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Related to the Left/Citron charges was this SEC Administrative Action from last month that largely went unnoticed at the time. "Individual A" is undoubtedly Left and Citron, as the specific short reports and Tweets mentioned in the Order were done by Citron. The Order also says Anson worked with "Short Publishers", plural. This may signal more firms are in the SEC's crosshairs.
https://www.sec.gov/files/litigation/admin/2024/ia-6622.pdf
On the basis of this Order and the Respondents’ Offers, the Commission finds that:
Summary
1. These proceedings arise from the Respondents’ work with activist short publishers who issue reports presenting bearish views of target securities (“short reports”). From at least 2018 through 2023 (the “Relevant Period”), the Private Placement Memorandum (“PPM”) for Anson Investments Master Fund (“AIMF”), the private flagship fund that Respondents advised, described a short position investment strategy to be used for AIMF but omitted that AIMF’s investment strategy involved working with activist short publishers and trading in the target securities, including around the time the reports were issued by activist short publishers, and paying a portion of AIMF’s trading profits to the short publishers in exchange for the short publishers sharing their work with Respondents in advance of posting it publicly. In addition, by not disclosing this practice, Anson Funds did not implement its written policy to “clearly articulate” AIMF’s short strategy or the risks associated with this strategy, in violation of the Advisers Act.
2. In addition, in September and October 2018, Anson Advisors agreed to pay “Individual A,” the principal of a short activist firm (hereafter, “Short Publisher A”), a share of AIMF trading profits in connection with Short Publisher A’s bearish reports and tweets on two securities. As a result of AIMF’s trading, Individual A’s share of AIMF’s trading profits exceeded $1.1 million, which Respondents paid through a third-party intermediary via invoices for purported research services that the third-party intermediary had not performed. Anson Funds inaccurately recorded these payments as payments to the third-party intermediary for such research services and in doing so violated the Advisers Act books and records provisions. Further, by failing to implement its written policies regarding the accuracy of records, Anson Funds violated the Advisers Act compliance rule.
3. As a result, and as detailed below, Anson Advisors violated Section 206(4) of the Advisers Act and Rule 206(4)-8 promulgated thereunder, and Anson Funds violated Sections 204 and 206(4) of the Advisers Act and Rules 204-2, 206(4)-7, and 206(4)-8 promulgated thereunder.
Respondents
4. Anson Funds Management, LP is a limited partnership organized under the laws of Texas with a principal place of business in Dallas, Texas. Anson Funds was founded in 2003. It has been registered as an investment adviser with the Commission since 2012 and as of March 2024 reported having approximately $2.5 billion in regulatory assets under management.
5. Anson Advisors, Inc. is a corporation organized under the laws of Ontario, with a principal place of business in Toronto, Canada. Anson Advisors was founded in 2007. Anson Advisors is registered with the Ontario Securities Commission and has reported to the Commission as an exempt reporting adviser since 2013. Anson Advisors and Anson Funds are co-investment advisers of a number of private pooled investment vehicles, including AIMF.
Other Relevant Entities and Persons
6. Anson Investments Master Fund LP is the Respondents’ flagship fund and a Cayman Islands limited partnership.
7. Short Publisher A is an activist short publisher that presents itself to the market as an independent research firm. Short Publisher A purports to expose frauds or other problematic conduct at target companies through its own website and twitter feed.
8. Individual A founded Short Publisher A around 2008 and has been writing and disseminating reports and tweets through that platform since its inception.
AIMF’s Private Placement Memorandum
9. During the Relevant Period, the Respondents were co-investment advisers of private pooled investment vehicles, including AIMF. They received an asset-based management fee and performance-based compensation from their clients. The Respondents worked together to determine fund strategy, manage risk, communicate with investors, and to draft marketing materials. Anson Advisors was primarily responsible for making investment decisions, while Anson Funds was primarily responsible for operational and administrative tasks, such as financial and compliance functions for both firms pursuant to a shared services agreement. The shared services agreement contractually obligated the Respondents to provide each other certain support services in connection with the day to day legal, compliance, and operations of each party.
10. The Respondents’ investor materials describe AIMF as a long-short fund, meaning the fund employed a strategy of taking both long and short positions in certain securities to enhance returns. The PPM for AIMF, which Respondents prepared and sent to actual and prospective investors to solicit investment in the fund, described the AIMF short position investment strategy as “scour[ing] the market using various data filters and screens to identify companies with significant short-term stock price appreciation that we believe is not justified by a corresponding improvement in underlying businesses prospects” and “monitor[ing] larger industry trends” to take short positions in companies the Respondents “expect to suffer the same decreased stock price and then hold the positions until the stock prices decreases to reflect the industry-wide decline.”
The Respondents’ Practice of Working with Activist Short Publishers
11. During the Relevant Period, the Respondents worked with activist short publishers who released reports presenting bearish information about target companies. These short reports were often posted on independent social media sites operated by the short publishers.
12. Respondents had formal consulting agreements with some of the short publishers, which at times provided that the short publisher would share its work with Respondents prior to public posting. In exchange, Respondents agreed to pay the short publisher, at times based on a percentage of AIMF’s profits from trading in the target security for an agreed period of time around the publication of the report.
13. Anson Advisors directed trading by AIMF. Generally, AIMF would secure a short position prior to the release of the reports. The price of the target securities often decreased after the reports were published, and AIMF would often cover its short position for a profit.
Anson Funds was aware of the arrangements and monitored AIMF positions and the share of AIMF profits owed to the short publisher pursuant to the agreements.
14. At other times, Respondents had informal arrangements with short publishers whereby they would exchange research and content with the short publishers, but would not enter into a formal consulting agreement with them.
Respondents’ Relationship with Individual A and Short Publisher A
15. During the Relevant Period, Respondents at times worked on an informal basis with Short Publisher A, which was operated by Individual A. In late 2018, Respondents paid Individual A a portion of AIMF’s trading profits regarding two securities in connection with Short Publisher A’s reports and tweets regarding those securities.
16. In September 2018, Anson Advisors contacted Individual A about Short Publisher A issuing bearish reports on Namaste Technologies, Inc. (“Namaste”), a company whose securities traded on the Canadian Securities Exchange. Namaste’s securities were also quoted on the OTC Link under the symbol “NXTTF.” Anson Advisors and Individual A worked together to prepare two bearish reports and tweets, which Short Publisher A published in September and October 2018. In exchange, Anson Advisors agreed to pay Individual A a share of AIMF’s profits from its short position in Namaste. AIMF’s short positions in Namaste in September and October generated approximately $3.8 million in profits.
17. In October 2018, Anson Advisors agreed to pay Individual A a share of AIMF’s profits from trading around Short Publisher A’s bearish tweet on India Globalization Capital, a company whose securities traded on the NYSE American stock exchange under the symbol “IGC.”
Short Publisher A published a bearish tweet regarding IGC in early October 2018, stating that the stock was overvalued. AIMF’s short positions on the day of the tweet generated approximately $500,000 in trading profits.
18. As a result of AIMF’s trading in Namaste and IGC, Individual A was owed more than $1.1 million of AIMF’s trading profits. Individual A did not pay or contribute funds to Respondents to purchase securities in either Namaste or IGC. Individual A asked Anson Advisors to send him his share of trading profits through a third-party intermediary, to which Respondents agreed. The third-party intermediary provided Anson Funds with invoices for purported research services that had not been performed by the third party intermediary and inaccurately stated that the amounts invoiced were for the benefit of the third-party intermediary, when they were for the benefit of Individual A. Anson Funds issued payment to the third-party intermediary, and Individual A collected payment from that third-party intermediary.
Respondents’ Omission of Their Work with Activist Short Publishers Rendered the PPM’s Description of Investment Strategies Misleading
19. The PPM for AIMF, which Respondents prepared and sent to actual and prospective investors, described a short position investment strategy for AIMF but omitted that AIMF’s investment strategy involved working with activist short publishers and trading in the target securities. The PPM for AIMF did not disclose this strategy, including that Respondents entered into agreements with activist short publishers and would compensate some short publishers by paying them a share of AIMF trading profits.
