Friday, September 27, 2013

SEC Litigation Releases: Week in Review

SEC Charges CEO of Video Game Company and Purported Consultant in Revenue Inflation Scheme, September 25, 2013, (Litigation Release No. 22813)

According to the complaint (PDF), in 2009 Troy Lyndon, CEO and CFO of Left Behind Games Inc, and his friend, Ronald Zaucha, schemed to "falsely inflate the company's revenue by nearly 1,300 percent in a one-year period through sham circular transactions." Left Behind Games "was founded in 2001 and touted itself as 'the only publicly-traded exclusive publisher of Christian modern media' and 'the world leader in the publication of Christian video games and a Christian social network provider.'" However, when the company faced financial problems in 2011, it was forced to terminate all of its employees and close its offices. Lyndon and Zaucha's scheme allegedly began in 2009, "in an apparent last-ditch fraudulent effort to save the company, which was unprofitable and severely undercapitalized at the time." At Lyndon's direction, Left Behind Games allegedly issued stock to Zaucha for "his so-called consulting services." According to the SEC, in reality Zaucha "performed few, if any, consulting services." Zaucha then sold all these shares for "approximately $4.6 million in proceeds. Zaucha then kicked back approximately $3.3 million of these proceeds to the company."

The SEC has charged the defendants with violating various provisions of the Securities Act and Exchange Act and seeks permanent injunctions, financial penalties, and penny stock bars against them, as well as an officer-and-director bar against Lyndon.

SEC Settles Action Against Oregon-Based Hedge Fund Manager Yusaf Jawed, Who Masterminded a Ponzi Scheme, September 25, 2013, (Litigation Release No. 22812)

Final judgments were entered against Yusaf Jawed and his entities, Grifphon Asset Management, LLC and Grifphon Holdings, LLC, for their involvement in a $30-plus million Ponzi scheme that Jawed allegedly ran through his two entities. The judgments order them to pay over $33.9 million in disgorgement and interest and bars "Jawed from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization."

SEC Charges Former President of California-Based Investment Firm with Fraud, September 25, 2013, (Litigation Release No. 22811)

According to the complaint (PDF), Larry Polhillused "used his company American Pacific Financial Corporation to buy and sell real estate and distressed assets, and he offered investors the opportunity to invest in the company through unregistered notes that would yield them interest payments of 5 to 17 percent per year." In reality, the "collateral that Polhill and APFC claimed made the investments secure was often non-existent or otherwise impaired." APFC eventually filed for bankruptcy and at that time it "named the investors as unsecured creditors who were owed nearly $160 million."

The SEC has charged Polhill with violating the Securities Act and Exchange Act. Polhill has agreed to an order that permanently enjoins him from future violations and places an officer-and-director bar against him.

SEC Charges TD Bank and Former Executive for Roles in Rothstein Ponzi Scheme in South Florida, September 23, 2013, (Litigation Release No. 22810)

Earlier this week, the SEC charged TD Bank and it former executive, Frank A. Spinosa, with "violating securities laws in connection with a massive...Ponzi scheme conducted by Scott Rothstein." TD Bank has agreed to pay $15 million to settle the charges. The SEC has charged Spinosa with violating the Securities Act and Exchange Act and seeks "disgorgement, prejudgment interest, financial penalties, and a permanent injunction."

Previously, the SEC charged "two feeder funds to the Rothstein Ponzi scheme."

Securities and Exchange Commission v. Lawrence J. Robbins, September 23, 2013, (Litigation Release No. 22809)

Earlier this week, the SEC charged Lawrence Robbins with insider trading on information about impending acquisitions of Millennium Pharmaceuticals Inc. and Sepracor Inc. Robbins learned of the information from his business partner, John Michael Bennett, who in turn learned of the information from his friend, Scott Allen. The complaint charges Robbins with violating the Securities Act and Exchange Act, and Robbins has agreed to pay over $1 million in disgorgement and prejudgment interest to settle the charges. Additionally, Robbins agreed "to be permanently enjoined from future violations of these provisions of the federal securities laws."

Previously, the SEC charged "Bennett and Allen for their roles in the scheme."

SEC Charges Atlanta-Area Defendants with Securities Fraud, September 23, 2013, (Litigation Release No. 22808)

According to the complaint (PDF), Stephen L. Kirkland and his company, The Kirkland Organization, Inc. made " false and misleading statements to investors." These false statements to investors include (a) if investors invested "with the defendants through a managed account at Westover Energy Trading Partners, LLC, there would be no risk of losing their principal; (b) they would earn 2% to 3% per month; (c) a specified New York real estate developer/owner was a manager of Westover; and (d) the...developer/owner’s substantial wealth would be used to indemnify investors against loss." The SEC has charged the defendants with violating various provisions of the federal securities laws and seeks "permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against the defendants."

