by T. GormanPosted on Posted in SECActions

The theme today seems to be “what a difference a day makes.” Last week the Commission was counting the billions of dollars it recovered from the fraudulent schemes of Robert Allen Stanford. This week the agency is trying to justify its existence to those who would like to hammer and slash not just the SEC but also every other federal agency. So the question is, if in fact the hammering and slashing continues and is effective who will protect investors and the markets? It may not be if agencies like the SEC are downsized and significantly weakened. Take, for example, the latest case handed down by the Commission, SEC v. Quartarano, Civil Action No. 2:21-cv-02305 (E.D. N.Y.).

The case is a previously filed action which names as a relief defendant Leonard Quartarano. Relief Defendant Quartararo consented to the entry of a final judgment that required him to give back the money he obtained from wrong-doing – disgorgement. He also had to pay prejudgment interest – essentially the money Mr. Quartarano made from having money he should not have had in the first place. In Mr. Quartarano’s case resulted in him paying into the Court $20,103.98 in disgorgement and prejudgment interest of $33,128.88. The Court’s order here means that Mr. Quartarano did not profit from his wrongful conduct. In a parallel state law case the court directed Lisa Eckert to pay disgorgement of $46,600. See New York v. Quartararo, No. CR-0000238/2021 (Sup Ct. NY). The underlying case in each instance was based on situations in which investors had been defrauded of their money by those who had obtained it through wrongful conduct. See Lit. Rel. 26260 (March 4, 2025).

The question we began with about what a the difference a day makes is this: Do the actions reported above help deter other investors from suffering similar losses because of the work by agencies such as the SEC and those at a New York state agency that filed he second action? What happens if there is no federal or state agency to protect investors in the future? Is it sufficient for those of us who did not suffer the losses to say “there will be someone else? Who??

See Lit. Rel. No. 26260 (March 4, 2025)

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by T. GormanPosted on Posted in SECActions

Last week the Commission filed two new enforcement actions. Both cases focused on sham transactions. In addition, the Commission completed the case against Robert Allen Stanford and those who worked with him. The case traces to 2009.

Be careful, be safe this week and be warm

SEC Enforcement – Filed and Settled Actions

Statistics: Last week the Commission filed 2 new civil injunctive action and no new administrative proceedings.

Sham transactions: SEC v. Butkus, Civil Action No. 25-cv-1695 (S.D.N.Y. Filed Feb.27, 2025) is an action which names as defendants: Justinas Butkus, a Lithuanian citizen residing in the U.A.; TBO Capital Group, a firm controlled by Defendant Butkus; Gray Capital Group; HMC Trading, LLC and HMC Management, LLC. Over a period of about two years, beginning in late 2021, Defendants operated a scheme which raised about $4.1million by selling shares of firms that were fictitious. Investors were told that the management of the firms was very professional. In fact, the management was like the firm – fictitious. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Sections 10(b) and Rule 10b-5. See Lit. Rel. No. 26259 (Feb. 28, 2025).

Unregistered sales: SEC v. Trends Investments Inc., Civil Action No. 1:22-cv-10889 (D. Mass) is a previously filed action which named six individuals as defendants. The case centered on unregistered entities selling shares of stock to investors. All but two of the defendants had resolved the matter; the two remaining defendants went to trial last fall. Following a bench trial the court found in favor of the remaining two defendants. See Lit. Rel. No. 26258 (Feb. 27, 2005).

Unregistered sales: SEC v. Grybniak, Civil Action No. 1:20-cv-327 (E.D.N.Y.) is a previously filed action in which the court granted partial summary judgment against defendants Sergii Grybniak and his firm, Opporty International, Inc. Over a period of about one year, beginning in September 2020, defendants conducted unregistered sales of OPP Tokens through an initial coin offering. About $600,000 was raised from 200 investors. The tokens were sold by exaggerating the number of uses and the growth of the coins. The court granted partial summary judgment in favor of the Commission. Subsequently, Defendants Grybniak and Opporty consented to the entry of final judgments based on Securities Act Sections 5, 17(a)(2) and (3). The court entered permanent injunctions based on the Sections cited and a civil penalty of $100,000. See Lit. Rel. No. 26257 (Feb. 26, 2025).