20. Respondents’ agreements with and payments to short publishers, including Individual A, was information that investors would have found material. The omission of this conduct from the AIMF PPM, which was not available to investors through other means, rendered its statements about its short strategy misleading.
Anson Funds Failed to Maintain Accurate Books and Records and to Follow Its Policies and Procedures
21. Anson Funds inaccurately recorded the payments for the benefit of Individual A in its journal and ledgers as payments to the third-party intermediary for research services, when in fact they were to Individual A for trading profits.
22. Anson Funds’ compliance policies and procedures required the keeping of accurate books and records. Among other things, this included restrictions on using money or approving transactions when the funds would be used for purposes other than those described. Anson Funds failed to implement this policy when it approved and paid Individual A through the third-party intermediary.
Anson Funds Failed to Implement its Compliance Policies and Procedures Regarding Accurate Disclosure of Fund Strategies
23. Anson Funds adopted compliance policies and procedures requiring it to “clearly articulate” in the PPMs for the pooled investment vehicles it managed, its investment strategies; these policies and procedures required the firm to provide “disclosure as to how funds are to be invested, what factors will influence investment performance and what risks are associated with the Account’s principal investment strategy.”
24. By omitting from the description of its short strategy in the PPM its practice of working with short publishers and paying them a share of AIMF trading profits, Anson Funds did not “clearly articulate” its short strategy or the risks associated with this strategy.
Violations
25. As a result of the conduct described above, Anson Advisors and Anson Funds willfully violated Section 206(4) of the Advisers Act and Rule 206(4)-8(a)(1) and (2) thereunder, which makes it unlawful for any investment adviser to a pooled investment vehicle to (1) make any untrue statement of a material fact or to omit to state a material fact necessary to make the statements made not misleading, or (2) otherwise engage in any act, practice, or course of business that is fraudulent, deceptive, or manipulative with respect to any investor or prospective investor in the pooled investment vehicle. Proof of scienter is not required to establish a violation of Section 206(4) of the Advisers Act or the rules thereunder. S.E.C. v. Steadman, 967 F.2d 636, 647 (D.C. Cir. 1992).
26. As a result of the conduct described above, Anson Funds willfully violated Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, which require registered investment advisers to adopt and implement written policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder.
27. As a result of the conduct described above, Anson Funds willfully violated Section 204 of the Advisers Act and Rules 204-2(a)(1) and (2) thereunder. Section 204 of the Advisers Act requires investment advisers to make and keep certain records and furnish copies thereof, and to make and disseminate such reports as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors. Rule 204-2 provides that investment advisers registered or required to be registered shall make and keep true, accurate and current books and records in specified categories.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in Respondents’ Offers.
Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby ORDERED that:
A. Anson Funds cease and desist from committing or causing any violations and any future violations of Sections 204 and 206(4) of the Advisers Act and Rules 204-2(a), 206(4)-7, and 206(4)-8 promulgated thereunder.
B. Anson Advisors cease and desist from committing or causing any violations and any future violations of Section 206(4) of the Advisers Act and Rule 206(4)-8 promulgated thereunder.
C. Respondents are censured.
D. Respondent Anson Advisors shall, within ten days of the entry of this Order, pay a civil money penalty in the amount of $1,000,000 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. 3717.
E. Respondent Anson Funds shall, within ten days of the entry of this Order, pay a civil money penalty in the amount of $1,250,000 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. 3717.
SEC Charges Ex-CEO of View Systems, Inc. with Securities Fraud for Falsely Claiming the Company Was Engaged in Business Operations that It Was Not
Securities and Exchange Commission v. Juan [a/k/a John] Campo, No. 1:24-CV-2198 (D.D.C. filed July 26, 2024)
https://www.sec.gov/files/litigation/complaints/2024/comp26058.pdf
On July 26, 2024, the Securities and Exchange Commission charged Colombian resident Juan Campo, the former CEO of View Systems, Inc., with securities fraud for creating the false impression that View Systems was actively engaged in two potentially lucrative lines of business, temperature screening for Covid-19 and cannabis, and for including a fake audit report in a View Systems SEC filing.
The SEC’s complaint, filed in the U.S. District Court for the District of Columbia, alleges that from July 2019 through July 2022, Campo made and disseminated numerous false statements in View Systems press releases, the company’s Twitter account, company filings with the SEC, and on the company’s website. As alleged in the complaint, Campo falsely and repeatedly represented that View Systems had acquired Sannabis S.A.S., a cannabis company, when Campo knew that View Systems had never completed this acquisition. The complaint also alleges that in late 2020—during the height of the COVID-19 pandemic—Campo falsely represented that View Systems had developed a real time temperature screening product, when Campo knew View Systems had no such device, and could not build one unless it raised additional capital. In addition, the complaint alleges that in July 2022, Campo signed and certified View Systems’ 2020 annual report which falsely represented the company’s financial statements had been audited and included a fake audit report.
The SEC’s complaint charges Campo with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and the certification provision of Exchange Act Rule 13a-14. The complaint also charges Campo with aiding and abetting the company’s violations of the company reporting provisions, Exchange Act Section 13(a) and Rules 12b-20, 13a-1, and 13a-13 thereunder. The complaint seeks an injunction, an officer-and-director bar, a penny stock bar, and civil penalties against Campo.
The SEC’s investigation was conducted by Ashley Sprague and Sachin Verma, and supervised by Lisa Deitch, Peter Rosario, and Stacy Bogert. The case will be litigated by Devon Staren, and supervised by Christopher Bruckmann. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
Securities and Exchange Commission v. Juan [a/k/a John] Campo, No. 1:24-CV-2198 (D.D.C. filed July 26, 2024)
https://www.sec.gov/files/litigation/complaints/2024/comp26058.pdf
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26058 / July 26, 2024
SEC Charges Ex-CEO of View Systems, Inc. with Securities Fraud for Falsely Claiming the Company Was Engaged in Business Operations that It Was Not
On July 26, 2024, the Securities and Exchange Commission charged Colombian resident Juan Campo, the former CEO of View Systems, Inc., with securities fraud for creating the false impression that View Systems was actively engaged in two potentially lucrative lines of business, temperature screening for Covid-19 and cannabis, and for including a fake audit report in a View Systems SEC filing.
The SEC’s complaint, filed in the U.S. District Court for the District of Columbia, alleges that from July 2019 through July 2022, Campo made and disseminated numerous false statements in View Systems press releases, the company’s Twitter account, company filings with the SEC, and on the company’s website. As alleged in the complaint, Campo falsely and repeatedly represented that View Systems had acquired Sannabis S.A.S., a cannabis company, when Campo knew that View Systems had never completed this acquisition. The complaint also alleges that in late 2020—during the height of the COVID-19 pandemic—Campo falsely represented that View Systems had developed a real time temperature screening product, when Campo knew View Systems had no such device, and could not build one unless it raised additional capital. In addition, the complaint alleges that in July 2022, Campo signed and certified View Systems’ 2020 annual report which falsely represented the company’s financial statements had been audited and included a fake audit report.
The SEC’s complaint charges Campo with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and the certification provision of Exchange Act Rule 13a-14. The complaint also charges Campo with aiding and abetting the company’s violations of the company reporting provisions, Exchange Act Section 13(a) and Rules 12b-20, 13a-1, and 13a-13 thereunder. The complaint seeks an injunction, an officer-and-director bar, a penny stock bar, and civil penalties against Campo.
The SEC’s investigation was conducted by Ashley Sprague and Sachin Verma, and supervised by Lisa Deitch, Peter Rosario, and Stacy Bogert. The case will be litigated by Devon Staren, and supervised by Christopher Bruckmann. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
Canadian company at the centre of alleged international pyramid scheme: authorities
Ah, the usual fingerprints of a financial scam. Fake Directors using a Regus address, registered by a scam facilitator business service who doesn't ask any questions (or confirm the people are real), using fake websites to fool people into thinking they had real investments that were turning profits. But this one was different than most. This one stole at least $2 billion, and most likely at least double that, all from hundreds of thousands, if not millions, of relatively poor "investors" in Southeast Asia, all out in the open.
https://www.ctvnews.ca/canada/canadian-company-at-the-centre-of-alleged-international-pyramid-scheme-authorities-1.6974263
Editor's note: This story is a collaboration between the Investigative Journalism Foundation (IJF(opens in a new tab)) and CTV News.
