Friday, May 2, 2014

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

SEC Charges Barry R. Bekkedam with Defrauding Investment Advisory Clients in Connection with Multimillion Dollar Rothstein Ponzi Scheme
, April 30, 2014, (Litigation Release No. 22983)

According to the complaint (PDF), Barry R. Bekkedam, former SEC-registered investment advisor and former owner, Chairman, and Chief Executive Officer of Ballamor Capital Management, LLC, "fraudulently induced, or assisted in inducing, his advisory clients and others to invest approximately $100 million in a fund that purportedly purchased lawsuit settlements from now-convicted Ponzi-schemer Scott Rothstein." In 2009, Bekkedam met George Levin, "who was himself a Rothstein investor and had been raising capital from investors to purchase settlements from Rothstein since 2007." In April 2009, they "formed a private fund called Banyon Income Fund, LP to enable Bekkedam to raise funds from clients and others to be invested exclusively in Rothstein’s settlements." While the scheme lasted, "Levin and Bekkedam engaged in a series of transactions designed to funnel money to Bekkedam and his related entities in exchange for Bekkedam’s solicitation of investors in the Fund." The complaint finds that Bekkedam violated various provisions of the securities laws and seeks a final judgment, disgorgement, prejudgment interest, and a civil penalty against him.

SEC Charges Utah-Based Retirement Plan Administrator with Defrauding Investors, April 30, 2014, (Litigation Release No. 22982)

The SEC obtained an asset freeze and an appointment of a receiver against American Pension Services, Inc., a retirement plan administrator that has been charged along with its Founder, President and CEO, Curtis L. DeYoung, with "defraud[ing] investors in self-directed Individual Retirement Accounts, causing them to lose millions of dollars of savings." The SEC has charged the defendants with violating various provisions of the securities laws and seeks a permanent injunction, disgorgement, prejudgment interest, and a civil penalty.

SEC Charges Individuals with Insider Trading in Stock of E-Commerce Company Prior to Acquisition by Ebay, April 29, 2014, (Litigation Release No. 22981)

Last week, the SEC charged Christopher Saridakis and Jules Gardner with insider trading in advance of eBay’s acquisition of GSI Commerce, Inc. Gardner allegedly " violated a duty of trust as CEO of the marketing solutions division of GSI Commerce by illegally tipping family members and two friends, including Jules Gardner, about the acquisition of GSI." The defendants have agreed to judgments that permanently enjoin them from future violations of the Securities Exchange Act and impose an officer and director bar against Saridakis. The defendants have also been ordered to pay over $920,000 in disgorgement, prejudgment interest, and penalties combined. Criminal charges have been announced against Saridakis.

The SEC's investigation remains ongoing.

SEC Files Action Against Broker-Dealer to Enforce Compliance with Order to Pay Civil Penalty, April 28, 2014, (Litigation Release No. 22980)

This week, the SEC announced "that it filed an application...against Charles Vista, LLC alleging that it violated an SEC Order requiring it to pay civil penalties of $4,350,000. " In November 2013, the SEC found that Charles Vista, LLC had "violated the antifraud provisions of the federal securities laws by reason of false and misleading statements made by Gregg Lorenzo and Frank Lorenzo (not related) to induce investors to purchase certain debentures." The SEC's order directed the defendants to cease and desist from "committing or causing any violations or future violations" of the securities laws and, among other things, ordered Charles Vista, LLC, to pay a civil penalty of $4,350,000. "No portion of this civil penalty has been paid." The SEC seeks a court order to enforce the payment of this civil penalty.

SEC Charges Texas Resident and His Companies for Selling Fraudulent Oil and Gas Investments, April 28, 2014, (Litigation Release No. 22979)

Last week, the SEC filed "civil securities fraud charges against Guardian Oil & Gas, Inc., Guardian Oil & Natural Gas, Inc. and their principal, Rick D. Mullins. The charges stem from an alleged oil and gas offering fraud." According to the SEC, "the defendants failed to disclose to investors Guardian's deteriorating financial condition, including significant amounts owed on pre-existing bank loans" and furthermore, "falsely represented to investors that their contributions would be used solely for the specific drilling project in which they had invested but instead, under Mullins's direction, Guardian and GONG redirected investor funds for other unrelated purposes." The SEC has charged the defendants with violating various provisions of the securities laws and seeks permanent injunctions, disgorgement, and prejudgment interest as well as civil penalties against Mullins.

