SEC Charges Detroit Firm For Deceiving Trustees of MM Fund

The Securities and Exchange Commission today announced fraud charges against a Detroit-based investment advisory firm and a portfolio manager for deceiving the trustees of a money market fund and failing to comply with rules that limit risk in a money market fund’s portfolio.  Money market funds seek to maintain a stable share price by investing in highly safe securities.  Under the federal securities laws, a money market fund may only invest in securities determined by the fund’s board of trustees to present minimal credit risk.

The SEC’s Enforcement Division alleges that Ambassador Capital Management and Derek Oglesby repeatedly made false statements to trustees of the Ambassador Money Market Fund about the credit risk in the securities they purchased for its portfolio.  Trustees also were misled about the fund’s exposure to the Eurozone credit crisis of 2011 and the diversification of the fund’s portfolio. 

“Money market fund managers must not hide the ball from a fund’s board,” said George S. Canellos, co-director of the SEC’s Enforcement Division.  “Ambassador Capital Management and Oglesby weren’t truthful about whether securities in the portfolio threatened to destabilize the fund, and they failed to operate under the strict conditions designed for money market fund managers to limit risk exposure and maintain a stable price.”

The enforcement action stems from an ongoing analysis of money market fund data by the SEC’s Division of Investment Management, in this case a review of the gross yield of funds as a marker of risk.  The performance of the Ambassador Money Market Fund was identified as consistently different from the rest of the market.  Upon further examination by the SEC’s Office of Compliance Inspections and Examinations, the matter was referred to the Enforcement Division’s Asset Management Unit for investigation.

For more information - SEC.gov | SEC Announces Fraud Charges Against Detroit-Based Money Market Fund Manager

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actionsand representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Prosecutors Investigating SEC Staff

In an interesting twist, the Wall Street Journal is reporting that federal prosecutors and the office of the inspector general of the U.S. Securities and Exchange Commission are conducting an investigation of the SEC's New York office for the possibility of improper investments.

According to Reuters, investigators are checking whether the employees' investments comply with SEC internal rules that prohibit trading shares of companies under investigation.

The article claims that the investigation appears limited to the New York office of the securities regulator, and there is no indication of widespread flouting of the rules, according to the report.

For more detail, visit U.S. authorities probing New York SEC staff investments -WSJ | Reuters

BofA Said to Face Three More U.S. Probes of Mortgage-Bond Sales

Bloomberg is reporting that Bank of America Corp., sued by U.S. attorneys in August over an $850 million mortgage bond, faces three additional Justice Department civil probes over mortgage-backed securities, according to two people with direct knowledge of the situation.

U.S. attorneys offices in Georgia and California are examining potential violations tied to Countrywide Financial Corp., the subprime lender Bank of America bought in 2008, said the people, who asked not to be identified because the inquiries aren’t public. U.S. attorneys in New Jersey are looking into deals involving Merrill Lynch & Co., purchased by the firm in 2009, the people said.

If claims are brought, Bank of America would join JPMorgan Chase & Co. (JPM) in facing Justice Department demands that it resolve liabilities inherited while buying weakened rivals at the government’s urging during the credit crisis. JPMorgan, the biggest U.S. bank, reached a tentative $13 billion agreement last week to end civil claims over mortgage-bond sales, including those handled by Bear Stearns Cos. and Washington Mutual Inc. operations purchased in 2008. Bank of America, led by Chief Executive Officer Brian T. Moynihan, 54, is being examined for violations of the Financial Institution Reform, Recovery and Enforcement Act of 1989, a relic of the savings-and-loan crisis known as FIRREA, according to the people. The Justice Department cited that statute in its August lawsuit against the firm, which is the nation’s second-largest lender after JPMorgan.

For more information - BofA Said to Face Three More U.S. Probes of Mortgage-Bond Sales - Bloomberg

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms and brokers nationwide. For more information cotact Mark Astarita at 212-509-6544 or at email us

The Best Defense Your Money Can't Buy

How prosecutors disarm defendants by freezing their assets

The Best Defense Your Money Can't Buy

 

Previously Unknown Inside Traders in Heinz Settle SEC Charges

The Securities and Exchange Commission announced that two brothers in Brazil have agreed to pay nearly $5 million to settle charges that they were behind suspicious trading in call options for H.J. Heinz Company the day before the company publicly announced its acquisition.

