by T. GormanPosted on Posted in SECActions

Deterrence can, and typically is, a most difficult issue. You can tell people that they should not do something and maybe they will listen. You can show them that it is illegal and maybe it will sink in. But maybe not. Clearly insider trading is like this.

On insider trading the Commission and others repeatedly conduct programs and give lectures on it. Many organizations have programs on it as do any number of companies. And, the Commission continually brings insider trading cases in which the defendant often pays large penalties and, more importantly, destroys his or her credit record which will forever carry the badge of fraud. Yet it continues. Just take a look at the Commission’s most recent case in the area – SEC v. Xie, Civil Action No. 2:24-cv-09801 (D. N.J. Filed October 15, 2024).

Defendant Ruimin Xie is a resident of New Jersey. During the period of this case he was the Director of Analytical Development at BELLUS Health.

On April 18, 2024, a takeover deal was announced involving his employer: GKS plc would acquire Canadian-based BELLUS. Earlier in the month Defendant had been tasked with conducting due diligence for the deal. After finishing his assignment, Defendant did something he had never done – Mr. Xie purchased shares of BELLUS Health. He continued to purchase shares until April 17 when he stopped. By that time he had acquired over 7,000 shares, although is last order was not filled. The deal was announced the next day.

Following the deal announcement Defendant sold all of his shares. He had profits of over $59,000. The complaint alleges violations of Exchange Act Section 10(b) and Rule 10b-5.

To resolve the matter Defendant consented to the entry of a permanent injunction based on the Section and Rule cited in the complaint. In addition, he agreed to pay disgorgement of $59,408.42, prejudgment interest of $6,800.89 and a penalty equal to the amount of his trading profits. In addition, he is be barred from serving as an officer or director of a firm for five years. More importantly his credit record is now for ever stained with the word “fraud.” Perhaps he has learned now. See Lit. Rel. No. 26162 (October 17, 2024).

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by T. GormanPosted on Posted in SECActions

Crypto assets continue to be a controversial topic. Many believe that crypto can be a real source of value; others do not. Congress has considered if crypto assets should be regulated by an agency; despite years of consideration, regulation has yet to emerge. Now, of course, the question will essentially be tabled until after the election. Nevertheless, the Commission continues to debate questions about the assets while the enforcement division brings actions. The Commission’s latest case in this area centers on transactions involving two different crypto assets. The latest case in the area is SEC v. Vy Pham, Civil Action No. 1:24-cv-12588 (D. Mass. Filed Oct. 9, 2024).

Defendant Vy Pham is a citizen of Vietnam who resides in Los Angeles. She holds herself out as the leader of a project related to Robo Inn and as the CEO of Robo Global Investment PTE, Ltd.

In the spring of 2021 Defendant Pham participated in the launch of Saitama Inu, a crypto asset offered and sold as a security. Those involved with the promotion of the asset claimed it would create wealth through passive income. They also claimed that it would promote financial literacy and global financial well-being. Ms. Pham and the others promoting the crypto asset then engaged in a series of actions designed to increase the price and trading volume. Shortly thereafter Defendant Pham had a falling out with the leadership team. Members of that team were also named in a Commission enforcement action, SEC v. Russell Armand, et. al (D. Mass 2024).

Later in 2021 Ms. Pham launched another crypto asset – the Robo Inu Finance token. It was inspired by a NASA plan to launch Robo dogs to Mars. There was no real market for the asset. Defendant hired Gotbit Consulting LLC to provide market making services. They did. A process was used to create the illusion of public interest in Robo Inu. Trading in the assets was designed to attack public interest in the assets. It did. There was wash trading to induce public interest. Those efforts began in February 2022 and continued through June of 2023. Social media and other, similar avenues, were used to promote the assets. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a)(1) & (3) and Exchange Act Section Sections 9(a)(2), 10(b) and Rules 10b-5(a) and (c). See Lit. Rel. No. 26153 (Oct. 15, 2024).

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