1. On February 28, 2022, the SEC filed an amended complaint (which is highly unusual) bringing additional charges against Ofer Abarbanel and Victor Chilelli in the scheme resulting in more than $77 million being returned to harmed investors. Abarbanel and Chilelli engaged in a scheme to defraud investors in an offshore fund. After promising to invest in U.S. Treasury securities and reverse repurchase agreements, Abarbanel instead routed fund assets to shell companies under his control as part of uncollateralized sham lending arrangements. The SEC charged Abarbanel, Chilelli, as well as the Fund. The Fund was ordered to pay disgorgement and prejudgment interest of $111,591,312. https://www.sec.gov/litigation/litreleases/2022/lr25336.htm
2. On February 28, 2022, the SEC instituted administrative proceedings SICA Wealth Management, LLC (“SWM”) and Jeffrey C. Sica (“Sica”). SWM advisory clients invested a total of more than $30 million in securities issued by Aequitas Commercial Finance, LLC on Sica’s recommendation. SWM and Sica failed to provide these advisory clients material facts regarding compensation that Aequitas provided to SWM and another firm owned and controlled by Sica which created conflicts of interest relating to SWM’s and Sica’s recommendations that clients invest in Aequitas securities. Aequitas paid SWM a total of approximately $2 million during the relevant period pursuant to consulting agreements and a loan agreement. The Aequitas agreements and the resulting compensation should have been disclosed to clients so that they could fairly evaluate the conflicts in deciding whether to invest in Aequitas securities. By failing to disclose these facts to advisory clients, SWM and Sica violated Section 206(2) of the Advisers Act. SWM and Sica was ordered to pay $236,029 in disgorgement, $62,664 in prejudgment interest, and collectively $110,000 in civil money penalties, for a total of $408,693. https://www.sec.gov/litigation/admin/2022/34-94320.pdf
3. On February 24, 2022, the SEC filed charges against Rehoboth Beach, Bell Rock Capital, LLC and its principal Cassandra Toroian for operating a multi-year cherry-picking scheme that defrauded Bell Rock clients. Toroian traded securities in Bell Rock’s master trading account and delayed allocating the securities to specific client accounts until after she had observed the securities’ performance over the course of the day. She then disproportionately allocated profitable trades to accounts that belonged to her and her family members and allocated less profitable and losing trades to client accounts. Toroian allocated to accounts held by Toroian and her family members increased in value by more than 2%, or a gain of over $1 million, between the time Toroian purchased them and when she allocated them. The securities that Toroian allocated to her clients’ accounts decreased in value by -more than 1.3%, or a loss of over $1 million, between the time Toroian purchased them and when she allocated them. Bell Rock and Toroian misrepresented to clients that all trades would be allocated fairly and that Bell Rock and Toroian would not put their interests before their clients’ interests. Bell Rock failed to implement policies and procedures designed to prevent Toroian’s cherry-picking. This matter is being litigated. https://www.sec.gov/litigation/litreleases/2022/lr25335.htm
4. On February 24, 2022, the SEC instituted administrative proceedings against Ameritas Advisory Services, LLC. Ameritas breached its fiduciary duty to advisory clients by failing to provide full and fair disclosure regarding third-party compensation received when the advisory business was part of a dually registered investment adviser/broker-dealer firm, Ameritas Investment Company, LLC. Ameritas also breached its duty to seek best execution by causing certain advisory clients to invest in share classes of mutual funds and money market funds when share classes of the same funds were available to the clients that presented a more favorable value for these clients under the particular circumstances in place at the time of the transactions and breached its duty of care by failing to undertake an analysis to determine whether the particular mutual fund and money market fund share classes it recommended were in the best interests of its advisory clients. Ameritas failed to adopt and implement written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder in connection with its practices regarding mutual fund and money market share class selection, fee markups, margin interest, business development credits, and best execution. Ameritas was ordered to pay disgorgement, prejudgment interest, and a civil penalty, totaling $4,628,194. https://www.sec.gov/litigation/admin/2022/ia-5970.pdf
5. On February 24, 2022, the SEC charged Arthur Hoffman with fraud arising from recommendations he made to clients while working as an investment adviser representative of Ameriprise Financial Services. Hoffman recommended investments in securities issued by Zima Global Ventures, LLC, which purported to use investor funds to trade cryptocurrencies and other digital assets for profit. Hoffman recommended Zima’s securities to clients without disclosing conflicts of interest that Zima had agreed to lend Hoffman up to $1.5 million at two-percent interest per year for soliciting investors. Hoffman already owed Zima tens of thousands of dollars under that agreement. At least one client asked Hoffman about his compensation from Zima, and Hoffman represented that his association with Ameriprise limited him to a one percent commission. Zima collapsed in January 2020 when its principals were arrested and charged by the federal criminal authorities with conspiracy to commit wire fraud and money laundering, leaving six of Hoffman’s clients with total losses of more than $610,000. The matter is being litigated. https://www.sec.gov/litigation/litreleases/2022/lr25334.htm