The SEC filed an emergency enforcement action earlier this year to freeze assets in a Swiss-based trading account used to reap more than $1.8 million from trading in advance of the Heinz announcement.  The SEC’s immediate move the day after the announcement ensured the illicit profits could not be released out of the account while the investigation into the then-unknown traders continued.

In an amended complaint filed today in federal court in Manhattan, the SEC alleges that the order to purchase the Heinz options was placed by Rodrigo Terpins while he was vacationing at Walt Disney World in Orlando, and the trading was based on material non-public information that he received from his brother Michel Terpins.  The trades were made through an account belonging to a Cayman Islands-based entity named Alpine Swift that holds assets for one of their family members.  Rodrigo Terpins purchased nearly $90,000 in option positions in Heinz the day before the announcement, and those positions increased dramatically by nearly 2,000 percent the next day.

The Terpins brothers and Alpine Swift, which has been named as a relief defendant for the purposes of recovering ill-gotten gains, have agreed to disgorge the entire $1,809,857 in illegal profits made from trading Heinz options.  The Terpins brothers also will pay $3 million in penalties.  The settlement is subject to court approval.

For more detail, visit SEC.gov | Previously Unknown Insider Traders in Heinz Agree to $5 Million Settlement

SEC Charges RIA For False Statements to Investors and Investigators - Parallel Criminal Charges Filed.

Why don't these defendants learn? When confronted by government investigators, either tell the truth or don't talk. Simple. But this basic concept seems to elude them.Case in point - the Securities and Exchange Commission charged the owner of a New York-based investment advisory firm with defrauding investors while grossly exaggerating the amount of assets under his management, and announced that the defendant has pled guilty to criminal charges which included charges that he lied to investigators.  

The SEC alleges that Fredrick D. Scott registered his firm ACI Capital Group as an investment adviser and then embarked on a series of fraudulent schemes targeting individual investors and small businesses.  Scott repeatedly touted ACI’s registration under the securities laws and falsely claimed the firm’s assets under management to be as high as $3.7 billion to bolster his credibility when offering too-good-to-be-true investment opportunities.  As Scott solicited funds from investors after promising them very high rates of return, he simply stole their money almost as soon as they deposited it with ACI.  Scott paid no returns to investors and illegally used their money to fund such personal expenses as his children’s private school tuition, air travel and hotels, department store purchases, and several thousand dollars in dental bills.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York announced Scott has pleaded guilty to criminal charges.  Among the charges to which Scott has pleaded guilty is making false statements to SEC examiners when they questioned whether Scott and ACI had accepted loans from investors. 

SEC examiners notified the agency’s Enforcement Division, which began investigating and referred the matter to criminal authorities. “Scott told brazen lies about the value of ACI’s assets under management and its ability to deliver huge returns on various investments,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “Our examination and enforcement staff aggressively pursue investment advisers who flout the registration provisions of the securities laws for their personal gain, especially those who attempt to cover up their misdeeds by flat-out lying to our examiners.”

According to the SEC’s complaint filed in federal court in Brooklyn, one variation of Scott’s fraud was a so-called advance fee scheme – Scott promised investors that ACI would provide multi-million dollar loans to people seeking bank financing.  But investors were told that they first needed to advance ACI a percentage of the loan amount, and once they did so they would receive the remaining balance of the amount that Scott promised to pay.  Scott had no intention of ever returning the money, nor did he repay it.

The SEC alleges that in another iteration of his fraud, Scott offered investors the opportunity to make a bridge loan to a third-party entity.  The investor was told to fund one portion of the loan, and ACI would supposedly fund the remaining balance.  In exchange, the investor would supposedly receive a substantial return on his initial investment.  In this scheme as with each of his others, investors never received returns and Scott stole the money.

The SEC’s complaint charges Scott with violating Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5, Section 207 of the Investment Advisers Act for filing a false Form ADV, and aiding and abetting ACI’s improper registration in violation of Section 203A of the Advisers Act.

More information is available at the SEC's site and the complaint is also online.