A Canadian company is at the centre of an alleged pyramid scheme that foreign officials say stole more than US$2 billion from hundreds of thousands of people in Sri Lanka and Bangladesh, according to authorities in those countries.
Metaverse Foreign Exchange Group Inc., also known as MTFE, pitched itself as a reputable online trading platform. The company is federally incorporated in Markham, Ont., has a Canadian director and is even registered with Canada’s money laundering watchdog.
But in August 2023 the platform stopped working and investors' money disappeared, according to court documents filed in Sri Lanka. Sri Lanka’s central bank has since described MTFE as a pyramid scheme.
Now, an investigation from the Investigative Journalism Foundation and CTV News shines new light on how Canadian shell companies and registries were used to pull off the scheme.
Canadian lawyers play key role in money laundering, says financial intelligence report: IJF & CTV News(opens in a new tab)
The investigation — based on dozens of corporate filings, interviews with experts and both domestic and international court records — found MTFE was part of a network of dozens of Canadian shell companies peddling similar cryptocurrency investment schemes.
Most of those companies had foreign directors, and experts interviewed for this story suspect some used fake identities.
Efforts to locate MTFE’s sole Canadian director, Randy Mathieu Lane, who had a listed address in Richmond, B.C., were unsuccessful.
Corporate records show Lane is a listed director of six Canadian companies including MTFE, all offering cryptocurrency or other financial services. In five of those registrations, including the one for MTFE, the other listed director had an address in China .
Four of Lane’s companies were dissolved by Canadian officials for non-compliance in May, shortly after the IJF and CTV News contacted the federal department that runs the corporate registry seeking comment for this story.
Agencies including the RCMP, the Ministry of Finance and the Ontario Securities Commission would not answer direct questions about MTFE or whether Canadian officials are investigating MTFE.
But experts interviewed for this story, including former law enforcement and intelligence officials, say the investigation highlights gaps in Canada’s enforcement that have made the country a waystation for financial crime.
“We’ve become such a weak link in the financial crime arena that we’re attracting all the business,” said Garry Clement, a former RCMP officer who investigated financial crime. “Because they know that virtually nothing is going to happen to them.”
Behind MTFE
Arif, a 22-year-old in Dhaka, Bangladesh, made his first investment on Metaverse Foreign Exchange in January 2023.
MTFE’s website claimed to use artificial intelligence to trade foreign currencies on behalf of users, offering steady, gradual gains with little effort and low risk.
Arif was skeptical, but trusted MTFE because it was a Canadian company.
“I thought that Canada should have strict regulations and that it should have good regulations around setting up a company and doing trading,” said Arif, who asked his full name not be used.
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By August 2023, Arif had invested the equivalent of about US$3,400. Most of that was money he borrowed from his parents.
“I assured them that there was no risk, so we can get them the money back,” said Arif. “And it didn’t work out.”
That month, MTFE’s website went down. Investors could no longer withdraw their money. And then, it was gone.
Bangladesh’s Criminal Investigation Department — which didn’t respond to repeated requests for comment — told local media as many as 500,000 people in the country may have lost money.
Bangladeshi police have estimated investors lost the equivalent of US$1.7 billion, according to the Dhaka Tribune. In Sri Lanka, the Sunday Times quoted said the equivalent of US$1 billion was stolen from investors there, citing the country's central bank. The bank declined to comment for this story, citing the ongoing investigation.
To sign up, users had to purchase and send cryptocurrency to one of various digital wallets used by MTFE.
A sleek app would then show users the state of their “investments,” including daily returns and losses. Initially, users could even withdraw money, which made them more inclined to trust it.
Many, like Arif, heard about the company through a friend. That was no coincidence. MTFE offered financial incentives to users who recruited more investors, something Arif now recognizes as a hallmark of a pyramid scheme.
Court records in Sri Lanka suggest MTFE also benefited from local partners who promoted the platform in exchange for a share of the profits.
In August 2023 -- shortly before the scheme collapsed -- Sri Lanka’s central bank began an investigation into local companies set up to promote MTFE.
Sri Lankan authorities arrested three individuals in 2024 on charges of money laundering related to their role in the alleged pyramid scheme. Proceedings are set to resume this September.
The bank – which declined to comment on the investigation – has also banned 10 other individuals it suspects of being involved with the scheme from leaving the country since August 2023. It has also obtained orders freezing the movement of funds from 29 cryptocurrency wallets, which the bank said contained the equivalent of about US$900,000.
In court filings, investigators claim the local promoter groups received between 60 and 70 per cent of investments made by MTFE users.
The rest, investigators said, was kicked up to the “parent company” in Canada in the form of a “service fee.”
Investigators did not know who was behind that “parent company,” or how local promoters contacted them. The records say there “is no information available about any organization running this computer software service or the individuals responsible for creating or hosting the service.”
But court records say the arrested suspects testified they would receive the equivalent of US$4,000 in cryptocurrency and a US$500 monthly allowance if they personally recruited 100 people onto the service.
Those groups eventually became very large. Investigators claimed one of them had 42 sub-branches throughout the island. One became large enough that it sponsored a local cricket team, the Jaffna Kings. Another promotional group even hosted a concert, the court documents said.
Investigators said MTFE software that investors like Arif had used did not seem to work and had been “inactive since the beginning of this inquiry.”
Many transactions with MTFE happened via Binance, a Canadian cryptocurrency exchange.
In a statement, Binance spokesperson Carolina Matos said the company “was made aware of the MTFE scam by one of our trusted law enforcement partners” in August 2023. She said Binance was “unable to provide details of the case due to ongoing investigations.”
Matos said MTFE was also active in Pakistan and Nigeria. She noted the company had curated a strong online presence and even successfully registered for the Apple mobile app store.
“This showcases how well-crafted schemes can appear legitimate on the surface while deceiving both seasoned and novice investors alike,” Matos said.
Nauriin Ahmed, a Dhaka-based lawyer specializing in technology, says Bangladeshi residents have been repeatedly targeted by such schemes.
The country’s restrictive securities trading regime means Bangladeshis have relatively few legitimate ways to invest.
'I ... thought I wouldn't fall for a scam like this'
While buying cryptocurrency in Bangladesh is easily done, it can also be considered a crime — one of the reasons why Arif asked not to be named for this story.
“These victims, at least within Bangladesh — they don’t have any sort of recourse,” Ahmed said.
Canadian officials knew about MTFE. The Ontario Securities Commission issued a brief statement in July 2023 warning that MTFE was not registered in the business of trading securities .
Andy McNair-West, a spokesman for the OSC, said they issued that statement after receiving calls about the company’s registration status. He did not answer questions about whether the commission contacted officials in Bangladesh or other affected countries, or if the OSC was investigating MTFE.
Canada’s federal corporate registry says MTFE is still active, though it has since been found non-compliant and is in the process of being dissolved.
Ahmed wishes the OSC’s warning had reached more investors.
“I think if OSC had reached out to the Bangladesh central bank to put out a circular saying this is not a legitimate organization … that would have helped,” Ahmed said.
If the scale of the alleged fraud was massive, so was its human impact.
Arif blamed himself for losing his family’s life savings. He worried his parents would kick him out of their house. At his darkest moments, he says he called suicide prevention hotlines for help.
Arif begged his parents to forgive him, and they did. But he still blames himself.
“I consider myself an educated individual and thought I wouldn’t fall for a scam like this,” Arif said.
The Canadian shell companies
Ahmed said the key to MTFE’s success was its Canadian credentials.
But on closer inspection, those credentials raise more questions about MTFE — and how it was able to operate in Canada in the first place.
MTFE’s corporate address was 500-7030 Woodbine Avenue in Markham, Ont., on the fifth floor of an office tower.
At one time, this one office unit in Markham was home to 97 different money services companies, including 95 registered foreign currency exchanges .
