Hedge fund trader and broker-dealer partner caught in multi-million SPAC insider trading scheme – March 30
Sean Wygovsky and Christopher Matthaei have both been charged with insider trading for using non-public information about at least seven merger announcements involving Special Purpose Acquisition Companies (SPACs). They are said to have gained more than $3.4m in illicit profits.
The pair are accused of violating the antifraud provisions of the federal securities laws, and the charges seek permanent injunctive relief, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties against both, plus an officer and director bar against Matthaei. Wygovsky has consented to a bifurcated settlement, which is subject to court approval, where he will be permanently enjoined from violating the federal securities laws.
Wygovsky was also previously charged with running a lucrative front running scheme, and he consented to a bifurcated settlement.
The US Attorney’s Office for the District of New Jersey has also brought charges against Matthaei. Securities fraud can carry a penalty of 20 years in prison and a $5m fine, while a securities fraud conspiracy count carries a maximum of five years in prison and a $250,000 fine, or twice the gross amount of gain or loss from the offense.
Audit failures by Denver private fund auditor and audit engagement partner – March 29
The audit firm Spicer Jeffries LLP and the audit engagement partner Sean P Tafaro have been charged for improper professional conduct with audits of two private funds. Both evaluated investments “a significant fraud risk” but did not approach and respond to the risk properly.
Spicer Jeffries and Tafaro have, without admitting or denying, consented to engaging in improper professional conduct. Spicer Jeffries has agreed to be censured and to undertake independent consultancy to review and evaluate some control policies and procedures. Tafaro has agreed to be suspended from appearing and practicing as an accountant, but is permitted to apply for reinstatement after one year.
“Auditors are critical gatekeepers that must employ a robust system of quality control to ensure adherence to professional standards.”
Andrew Dean, Co-Chief, Asset Management Unit
Crypto trading platform Beaxy operated as an unregistered exchange, broker, and clearing agency – March 29
The crypto trading Beaxy platform and its executives have been charged for not registering as a national securities exchange, broker, and clearing agency. The founder, Artak Hamazaspyan, and the company Beaxy Digital, Ltd., have been charged with raising $8m in an unregistered offering of the Beaxy token (BXY), of which Hamazaspyan is alleged to have misappropriated at least $900,000 for personal use. Market makers that operated on Beaxy as unregistered dealers have also been charged.
Windy, Murphy, Abbott, Peterson, and the Braverock Entities have, without admitting or denying, all agreed to permanent injunctions prohibiting them from future violations of the alleged securities laws to pay civil penalties.
Windy, Murphy, Abbott, and Peterson have also agreed to certain undertakings, including ceasing all activities as an unregistered exchange, clearing agency, broker, and dealer, and to shut down the Beaxy Platform. They will transfer all funds to each customer, and destroy all BXY in Windy’s possession. Windy, Abbott, and Murphy have agreed to pay a total of $79,200 in civil penalties, Peterson $6,600, and the Braverock Entities $80,000. Windy will also pay $10,779 in disgorgement plus prejudgment interest, and the Braverock Entities will pay $52,000.
The SEC is litigating its charges against Hamazaspyan for securities fraud, and Hamazaspyan and Beaxy Digital for the unregistered BXY offering.
“When a crypto intermediary combines all of these functions under one roof … investors are at serious risk. The blurring of functions and the lack of registrations meant that regulations designed to protect investors were not followed or even recognized by Beaxy.”
Gurbir S Grewal, Director, SEC Division of Enforcement
Brazilian mining company to pay $55.9m to settle charges over misleading disclosers – March 28
Vale S.A, one of the world’s largest iron ore producers, has agreed to pay $55.9m to settle charges brought last April related to misleading disclosures prior to a dam collapse that killed 270 people in 2019. The complaint alleged that the dam did not meet internationally-recognized safety standards for years, even when the company’s public reports assured investors that all of the dams were certified as stable.
The settlement, which remains subject to approval, will require Vale to pay a civil penalty of $25m, and disgorgement and pre-judgment interest of $30.9m and would permanently restrain and enjoin the company from violations of the Securities Act of 1933 and of the Securities Exchange Act of 1934.
Advisor defrauded investor of millions of dollars – March 27
Former broker Surage Kamal Roshan Perera and his firm, Janues Capital Incorporated, are facing charges over defrauding at least one investor out of millions in a Ponzi-like act. Allegedly, Perera lied about investment opportunities, was hiding trading losses, and used others’ funds to pay the victim. The Commission has also obtained emergency relief, plus a temporary restraining order and an asset freeze.
The SEC alleges that Perera and Janues violated antifraud provisions of the federal securities laws, and Perera is also charged with aiding and abetting Janues’ alleged violations. The complaint names Nishani Alahakoon, whose brokerage account Perera and Janues traded, as a relief defendant, and seeks permanent injunctions and disgorgement of ill-gotten gains plus interest and penalties.
The US Attorney’s Office for the Eastern District of New York has also announced charges against Perera. If convicted, he faces a maximum sentence of 20 years’ imprisonment.
“Perera and his firm Janues engaged in predatory and fraudulent behavior by claiming to have special access to securities through their professional connections, but instead defrauded millions of dollars from his investor.”
Antonia Apps, Director, SEC New York Regional Office
Sales agents charged with fraud and unregistered broker activity – March 23
Scott Hollender, Gabriel Migliano, Jr, and Frank Vecchio have all been charged for selling interests in shares of pre-IPO companies on behalf of StraightPath Venture Partners LLC – while not being registered broker-dealers – to a value of at least $13m from 115 investors. Including misleading investors about the fees connected to those investments. Last year, the SEC also charged StraightPath Venture Partners, StraightPath Management LLC, and its four principals in connection with a $410m fraud.
The defendants are being charged with violating antifraud and other provisions of the federal securities laws. The complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties. GSH Empire Inc. and 21st Century Gold & Silver Inc. – entities controlled by Hollender and Vecchio respectively, are also named as relief defendants for purposes of recovering ill-gotten gains that Hollender and Vecchio generated through their alleged conduct.
“StraightPath Venture Partners could not have cheated investors without the unregistered sales agents who fraudulently solicited them.”
Antonia Apps, Director, SEC New York Regional Office
Financial adviser misappropriated $1m from NBA players – March 23
Darryl Matthew Cohen, a former investment adviser at a large financial institution, has been charged with misappropriating more than $1m from three current and former NBA players. Allegedly, Cohen used client funds for personal use, including supporting his son’s amateur basketball program. He also sold life insurance settlements for kickbacks to fund his home improvements.
The complaint charges Cohen with violating the antifraud provisions of the federal securities laws. It seeks permanent injunctive relief, disgorgement and prejudgment interest, and a civil penalty.
Cohen has also been charged by the US Attorney’s Office for the Southern District of New York with one count of conspiracy to commit wire fraud, one count of wire fraud, and one count of investment advisor fraud. The two first carries each a maximum sentence of 20 years in prison, five years on the last count.