Money Manager Charged With Defrauding Investors and Firms

The SEC has charged a purported money manager in New York with conducting a free-riding scheme to defraud three brokerage firms, and then bilking several investors out of nearly a half-million dollars that he stole to fund his luxurious lifestyle that included a Bentley automobile, summers in the Hamptons, and casino junkets.
The SEC alleges that Ronald Feldstein caused more than $2 million in losses for the brokerage firms that he victimized in the free-riding scheme, which occurs when customers buy or sell securities in their brokerage accounts without having the money or shares to actually pay for them.  Feldstein opened three separate brokerage accounts in the names of two purported investment funds that he created.  He had no intention to pay for the stocks that he purchased if they resulted in big losses.  Feldstein planned to walk away from any transactions where the price declined substantially after the trade date, and planned to use sales proceeds to pay for the purchases if the price of a stock increased.
The SEC further alleges that Feldstein later began soliciting investments by targeting owners of businesses that he had frequented for decades, including a dry cleaner and a car leasing and servicing company.  Feldstein convinced them to provide funds for him to invest on their behalf, promising such profitable opportunities as a successful hedge fund, a promising penny stock, and an initial public offering (IPO) of a fashion company.  However, Feldstein never invested this money, instead converting it for his personal use without their knowledge.

“Without sufficient assets to pay for his stock purchases, Feldstein illegally arranged trades in which he got the profits if he won and left brokerage firms holding the bag if he lost.”
-Andrew M. Calamari, Director of the SEC’s New York Regional Office. 

The complaint does not address how this scheme was discovered, or why the free-riding scheme went undetected for any period of time. Brokerage firms have the obligation to detect free-riding and to take steps to prevent such activities. My firm has the experience to assist firms in creating such compliance systems, as well as assisting firms, and investors, in recovering losses from fraudulent investment practices.
Give us a call at 212-509-6544. We represent all market participants, nationwide.
SEC.gov | SEC Charges Purported Money Manager With Defrauding Investors and Brokerage Firms

Cell Phones Do Not Avoid Insider Trading Charges

While we have successfully defended professionals and investors in insider trading cases, those defenses are usually based on the fact that the client did not trade on such information. We do not win such cases because the investor hid his trading activity, but it is interesting to see what those trading on inside information do in order to avoid detection.

The most recent example, the SEC announced insider trading charges against a former systems administrator at Vermont-based Green Mountain Coffee Roasters who repeatedly obtained quarterly earnings data and traded in advance of its public release. According to the Commission, they traded out of the money options before earnings announcements and gained $7 million dollars in profits. The Commission alleges that they communicated with each other by voice and text messages using their wives' cellphones.

Pretty clever. No one would ever think of issuing a subpoena for my wife's cell phone in an insider trading investigation!

None of this works. First, let's keep in mind that the Commission and the exchanges have extensive records of trading activity. The regulators know, at a minimum, which brokerage firm had clients purchasing stock, or options, in the days, weeks, or even months leading up to an event. It is not difficult for the regulators to issue requests to the firms for the identity of the customer who made suspicious purchases.

From there the SEC Staff issues a document request to the customer, his brokerage firm, and ultimately his bank, his telephone company and any other entity, following the money. Ultimately the Staff takes the customer's testimony under oath,

At that time, the customer is faced with a choice - assist the investigation and testify, or refuse to testify and assert his rights under the Fifth Amendment. The latter choice is not always the right choice, and there are complications in doing so, but it is an option, and one that we sometimes recommend to our clients. Of course,there is a third choice - testify and lie - but that is not an option, as many targets of investigations have found, including Martha Stewart. She did a year for obstruction, and then settled the insider trading case.

The reality is that if you are going to trade on inside information, you are probably going to get caught, and if you are not trading on inside information, you don't have to go through hoops to hide your activity. In this case, this team of investors correctly predicted the company's stock price reaction to 12 of the past 13 quarterly earnings announcements. I once had a federal court judge tell me, during an insider trading trial, that "you don't pull a royal flush in 4 out of 5 poker hands." So too here.