But there’s little evidence any of them ever did business there — or that they were even actual tenants.
A manager at the shared office space, whose name we’re keeping confidential, told CTV News, “it’s hard to keep track of all the companies using our address.”
The shared office space has about 650 clients registered at its Markham location. The manager told CTV News that “90% of (our clients) are good legitimate businesses, there’s 10% of that group that are not, and once we find out we shut them down, we stop accepting mail on their behalf and we close out their account.”
Joseph Iuso, the executive director of the Canadian Money Services Businesses Association(opens in a new tab), says such “clusters” of money services businesses are often a sign of fraud.
Money services businesses (MSBs) are a type of business that offers financial services like wire transfers, cryptocurrency exchange or foreign currency exchange. Most are legitimate, but they are considered high-risk for money laundering, which is why they must register with the Financial Transactions and Reports Analysis Centre of Canada, or Fintrac(opens in a new tab), Canada’s financial intelligence unit .
But Iuso says Fintrac has neither the mandate nor the resources to audit the 3,000-odd registered MSBs in the country .
He says scammers have capitalized on that by incorporating companies and then registering them with Fintrac to make them seem more like legitimate businesses.
“A lot of them are Ponzi schemes related to crypto and foreign exchange and other high-yield investments or high-yield investment products,” Iuso said.
They congregate in the same locations, Iuso said, often picking addresses used by lots of other companies, like lawyers’ offices or corporate service providers.
Fintrac’s website states registration does not mean Fintrac endorses the business or can guarantee its compliance. But Iuso says that’s a nuance lost on most investors.
“Registration with Fintrac as an MSB can lead to a veneer of legitimacy,” said Denis Meunier, a former Fintrac deputy director. “And that can be abused.”
The unit at 500-7030 Woodbine Avenue is operated by IWG Plc., a British holding company that provides office services under the name of Regus . They own and operate 4,000 locations across the globe.
IWG Plc. would not provide an interview for this story. When presented with the IJF and CTV’s findings, public relations agent Linda North wrote an email saying they “take their regulatory responsibilities seriously.”
The manager at Regus’s Markham location shared that “fraudulent people know that business centres are easy prey because they can use the address as a legitimate business address but (the criminals) aren’t paying to use our address (for their companies) and we can’t keep track of the people who’re using it.”
Fintrac may have known something was amiss at the Woodbine address.
As of February 2024, it had revoked the registration of 86 of the 97 MSBs based there.
Fintrac would not say why it did that.
But a confidential 2022 Fintrac report to the Minister of Finance says the agency “detected an unusual trend” that year involving 95 MSBs registered to the same address, almost none of which responded to “repeated attempts” to contact them .
In the report, which the IJF and CTV obtained via access to information legislation, Fintrac asked the Ministry of Finance to give it new tools to revoke registrations from “unscrupulous operators” and to address “exploited weaknesses.”
In June 2023, the federal Ministry of Finance introduced a new requirement for MSB registrants to provide criminal record checks for their directors. A ministry spokesperson declined repeatedly to say why the government did that.
Fintrac would end up revoking registrations for most of those MSBS in January 2022 — but not MTFE, which kept its registration until September 2023, a month after the scheme had folded.
A cluster of MSBs
It’s not clear who the masterminds behind MTFE were.
One of the company’s registered directors, Hongbing Wang, listed an address in China. The second, Randy Mathieu Lane, had a listed address in Richmond, B.C.
The IJF and CTV tried to find and interview those people without success.
The paper trail led to another business on the other side of the country.
The IJF and CTV examined corporate filings for all 97 of MSBs incorporated at 500-7030 Woodbine Ave.
We found 75 of those companies had a director who used the address 150-10451 Shellbridge Way – the same address used by Lane.
The 150-10451 Shellbridge Way address was also listed by MTFE on its website, according to an archived webpage from the Wayback Machine. The address was changed sometime before August 2022.
That is the address of Raydwell Consulting, a Richmond “business service provider” whose website markets “virtual addresses” and dedicated phone lines for registered companies.
The company’s director, De Wang, wrote in an email to the IJF that his company had never worked for MTFE or any of the other companies whose directors used Raydwell’s address.
Listed phone numbers for those MSBs — which all used British Columbia area codes — did not respond to calls.
Iuso suspects some of the directors may not exist — or that they are using false identities.
“They’re all fake. Fake, fake, fake,” Iuso said.
Bad actors
Experts interviewed for this story say its findings raise serious questions about Canada’s regulation of MSBs.
Peter German, a former RCMP deputy commissioner and the author of two reports on money laundering in British Columbia, says the incident shows the limits of Fintrac’s mandate and authority.
“By creating this registration process, you do recreate a certain air of legitimacy to those who register that maybe they don’t deserve. And that can be misleading,” German said .
Some said it also speaks to a greater trend of criminals exploiting Canada’s reputation and corporate infrastructure without obvious consequences.
“I guarantee this group (MTFE) that you’ve discovered, they’re still operating” Iuso said.
Fintrac declined to answer specific questions about MTFE.
Finance Minister Chrystia Freeland originally declined to be interviewed for this story.
When asked about some of the investigation’s findings at an unrelated press event in Markham, she highlighted recent regulatory changes cracking down on activity like money laundering. But she acknowledged the status quo was not perfect.
“We do have more work to do here in Canada, both in terms of ensuring we have the tools we need to crack down on fraud and money laundering and also that enforcement agencies across the country are doing their jobs,” Freeland said.
But any changes come too late for victims like Arif, who is still getting his life back on track.
As of April, Arif said he had finally finished paying back his parents for the money he lost on MTFE. It didn’t come easily: he had to cut back on almost all his expenses, he said, and miss out on time he would normally spend with friends.
And he’s cautious about ever investing again.
“People are vulnerable when they’re trying to escape their poor life and get a better life for themselves and their family,” Arif said.
“Everyday, now, people are falling for a new scam.”
The Orlando litigation is now on the SEC website.
https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26051
SEC Launches Interagency Securities Council to Coordinate Enforcement Efforts Across Federal, State, and Local Agencies
Why hasn't this already been done? Seems like a no-brainer to me.
https://www.sec.gov/newsroom/press-releases/2024-86
FOR IMMEDIATE RELEASE
2024-86
Washington D.C., July 19, 2024 —
The Securities and Exchange Commission’s Division of Enforcement this month launched the Interagency Securities Council (ISC), which invites federal, state, and local regulatory and law enforcement professionals to meet quarterly to discuss the latest in scams, trends, frauds, and mitigation strategies.
The ISC’s objective is to strengthen the cohesion between federal, state, and local agencies, enhance opportunities to collaborate on cases to protect investors, provide insight and guidance across the ecosystem to those who may not frequently operate in this space, and create a forum for unified efforts in combatting financial fraud.
The ISC launched with representatives from more than 100 departments and agencies, including federal agencies, state offices of attorneys general and state police, and local police departments and sheriff’s offices.
“The Interagency Securities Council will help front line investigators stay abreast of emerging threats and fact patterns to protect their communities from securities fraud, while supporting the efforts of federal, state, and local law enforcement partners across the country,” said Gurbir S. Grewal, Chair of the ISC and Director of the SEC’s Division of Enforcement.
“As financial frauds become more complex, investors benefit from the government – at all levels – working together and sharing information to protect and inform the public,” said Cristina Martin Firvida, the SEC’s Investor Advocate.
About the Interagency Securities Council
The ISC is open to law enforcement and regulatory agencies, and members participate in discussions with experts on emerging threats, hear from investigators conducting and supervising investigations, and explore case study examples of agencies employing innovative approaches to combat financial fraud. The ISC also serves as an opportunity to connect and share information with the larger law enforcement community that less frequently deals with securities law violations, such as police/sheriff departments and tribal- and military-community law enforcement.
The SEC’s efforts on the council will be led by Adam Anicich and Manuel Vazquez.
Contact
To learn more about this initiative, or to enroll your department or agency, please contact ISC@sec.gov.
Yup, the new layout is counter-intuitive. A person has to go back and forth, and though additional menus, to find what they want.
