montana State Auditor, Commissioner of Securities and Insurance.

SEC TAKES ACTION AGAINST UNDISCLOSED PAID STOCK TOUTING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Press Release
SEC: Payments for Bullish Articles on Stocks Must Be Disclosed to Investors
27 Firms and Individuals Charged With Fraudulent Promotion of Stocks

FOR IMMEDIATE RELEASE
2017-79
Washington D.C., April 10, 2017—
The Securities and Exchange Commission today announced enforcement actions against 27 individuals and entities behind various alleged stock promotion schemes that left investors with the impression they were reading independent, unbiased analyses on investing websites while writers were being secretly compensated for touting company stocks.

SEC investigations uncovered scenarios in which public companies hired promoters or communications firms to generate publicity for their stocks, and the firms subsequently hired writers to publish articles that did not publicly disclose the payments from the companies.  The writers allegedly posted bullish articles about the companies on the internet under the guise of impartiality when in reality they were nothing more than paid advertisements.  More than 250 articles specifically included false statements that the writers had not been compensated by the companies they were writing about, the SEC alleges.

“If a company pays someone to publish or publicize articles about its stock, it must be disclosed to the investing public.  These companies, promoters, and writers allegedly misled investors by disguising paid promotions as objective and independent analyses,” said Stephanie Avakian, Acting Director of the SEC’s Division of Enforcement.

According to the SEC’s orders as well as a pair of complaints filed in federal district court, deceptive measures were often used to hide the true sources of the articles from investors.  For example, one writer wrote under his own name as well as at least nine pseudonyms, including a persona he invented who claimed to be “an analyst and fund manager with almost 20 years of investment experience.”  One of the stock promotion firms went so far as to have some writers it hired sign non-disclosure agreements specifically preventing them from disclosing compensation they received.

“Deception takes many forms.  Our markets cannot operate fairly when there are deliberate efforts to reach prospective investors with positive articles about a stock while hiding that the companies paid for those articles,” said Melissa Hodgman, Associate Director of the SEC’s Division of Enforcement.

The SEC filed fraud charges against three public companies and seven stock promotion or communications firms as well as two company CEOs, six individuals at the firms, and nine writers.  Of those charged, 17 have agreed to settlements that include disgorgement or penalties ranging from approximately $2,200 to nearly $3 million based on frequency and severity of their actions.  The SEC’s litigation continues against 10 others.

The SEC also instituted separate charges against another company for its involvement in circulating promotional materials that did not comply with prospectus requirements under the federal securities laws.  The company settled the case.

The SEC today released an investor alert warning that articles on an investment research website that appear to be an unbiased source of information or provide commentary on multiple stocks may be part of an undisclosed paid stock promotion.  Investors should never make an investment based solely on information published on an investment research website.  When making an investment decision, thoroughly research the company using multiple sources.

“Stock promotion schemes may be conducted through investment research websites,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy.  “Investors looking for objective investment information should be aware that fraudsters may use these websites to profit at investors’ expense.”

The SEC’s investigations were conducted by Beth Groves, Ian Rupell, Shelby Hunt, Jim Blenko, and Jonathan Jacobs with assistance from Michi Harthcock, Jamie Wohlert, Suzanne Romajas, and Frederick Block.  The cases were supervised by Rami Sibay, and the litigation will be led by Ms. Romajas and Patrick Costello.