But what I found interesting was the that the SEC alleges that as an information technology employee, McGinnis had access to shared folders on Green Mountain Coffee’s computer server where drafts of pending press releases and earnings announcements were stored.  He also had access to other employees’ e-mail accounts.  Both sources provided McGinnis with details about upcoming Green Mountain Coffee earnings announcements before they became public.

Plus, although the technology officer lives in Vermont, and his partner lives in Connecticut, according to the SEC, much of the insider trading in their online brokerage accounts occurred through McGinnis’ home Internet service.  They communicated frequently around earnings announcements, but infrequently otherwise.
But I am sure they thought they were being clever, according to the SEC, around trading times, they exchanged numerous phone calls and text messages  using cell phones belonging to their spouses.
It doesn't work. The SEC will figure it out eventually, and when they do, the penalty is THREE TIMES your profits. Not three times your net trading profits; three times the profit on the trades that the SEC says were made with inside information. They ignore the losers, by the way.

The solution? The obvious one is not to trade on inside information. More importantly, be careful when you trade on tips received from friends or colleagues, and document the trades that you do make. And if you are in the unfortunate position of being investigated for insider trading, retain an experienced securities attorney at the start of the investigation. Do not go it alone, the downside, which can include criminal charges, are simply too great.

SEC.gov | SEC Charges Former Green Mountain Coffee Employee And Friend In $7 Million Insider Trading Scheme

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of insider trading investigations and enforcement actions. We represent investors, financial professionals and investment firms nationwide. For more information contact Mark Astarita at 212-509-6544 or at mja@sallahlaw.com

• More posts on insider trading at The Securities Law Blog, including SEC Loses Insider Trading Trial

SEC Files Admin Proceeding Against Steven A. Cohen

After months of speculation, the SEC filed administrative proceedings against Steve Cohen, the founder of SAC Capital Advisors, one of the largest and most well known hedge funds in the country.The fact that they filed an administrative proceeding rather than a civil case in court, indicates that they do not believe they can prove that there was fraud involved in their investigation, and that they do not believe he was engaged in insider trading. If they thought they could prove insider trading, they certainly would have been a civil, if not criminal case.

The charges involve allegations that he failed to supervise his employees and to prevent them from engaging in insider trading. Specifically, the Commission alleges that on two separate occasions in 2008, two portfolio managers who reported to Cohen obtained material nonpublic information about three different publicly traded companies. The Commission alleges that both portfolio managers provided information to Cohen indicating that they may have had access to inside information to support their trading. Based on that information, both portfolio managers engaged in unlawful insider trading. 

That is a typical SEC-style allegation. The allegations are full of innuendo and speculation, and perfectly innocent statements and text messages presented as "evidence" of wrongful conduct. The Commission does NOT allege that the managers told Cohen that it was inside information, it alleges that the information indicated that they may have had access to inside information. Those two statements are very different, but undoubtedly intended by the Staff to imply that Cohen knew it was inside information.

Clearly that is not the case, or this would not be an administrative proceeding. I think we can confidently conclude that the Commission does not have any information that Cohen knew of the use of any inside information.

This becomes clear when the Commission alleges that "Cohen received highly suspicious information that should have caused any reasonable hedge fund manager in Cohen’s position to take prompt action to determine whether employees under his supervision were engaged in unlawful conduct and to prevent violations of the federal securities laws."

Parsing the Commissions factual allegations there are far too many conclusions, such as "Cohen was aware" and implications to convince me that the Commission has a case. Clearly, if they had evidence that Mr. Cohen was in fact "aware" and allowed the trades to be placed he would be the subject of an insider trading case, not a failure to supervise case.

While this all makes for interesting reading and exploration to securities attorneys who are interested in insider trading cases, really is not fun and games. The Commission spent a significant amount of time investigating Mr. Cohen for insider trading, undoubtedly hoping to catch a career making big fish. Obviously there was no such case.

However, rather than closing the investigation, they file this administrative proceeding, which could have a significant impact on Mr. Cohen's ability to conduct business. Although the Commission did not ask for any specific relief in its complaint, in the press release they claim that they will be seeking financial penalties as well as a "supervisory and financial services industry bar."

We will continue to review the allegations, but at this point in time it appears that not only is the proceeding excessive, discussions of "financial services" bars are a flight of fantasy.