And the complete lack of any mention of the Orlando suit anywhere on the website is puzzling, to say the least. Sometimes the SEC has been delayed for a few hours between the formal court filing and the notification on the website, but I have never seen a case take this long to add to the website. Especially such a high-profile one.
Did everyone at the SEC go down to the shore at the same time?
Yeah, to heck with rehashing the evil of WWII - RIP to that guy, too, right?
Sorry, but now that you have been proven wrong, you can't just ignore it and what that SOB did to you and others. The lying and stealing needs to be called out, period. What he and PT did together was evil and even criminal, plain and simple. Ignoring it does nothing except assuage your feelings, I suppose. But it certainly doesn't help people recognize the scam they fell for and learn from their mistakes.
Too bad, but I won't let people forget. Even if PT and his enablers get charged with securities fraud and go to prison, which is really something that should happen.
Janice, the SEC has always done what you describe. They only issue prepared news releases on a very small portion of their litigation and administrative actions, and it has been that way for decades.
Previous to the recent redesign, though, they were not as separated. The news releases were prominent on the front page of the website, and the links to the litigation and administrative proceedings were close at hand from there, so it wasn't a hunt or a mystery for a reader to drill into all the cases from there. Now, though, the enforcement pages are more difficult to find as there is an additional drop-down menu in between. The truncated "latest news" on the front page is pretty much useless, as it only contains the latest 2 releases, and no links or indications that there is more to be found from that area. So, it is easy to see that an individual investor that is not as familiar with the SEC and the website may not know of the existence of the other pages, and the SEC doesn't exactly make it easy to find on the new home page.
Yeah, my opinion of the redesign hasn't changed. There is some good stuff in sections, but the layout is clunky and anti-intuitive, with fewer flow between connected information - it is far too segregated and far too many additional menus involved.. I think it is harder to find what the general public is looking for now than it was before.
Those trades were most likely short covering. Shorting is not free, and the people that shorted those shares already made a lot of money on the recent decline. Although the stock is going to go to $0, they don't want to pay the borrowing fees in the meantime to make that little extra.
Volume is decreasing daily. Soon it will likely be just a few thousand shares a day, and then when the shares are cancelled, nothing.
Waiting for a run? From who? Idiots who can't read and somehow think the stock will have any value in a Chapter 7 liquidation? There are going to be a lot of sellers looking to bail out at any price before the stock gets cancelled and they lose everything. Many of them will be happy to take any price they can get above $0.
Something else to consider. A lot of shareholders were burned in the Redbox bankruptcy and learned their lesson there. They are highly unlikely to fall for the internet pumping and dumping a second time. They got fooled once into buying and holding Redbox waiting for that "run", but they won't get fooled again.
Yes, they can. But that is meaningless for the shareholders in regards to the value of the stock. The stock is going to zero, guaranteed. It will be cancelled under Chapter 7 with no payments to shareholders.
Even if any lawsuit against the Board is successful, it won't generate any funds for shareholders. The money would go towards making the creditors whole, and that is a massive nut to crack. The liquidation of the assets will bring pennies, and they need dollars to satisfy all of their liabilities and debt. Only after creditors receive 100% of what they are owed will shareholders get what is left, and that will not happen here. But even if it did and any lawsuit was successful and magically found enough money to pay off all the creditors in full AND provide additional money for shareholders, that money would be paid to shareholders as of the date of the malfeasance, not shareholders as of the final liquidation of the assets. In other words, it doesn't matter if a person owns the stock from this point forward or not. Buying the stock now would not get a person into the lawsuit - that has passed.
Except that Dog has been barking at that wicked lion for a very long time, long before it died. Even when the stupid hyenas laughed at him and not only said the Lion was the King, but would live forever.
Smart dog. Stupid hyenas have lost all their money. They should have listened to the dog all along.
No hope for the stock. It will be worthless.
The Company requested to the Court that its Bankruptcy be converted from Chapter 11 to Chapter 7, which the Judge indicated he would approve. Chapter 7 is automatic liquidation. The common shareholders are dead last in line for assets, and since there is ZERO chance of having enough assets to pay off the massive amount of liabilities and debt, there is no chance that shareholders will receive anything at the conclusion of the bankruptcy process.
COWI has made investors Hundredaires! If they are lucky that is, since the current market cap of the company is about $22,000. COWI is worth less than a new car! Someone holding 10% of the currently issued and outstanding would have stock worth about $2,200!
Who in their right mind actually thought this insolvent lying POS with a LONG history of multiple pump and dumps was actually real and could change the world without two nickels to rub together?
I don't know how they did it, but the SEC somehow was able to include even LESS information on the new home page than they did before. Even without the inclusion of the 3 giant rotating stock photos. It is, as you say, now requiring even more clicks to get somewhere useful than it did under the old design.
The site no longer even tries to be user friendly, especially for the individual investor. It now has a sterile and harsh industrial look I find very off-putting.
It ain't great. It is very much non-intuitive, which seems to be the exact opposite of what they say was their goal.
And what is especially frustrating is that IMO a lot of the redesign elements are better, but they are not only arranged wrong, but their labeling is crap. They dumbed it down with their wording, but not their use. It is a very poor compromise between the needs of professional users and the general public, and in the end it works well for neither one. It is really a mess.
I do have one nice thing to say about the redesign, though. I am thrilled I never have to see those same 3 rotating PC stock photos on the home page ever again, but each is seared into my brain. The Asian family riding bikes, the minority couple sitting down talking with (presumably) a financial advisor, and the oddest one, the two professional woman leaning over a cubical wall with one of them talking into a old cell phone like it is a walkie-talkie (push to talk is SO year 2000!). What the hell is that one about, and what did it ever have to do with the SEC?
The SEC prepared an E-mail notice entitled "Upcoming Changes to EDGAR Webpages on SEC.com" dated June 28th which gave subscribers details of the changes they would be making that weekend and where the rearranged pages would be found.
Sounds great, but they sent it later in the morning on Monday, July 1st. After the changes had already been made and after many users had already seen the new site and lost all their bookmarks.
Very (non) helpful.
And you would be wrong about that.
Some posters here actually have a brain and understand how stocks work. And what toxic death spiral convertibles do to a company, and what pump and dumps are.
COWI doesn't have long to live. Good riddance.
COWI is insolvent. They have NO MONEY, and are sliding into the expert market. The chances of them completing the audit, completing and filing the delinquent 10-K, then filing the delinquent 10-Q, all in the next 2 weeks, are damn slim. Especially since they have no money. They can't even afford to buy a cup of coffee, much less pay the auditors and their other professional service providers necessary to complete and file.
COWI is about to become completely and utterly worthless. Those that may have listened and won't get stuck holding a worthless and untradeable stock with a 100% loss won't think any of my FACTUAL posts were a waste of time, would they? Just those stupid and stubborn enough to not pay attention to the facts and are somehow thrilled to lose it all to Lloyd Spencer's lies and grifting.
Do you realize that COWI is about to be kicked to the Grey Market for lack of current information due to their extended delinquency with the SEC? In about 10 days to 2 weeks, COWI will essentially no longer be tradable, and everyone will be stuck with their stock regardless.
That should be fun, huh? Great investment decision.
I agree. I think Cohen has spoken to Kitty, but they are not working together. What would be the benefit to Cohen? The risk of being ensnared in Kitty's possible reporting and market manipulation issues would be infinitely higher than any long-term benefit he would obtain. Besides, their goals seem somewhat at odds, as Cohen is (usually) a long-term investor who actually gets in there and gets his hands dirty "fixing" companies. Kitty, on the other hand, is all about the short-term momo. If he actually had long-term investment aspirations, he wouldn't be dumping that much money into short-term options.
Kitty is nothing but a star-struck fanboy who seems to desperately want Cohen's attention and admiration. He definitely has the first, but is unlikely to get the second in any meaningful way.
Sure, feel free to donate more of your hard earned money to Lloyd and the toxic death spiral convertible funders. Surely they are more deserving of your cash than you are, right?
