Investor failed to disclose his increasing stake  – March 9

Switzerland-based investor Ralph Bartel has been charged for failing to disclose his increasing stake in shares of NASDAQ-listed Wilhelmina International, Inc. He acquired shares in both his name and in an entity that he indirectly beneficially owns, Azzurro Capital LLC.

The SEC has charged Bartel with violations of the disclosure provisions of the federal securities laws applying to owners of greater-than-5% and greater-than-10% of a company’s outstanding stock, including Sections 13(d)(1), 13(g)(1), and 16(a) of the Exchange Act and Rules 13d-1(a) and (d), and 16a-3. Bartel has, without admitting or denying the findings, agreed to cease and desist from future violations, and to pay a $100,000 penalty.

Software company failed to disclose impact of ransomware attack – March 9

Blackbaud Inc, which provides donor data management software to non-profit organizations, has settled charges with the SEC for making misleading disclosures about a ransomware attack that impacted more than 13,000 customers in 2020.

The SEC’s order finds that Blackbaud violated Sections 17(a)(2) and 17(a)(3) of the Securities Act, and Section 13(a), and Rules 12b-20, 13a-13, and 13a-15(a) of the Securities Exchange Act. Without admitting or denying, Blackbaud agreed to cease and desist from committing violations of these provisions and to pay a $3m civil penalty.

Global mining and metals company settles bribery violations paying a $15m penalty – March 6

Rio Tinto plc has agreed to settle the charges for violating the Foreign Corrupt Practices Act (FCPA), which emereged out of a bribery scheme involving a consultant in Guinea.

Without admitting or denying, Rio Tinto has consented to violating the books and records and internal accounting controls provisions of the Securities Exchange Act. The company will also pay a $15m civil penalty.

Pokerstars parent company charged with FCPA violations – March 6

Ireland-based global gaming and sports betting company Flutter Entertainment, plc and the successor-in-interest to the Stars Group, Inc has been charged with books and records and internal accounting controls violations – which arise from the use of third-party consultants in Russia. The Stars Group, which operated brands such as PokerStars, paid about $8.9m to consultants in Russia for support of the company’s operations.

Flutter, as successor-in-interest due to its acquisition of the Stars Group in May 2020, with violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act. Flutter has, without admitting or denying, agreed to cease and desist from future violations and to pay a $4m penalty.

55 investors tricked in a $100m crypto fraud scheme – March 6

BKCoin Management LLC and one of its principals, Kevin Kang, have been charged for orchestrating a $100m crypto asset fraud scheme, where more than $3.6m was used to make Ponzi-like payments to fund investors. Kang also allegedly use at least $371,000 of the funds to go on vacation, buy sporting events tickets, and for a New York City apartment.

The complaint alleges that BKCoin and Kang violated the antifraud provisions of the federal securities laws. It seeks permanent injunctions, disgorgement, prejudgment interest, and a civil penalty from both of the defendants. Kang is also facing an officer and director bar and conduct-based injunction.

The complaint also names as relief defendants, and seeks disgorgement from each of the funds, including Bison Digital LLC which allegedly received $12m as part of the scheme. The court has also granted emergency relief against the relief defendants, including appointment of a receiver.

“The defendants misappropriated their money, created false documents, and even engaged in Ponzi-like conduct.”

Eric I. Bustillo, Director of the SEC’s Miami Regional Office

Unregistered broker-dealer activity relating to pre-IPO funds – March 3

Silver Edge Financial LLC, Equity Acquisition Company Ltd. (EAC), the owners of both companies, and sales staff of Silver Edge Financial have all been charged with unregistered broker-dealer activity in relation to their sales of interests in shares of pre-IPO companies. Silver Edge, Mackle, and the salespeople raised more than $65m while failing to register as brokers, and EAC and its founder acted as unregistered dealers.

The order finds that Klein, EAC, Mackle, Silver Edge, and the six salespeople have violated Section 15(a) of the Securities Exchange Act of 1934.

Without admitting or denying the findings, all respondents have agreed to cease and desist from future violations, and:

• Silver Edge and Mackle have agreed to pay disgorgement and prejudgment interest of over $2.5m and a civil penalty of $975,000, and have agreed to industry and penny stock bars with the right to reapply after five years.
• EAC and Klein have agreed to pay disgorgement and prejudgment interest of more than $3.6m and a civil penalty of $269,360.
• Silver Edge, Mackle, EAC, and Klein have also agreed to undertakings that will ensure the legal and orderly distribution of pre-IPO interests.
• The salespeople – Scott Esposito, Richard Konopka, Robert Daniel Louis, Dave Nicolas, Joshua Simmons, and Daniel Esposito – have agreed to pay civil penalties ranging from $61,000 to $124,320 and to industry and penny stock bars.

“Individuals and entities in the pre-IPO space, including dealers, must comply with the SEC’s registration provisions when selling securities backed by pre-IPO shares and cannot avoid essential regulatory oversight.”

Carolyn M. Welshhans, Associate Director of the SEC’s Enforcement Division