We will update as the case progresses.

Press Release:SEC Charges Steven A. Cohen with Failing to Supervise Portfolio Managers and Prevent Insider Trading

The Administrative Order Filing the Charges 

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• Introduction to Insider Trading
• Registration and Regulation of Investment Advisors

SEC Charges Two Executives in Ponzi Scheme At Dallas-Based Medical Insurance Company

The SECcharged two executives at a Dallas-based medical insurance company with operating a $10 million Ponzi scheme that victimized at least 80 investors.

The SEC alleges that the two executives solicited investments for Global Corporate Alliance (GCA) by promoting it as a proven business with a strong track record of generating revenue from the sale of limited-benefit medical insurance. In reality, GCA was merely a start-up company with no operating history and virtually no revenue. As they raised investor funds, the executives used proceeds from new investors to pay returns to existing investors. Once they couldn’t find any new investors, the executives used a stall campaign of purported excuses to delay making any further payments to investors.

“[The executives] raised millions of dollars by lying to investors about their company’s business and history and their planned use of investor funds,” said David Woodcock, Director of the SEC’s Fort Worth Regional Office.  “When they could no longer fuel their Ponzi scheme with money from new victims, they told more lies in a failed effort to prevent their scheme from unraveling sooner.”

David Peavler, Associate Director of the SEC’s Fort Worth Regional Office, added, “[The executives] created fake monthly statements to falsely portray GCA as a thriving health insurance company successfully enrolling thousands of premium-paying policyholders each month. In reality, they never had more than 40 policyholders, and half of those were GCA’s own employees.”

For more information, visit SEC Charges Two Executives in Ponzi Scheme At Dallas-Based Medical Insurance Company.

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent firms and brokers nationwide. For more information contact Mark Astarita at 212-509-6544 or  by email

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EC Charges China-Based Company and CEO in Latest Cross-Border Working Group Case

The SEC charged a China-based company and the CEO with fraudulently misleading investors about its financial condition by touting cash balances that were millions of dollars higher than actual amounts.

The case is the latest from the SEC's Cross-Border Working Group that focuses on companies with substantial foreign operations that are publicly traded in the U.S. The Working Group has enabled the SEC to file fraud cases against more than 65 foreign issuers or executives and deregister the securities of more than 50 companies.

The SEC alleges that China MediaExpress, which purports to operate a television advertising network on inter-city and airport express buses in the People's Republic of China, began falsely reporting significant increases in its business operations, financial condition, and profits almost immediately upon becoming a publicly-traded company through a reverse merger. In addition to grossly overstating its cash balances, China MediaExpress also falsely stated in public filings and press releases that two multi-national corporations were its advertising clients when, in fact, they were not. The company's chairman signed the public filings and attested to their accuracy. After suspicions of fraud were raised by the company's external auditor and an internal investigation ensued, the chairman attempted to pay off a senior accountant assigned to the case.

"Investor confidence in the representations made by publicly-traded companies is critically important to the proper functioning of our financial markets," said Antonia Chion, Associate Director in the SEC's Division of Enforcement. "China MediaExpress and [its chairman] falsely reported whopping increases in its cash balances and deceptively raised money from stock sales. Today's action demonstrates the Commission's commitment to policing financial fraud in the U.S. markets, regardless of whether it is perpetrated by persons who live here or abroad."

For more information, visit EC Charges China-Based Company and CEO in Latest Cross-Border Working Group Case.



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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent firms and brokers nationwide. For more information contact Mark Astarita at 212-509-6544 or at mja@sallahlaw.com

Related articles

• What is the SEC's "Cross-Border Working Group"? This Chinese Company's Executive Is Getting a Tough Lesson (grandjurytarget.com)
• SEC Charges Whittier Trust and Fund Manager in Insider Trading Investigation Into Expert Networks (seclaw.blogspot.com)
• Trader's Day in Court May Lack Some Details (dealbook.nytimes.com)

SEC Obtains Freeze on Proceeds from Unlawful Distribution of Biozoom Securities

The SECannounced charges against eight Argentine citizens who unlawfully sold millions of shares of Biozoom, Inc. in unregistered transactions. The SEC also obtained an emergency order to freeze assets in the U.S. brokerage accounts of the eight defendants and two other Argentine citizens who had Biozoom shares but had not yet sold them. The action follows last week’s suspension of trading in Biozoom due to concerns that some shareholders may be unlawfully distributing its securities.

