Friday, March 28, 2014

Enforcement Actions: Week in Review


SEC Obtains Order Enforcing Compliance with Order to Pay Over $5 Million in Disgorgement, Prejudgment Interest, and Civil Penalties
, March 26, 2014, (Litigation Release No. 22952)

An opinion and order were entered this week "directing Walter Gerasimowicz, Meditron Asset Management, LLC, and Meditron Management Group, LLC to comply with the SEC order requiring them to pay $3,143,029.41 in disgorgement and prejudgment interest, and a civil penalty of $1,950,000." The SEC had previously found that the Respondents had "willfully violated the antifraud provisions" of the securities laws.

SEC Obtains Summary Judgment Against Defendant Jonathan Curshen in Market Manipulation Case, March 26, 2014, (Litigation Release No. 22951)

A summary judgment was entered against Jonathan Curshen which permanently enjoins him from future violations of the securities laws, imposes a penny stock bar against him, orders him to pay a $65,000 civil penalty, and holds him "jointly and severally liable with Defendant Bruce Grossman for $76,000 in disgorgement, plus $18,599.86 in prejudgment interest." In 2012, a final judgment was entered against Grossman that permanently enjoins him from future violations of the securities laws and imposes a penny stock bar against him. Grossman's liability "was deemed fully satisfied by Grossman's criminal forfeiture order in United States v. Grossman."

The SEC's original complaint found that the defendants "engaged in a fraudulent broker bribery scheme designed to manipulate the market for the common stock of Industrial Biotechnology Corp."

District Court Enters Final Judgments of Permanent Injunction Against All Defendants and Orders Penny Stock and Officer and Director Bars Against Linda Grable and Allan Schwartz, March 25, 2014, (Litigation Release No. 22950)

Final judgments were entered against Imaging Diagnostic Systems, Inc., Linda Grable, its CEO, and Allan Schwartz, its CFO, that permanently enjoin them from future violations of the securities laws, and impose penny stock bars and officer and director bars against Grable and Schwartz as well as order Grable and Schwartz to each pay $150,000 civil penalties.

The SEC's original complaint found that the defendants "made material misstatements and omissions in Imaging Diagnostic's public filings about the timing of the company's Food and Drug Administration application and its failure to remit payroll taxes to the Internal Revenue Service."


CFTC Orders Morgan Stanley Smith Barney LLC to Pay $490,000 to Settle Charges Relating to Rules and Regulations Pertaining to Segregated and Secured Amount Funds, March 27, 2014, (CFTC Press Release No. 6894-14)

The CFTC has filed and settled charges against Morgan Stanley Smith Barney LLC "for violating CFTC rules governing secured funds of foreign futures and option customers, commingling customer and firm funds, failing to prepare accurate daily computations of its segregated and secured funds, failing to properly title account statements...and failing to diligently supervise its employees handling of matters." The Order (PDF) "requires MSSB to pay a $490,000 civil monetary penalty and to cease and desist from violating the Commodity Exchange Act and CFTC Regulations."

CFTC Charges New York-Based SK Madison Commodities, LLC and its principals, Michael James Seward and Yan Kaziyev, with Commodity Pool Fraud and Other Violations, March 27, 2014, (CFTC Press Release No. 6892-14)

An emergency Order (PDF) has been issued that freezes and preserves "the remaining pool participant assets under the control of Michael James Seward, Yan Kaziyev, and their company SK Madison Commodities, LLC" and "freezes assets controlled by a successor company, SK Madison, LLC, prohibits Seward, Kaziyev, and SKMC from destroying books and records, and allows the CFTC immediate access to those records." The CTFC's original complaint (PDF) alleges that the defendants "fraudulently solicited more than $1.3 million from members of the public to trade futures in a commodity pool by...misrepresenting their trading practices and historical trading returns,...prepared and distributed...false account statements and performance reports showing huge profits" and "divert[ed] large amounts of pool participants’ funds for [their] own use." The CFTC seeks full restitution, disgorgement, civil penalties, permanent registration and trading bans, and a permanent injunction against the defendants.

Federal Court in North Carolina Orders Mitchell Brian Huffman to Pay $2.1 Million Penalty for Defrauding Customers of More than $3.2 Million in Commodity Pool Scheme, March 24, 2014, (CFTC Press Release No. 6891-14)

The CFTC obtained a federal court supplemental Consent Order (PDF) which requires Mitchell Brian Huffman "to pay a $2.1 million civil monetary penalty for operating a fraudulent commodity pool scheme that defrauded customers of more than $3.2 million in connection with exchange-traded commodity futures contracts." A separate Order requires Huffman "to pay $3.2 million in restitution to defrauded customers" as a part of his criminal sentencing in United States v. Mitchell Brian Huffman. A Consent Order (PDF) was entered in 2012 that "imposes permanent trading and registration bans against Huffman, prohibits him from violating federal commodities law, as charged" as well as orders him to pay the civil penalty "as provided for in the supplemental Order."

CFTC Orders Morgan Stanley Capital Group Inc. to Pay $200,000 Penalty for Violating Soybean Meal Futures Speculative Position Limits, March 24, 2014, (CFTC Press Release No. 6889-14)

Morgan Stanley has agreed to pay "a $200,000 civil monetary penalty to settle CFTC charges that it exceeded speculative position limits in soybean meal futures contracts trading on the Chicago Board of Trade ." The CTFC Order (PDF) against MSGCI also requires "MSGCI to cease and desist from further violations" of the federal commodities laws.

An Ohio Federal Court Rules against Defendants in CFTC Fraud Action and Orders Patrick Cole and Global Strategic Marketing, Inc. to Pay over $2.2 Million in Sanctions in Connection with Foreign Currency Ponzi Scheme, March 21, 2014, (CFTC Press Release No. 6887-14)

A judgment was entered against Patrick Cole and his company, Global Strategic Marketing, Inc., for allegedly committing "fraud in connection with a multi-million dollar off-exchange foreign currency Ponzi scheme." The court's Order (PDF) "imposes disgorgement of $1,146,399,...requires Cole and GSM to pay civil monetary penalties of $1,146,39,...imposes permanent trading and registration bans on Cole and GSM, and prohibits them from violating the anti-fraud provisions of the Commodity Exchange Act, as charged."

In May 2013, a judgment was entered "requiring Defendants CDL, its principals and controlling persons Kevin Harris, Keelan Harris, and Karen Starr, and Defendant Investment International Inc., to pay over $23 million in civil monetary penalties and restitution in connection with this fraudulent forex Ponzi scheme."

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