Wells Fargo will pay $480 million to resolve fraud and insider trading allegations brought in a class action in California.
According to the plaintiffs, top executives at the bank engaged in insider trading after employees were directed to create millions of accounts under customer names, without the customers’ consent.
While litigation in California state court continues, the settlement will end the federal lawsuit.
Jehu Hand, a California-based attorney has been found guilty of securities fraud and is now awaiting sentencing. Following his trial, which took place in Boston, the defendant could be facing up to eight years in prison.
The federal jury found that Hand conspired with his two brothers to run a pump-and-dump scheme by falsifying documents. According to the evidence presented during trial, the defendant and his co-conspirators fraudulently obtained $1.5 million through the scheme.
Hand and his brothers allegedly misrepresented Greenway Technology Inc. as a company with tremendous potential, which was about to acquire lucrative gay-friendly hotels in California and Nevada.
In a complex and shifting global scenario, the financial industry faces numerous challenges relating to anti-money laundering (AML) compliance. In a rapidly changing regulatory environment, within an unstable geopolitical context, financial institutions have to adapt to new technologies and innovative operating models.
As regulators worldwide coordinate to increase transparency and target wrongdoers, AML has taken center stage when it comes to compliance programs.
The 2017 Global Anti-Money Laundering and Sanctions Compliance Survey by AlixPartners shed light on many observable industry trends. A survey of 361 financial institutions, the report is a valuable tool for anyone trying to understand the industry’s current perceptions and expectations.
Last week, federal prosecutors charged Delaney Equity Group with participating in a fraudulent scheme involving the sale of bogus shell company shares. The Florida-based broker-dealer allegedly conspired to sell shares of fraudulent microcap companies to investors at a profit. The Department of Justice has accused the defendant of “unlawfully” selling “unregistered securities” between late 2009 and mid 2013.
According to prosecutors, Delaney Equity Group recruited individuals to pose as CEOs for shell companies which were used to fraudulently register securities with the SEC. In order to be able to market shares of the shell companies, Delaney and the straw CEOs allegedly submitted numerous fraudulent documents to government agencies. Among other falsehoods, the documents stated that the ‘CEOs’ owned a control block of restricted shares in their respective companies.
Delaney Equity Group could be fined up to $500,000 or double the proceeds from the misconduct. The case has been assigned to Miami District Judge Cecilia M. Altonaga.
The over 80 subpoenas recently issued to companies in the cryptocurrency sector have provided a logical corollary to the agency’s many warnings about ICOs potential violations of security laws.
The time for warnings is over. Now, the SEC’s intentions have evolved into enforcement actions, forever changing the scenario for new cryptocurrency initiatives.
In late 2017, Bitcoin’s spectacular rise in value lured both would-be cryptocurrency developers and new investors with the promise of returns higher than 2,000 percent. Although the digital currency’s value eventually stabilized, these price fluctuations and the surge in ICO initiatives raised alarm among regulators, who pointed to issues of valuation, liquidity, and arbitrage.
Hip-hop star Shawn Carter, aka Jay-Z, has just received a subpoena to appear in court after he failed to testify in connection with the SEC’s probe into Iconix Brand Group’s accounting practices.
Iconix acquired intangible assets from Jay-Z’s clothing brand Rocawear in 2007, which boasted $700 million in annual sales at the time. The agreement was that Carter and Iconix would work on the joint development of new brand opportunities following the sale. But Iconix went on to announce two write-downs of Rocawear, one in 2016, of $169 million, and another one of $34 million earlier this year.
Iconix, which describes itself as, “the world’s premier brand management company and owner of a diversified portfolio of strong global consumer brands across fashion, sports, entertainment, and home,” markets retail brands such as Joe Boxer, Candie’s, Bongo, Pony, Umbro, and Material Girl.
Celebrity endorsements add an element of trust for investors who are just entering the ICO market. But the strategy did not turn out well for Centra Tech, as a third arrest has just been made in connection with the SEC’s allegations that the company defrauded investors out of over $25 million.
Earlier this year, I reported on the charges brought against Sohrab Sharma and Robert Farkas, and the public exposure of the alleged fraud.
Sharma, Farkas, and now Raymond Trapani have been charged with falsely advertising their ICO as having links with Visa, and Mastercard, which they claimed were backing their cryptocurrency-funded debit card, “Centra Card.”
A new proposed SEC regulation vows to “enhance the quality and transparency of investors’ relationships with investment advisers and broker-dealers.”
If “Regulation Best Interest” is finally implemented, broker-dealers will be required to “act in the best interest” of their retail customers whenever they recommend any securities transactions or investments.
Following numerous penalties in cases where broker-dealers recommended investments to their retail customers for the sake of personal gain, the proposed regulation is designed to deter financial advisers from this type of behavior, in the SEC’s words, “to make it clear that a broker-dealer may not put its financial interests ahead of the interests of a retail customer in making recommendations.”
The SEC is effectively expanding its jurisdiction into the cryptocurrency and ICO market. Dozens of companies, possibly hundreds, are receiving SEC subpoenas, which I advise them to take very seriously.
High profile companies, including giants like TechCrunch’s cryptofund, are currently dealing with these subpoenas. One of the problems is that nobody knows exactly what is going on, and the market is eager for the SEC to clarify the rules.
Do securities laws apply to cryptocurrency? The SEC says they do, but it is yet to issue a detailed guide for compliance. That is why securities lawyers like myself are playing an increasingly important role in the digital currency space right now.
The SEC has repeatedly warned cryptocurrency investors about the market’s vulnerability to large-scale fraud. Likewise, the agency has made it clear that cryptocurrency offerings that function as securities will be treated as such, and thus subjected to scrutiny.
Since SEC officials began making emphatic statements about its jurisdiction over the cryptocurrency space, many companies have been sued in connection with their ICO dealings.
According to estimates, the SEC is looking into the affairs of at least 80 crypticompanies, in search of a variety of violations.
FINRA Lawyer Blog