The Commission filed three new enforcement actions last week. Two are based on insider trading claims. A third centers on alleged false statements.
Be careful, be safe this week and be warm
SEC Enforcement – Filed and Settled Actions
Statistics: Last week the Commission filed 3 new civil injunctive action and no new administrative proceedings.
Insider trading: SEC v. Chen, Civil Action No. 1:18-cv-10657 (D. Mass.) is a previously filed action which named as defendant Charlie Jinan Chen. The Commission charged Mr. Chen with insider trading in the shares of Vistaprint. The information came from either a family friend who is a company insider or the friend’s spouse on several occasions. Over the period 2013 to 2014, according to a memorandum by the court, Defendant traded successfully in the shares of the firm, reaping $900,000 in trading profits. Following a five-day trial, the jury found Mr. Chen violated Exchange Act Section 10(b) and Securities Act Section 17(a). The court entered permanent in junctions barring Defendant from future violations of each Section. Defendant was ordered to pay a civil monetary penalty of $892,827. See Lit. Rel. No. 26247 (Feb. 13, 2025).
False statements: SEC v. Gramins, Civil Action No. 1:15-cv-07045 (S.D.N.Y.). Named as defendants in the action are Ross Shapiro, Michael Gramins and Tyler Peters. The three defendants were hired by Nomura Securities International, Inc. in August 2009. Each was responsible for arranging trades between customers involving residential mortgage backed securities or RMBS and manufactured housing asset-backed securities or MHABS. Mr. Shapiro was the head trader. The traders began with the firm in 2010; the trading was based on misconduct. Specifically, the traders lied during negotiations involving a transaction. At times Defendants instructed traders as to the precise lies to tell customers to extract extra, concealed profits for Nomura traders. The markets for these securities are illiquid. Accordingly, customers and traders must rely on information available in the markets. If customers knew that more profit was available, they could have paid less fees or received more for the securities involved in the transactions. Defendant traders engaged in this misconduct to earn more revenue for Nomura when trading RMBS and MHABS. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The matter was resolved by Defendant Gramins. Last week the court entered a final judgment against him which precludes future violations of Exchange Act Section 10(b) and Securities Act Section 17(a). See Lit. Rel. No. 26246 (Feb. 13, 2025). The original case is captioned SEC v. Shapiro, Civil Action No. 1:15-cv-07045 (S.D.N.Y.).
Manipulation: SEC v. Chen, Civil Action No. 19-CV-12127 (D. Mass.). The complaint names as defendants: Jiali Wang, a resident of China and Weymouth Massachusetts; Jing Guan, a resident of China who at one time shared a residence with Jiali Wang in Massachusetts; Vicky Liu, a resident of Weymouth Massachusetts, who lives next door to Jiali Wang, an officer of WV Forrest Investments, LC, a company formed and funded by Jiali Wang; and Xiaosong Wang, also a resident of China who owns a resident in Upton, Massachusetts. The complaint lists 15 other individuals with Chinese names that have connections to this action. There are 14 relief defendants (12 individuals and 2 companies). Beginning in August 2013 Defendants engaged in a market manipulation scheme. Dozens of accounts at various brokerage firms were involved. The focus was to artificially influence the prices of many publicly traded securities. Typically, Defendants used at least two brokerage accounts to manipulate a stock. The first was used to put pressure on the stock price to move either up or down. Once the share price reached the desired level, the second account was used to purchase or sell large amounts of the stock. Frequently, the accounts involved were at different brokerage firms. At times Defendants also engaged in deceptive conduct to try and avoid detection. For example, Xiaosong Wang and Jiahi Wang used nominee accounts held in the names of individuals and entities other than themselves. They also used entities rather than their account to implement the trading. Overall Defendants traded in 3,900 publicly traded securities. During the relevant period Defendants collectively generated millions in illegally obtained proceeds. The complaint alleges violations of Securities Act Section 17(a)(1) and 17(a)(3) and Exchange Act Sections 9(a)(2) and 10(b). The action has been concluded. The court entered judgment against Ziaosong Wang. He was enjoined from future violations of the Sections cited in the complaint. Mr. Wang was also directed to pay disgorgement of $1,041,084 plus prejudgment interest of $80,428.35. That amount will be deemed satisfied by an order of forfeiture in the parallel criminal case and monies previously collected in the action. Earlier the court entered a final judgment against Wannian Investment Inc., representing the net profits from the scheme, $4,121,754.65. Mr. Jiali Wang was also enjoined from violating the Sections cited in the amended complaint in March 2023. He was directed to pay disgorgement of $7,750,000. The amount will be satisfied by an order of forfeiture in the parallel criminal case. Default judgments were order as to 15 other individuals and one entity. The judgments were based on the Sections cited in the amended complaint. The payment of $35,603,447 was ordered as disgorgement along with a civil penalty of $2 million. In June 2022 the court also entered default judgments against a series of relief defendants and directed that they each pay disgorgement in an amount ranging from $3,505 to $533,713 individually. The judgments ordered, in addition, the payment of prejudgment interest for a total of $1,512,333. See Lit. Rel. No. 26245 (Feb. 11, 2025).
Unregistered securities: SEC v. Crystal World Holdings, Inc., Civil Action No. 1:19-cv-2490 (D.D,C.) is a previously filed action which named as defendants: Crystal World, The New Sports Economy Institute and Christopher Rabalais. Defendants are alleged to have engaged in a scheme from July 2014 to April 2019 marketed essentially as the distribution of pre-IPO shares of the sports enterprises. Investors were told the payments for shares were “gifts” to a nonprofit entity he formed for the donations. In marketing the shares Defendant Rabalais stressed the importance of obtaining the shares prior to registration. About $1.5 million was raised through this process. The complaint alleges violation of Securities Act Sections 5 and 17(a). Mr. Rabalais and his companies previously consented to the entry of permanent injunctions based on the Sections cited. To resolve the matter, Defendants consented to the entry of, and the court entered, final judgments directing the payment, jointly and severally, of disgorgement in the amount of $1,468,556. Mr. Rablais will also pay a penalty of $223,229 while the two entity defendants will each pay a penalty of $1,000,000. See Lit. Rel. No. 26244 (Feb. 10, 2025).
Insider trading: SEC v. Marsico, Civil Action No. 1:25-cv-005553 (N.D. Ill.) is an action which alleges that Anthony Marsico, Arthur Pizzello, Jr., Robert Quattrocchi and Timothy Carey traded in the shares of Goodness Growth Holdings, Inc. (now known as Verano Growth, Inc.) prior to the announcement that the firm would be acquired. According to the complaint, Defendant Marsico learned through his employment at the acquiring firm that Verano Growth, a cannabis firm, would be acquired. He then tipped Defendant Pizzello who in turn tipped Defendants Quattrocch and Carey. Each traded profitably. Indeed, Mr. Marsico has unrealized gains of $661,549, Mr. Pizzello $124,456, and Mr. Carey $9,260. Each Defendant consented to the entry of a permanent injunction based on Exchange Act Section 10(b) and Rule 10b-5. Each will pay disgorgement and a civil penalty in an amounts to be determined later. See Lit. Rel. No. 26243 (Feb. 10, 2025).
Hong Kong
Meeting: The regulator convened the inaugural meeting of the of the Virtual Asset Consultative Panel for licensed virtual asset trading platforms. The group is part of the regulator’s proactive engagement to sustain growth in the virtual asset ecosystem, according to a Feb. 14 2025, release (here).
Singapore
Financial planning: On January 31, 2025 the regulator published the “Industry Good Practices – The Basic Planning Guide”, according to a release dated January 31, 2025 (here).