SEC Charges Former Qualcomm Executive and His Financial Advisor with Insider Trading Through Secret Offshore Accounts, September 23, 2013, (Litigation Release No. 22087)

According to the complaint (PDF), "Jing Wang, a former executive vice president and president of global business operations at Qualcomm, used a secret offshore brokerage account to make illegal trades based on confidential information that he learned on the job." Wang received assistance with setting up the account from "Gary Yin, a former registered representative at Merrill Lynch." Yin additionally made his own "secret offshore account..and traded on the non-public information gleaned from Wang." Wang created his account in the name "of a BVI company called Unicorn Global Enterprises, and Wang’s older brother was listed as the owner." Yin created "his own BVI-registered entity named Pacific Rim and put it in his mother-in-law’s name." When Wang realized that "that insider trading in the offshore accounts still may be discovered by the SEC or other regulators, he concocted a plan to conceal his trading activity by claiming the trades were made by his brother." Yin then traveled to China to "go over the account statements with Wang’s brother so he could explain the trades if asked by investigators." Combined, Wang and Yin gained over $271,000 from the illicit trading.

The SEC has charged Wang and Yin with violating the Exchange Act and seeks disgorgement, prejudgment interest, financial penalties, and permanent injunctions, as well as an officer-and-director bar against Wang.

SEC Charges Former Technology Company Executive for Role in Rajaratnam Insider Trading Scheme, September 23, 2013, (Litigation Release No. 22806)

Last Friday, the SEC charged Akamai Technologies' senior director of marketing, Kieran Taylor, with "illegally tipping non-public information about the company’s financial predicament as part of the insider trading scheme operated by now-imprisoned Galleon Management hedge fund founder Raj Rajaratnam." Taylor allegedly tipped his close friend Danielle Chiesi in 2008 and Chiesi in turn tipped Rajaratnam. Additionally, Taylor "traded on the non-public information...to avoid losses of $20,635." The SEC has charged Taylor with violating the Exchange Act and Securities Act and Taylor has agreed to pay over $145,000 to settle the charges. Taylor has also agreed to a five-year officer-and-director bar and to be "permanently enjoined from future violations of these provisions of the federal securities laws."

The SEC "has charged a total of 34 firms and individuals in its Galleon-related enforcement actions."

SEC Files Injunctive Action Against South Carolina Father and Son for Fraudulent Program Designed to Profit from Fate of Terminally Ill, September 23, 2013, (Litigation Release No. 22805)

According to the complaint (PDF), "Benjamin Sydney Staples and his son, Benjamin Oneal Staples...operat[ed] a fraudulent investment program designed to profit illegally from the deaths of terminally ill individuals." The Staples "deceived bond issuers out of at least $6.5 million by lying about the ownership interest in bonds they purchased in joint brokerage accounts opened with people facing imminent death who were concerned about affording the high costs of a funeral." From 2008 to 2012, the Staples allegedly operated an Estate Assistance Program and "recruited at least 44 individuals into the program."

The SEC has charged the defendants with violating sections of the Securities Act and Exchange Act and seeks disgorgement, prejudgment interest, financial penalties, and permanent injunctions. The complaint also names "another son of Benjamin Staples, Brian Staples,...as a relief defendant."

Securities and Exchange Commission v. Jenifer E. Hoffman, John C. Boschert, and Bryan T. Zuzga, September 20, 2013, (Litigation Release No. 22804)

The SEC has charged former Assured Capital Consultants, LLC principals, Jenifer E. Hoffman and John C. Boschert, and the company's purported escrow agent, Bryan T. Zuzga, "for their involvement in a fraudulent prime bank offering and Ponzi scheme." According to the SEC, the defendants raised at least "$25 million from investors, through false representations and fake documents." The defendants then used these funds for personal use and to "make payments to other investors in Ponzi fashion." The SEC has charged the defendants with violating various provisions of the securities laws and seeks "financial penalties, disgorgement of ill-gotten gains plus prejudgment interest, and permanent injunctions."

Securities and Exchange Commission v. Tibor Klein and Michael Shechtman, September 20, 2013, (Litigation Release No. 22803)

According to the complaint, Tibor Klein, president of Klein Financial Services, traded "in his own account and client accounts based on non-public information [...] about Pfizer Inc.’s planned acquisition of King Pharmaceuticals." Klein tipped his close friend, Michael Shechtman, who also traded on the insider information. Klein allegedly gained over $300,000 in illicit profits for himself and his clients, and Shechtman gained over $100,000 in illegal profits. The SEC has charged Klein and Shechtman with violating the Exchange Act and seeks "disgorgement of ill-gotten gains, financial penalties, and permanent injunctive relief against Klein and Shechtman to enjoin them from future violations of the federal securities laws."

No comments:

Post a Comment

Please keep comments appropriate. Malicious comments or solicitations will be removed.