Biozoom, formerly Entertainment Art, Inc., announced in April that it was changing its name and moving from producing leather bags to developing biomedical technology. The SEC’s complaint alleges that from March to June 2013, the ten defendants received more than 20 million shares of Entertainment Art, which was one-third of the company’s total outstanding shares. In a one-month period beginning in mid-May, eight of them sold more than 14 million shares. The sales yielded almost $34 million, of which almost $17 million was wired to overseas bank accounts. Their U.S. brokerage accounts, which include approximately $16 million in cash, are subject to the asset freeze.

The SEC’s complaint, filed in U.S. District Court in Manhattan, charges the eight defendants along with two others who received shares but have yet to sell them.

“Today’s action, along with the SEC’s trading suspension order last week, demonstrate the SEC’s ability and commitment to act swiftly to halt ongoing illegal conduct and preserve assets,” said Antonia Chion, Associate Director in the SEC’s Division of Enforcement.

For more information, visit SEC Obtains Freeze on Proceeds from Unlawful Distribution of Biozoom Securities.

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent firms and brokers nationwide. For more information contact Mark Astarita at 212-509-6544 or at mja@sallahlaw.com

SEC Obtains $13.9 Million Penalty Against Rajat Gupta

The SEC obtained a $13.9 million penalty against a former Goldman Sachs board member for illegally tipping corporate secrets to a former hedge fund manager.  The board member also is permanently barred from serving as an officer or director of a public company.

The SEC previously obtained a record $92.8 million penalty against the hedge fund manager for prior insider trading charges.

“The sanctions imposed today send a clear message to board members who are entrusted with protecting the confidences of the companies they serve,” said George S. Canellos, Co-Director of the SEC’s Division of Enforcement.  “If you abuse your position by sharing confidential company information with friends and business associates in exchange for private gain, you will be prosecuted to the fullest extent by the SEC.”

In its complaint filed in late 2011, the SEC alleged that the board member disclosed confidential information to the former hedge fund manager about Berkshire Hathaway Inc.’s $5 billion investment in Goldman Sachs as well as nonpublic details about Goldman Sachs’ financial results for the second and fourth quarters of 2008.

For more information, visit SEC Obtains $13.9 Million Penalty Against Rajat Gupta.

SEC Halts Texas-Based Forex Trading Scheme

The SECannounced an emergency asset freeze against an unregistered money manager and his companies in Plano, Texas, who are charged with defrauding investors in a foreign currency exchange trading scheme.

The forex market is a large and generally liquid financial market in which the risk of loss for individual investors can be substantial. The SEC has previously warned individual investors about the risks involved with forex trading.

The SEC alleges a forex trader raised more than $7.1 million from investors by touting a sophisticated low-risk forex trading strategy yielding astronomical returns. He advertised his purported "25-year Wall Street career." In reality, the forex trading has incurred losses of investor funds, and the forex trader actually spent only six years as a licensed securities professional in Houston before being barred by the New York Stock Exchange two decades ago. The forex trader also lied about his education. Meanwhile, he has siphoned away more than $1.7 million of investor money to pay personal expenses, finance expensive trips, and fund other unrelated and undisclosed businesses and investments.

"[The forex trader] and his companies brandished phony credentials and a can't-miss trading strategy to lure investors into a web of deceit," said David Woodcock, Director of the SEC's Fort Worth Regional Office. "In reality, [the forex trader] was suffering forex trading losses and putting investor money to other uses."

The Commodity Futures Trading Commission(CFTC) today announced parallel charges against the forex trader and his companies.

According to the SEC's complaint that was unsealed late yesterday in U.S. District Court of the Eastern District of Texas, [the forex trader] raised investor money through two entities that he owns and controls: KGW Capital Management and Revelation Forex Fund. KGW Capital purports to be "one of the world's leading private investment firms."

For more information, visit SEC Halts Texas-Based Forex Trading Scheme.