Offering fraud: SEC v. Burak, Civil Action No. 25 Civ. 1626 (Filed Feb. 26, 2025). The complaint alleges that Defendant Alan Burk engaged in an offering fraud scheme for a claimed investment fund, Never Alone Capital, LLC. Defendant was the founder and sole member of the firm. He marketed shares by presenting himself as a very experienced hedge fund investor. Few shares were actually purchased. Much of the investor money was misappropriated and converted to personal use. By 2023 the scheme began to unravel as investors tried to withdraw their funds. The complaint alleges violations of Securities Act Section 17(a) and Exchange Section 10(b). See Lit. Rel. No. 26256 (Feb. 26, 2025).

Ponzi scheme: SEC v. Stanford International Bank, Civil Action No. 3:09 (N.D. Tex. Filed Feb. 16, 2009); U.S. v. Robert Allen Stanford, No. 4:0-cr-342(1)(S.D. Tx. Huston Division). On January 29, 2025, the court entered a final judgement against Mr. Stanford and a number of his associates and entities. The final judgments order permanent injunctions based on the antifraud provisions of the federal securities laws for perpetrating a massive multi-billion Ponzi scheme and misappropriating billions of investor dollars using his offshore “certificates of deposit” approach of convincing investors to give him their money in return for a CD. The final judgments were based on, Investment Company Act Section (d) as to the entity defendants. The relief ordered included the following as to:

Mr. Stanford. Disgorgement and prejudgment interest totaling $6,761,189,969.06; also included in this judgment was Stanford International Bank and Stanford Group Company on a joint and several bases. Mr. Stanford’s obligation to pay was satisfied by the forfeiture orders entered in U.S. Robert Allen Stanford, 4:0-cr-342(1)(S.D. Tex. Huston Division). A civil penalty of $5.9 billion was also imposed.

James Davis: Disgorgement plus prejudgment interest totaling $13,504,749.06, offset by $841,288.08 obtained by the court-appointed receiver. A civil penalty of $5 million was imposed.

Gilberto Lopez: Disgorgement plus prejudgment interest totaling $3,423,794.05.

Stanford International Bank: Disgorgement plus prejudgment interest totaling $6,716,189,969.06, jointly and severally, with Stanford and Stanford International Bank but deeming Stanford Group Company’s obligation to pay satisfied by the court-appointed receiver’s ultimate collection efforts and distributions to investors.

Stanford Group Company: Disgorgement plus prejudgment interest totaling $6,761,189,969.06, jointly and severally with Stanford and Stanford International Bank, but deeming Stanford Group Company’s obligation to pay this amount satisfied upon the court-appointed receiver’s ultimate collection efforts and distributions to investors.

Stanford Capital Management: Disgorgement plus prejudgment interest totaling $23,647,189.35 but deeming Stanford Capital Management’s obligation to pay this amount satisfied by the collection efforts and distributions to investors of the court-appointed receiver.

Stanford Financial Group Company: Disgorgement plus prejudgment interest totaling $2,229,094.83 but deeming Stanford Capital Management’s obligation to pay this amount satisfied by the collection efforts and distributions to investors by the court-appointed receiver. Disgorgement plus prejudgment interest totaling $6,428,833.27, but deeming The Financial Group Building’s obligation to pay this amount satisfied by the collection efforts and distributions to investors by the court-appointed receiver. See Lit. Rel. No. 26255 (Feb. 24, 2025),

Mr. Stanford is serving a 110-year sentence at United States Penitentiary, Coleman II in Coleman, Florida. See Lit. Rel. No. 26255 (Feb. 24, 2025). See also Memorandum Opinion and Order dated Jan. 29, 2025 reviewing the action as to each defendant written by the court.

FinCEN

The regulator issued a notice stating that it is not issuing fines or penalties in connection with beneficial ownership information reporting deadlines. This will continue until a forthcoming interim final rule becomes effective and the new relevant due dates in that interim final rule have passed. The release is dated Feb. 27, 2025 (here).

Hong Kong

Proposal: The Securities and Futures Commission of Hong Kong proposes to relax position limits for key exchange-traded derivatives, according to a release dated February 27, 2025 (here).

Singapore

Response anti-corruption: The Monetary Authority of Singapore provided a written response to questions posed by Parliament regarding anti-corruption, in a release dated on February 28, 2025 (here).

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