This Week In Securities Litigation (Week of September 16, 2026)
Last week the Commission filed eight new enforcement actions. Three focused on offering frauds while the five other cases concerned advisory fees, insider trading, false statements, financial fraud and improper payments.
Be careful, be safe this week
SEC Enforcement – Filed and Settled Actions
Statistics: This week the Commission filed 8 new civil injunctive actions and no new administrative proceedings, excluding tag-along actions and those that present a conflict for the author.
Improper payments: SEC v. Jones, Civil Action No. 5:24-cv-01560 (N.D. Oh. Filed Sept. 12, 2024) is an action which names as defendant Charles E. Jones, the CEO of FirstEnergy Corporation. From early 2017 through March 2020 Defendant Jones paid Larry Householder, then a member of the Ohio House of Representatives and a former Speaker of the chamber, about $60 million. When Mr. Householder was indicted in July 2020, Defendant Jones stated that all payments were proper. They were not. Similar public statements made by Mr. Jones alsowere false. And, Defendant Jones misled the auditors for First Energy regarding the payments to Mr. Householder. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Sections 10(b), 13(a) and 13(b)(2)(B). See Lit. Rel. No. 26105 (Sept. 12, 2024).
Financial fraud: SEC v. Patel, Civil Action No. 1:24-06405 (E.D.N.Y. Filed Sept. 12, 2024) is an action which names as defendants: Marg Patel, the former chief executive officer of Medly Health, Inc., a defunct on-line pharmacy; Robert Horowitz, the firm’s CFO; and Chintankumar Bhatt, the former head of Rx Operations. The company was marketed to the public and investors as an industry disrupter that was very successful and the fastest growing digital pharmacy. In fact, the company was a fraud. For years it had booked revenue from fake sources. To conceal this fact Defendant Medly restricted access to, and concealed, the firm’s records. By April 2022 the scheme began to unravel, the fraud was uncovered. The complaint alleges violations of each subsection of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10(b)-5 thereunder. See Lit. Rel. No. 26104 (Sept. 12, 2024).
Insider trading: SEC v. Gupta, Civil Action No. 1:24-cv-12316 (D. Mass. Filed Sept. 10, 2024). The case centers on a transaction involving two pharmaceutical firms. One is Epizme, Inc. a publicly traded Massachusetts company. The other is Ipsen Biopharmaceuticals, Inc., a public French biopharmaceutical firm which announced on June 27, 2022, that it was being acquired by Epizme. The firm’s securities were traded on NASDAQ. Ipsen, based in Paris, had about 5,000 employees in thirty countries. One of its global hubs is in Cambridge. Mr. Gupta joined Ipsen in September 2019. He was a “Business Insight Lead.” In that role Mr. Gupta managed data analytics projects to facilitate the assessment of business strategies. In November 2021 he was promoted to Director of Data Strategy and Operations. In January 2022 Ipsen and Epizyme first discussed the possibility of Ipsen purchasing Epizyme’s premier product, a cancer drug called Tarverik. A confidentiality agreement was executed on February 7, 2022. By early April the two firms had progressed to discussing a potential acquisition of Epizyme by Ipsen. As the discussions between the two companies progressed, Mr. Gupta became aware of the potential deal. On March 25, 2022, for example, he sent an email to his colleagues thanking them for bringing him into the deal. He attached a slide deck titled Ipsen US One – Capacity Planning, which related to the commercial sales model for Ipsen’s oncology business. Later he attended a meeting focused on Ipsen’s strategy for oncology acquisitions. In early April Mr. Gupta had additional conversations with an Ipsen employee related to that business. Subsequently, he continued to be involved in the conversations. On June 27, 2022, Mr. Gupta was tasked with projects regarding the transaction. Between April 7, 2022, and June 24, 2022, Mr. Gupta purchased shares of Epizyme on 27 different days. He accumulated 325,317 shares at prices ranging from $0.43 to $1.05 per share. Following the deal announcement on June 27 the share price increased 65% from the prior day close. Mr. Gupta had profits of $250,078.27. The complaint alleges violations of Exchange Act Section 10(b) and Rule 10(b)-5. Defendant resolved the charges, consenting to the entry of a permanent injunction based on the Section and Rule and an officer/director bar. Monetary relief will be considered at a later date. The U.S. Attorney’s Office filed parallel criminal charges. See Lit. Rel. No. 26103 (Sept. 10, 2024).
False statements: SEC v. Ward, Jr., Civil Action No. 1:24-cv-00327 (S.D. Ala. Filed Sept. 10, 2024) is an action which names as defendant James O. Ward, Jr. who admitted in a CFTC filing in March 2022 that he had conducted a Ponzi scheme in 2017. In this action he promoted the offer and sale of over $852,000 in securities issued by Apex Financial Institute Pvt., a private fund, to 70 investors. Those investors were told that the firm had been regulated by the SEC, had $25 million in assets under management, had a trading strategy that guaranteed against lost and had several international offices. Each representation was false. In September 2021 Apex stopped accepting investments and began to wind down operations. In connection with the shut down two partners used their personal funds to help repay investors. The complaint alleges violations of Securities Act Sections 17(a)(1) & (3) and Exchange Act Section 10(b) and Rule 10(b)-5 thereunder. See Lit. Rel. No. 26102 (Sept. 10, 2024).