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The attorneys at Sallah Astarita & Cox, LLC include veteran securities litigators and former SEC Enforcement Attoreys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent firms and brokers nationwide. For more information contact Mark Astarita at 212-509-6544 or at mja@sallahlaw.com

SEC Freezes Assets Of Insider Traders in Onyx Pharmaceuticals

The SECobtained an emergency court order to freeze the assets of traders using foreign accounts to reap approximately $4.6 million in potentially illegal profits by trading in advance of the Sunday, June 30, 2013 announcement that Onyx Pharmaceuticals, Inc. had received, but rejected an acquisition offer from Amgen, Inc.

The SEC alleges that unknown traders took risky bets that Onyx's stock price would increase by purchasing call options on June 26, 27 and 28, the three trading days before the announcement. Through quick, cross country coordination between the agency's Los Angeles and New York offices, the SEC took emergency action to freeze the traders' assets before courts closed for the holiday.

"This action demonstrates that the SEC will not hesitate to freeze the assets of suspicious foreign traders when the timing and size of their trades indicate that they were misusing inside information, and use of foreign accounts will not dissuade us," said Michele Wein Layne, Director of the SEC's Los Angeles Regional Office.

According to the SEC's complaint filed in federal court in Manhattan, on June 30, 2013 Onyx announced that it had received, but rejected, an unsolicited proposal from Amgen to acquire all of Onyx's outstanding shares and share equivalents for $120 per share in cash. The Announcement also stated that Onyx's board of directors rejected Amgen's proposal and that Onyx had authorized its financial advisors to contact potential acquirers who may have an interest in a transaction with Onyx. Amgen's $120 per share price offer represented a 38% premium to Onyx's closing share price on Friday June 28, 2013. The complaint further alleges that as a result of the announcement, Onyx's share price increased from a close of $86.82 on over 51% on Monday July 1 compared with the prior trading day's closing price, and that the trading volume of its stock increased by over 900% that day. The complaint alleges that the traders, as a result of these well-timed trades, collectively earned a profit of approximately $4.6 million in just three days.

For more information, visit SEC Freezes Assets Of Insider Traders in Onyx Pharmaceuticals.



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The attorneys at Sallah Astarita & Cox, LLC include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent firms and brokers nationwide. For more information contact Mark Astarita at 212-509-6544 or at mja@sallahlaw.com

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• SEC Freezes $4.6 Million In Insider Trading Profits Tied To Attempted Pharma Acquisition
• 14,200% Return in Three Days: Charges of Insider Trading Follow Amgen's Failed Onyx Buyout
• SEC alleges insider trading in Onyx buyout bid

SEC Charges San Diego-Based Promoter in Penny Stock Scheme

The SEC charged a penny stock promoter in the San Diego area for fraudulently arranging the purchase of $2.5 million worth of shares in a penny stock company in an attempt to generate the false appearance of market interest and induce other investors to purchase the stock.

The SEC alleges that the promoter artificially increased the trading price and volume of iTrackr Systems stock when he conspired with a purported businessman with access to a network of corrupt brokers. What the promoter didn’t know was that the purported businessman was actually an undercover FBI agent. During a test run of their arrangement, the promoter paid a $3,000 kickback in exchange for the initial purchase of $14,000 worth of iTrackr shares.

In a parallel action, the U.S. Attorney’s Office for the Southern District of California today filed criminal charges against the promoter.

“[The promoter] tried to artificially inflate the price and volume of iTrackr shares to the detriment of retail investors who wouldn’t have known the real story behind the flurry of market activity,” said Michele Wein Layne, Director of the SEC’s Los Angeles Office. “Working with criminal authorities, we were able to stop [the promoter]’s misconduct before he could seriously impact the markets and harm investors.”

The SEC also has issued an order to suspend trading in iTrackr securities.

According to the SEC’s complaint filed in federal court in San Diego, the promoter set out to give the markets a false impression of supply and demand in iTrackr stock where none actually existed. He coordinated the purchase of iTrackr shares so the stock price could remain high enough for him to effectively promote it at a later date and artificially inflate the price even higher. [The promoter] arranged for the dissemination of promotional material that overstated the likelihood of iTrackr’s success and future profits.