I have a policy not to come back and tell the fools who lost all their money on obvious scams like COWI "I told you so" after they get wiped out and the crooks have absconded with their money. But since you would like me hang around until the end, I will make an exception for you. I will certainly be here to remind you how stupid you were not only buying shares of this obviously worthless insolvent pump and dump in the first place, but then buying more when revocation by the SEC can come at any time, any day, without any warning. Be sure of it.
COWI's vast insolvency is unusual. It is not a common trait among penny stocks to be $25 million in debt with only $166k in assets. That is remarkably incompetent.
COWI IS DELINQUENT. Their extension periods ran out long ago. They only get 5 extra days for a 10-Q and 15 extra days for a 10-K. In both cases, they told the SEC they would definitely file their 10-Q and 10-K before the extension period ran out. They lied. But what else is new with Lloyd Spencer? The SEC is now revoking companies that are as little as 6 months from their last filed period. COWI hit the 6 month limit yesterday, which means the SEC can begin revocation proceedings against them at any time. Once they do, the stock will cease to trade and be revoked. Anyone dumb enough to be holding shares will lose 100% of what little they have left.
COWI's spin-off has not filed anything with the SEC to continue the registration process since January. My statement was factual and correct.
The stock has lost 99.99% of its value. Its current market cap is $21k, which is $21,000 more than it is worth.
It does, but even if he is communicating with Cohen, I doubt he is working with him per se, as I don't think the purchase of Chewy benefits Cohen in any way.
I think he is just more of a fanboy following in Cohen's footsteps.
But I do think Chewy is a much, much, MUCH better investment than GameStop is, but maybe not as good of a trade.
Buffett doesn't telegraph his purchases to his followers before filing the required regulatory paperwork. That would be illegal.
And that is where Kitty's perceived cleverness may land him in very hot water. HIs tweeting of the Chewy Dog to his followers after he bought the stock, but before he disclosed his greater than 5% position in a regulatory, is likely a violation and would be considered pumping.
Actually, there is no "standard form" for Schedule 13D or 13G. The SEC has a set form for pretty much everything else, but for some reason they don't have one for Schedule 13 filings. Instead, the Exchange Act (240.13d) details what needs to be included in the filing, but doesn't say you can't add other things. Therefore, as long as he included all the information required under the Exchange Act, which it appears he did, his inclusion of "I am not a cat" is not strictly prohibited.
He is pretty damn clever. But perhaps too clever for his own good.
After this stunt, the SEC may decide to make a standard form for those Schedules to prevent others from doing what he did in the future.
Facts are facts.
COWI is insolvent. FACT.
COWI is serious delinquent in their reporting obligations. FACT
COWI's purported spin-off has done nothing since January. FACT
If they don't file soon, which they won't since they have no money, they will be revoked and disappear forever. FACT
The "doom and gloom" is all factual. Too bad. People should have gotten some brains and not bought this very obvious pump and dump.
Yes, I said that.
"That acquisition would never have been necessary if they hadn't sold off Spirit in the first place".
The use of Boeing Wichita/Spirit has never been very efficient. For instance, the 737 fuselage is manufactured whole in Wichita, then wrapped in essentially saran wrap, loaded on LONG completely open flatbed rail cars, and moved via a very circuitous route by rail north and then west through Montana to Boeing's Renton plant. They don't arrive in ready to use condition, which requires a lot of reworking by Boeing and that is what led to the Alaska Air 737 Max blowout.
COWI is DEAD. The pump and dump has run its course and Lloyd and his cronies have moved on to their next scheme.
How is that not abundantly clear to everyone by now? They never filed their last 10-K or their 10-Q, and are soon to be a second 10-Q behind. That is the point that the SEC is now beginning to revoke issuers, and once that happens COWI will be gone forever.
And where are the spin-off shares? They filed their initial registration in January, and nothing since. The SEC will likely terminate that soon as well due to inaction.
This should not have been a surprised to anyone. COWI was a VERY obvious pump and dump that was completely insolvent. They were slinging complete BS about JV's and bogus technologies whose only purpose was to get suckers to buy so Lloyd and the toxic death spiral convertible holders could dump as many shares on them as possible before the company went under.
That acquisition would never have been necessary if they hadn't sold off Spirit in the first place. What a freaking disaster that has been. Boeing's decision to get rid of their component manufacturing in-house and delegate it to unrelated suppliers has been a major, if not THE MAJOR, component of their problems ever since.
Yes, but I think it has been scheduled for a while. I don't know what it will entail, but it will be interesting to see what they do to the public facing display for EDGAR, if anything.
EDGAR is rarely down for maintenance. In Canada, SEDAR is down for maintenance pretty much every weekend these days, which is too bad as the weekend is when a lot of individual investors want and need the access the most.
Wall Street Cop Finra Goes Quiet on the Beat as Its Caseload Plunges
https://finance.yahoo.com/news/wall-street-cop-finra-goes-103056104.html
(Bloomberg) -- Two days after Christmas, a prominent Wall Street regulator updated a database with news of interest to the industry: A $1.4 trillion brokerage had been slapped with one of the year’s biggest fines for allegedly losing track of almost a million trades.
But there was no press release when the Financial Industry Regulatory Authority hit LPL Financial Holdings Inc. with the $6 million penalty. Nor did Finra seek attention for its multimillion-dollar sanctions of Goldman Sachs Group Inc. and Barclays Plc months earlier.
The quiet end to those probes capped a year in which the number of enforcement actions brought by the brokerage industry’s self-funded regulator slid to the lowest level in its history. Total fines picked up last year but are down by about half since a peak in 2016. Meanwhile, Finra’s headcount and budget have expanded.
The declines are raising concerns that the watchdog isn’t policing firms with the same aggressive posture it adopted after the 2008 financial crisis and multibillion-dollar Ponzi scams by brokerage operators Bernie Madoff and Allen Stanford, both of which went undetected for years.
Finra rejects the idea that it has pulled back on enforcement. But some are raising the question: Will the regulator catch the industry’s next big fraud?
“Right now, there’s no big crisis going on,” said Brad Bennett, Finra’s enforcement director from 2011 to 2017. “The tide is in, but as sure as the sun rises in the east, the tide will go out. And people will be wondering: Where the hell was Finra?”
The changes at Finra have frustrated some enforcement staff, who have pushed the regulator to more aggressively pursue and promote cases, according to people familiar with the matter. In multiple instances in recent years, employees drafted press releases to promote cases, only for managers to spike their publication, the people said.
Last year, the regulator issued press releases on just 10 of 426 enforcement actions, compared with 63 in 2015. Finding details on cases like LPL’s can require digging into a cumbersome Finra database.
Finra says it hasn’t strayed from its mission.
“There is an important reason why there are fewer enforcement actions: Finra has reduced the number of bad actor firms and individuals over time,” Ray Pellecchia, a spokesperson for the regulator, wrote in a reply to Bloomberg’s questions. “Any suggestion that we have let up on our regulatory focus is just dead wrong.”
Finra said it has improved rules that keep bad actors from being brokers, leading many to operate in industries that it doesn’t regulate — like insurance. It prioritizes cases that involve repeat offenders and customer harm. And the regulator said it tries to address multiple matters in one enforcement action when appropriate, which tends to decrease the total number of actions.
On press releases, Pellecchia said issuing too many of them would dilute the impact of enforcement actions it wants to emphasize. Finra also publishes them in a monthly newsletter and two databases, he said.
A spokesperson for the SEC, which oversees Finra, declined to comment. The SEC’s enforcement numbers stayed relatively steady even as Finra’s fell.
Gary Carleton, a former senior counsel at Finra, said he has no reason to believe that there has been decline in financial crime, including in areas that Finra regulates. “To the contrary, with the growth of so many more financial platforms, the use of social media and direct messaging, there is far more opportunity for abuse that is harder to detect,” he said in an interview.
When asked about the drop-off in enforcement, Senator Elizabeth Warren said she planned to investigate.
“Finra’s job is to protect investors and hold big financial services firms like Goldman and Barclays publicly accountable when they don’t follow the rules – but they can’t do that if they take the cop off the brokerage beat,” Warren, a Massachusetts Democrat, said in an emailed statement to Bloomberg.
