Monday, February 23, 2015

Enforcement Actions: Week in Review

SEC ENFORCEMENT ACTIONS

SEC Halts Colorado-Based Pyramid Scheme
February 18, 2015(Litigation Release No. 35)
The SEC has announced fraud charges against and emergency asset freezes on Kristine L. Johnson and Troy A. Barnes for their involvement in an alleged Ponzi/pyramid scheme. The SEC alleges that Johnson and Barnes’ company, Work With Troy Barnes Inc., raised over $3.8 million since April of last year by luring investors in with promises of 700% returns. These returns were claimed to be possible through an investment algorithm created, according to Barnes, by an expert programmer. The SEC alleges the company had no actual business operations, investors were being paid “returns” using money coming from new investors, and that Johnson and Barnes were using investor funds to pay for personal expenses such as credit card bills and a vehicle purchase. The investigation is ongoing.

SEC Charges New York-Based Brokerage Firm and CEO With Committing Fraud During CDO Liquidation Auctions
February 19, 2015(Litigation Release No. 36)
The SEC has charged NYC brokerage firm VCAP Securities and its CEO, Brett Thomas Graham, with deceiving participants of their CDO liquidation auctions. VCAP and its affiliates were barred from participating in the auction by their agreement with the CDO trustees. In order to secure CDOs that would bolster funds managed by VCAP, Graham conspired with a third party broker-dealer. He used confidential bidding information in order to guarantee the CDOs would go to the third party who would later sell them to the investment advisor affiliate. Over the course of five auctions, the investment adviser affiliate won 23 CDOs. VCAP and Graham have agreed to pay disgorgements and prejudgment interests of $1,149,599 and $127,733, respectively. Graham has been fined an additional $200,000 penalty and has been barred from the securities industry for at least three years.

SEC Charges Brothers-in-Law in Louisiana With Insider Trading
February 19, 2015(Litigation Release No. 37)
The SEC has announced charges against Scott Zeringue (former company executive of The Shaw Group, a Fortune 500 company) and his brother-in-law, Jesse Roberts III, with violations of the antifraud provisions of the federal securities laws. Zeringue had tipped Roberts with nonpublic information ahead of the company’s merger, making them and others (tipped by Roberts) nearly $1 million in combined illicit profits. Zeringue has previously pled guilty, settling the SEC’s charges by paying a total of $96,018. Zeringue will be prohibited from serving as an officer or director of a public-traded company for 10 years.


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