6. On February 18, 2022, the SEC instituted administrative proceedings against BlueCrest Capital Management, Limited. BlueCrest engaged in a course of conduct stemming from its management of a proprietary hedge fund. The Commission ordered BlueCrest to pay $107,560,200 in disgorgement, $25,154,306 in prejudgment interest, and a $37,285,494 civil money penalty, for a total of $170,000,000, to the Commission. https://www.sec.gov/litigation/admin/2022/34-94285.pdf
7. On February 17, 2022, the SEC instituted administrative proceedings against John Griffin. Griffin sold unregistered securities and acted as an unregistered broker. Griffin solicited investors and received transaction based compensation. Griffin was barred. https://www.sec.gov/litigation/admin/2022/34-94269.pdf
8. On February 17, 2022, the SEC charged James Velissaris with overvaluing assets by more than $1 billion while pocketing tens of millions of dollars in fees. Velissaris engaged in a fraudulent scheme to overvalue assets held by the Infinity Q Diversified Alpha mutual fund and the Infinity Q Volatility Alpha private fund. Velissaris executed the overvaluation scheme by altering inputs and manipulating the code of a third-party pricing service used to value the funds’ assets. Velissaris collected more than $26 million in profit distributions through his fraudulent conduct and without disclosing his activities to investors. This matter is being litigated. https://www.sec.gov/litigation/litreleases/2022/lr25331.htm
9. On February 15, 2022, the SEC instituted administrative proceedings against Wall Street Access. This matter involves Wall Street Access’ failure to file with the Commission and to deliver to retail investors its Form CRS. Wall Street Access was required to file its initial Form CRS with the Commission and to begin delivering its Form CRS to prospective and new retail investors by June 30, 2020. Wall Street Access was further required to deliver its Form CRS to existing retail investor customers by July 30, 2020. The firm failed to file and deliver Form CRS by these deadlines, not becoming compliant until. Wall Street Access violated Exchange Act Section 17(a)(1) and Rule 17a-14 thereunder. Wall Street Access was ordered to pay a civil money penalty in the amount of $97,523. https://www.sec.gov/litigation/admin/2022/34-94245.pdf
10. On February 9, 2022, the SEC voted to propose rules related to cybersecurity risk management for registered investment advisers, and registered investment companies and business development companies (funds), as well as amendments to certain rules that govern investment adviser and fund disclosures. The proposed rules would require advisers and funds to adopt and implement written cybersecurity policies and procedures designed to address cybersecurity risks that could harm advisory clients and fund investors. The proposed rules also would require advisers to report significant cybersecurity incidents affecting the adviser or its fund or private fund clients to the Commission on a new confidential form. https://www.sec.gov/news/press-release/2022-20
11. On February 9, 2022, the SEC voted to propose rule changes to reduce risks in the clearance and settlement of securities, including by shortening the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date (T+2) to one business day after the trade date (T+1). https://www.sec.gov/news/press-release/2022-21
12. On February 9, 2022, the SEC voted to propose new rules and amendments under the Investment Advisers Act of 1940 (“Advisers Act”) to enhance the regulation of private fund advisers and to protect private fund investors by increasing transparency, competition, and efficiency in the $18-trillion marketplace. The proposed rules would increase transparency by requiring registered private fund advisers to provide investors with quarterly statements detailing certain information regarding fund fees, expenses, and performance. The proposed rules would prohibit private fund advisers, including those that are not registered with the SEC, from providing certain types of preferential treatment to investors in their funds and all other preferential treatment unless it is disclosed to current and prospective investors. This would create new requirements for private fund advisers related to fund audits, books and records, and adviser-led secondary transactions. The proposals would prohibit all private fund advisers from engaging in several activities, including seeking reimbursement, indemnification, exculpation, or limitation of liability for certain activity; charging certain fees and expenses to a private fund or its portfolio investments, such as fees for unperformed services and fees associated with an examination or investigation of the adviser; reducing the amount of an adviser clawback by the amount of certain taxes; charging fees or expenses related to a portfolio investment on a non-pro rata basis; and borrowing or receiving an extension of credit from a private fund client. https://www.sec.gov/news/press-release/2022-19?utm_medium=email&utm_source=govdelivery
13. On February 11, 2022, the SEC announced that Chief Judge Dana Sabraw of the United States District Court for the Southern District of California granted the SEC’s motion for summary judgment on the issue of liability against Mark Boucher and his company Strategic Wealth Advisor Group Services Inc. According to the SEC’s complaint, Boucher and SWAG defrauded advisory clients by misappropriating more than $2.2 million from advisory accounts. This matter is being litigated. https://www.sec.gov/litigation/litreleases/2022/lr25329.htm