Finra was created in 2007 through a merger of self-regulatory organizations. It serves as a beat cop for brokerages and exchanges, helping to track stock and option trades in US markets. Each year, it feeds reams of tips on suspicious trades to the SEC.
The watchdog emerged as an influential force in the US effort to toughen regulation after the 2008 financial crisis. In addition to regularly fining major banks for misconduct, it played roles in probes of Wall Street spoofing and aided in the SEC investigation into hedge fund titan Steve Cohen.
But Finra’s hands-on, in-person and dogged examinations exasperated many brokers, according to two former board members.
“I felt that examiners came in with the idea that they were going to find violations, and it was just a question of how many,” Mark Cresap, a money manager in the Philadelphia area, said in an interview. His firm, Cresap Inc., manages about $1 billion in assets.
Examiners would spend months at a time at his firm, Cresap said. Finra, he said, was devoting too much time scrutinizing small, well-intentioned companies and not enough time looking at firms trying to skirt the rules.
Broker Joe Romano, president of Romano Brothers & Co., said Finra’s oversight often fixated on minor violations rather than major fraud.
Perceived overregulation has even driven one firm to challenge the constitutionality of parts of Finra. That case is making its way through the appeals process.
New Chief
In 2016, Robert Cook, a former white-collar law partner and SEC official, took the helm of Finra. The year before, Finra had a record high of 1,147 enforcement actions, based on the number of settlements and complaints filed by the regulator. Finra’s internal statistics on disciplinary actions show a higher count, though a similar decline over the years.
In one of his first major actions, Cook launched Finra360, described as a “comprehensive self-evaluation and organizational improvement initiative.” Finra needed to modernize, streamline and engage more with brokers, he said.
One of Romano’s messages — echoed by other brokers — was that Finra had to cut down on the number of enforcement cases and increase their quality. That feedback quickly made its way into Finra policy.
At an industry conference in New York in February 2018, Susan Schroeder, Cook’s then-head of enforcement, announced her priorities. She said they were driven by Finra360.
“Enforcement action, while a powerful tool in Finra’s toolbox, is not the right tool in all cases,” Schroeder said in her speech. “In fact, we must be thoughtful and intentional in order to use our finite enforcement resources in the matters where they are most needed.”
In 2018, Finra brought 557 enforcement actions, nearly half the 2015 mark. Company expulsions and broker suspensions decreased. Finra combined two enforcement divisions into one, explaining that it would lead to a “more effective and efficient” unit.
‘Precipitous Drop’
The changes in approach led to a “precipitous” drop in enforcement, said Justin Chretien, a senior official in Finra’s enforcement division from 2011 to 2021. The department was streamlined, and there was more transparency for brokers under investigation, he said, but productivity declined.
Schroeder, now a partner at the law firm WilmerHale, said in an email that she gave the speech to explain Finra’s approach to enforcement. For enforcement to be effective, “it has to be predictable, transparent and risk-based,” she said.
She added that Finra’s enforcement and surveillance units had “undergone significant changes in the past several years and during times of change, productivity often slows.”
Finra360 didn’t lead to a reduction in the number of enforcement actions, Finra’s Pellecchia said. Rather, it focused on making enforcement more efficient and consistent, he said.
Tim Scheve, a Finra board member and former CEO of Janney Montgomery Scott, said it didn’t feel like there was less enforcement. “Finra continues to be an aggressive regulator,” he said.
LPL Settlement
In LPL’s case, the lack of a press release was notable not only because of the fine’s amount but also due to the size of the company, which includes affiliated brokers that don’t usually do business under the firm’s banner.
The alleged lapses were also extensive. According to Finra, LPL failed to track hundreds of thousands trades its brokers made on behalf of clients – and neglected to check whether those investments were appropriate for them. For 2 million other transactions, LPL didn’t collect required data on investors, like their ages and investment needs, Finra said.
LPL’s $6.1 million payment to settle the probe amounted to about two days of the firm’s profit in 2023. An LPL representative didn’t respond to emailed requests for comment. The company didn’t admit to or deny the allegations. Neither did Goldman Sachs nor Barclays.
There’s value in shining a light on such cases, said US Representative Katie Porter, a California Democrat and law professor. When you don’t, “you are losing the deterrent effect,” she said.
Yes, I noticed that, too. I don't exactly know what it entails, but I would not be surprised if it involves further public pumping and dumping of the stock by certain different individuals and/or paid promoters online.
We all know that went on - hopefully the SEC will nail them down.
That is exactly what I expected to hear from the accused. Continue to deny, deny, deny and blame the invisible naked short sellers.....until the trial. I would give better than 2-1 odds they will eventually plead guilty when they hope most of the suckers who fell for their crap have forgotten.
SEC Charges Meta Materials and Former CEOs with Market Manipulation, Fraud and Other Violations
https://www.sec.gov/news/press-release/2024-77
FOR IMMEDIATE RELEASE
2024-77
Washington D.C., June 25, 2024 —
The Securities and Exchange Commission today filed charges against Meta Materials Inc. and its former CEOs, John Brda and George Palikaras. The company has agreed to settle the SEC’s charges in an administrative proceeding, while the SEC’s litigation against Brda and Palikaras will proceed in federal district court.
The SEC’s complaint against Brda and Palikaras alleges that, as a result of a concerted market manipulation scheme, Meta Materials, a Nevada corporation headquartered in Dartmouth, Nova Scotia, Canada, raised $137.5 million from investors in an at-the-market (ATM) offering in June 2021 immediately prior to the merger of Brda’s Torchlight Energy Resources Inc. and Palikaras’ Metamaterial Inc. that formed Meta Materials.
The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, alleges that Brda and Palikaras planned and conducted the manipulative scheme that included, among other things, issuing a preferred stock dividend immediately before the merger. The complaint alleges that Brda and Palikaras told certain investors and consultants—and hinted via social media—that the dividend would force short sellers to exit their positions and trigger a “short squeeze” that would artificially raise the price of the company’s common stock. The SEC further alleges that Brda and Palikaras also misrepresented the company’s efforts to sell its oil and gas assets and distribute proceeds to preferred stockholders, giving investors a false impression of the value of the dividend. While investors held or bought the company’s common stock to receive the dividend, the complaint alleges, the company was cashing in by selling $137.5 million in an ATM offering at prices that the company, Brda, and Palikaras knew were temporarily inflated by their manipulative scheme. “We have two days,” the complaint alleges Brda told Palikaras after the first day of the ATM offering, “to take advantage of the squeeze...”
“The conduct we allege was a sophisticated, yet brazen plan by a public company and its former CEOs to purposely mislead investors in the company’s stock,” said Eric Werner, Director of the SEC’s Fort Worth Regional Office. “This conduct is particularly alarming because it involves public company CEOs who were more concerned with ‘burning the shorts’ than creating long-term value for shareholders.”
The SEC’s complaint charges Brda and Palikaras with violating the antifraud and proxy disclosure provisions of the federal securities laws, and charges Brda with aiding and abetting Meta Materials’s violations of the reporting, internal accounting controls, and books and records provisions. The complaint seeks permanent injunctions, officer-and-director bars, and civil penalties from both defendants. The complaint also seeks disgorgement with pre-judgment interest from Brda.
The SEC also instituted a separate administrative proceeding against Meta Materials, entering a settled order finding that Meta Materials violated the antifraud, reporting, internal accounting controls, and books and records provisions of the federal securities laws. Without admitting or denying the findings, Meta Materials was ordered to cease and desist from violations of the relevant provisions of the federal securities laws and to pay a $1,000,000 penalty.
The SEC’s investigation was conducted by Christopher Rogers and Ty Martinez of the SEC’s Fort Worth Regional Office under the supervision of Samantha Martin, B. David Fraser, and Mr. Werner. The SEC’s litigation against Brda and Palikaras will be conducted by Patrick Disbennett and supervised by Keefe Bernstein.
A separate Commission investigation regarding subsequent events related to Meta Materials (MMTLP) remains ongoing. If you are an individual with information related to this investigation or any other related suspected fraud and you wish to contact the SEC staff, please submit a tip at SEC.gov.