For more information, visit SEC Charges San Diego-Based Promoter in Penny Stock Scheme.

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attoreys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent firms and brokers nationwide. For more information contact Mark Astarita at 212-509-6544 or  by email

Related articles

• SEC Charges Whittier Trust and Fund Manager in Insider Trading Investigation Into Expert Networks

SEC Charges Whittier Trust and Fund Manager in Insider Trading Investigation Into Expert Networks

The SECcharged a South Pasadena, Calif.-based wealth management company and a former fund manager with insider trading on non-public information about technology companies. The charges are the agency’s latest in its ongoing investigation into expert networks and hedge fund trading.

The SEC alleges that Whittier Trust Company and its fund manager participated in an insider trading scheme involving the securities of Dell, Nvidia Corporation, and Wind River Systems. The fund manager generated profits and avoided losses for funds he managed at Whittier Trust by trading on confidential information that he obtained from another Whittier Trust fund manager who he supervised. The other manager was charged by the SEC in January 2012 and is currently cooperating with the investigation.

Whittier Trust and the fund manager agreed to pay nearly $1.7 million to settle the charges.

“Time and again, [the fund manager] received what he knew was inside information from [the other manager] and traded on it to generate illicit gains for the funds he managed,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office. “Now, he and Whittier Trust join a long list of insider trading perpetrators who have been held accountable by the SEC for their transgressions.”

The SEC has charged more than three dozen individuals and firms in enforcement actions arising out of its expert networks investigation, which has uncovered widespread insider trading at several hedge funds and other investment advisory firms. The first series of charges were brought in 2011.

The attorneys at Sallah Astarita & Cox include former SEC staff attorneys and vetran securities litigators. We have extensive experience in insider trading cases, including recently obtaining a dismissal of insider trading charges against a client. See SEC Loses Insider Trading Case for more information. For more information regarding the defense of insider trading cases and investigations, contact us by email or visit our website at www.sallahlaw.com. For more information on this case, visit SEC Charges Whittier Trust and Fund Manager in Insider Trading Investigation Into Expert Networks.

SEC Charges Revlon with Misleading Shareholders in Going Private Transaction

The SEC charged cosmetics and beauty care manufacturer Revlon with violating federal securities laws when the company misled shareholders during a "going private transaction."

Going private transactions can occur in many forms and typically involve the company delisting and deregistering its stock and cashing out their shareholders so the company or a private equity firm can acquire all of the outstanding shares. An SEC investigation found that during a voluntary exchange offer to satisfy a significant debt to its controlling shareholder, Revlon engaged in "ring fencing" that deprived its independent board members from knowing critical information: the transaction's consideration had been deemed inadequate by a third party who evaluated whether current and former employees invested in Revlon common stock through the company's 401(k) plan could exchange their shares.

Revlon agreed to settle the SEC's charges and pay an $850,000 penalty.

"Going private transactions create opportunities for shareholder abuse and can have coercive effects on minority shareholders," said Antonia Chion, Associate Director in the SEC's Division of Enforcement. "By erecting informational barriers, Revlon kept critically important information from its board and, in turn, misled investors."

According to the SEC's order instituting settled administrative proceedings, controlling shareholder MacAndrews and Forbes (M&F) asked Revlon in 2009 to offer minority shareholders the option to exchange their common stock shares on a one-for-one basis for preferred shares with certain financial characteristics. The exchanged shares would then be provided to M&F to pay down Revlon's debt. The trustee administering Revlon's 401(k) plan decided that 401(k) members could tender their shares only if a third-party financial adviser made an "adequate consideration determination," which involved assessing whether the value of the preferred stock 401(k) members would receive was at least equal to the fair market value of the exchanged common stock shares. The third-party financial adviser ultimately found that the consideration offered in the transaction was inadequate for tendering 401(k) shareholders.

The attorneys at Sallah Astarita & Cox, LLC are available for consultation on going private transactions, as well as representing in claims involving misrepresentations in connection with such transactions. For more information contact us by email or visit our website at www.sallahlaw.com. For more information on this case, visit SEC Charges Revlon with Misleading Shareholders in Going Private Transaction.

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