Advisor fraud: SEC v. Wright, Civil Action No. 2:24-cv-00065 (M.D. Tenn. Filed Sept. 9, 2024) is an action which names as defendants Retirement Specialty Group, Inc., a registered investment adviser, and Donald Wright, the principal of the firm. Beginning in July 2023 Defendants raised over $2.4 million in fraudulent notes to at least five advisory clients and one other person. Defendant Wright sought to raise the funds to support his efforts to acquire a faith-based marketing company. Entities that Mr. Wright sought to aid him with his project promised the required money if certain amounts were first transferred to them. Defendant Wright complied and transferred the funds. In connection with these transactions Mr. Wright made a series of misrepresentations and omissions. He also failed to disclose certain conflicts arising from the work relations of Mr. Wright and the entities. Defendant Wright, in addition, repeatedly made misrepresentations to investors regarding the repayment of the notes. The complaint alleges violations of each subsection of Securities Act Section 17(a), Exchange Act Section 10(b) and Advisers Act Sections 206(1) & (2). Defendants resolved the action, consenting to the entry of permanent injunctions based on the Sections cited in the complaint as well as an officer and director bar as to Mr. Wright. Monetary relief will be determined at a later date. Mr. Wright also consented to the entry of an order prohibiting him from participating in the issuance of any security. See Lit. Rel. No. 26100 (Sept. 10, 2024).
Offering fraud: SEC v. Haithcock, Civil Action No. 1:24-cv-02585 (D. Md. Filed Sept. 6, 2024). Defendant Hunter Haithcock is not a registered broker-dealer or a trained investment adviser. He was not a securities expert. He was a young man who could tell a story. Beginning in 2019, and continuing for the next three years, Mr. Haithcock repeatedly told his story and convinced investors with available cash to turn it over to him. Would be investors were drawn to Mr. Haithcock by word-of-mouth, referrals, meetings, texts and pitches in-person about him and his claimed expertise. To secure investor confidence, the pseudo securities expert posed as a licensed securities professional associated with a registered broker-dealer and investment adviser. Once in his presence, Mr. Haithcock told the audience about his trading activity and investment returns. The tales of trading were augmented at times with payments of cash to former investors. This permitted the audience to supposedly see the wisdom of investing with the pitch man. Unfortunately for the investors, everything was false, an illusion. The tales of trading using investor cash were false – Defendant pocketed the money. The claims of trading profits were an illusion – the payments were made from investor cash. The claims of success were false – there were none. The complaint charges Defendant Haithcock with violations of Securities Act Section 17(a), Exchange Act Section 10(b) and Rule 10(b)-5 and Advisers Act Sections 206(1) & (2). See Adm. Lit. No. 26099 (Sept. 9, 2024).
Offering fraud: SEC v. Chhabra, Civil Action No. 1:24-cv-2561 (D.D.C. Filed Sept. 6, 2024) is an action which names as defendants: Michael V. Chhabra; Vineet K. Chhabra; Tort Fund LLC; Tort Fund SPV, LLC; and Tort Fund SPV2, LLC. In this matter the complaint alleges that Michael Chharba and his father, Vineet Chhabra, engaged in a fraudulent scheme tied to each of the entity defendants in which investors purchased $125,000 of securities through the Tort Fund entities the individuals control. Investors were told that the funds raised were loaned to law firms for tort litigation. Investors were also told that the securities were collateralized. In fact, much of the investor money was misappropriated. To conceal the fraud the individual Defendants repeatedly lied to investors regarding the use of the funds. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10(b)-5 thereunder. See Lit. Rel. No. 26098 (Sept. 6, 2024).
Adviser fee increases: SEC v. Raskobourian Financial Advisors, Civil Action No. 4:24-cv-00442 (D.Az. Filed Sept. 5, 2024) is an action which names the former registered investment adviser as a defendant. The firm was a registered adviser from 1985 to October 2023. Beginning in 2018 Defendant repeatedly increased its financial planning and investment adviser management fees without making the required disclosures. In addition, the materials in which the disclosures were required were not delivered to the clients. In the end, Defendant never provided clients a Brochure or summary of its changed fees. As a result, from May 2019 through July 2022, Defendant charged clients a total of over $1.3 million more in fees than were expressly authorized under the fee schedule provided in the client agreements. Defendant also failed to disclose periodic fee increases. The complaint alleges violations of Advisers Sections 206(2), 204(a) and the related rules. The action was resolved. Defendant consented to the entry of permanent injunctions based on the Sections and Rules cited. It is also ordered the payment of disgorgement in the amount of $1,364,513, prejudgment interest of $256,068 and a penalty of $225,000. See Lit. Rel. No. 26097 (Sept. 6, 2024).
Offering fraud: SEC v. Ameristar MK Ltd., Civil Action 24-cv-00169 (D. Wy. Filed Sept. 4, 2024) is an action which names as defendants the company, formed in 2023 in Wyoming with addresses in that state and Illinois. Other entities involved are Ameristar MK Ltd. and highline Gold Inc. Who controls the company cannot be determined at this point. Its attorney is relief defendant Fred Freitag IV. The company has raised about $3.6 from investors by promising them that funds raised would be invested in certificates of deposit issued by FDIC insured entities. In fact, much of the investor funds were not invested as promised to the firm’s 22 investors. Rather, the firm has purchased large quantities of HighLine Gold. Currently the firm is no longer answering its phone or emails. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Section 10(b) and Rule 10(b)-5. Recently, the Commission obtained emergency relief freezing the assets of the company and its relief defendants. See Lit. Rel. No. 2601 (Sept. 10, 2024).
FinCEN
Release: The Financial Crimes Enforcement Network issued a Financial Trend Analysis on mail theft related to check fraud incidents. It is based on Bank Secrecy Act data for the six months following the issuance of FinCEN’s 2023 Alert on the same topic. The Release was made on September 9, 2024 (here).
MAS
Remarks: Gan Kim Hyong, Deputy Prime Minister for Trade and Industry and Chairman of Monetary Authority of Singapore, delivered remarks on September 13, 20243 at the IBF 50th Anniversary Distinction Evening Gala (here).