by T. GormanPosted on Posted in SECActions

The Commission filed 3 new cases last week. Each action was based on making false statements while soliciting investors.

Be careful, be safe this week.

SEC Enforcement – Filed and Settled Actions

Statistics: Last week the Commission filed 3 new civil injunctive actions and no new administrative proceedings.

False statements: SEC v. Shang, Civil Action No. 25 Civ. 1920 (D. N.J. Filed April 11, 2025). Named as defendants in the action are David Yow Shang Chiueh and Upright Financial Corporation. The firm, based in East Hanover, New Jersey, has been registered with the Commission as an investment adviser since March 1991. Mr. Chiueh is the founder and owner of the firm and was president during the period relevant. The firm has disclosed since its

inception in 1998 that its investment policy would not permit more than 25% of its assets to be concentrated in one industry. Nevertheless, the settled action, focused on the period July 2017 to 2020, stated the company had a concentration of more than 25% of its assets in one industry. The complaint, dated November 2021, alleged violations of the firm’s concentration provisions.

In the Matter of Upwright Finananial Corp. and David Yow Shang, A.P. File No. 3-20664 (Nov. 24, 2021). Those actions caused investor losses of about $1.6 million. Despite the violations, Defendants continued to collect advisory fees of about $100,000. Contrary to Defendants promise to halt the conduct, it continued. In addition, Defendants engaged in other violations. First, they withheld information from the Board necessary to evaluate its contract with the firm. Second, they misled the Board about past conduct. The Order alleges violations of Advisers Act Sections 206(1), 206(2) and 206(4). See Lit. Rel. No. 26286 (April 15, 2025).

False statements: SEC v. Smith, Civil Action No. 1:24-cv-24802 (S.D. Fla.). This previously filed case named as defendants Steve Smith, Jr., the former CEO of the firm, and Xtreme Fighting Championships, Inc. as defendants. Mr. Smith sold shares in Xtreme Championships during the period here. The shares were unregistered. At the time of the sales Mr. Smith is alleged to have concealed control of those shares from investors. He was ultimately able to sell a substantial block of shares using this approach because the financial statements for the company were delinquent. That facilitated the sale of about $5 million of stock. In addition, in April 2022 the complaint alleged that Defendants publicly filed an annual report falsly stating that Xtreme Fighting’s finanancial statements were audited. The report was false. The amended complaint alleged violations of Securities Act Sections 5 and 17(a) and Exchange Act Section 10(b) and Rule 10b-5 thereunder. To resolve the matter Defendants consented to the entry of permanent injunctions as to each Defendant based on the Sections and Rule cited in the complaint. In addition, Defendants will pay disgorgement $436.000 and prejudgment interest of $236,451. Mr. Smith also consented to the entry of an officer/director bar and a penny stock bar. See Lit. Rel. No. 26285 (April 15, 2025).

False statements: SEC v. CanaFarma Hemp Products Corp., Civil Action No. 1:21-cv 8211 (S.D.N.Y) is a previously filed action in which the complaint was amended by Commission. Initially, Defendants Barone and Chumenko, along with the firm and its two co-founders, Vitaly Fargesen and Igor Palatnik, raised millions, supposedly for the firm. While raising the funds Defendants Vitaly Fargesen and Igor Palatnik, made misrepresentations to investors that claimed the firm was a fully integrated hemp operation. The claims were false. Additionally, the amended complaint claimed the two men, along with some assistance from Defendants Barone and Chumenko, misappropriated about $4 million. The courtt entered consent judgments against Defendants Barone and Chumenko in which they each agreed to be permanently enjoined from future violations of Securities Act Sections 17(a)(1) and (3) and Exchange Act Section 10(b) and Rule 10b-5. They also agreed to the entry of officer-director bars and the entry of penny stock bards, the length of which would be discussed later. The final consent judgments against Defendants Barone and Chumenko, entered on April 10, 2025, reimposed that permanent injunctive relief and imposed 5 year officer and director and penny stock bars. The entries concluded the litigation. The case as to the company was dismissed. See Lit. Rel. No. 26284 (April 14, 2025).

False statements: SEC v. Patel, Civil Action No. 23-cv-0026 (N.D. Ga.) is an action which named as defendant Milan Vinod Patel of Cumming, Georgia. It alleges that Mr. Patel disseminated bogus rumors to his contacts at various times about corporate events and then immediately recirculated them. More than 100 false rumors were circulated between December 2017 and January 2020. The prices of the shares involved were raised, allowing Mr. Patel to sell his holdings and generate over $1 million in illicit trading profits. A consent judgment based on the antifraud provisions was entered as to Mr. Patel. It also required the payment of disgorgement in the amount of $1,125,263, and prejudgment interest of $395,309. In the parallel criminal action, brought by the U.S. Attorney’s Office for the Northern District of Georgia, Mr. Patel pleaded guilty and was sentenced to serve 18 months in prison. See Lit. Rel. No. 26283 (April 11, 2025).

False statements: SEC v. Mantinan, a/k/a Albert Sanger, Civil Action No. 25, Civ. 2937 (S.D.N.Y. April 9, 2025) is an action which named Mr. Saniger as a defendant. The complaint alleges that beginning in the spring of 2019, and continuing through April 20, 2022, Defendant falsely solicited investors to purchase shares in his firm based on false claims that the “Nate App” used AI to process virtually all orders when in fact they had been placed manually. By selling his shares in the firm during the solicitations Defendant was able to raise about $3 million for himself. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. See Lit. Rel. No. 26282 (April 11, 2025).

Australia

Portal: The Australian Securities and Futures Commission launched a new digital portal on April 16, 2025, for licensing the application for an Australian financial servicers license, beginning on May 5, 2025 (here).

Hong Kong

Uncertified program: The Securities and Futures Commission of Hong Kong announced on April 17, 2025, that it welcomes the enactment of all necessary legislation to pave the way for the implementation of a new uncertificated securities market initiative in early 2026 subject to reediness (here).

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by T. GormanPosted on Posted in SECActions

Many investment funds have provisions which impose restrictions on the type or amount of investments which can be purchased by the firm. These can aid investors considering if they are interested in acquiring shares of a particular investment fund. If, however, the fund choses to ignore investment restrictions it may defraud investors, causing losses while violating not just the fund provisions but the securities laws. A good example of such an action is the Commission’s most recent case in the area, SEC v. Shang, Civil Action No. 25 Civ. 1920 (D. N.J. Filed April 11, 2025).

Named as defendants in the action are David Yow Shang Chiueh and Upright Financial Corporation. The firm, based in East Hanover, New Jersey, has been registered with the Commission as an investment adviser since March 1991. Mr. Chiueh is the founder and owner of the firm and was president during the period relevant here.

The firm has disclosed since its inception in 1998 that its investment policy would not permit more than 25% of its assets to be concentrated in one industry. Nevertheless, a settled action, focused on the period July 2017 to 2020, stated the company had a concentration of more than 25% of its assets in one industry. A complaint, dated November 2021, alleged violations of the firm’s concentration provisions. Upwright Finananial Corp. and David Yow Shang, A.P. File No. 3-20664 (Nov. 24, 2021). The alleged actions violated the concentration policy and caused investor losses of about $1.6 million. Despite the violations, Defendants continued to collect advisory fees of about $100,000.

Contrary to Defendants promise to halt the violations of the concentration policy, they continued. In addition, Defendants engaged in other violations. First, they withheld information from the Board necessary to evaluate its contract with the firm. Second, they misled the Board about past conduct. The Order alleges violations of Advisers Act Sections 206(1), 206(2) and 206(4). See Lit. Rel. No. 26286 (April 15, 2025).

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