SEC Charges Las Vegas Resident and His Company with Securities and Broker-Dealer Registration Violations in Connection with Multi-Million Dollar Prime Bank Schemes, April 28, 2014, (Litigation Release No. 22978)

According to the complaint (PDF), James Lee Erwin and his company, Joint Venture Solutions, Inc., violated "the securities offering and broker-dealer registration provisions of the federal securities laws" by promoting investments in "Malom Group AG of Switzerland, a company...that is behind a pair of advance fee schemes guaranteeing astronomical returns to investors in purported prime bank transactions and overseas debt instruments." The SEC alleges that "the investors [the defendants] recruited lost all of their invested funds." The complaint charges the defendants with violating provisions of the securities laws and seeks permanent injunctions, disgorgement, prejudgment interest, and civil penalties. Previously, the SEC charged "Malom Group AG, its principals, and agents with violating the antifraud and securities registration provisions of the federal securities laws in SEC v. Malom Group AG, et al."

CFTC ENFORCEMENT ACTIONS

Federal Court Freezes Assets of EJS Capital Management, LLC, Alex Vladimir Ekdeshman and Edward J. Servider and Relief Defendants in CFTC Action Charging Misappropriation of Nearly $2 Million in Ongoing Forex Fraud Scheme
, May 2, 2014, (CFTC Press Release No. 6919-14)

According to the complaint (PDF), EJS Capital Management, LLC, Alex Vladimir Ekdeshman, and Edward J. Servider fraudulently solicited over "$2 million, misappropriat[ed]...most of those funds, issu[ed] false account statements," and had "registration violations in an ongoing retail foreign currency fraud scheme." A restraining order has been entered against the defendants as well as relief defendants Alisa Ekdeshman (Ekdeshman’s wife), Executive Services of Florida LLC, Executive Management Services of Montana Inc., and Michael Vilner. The CFTC seeks disgorgement, restitution for the defrauded EJS customers, civil penalties, permanent registration and trading bans, and a permanent injunction from future violations of the commodities laws. A hearing date has been set for May 12, 2014.

Criminal charges have been filed against Ekdeshman charging him with "one count each of commodities fraud, mail fraud, and wire fraud."

Federal Court Orders James C. Yadgir of Palatine, Illinois to Pay $130,000 Penalty for Violating Speculative Position Limits for Cattle Futures, April 29, 2014, (CFTC Press Release No. 6917-14)

A final judgment and consent Order (PDF) has been filed against James C. Yadgir, "who has been registered with the CFTC as floor trader since 1993 and as floor broker since 2007." The Order settles charges that "Yadgir exceeded speculative position limits in live cattle futures contracts on one day and feeder cattle futures contracts on two other days" and "requires Yadgir to pay a civil monetary penalty of $130,000" as well as "permanently prohibits him from violating speculative position limits of a registered entity, which have been either approved by the CFTC or certified by a registered entity."

Federal Court Orders Illinois CPA Michael Tunney and His Accounting Firm, Tunney & Associates, P.C., to Pay a $100,000 Penalty for Improper Audits of a Commodity Futures Firm, April 28, 2014, (CFTC Press Release No. 6916-14)

The CFTC obtained a federal court Consent Order (PDF) "against Tunney & Associates, P.C...and Michael Tunney, its sole owner and a certified public accountant" requiring them "to pay a $100,000 civil monetary penalty for violating CFTC Regulations when conducting audits for The Linn Group, a CFTC-registered Futures Commission Merchant."

CFTC Obtains a Permanent Injunction against Australian Firm Halifax Investment Services, Ltd., Charged with Acting as an Unregistered Retail Foreign Exchange Dealer, April 25, 2014, (CFTC Press Release No. 6914-14)

Consent Order of Permanent Injunction (PDF) was entered against Halifax Investment Services, Ltd. The Order bars Halifax from "soliciting orders to trade foreign currency from United States residents who do not qualify as eligible contract participants and from offering to be the counterparty to United States residents’ forex transactions without registering with the CFTC." The Order also "requires Halifax to publish a notice on its website stating that Halifax does not provide services for United States residents" as well as settles "CFTC charges that Halifax unlawfully solicited members of the public to engage in forex transactions and operated as a Retail Foreign Exchange Dealer without being registered with the CFTC."

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