December 2023 SEC Updates

1. On December 20, 2023, the SEC instituted administrative proceedings against Ted Alexander and Jon Seawright. Alexander and Seawright defrauded investors and obtained money and property by means of materially false statements and that he used the United States mails to make such statements. Alexander and Seawright admitted that he knowingly solicited investors to invest in the Timber Fund through materially false and fraudulent pretenses, representations, or promises. Alexander and Seawright falsely promised that each property location, promissory note, timber contract, and timber deed would be vetted by him or others. Alexander and Seawright told investors that he would profit only if the investments performed as promised, failing to disclose that he received payments for recruiting investments to the scheme and received a predetermined percentage of investors’ funds from the timber broker for each recruited investor. Alexander and Seawright was barred.          

2. On December 14, 2023, the SEC charged Justin Murphy and his investment management firm Mara Investments, LLC, for fraudulent misappropriation of approximately $3.4 million of investor assets. Murphy induced multiple individuals to invest approximately $6.6 million in a private investment fund, Mara Investment Management LP controlled by Mara Investments.  Murphy told prospective investors that he was trading conservative stocks in the Fund’s brokerage accounts and generating consistent profits. Murphy ultimately used almost all the investors’ money for unauthorized business and personal expenses and to fund a company owned by a relative.  When the depleted assets in the Fund’s brokerage account failed to generate consistent profits, Murphy concealed and furthered the fraud by providing his investors with falsified account statements and inaccurate tax documents that showed profitable trading. This matter is being litigated.

3. On December 13, 2023, the SEC instituted administrative proceedings against Scott Levine. Levine was market-maker employed by an investment bank and in that role sold short securities in Fort Worth-based Global Resource Energy, Inc. Levine also interacted and communicated with one of GBEN’s undisclosed control persons, Thomas Collins. Collins asked Levine to provide him with information regarding incoming bids of GBEN so that Collins could dump free-trading shares. Levine provided this information knowing that Collins controlled most of the free-trading GBEN shares and wanted to sell them on the market. Collins and Levine had a verbal agreement that Levine could keep a five percent spread on closing out his employer’s short positions in GBEN. Levine received at least $46,911 from these trades. Levine was barred.

4. On December 12, 2023, David Gentile, the owner, and CEO of GPB Capital, and Jeffry Schneider, the owner of GPB Capital’s placement agent Ascendant Capital, lied to investors about the source of money used to make an annualized distribution payment to investors. Investors were told that the distribution payments were paid exclusively with monies generated by GPB Capital’s portfolio companies, but GPB Capital used investor money to pay portions of the annualized distribution payments.  GPB Capital manipulated the financial statements to give the false appearance that the funds’ income was closer to generating sufficient income to cover the distribution payments than it was. GPB Capital also violated the whistleblower provisions of the securities laws by including language in termination and separation agreements that impeded individuals from coming forward to the SEC, and by retaliating against a known whistleblower. Gentile, Schneider, GPB Capital, Ascendant Alternative Strategies, and Ascendant Capital was charged with violating the antifraud. This matter is being litigated.

5. On December 11, 2023, the SEC instituted administrative proceedings against Frontier Wealth Management, LLC and Shawn Sokolosky. Frontier failed to adopt and implement written policies and procedures reasonably designed to prevent its IARs from recommending certain types of complex products to clients for whom they were not suitable. Frontier was ordered to pay a total of $758,712.

6. On December 11, 2023, the SEC instituted administrative proceedings against Scott Reed. Reed sold securities that were neither registered nor exempt from registration and that had not been approved by the brokerage firm he was associated with. Reed failed to disclose IRS liens, promised to guarantee a client’s investment without disclosing his own debts that would impair such a guaranty, and failed to disclose that he was selling investments in violation of Arizona law and FINRA’s rules. Reed was ordered to pay a restitution in the amount of $1,804,901, and imposed an administrative penalty in the amount of $50,000. Reed was barred.

7. On December 7, 2023, the SEC instituted administrative proceedings against Alan Appelbaum. Appelbaum was a registered representative of Aegis Capital Corporation, a broker dealer, working from Aegis’s branch office in Florida. Appelbaum was a Managing Director of Aegis and headed the firm’s Municipal Bond Desk, after which time he became co-head of the firm’s Fixed Income Desk until his departure from the firm. Appelbaum disregarded his obligations to seven customers and violated the antifraud provisions of the federal securities laws by making unsuitable investment recommendations. Appelbaum engaged in unauthorized trading, also in violation of the antifraud provisions of the federal securities laws. Appelbaum was barred.

8. On December 6, 2023, the SEC released the Unified Agenda of Regulatory and Deregulatory Actions, which includes contributions related to the Securities and Exchange Commission and short- and long-term regulatory actions that administrative agencies plan to take.

Here is a summary of the SEC’s agenda:

9. On December 1, 2023, the SEC instituted administrative proceedings against Eagan Capital Management, LLC (“ECM”), a registered investment adviser. ECM is a New York limited liability company with its principal office and place of business in New York.  ECM reported that it had approximately $73.2 million in regulatory assets under management. ECM violated the custody rule in two respects related to two private real estate operating company (“REOC”) funds that it advised, (i.e., Rochester 153, LLC (“Rochester”) and Verity Investments, LLC (“Verity”)) (collectively, the “REOC Funds” or the “Funds”) in which ECM’s other advisory clients invested. First, ECM had custody of certain ECM clients’ membership interests in the REOC Funds but did not comply with the requirements set forth in the custody rule. Second, ECM had custody of the REOC Funds’ funds and securities but did not comply with the requirements set forth in the custody rule with respect to those assets. ECM order to pay a civil money penalty in the amount of $50,000.