So much for MMTLP naked short theory. According to the SEC, it was all made up as the most important component of the fraud.
SEC Charges Meta Materials and Former CEOs with Market Manipulation, Fraud and Other Violations
https://www.sec.gov/news/press-release/2024-77
Washington D.C., June 25, 2024 —
The Securities and Exchange Commission today filed charges against Meta Materials Inc. and its former CEOs, John Brda and George Palikaras. The company has agreed to settle the SEC’s charges in an administrative proceeding, while the SEC’s litigation against Brda and Palikaras will proceed in federal district court.
The SEC’s complaint against Brda and Palikaras alleges that, as a result of a concerted market manipulation scheme, Meta Materials, a Nevada corporation headquartered in Dartmouth, Nova Scotia, Canada, raised $137.5 million from investors in an at-the-market (ATM) offering in June 2021 immediately prior to the merger of Brda’s Torchlight Energy Resources Inc. and Palikaras’ Metamaterial Inc. that formed Meta Materials.
The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, alleges that Brda and Palikaras planned and conducted the manipulative scheme that included, among other things, issuing a preferred stock dividend immediately before the merger. The complaint alleges that Brda and Palikaras told certain investors and consultants—and hinted via social media—that the dividend would force short sellers to exit their positions and trigger a “short squeeze” that would artificially raise the price of the company’s common stock. The SEC further alleges that Brda and Palikaras also misrepresented the company’s efforts to sell its oil and gas assets and distribute proceeds to preferred stockholders, giving investors a false impression of the value of the dividend. While investors held or bought the company’s common stock to receive the dividend, the complaint alleges, the company was cashing in by selling $137.5 million in an ATM offering at prices that the company, Brda, and Palikaras knew were temporarily inflated by their manipulative scheme. “We have two days,” the complaint alleges Brda told Palikaras after the first day of the ATM offering, “to take advantage of the squeeze...”
“The conduct we allege was a sophisticated, yet brazen plan by a public company and its former CEOs to purposely mislead investors in the company’s stock,” said Eric Werner, Director of the SEC’s Fort Worth Regional Office. “This conduct is particularly alarming because it involves public company CEOs who were more concerned with ‘burning the shorts’ than creating long-term value for shareholders.”
The SEC’s complaint charges Brda and Palikaras with violating the antifraud and proxy disclosure provisions of the federal securities laws, and charges Brda with aiding and abetting Meta Materials’s violations of the reporting, internal accounting controls, and books and records provisions. The complaint seeks permanent injunctions, officer-and-director bars, and civil penalties from both defendants. The complaint also seeks disgorgement with pre-judgment interest from Brda.
The SEC also instituted a separate administrative proceeding against Meta Materials, entering a settled order finding that Meta Materials violated the antifraud, reporting, internal accounting controls, and books and records provisions of the federal securities laws. Without admitting or denying the findings, Meta Materials was ordered to cease and desist from violations of the relevant provisions of the federal securities laws and to pay a $1,000,000 penalty.
The SEC’s investigation was conducted by Christopher Rogers and Ty Martinez of the SEC’s Fort Worth Regional Office under the supervision of Samantha Martin, B. David Fraser, and Mr. Werner. The SEC’s litigation against Brda and Palikaras will be conducted by Patrick Disbennett and supervised by Keefe Bernstein.
A separate Commission investigation regarding subsequent events related to Meta Materials (MMTLP) remains ongoing. If you are an individual with information related to this investigation or any other related suspected fraud and you wish to contact the SEC staff, please submit a tip at SEC.gov.
https://www.sec.gov/files/litigation/complaints/2024/comp-pr2024-77.pdf
Lots of videos online of the Boathouse Amphicar trips around the Disney Springs Lake. It is a unique experience that I have never done myself, but wouldn't say no to.
SEC Charges Colorado Mining Company and its Executives with Fraud
https://www.sec.gov/litigation/litreleases/lr-26032
Western Sierra Resource Corporation, Roger Johnson, and Dennis Atkins
Securities and Exchange Commission v. Western Sierra Resource Corporation, Roger Johnson, and Dennis Atkins, No. 1:24-cv-01705 (D. Colo. filed June 18, 2024)
SEC Charges Colorado Mining Company and its Executives with Fraud
The Securities and Exchange Commission announced today that it filed charges against Colorado-based penny-stock issuer Western Sierra Resource Corporation, its Chief Executive Officer Roger Johnson, and its Chief Financial Officer Dennis Atkins for issuing false and misleading statements concerning Western Sierra's alleged purchase of gold mining claims worth billions of dollars.
The SEC's complaint alleges that for over two years, from June 2021 through at least October 2023, Western Sierra, Johnson, and Atkins made materially false and misleading statements concerning the acquisition of certain gold mining rights in multiple press releases; quarterly and annual submissions filed with the trading platform Over-the-Counter Markets; and on Western Sierra's website. According to the complaint, Western Sierra, through Johnson and Atkins, claimed it had paid $10 million for an interest in a company that purportedly owned more than 640 acres of Bureau of Land Management mining claims within the State of Nevada. In fact, the complaint alleges, Western Sierra did not pay $10 million for these purported mining claims and indeed did not own any mining claims at all.
The SEC's complaint, filed in federal district court in Denver, Colorado, charges Western Sierra, Johnson, and Atkins with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder. The SEC seeks permanent injunctive relief as well as civil penalties as to all defendants, and officer-and-director and penny-stock bars as to Johnson and Atkins.
The SEC's investigation was conducted by Abigail Edwards and supervised by Kimberly Frederick, Nicholas Heinke, and Jason Burt, all of the Denver Regional Office. William Connolly of the Enforcement Division's Office of Investigative and Market Analytics assisted with the investigation. The litigation will be led by Jodanna Haskins and supervised by Gregory Kasper, Mr. Heinke, and Mr. Burt.
https://www.sec.gov/files/litigation/complaints/2024/comp26032.pdf
SEC Charges Colorado Mining Company and its Executives with Fraud
https://www.sec.gov/litigation/litreleases/lr-26032
Western Sierra Resource Corporation, Roger Johnson, and Dennis Atkins
Securities and Exchange Commission v. Western Sierra Resource Corporation, Roger Johnson, and Dennis Atkins, No. 1:24-cv-01705 (D. Colo. filed June 18, 2024)
SEC Charges Colorado Mining Company and its Executives with Fraud
The Securities and Exchange Commission announced today that it filed charges against Colorado-based penny-stock issuer Western Sierra Resource Corporation, its Chief Executive Officer Roger Johnson, and its Chief Financial Officer Dennis Atkins for issuing false and misleading statements concerning Western Sierra's alleged purchase of gold mining claims worth billions of dollars.
The SEC's complaint alleges that for over two years, from June 2021 through at least October 2023, Western Sierra, Johnson, and Atkins made materially false and misleading statements concerning the acquisition of certain gold mining rights in multiple press releases; quarterly and annual submissions filed with the trading platform Over-the-Counter Markets; and on Western Sierra's website. According to the complaint, Western Sierra, through Johnson and Atkins, claimed it had paid $10 million for an interest in a company that purportedly owned more than 640 acres of Bureau of Land Management mining claims within the State of Nevada. In fact, the complaint alleges, Western Sierra did not pay $10 million for these purported mining claims and indeed did not own any mining claims at all.
The SEC's complaint, filed in federal district court in Denver, Colorado, charges Western Sierra, Johnson, and Atkins with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder. The SEC seeks permanent injunctive relief as well as civil penalties as to all defendants, and officer-and-director and penny-stock bars as to Johnson and Atkins.
The SEC's investigation was conducted by Abigail Edwards and supervised by Kimberly Frederick, Nicholas Heinke, and Jason Burt, all of the Denver Regional Office. William Connolly of the Enforcement Division's Office of Investigative and Market Analytics assisted with the investigation. The litigation will be led by Jodanna Haskins and supervised by Gregory Kasper, Mr. Heinke, and Mr. Burt.
https://www.sec.gov/files/litigation/complaints/2024/comp26032.pdf