14. On February 10, 2022, the SEC instituted administrative proceedings against Wahed Invest LLC. This matter involves misleading statements and compliance failures by Wahed Invest which operates a Shari’ah-compliant robo-adviser business that is marketed to individuals. Wahed Invest also launched a Shari’ah compliant exchange-traded fund, the Wahed FTSE USA Shariah ETF. Prior to the launch of the Wahed ETF, Wahed Invest disseminated false and misleading marketing materials about its advisory business and failed to rebalance client accounts as promised to its clients and prospective clients. Wahed Invest further breached its fiduciary duty in connection with its July 2019 investment of client assets into the newly launched Wahed ETF when it failed to provide its clients with prior full and fair disclosure of its conflicts of interest relating to the transactions. Wahed Invest failed to adopt and implement written policies and procedures related to the aforementioned issues and its Shari’ah advisory business, including policies and procedures related to its representation to clients that it would calculate and report purification amounts and its review of Shari’ah-related marketing materials. Wahed agreed to pay a $300,000 civil penalty. https://www.sec.gov/litigation/admin/2022/ia-5959.pdf
15. On February 8, 2022, the SEC instituted administrative proceedings against George Blankenbaker. Blankenbaker and three companies he owns and controls—StarGrower Commercial Bridge Loan Fund 1 LLC, StarGrower Asset Management LLC and Blankenbaker Investments Fund 17 LLC raised more than $11 million from at least 109 investors, many of whom were elderly, through an illegal offering fraud scheme. Blankenbaker Companies falsely told investors that their money would be used to make short-term loans to food exporters in Asia, that the investors would receive interest payments from the profits generated from the loans, and that the investments were secured by shipping containers holding the food products. Blankenbaker misused at least $8.1 million of their money, including by directing at least $4 million to hemp companies. Blankenbaker also misappropriated at least $1.7 million in investor funds to use for his own personal benefit, including by making approximately $1.6 million in hemp investments in his own name and using $87,320 to pay for his own personal expenses. He also used at least $965,000 in new investor funds to make Ponzi-style payments to prior investors. Two of Blankenbaker securities offerings allegedly violated the registration provisions of the federal securities laws. Blankenbaker was barred. https://www.sec.gov/litigation/admin/2022/ia-5954.pdf
16. On February 8, 2022, the SEC instituted administrative proceedings against Michael Williams. Williams sold unregistered securities and acted as an unregistered broker. Williams solicited investors and received transaction based compensation. Williams was barred https://www.sec.gov/litigation/admin/2022/34-94191.pdf
17. On February 8, 2022, the SEC instituted administrative proceedings against Kristian Sierp. Sierp pleaded guilty to one count of conspiracy to commit mail and wire fraud. Sierp participated in a scheme to defraud U.S. residents by convincing them to invest in Niyato under the false pretense that Niyato was a legitimate company with significant operational facilities and proprietary technology to induce victims to purchase Niyato stock. Sierp made numerous false representations about Niyato including, among other things, that Niyato was on the verge of an initial public offering and would have a value of at least $5.00 per share after the IPO. In return for recruiting investors, Sierp received commissions of approximately 40 percent of a victim investor’s funds, which he used for his personal benefit. Sierp was barred https://www.sec.gov/litigation/admin/2022/34-94195.pdf
18. On February 7, 2022, the SEC instituted administrative proceedings against Spar Street. Spar Street was an artist and a sales agent for Moddha Interactive, Inc. Moddha engaged in an unregistered and fraudulent securities offering in which the company raised over $2.6 million from 51 investors. Spar Street actively solicited potential Moddha investors. Spar Street received compensation for soliciting investors for Moddha, among other things, making statements to potential investors about the merits of an investment in Moddha, providing potential investors with information about Moddha, and participating in meetings between investors and Moddha’s principals. Spar Street was paid an approximate 15% commission for his fundraising efforts, and received more than $200,000 in commission compensation for investments by seven (7) Moddha investors located across the U.S. Spar Street was not registered as a broker-dealer, nor was he associated with a registered broker-dealer. Spar Street was barred. https://www.sec.gov/litigation/admin/2022/34-94169.pdf
19. On February 2, 2022, the SEC announced charges against Safeguard Metals LLC, and its owner, Jeffrey Santulan, for engaging in a multi-million dollar fraudulent scheme involving hundreds of investors who were at or near retirement age. Safeguard and Santulan acted as investment advisers and persuaded investors to sell their existing securities, transfer the proceeds into self-directed Individual Retirement Accounts, and invest the proceeds into gold and silver coins by making false and misleading statements about the safety and liquidity of the investors’ securities investments, Safeguard’s business, and its compensation. This matter is being litigated. https://www.sec.gov/litigation/litreleases/2022/lr25322.htm