SEC Obtains Temporary Restraining Order against British Internet Investment Scheme

Posted on April 8, 2013 by BraunHagey & Borden

SEC v. Inter Reef, Ltd. dba Profitable Sunrise, Melland Company S.R.O., Color Shock S.R.O., Solutions Company S.R.O. and Fortuna-K S.R.O., Case No. 1:13-cv-1104
(D. Ga.).  On April 4, 2013, the SEC announced it filed an emergency enforcement action against Inter Reef Ltd.  According to the SEC, UK-based Inter Reef offered securities over the internet under the name of Profitable Sunrise.  Profitable Sunrise promised investors returns of between 1.6% and 2.7% per business day on funds invested in programs giving loans to businesses at higher interest rates.  In addition to promising undeliverable returns, Profitable Sunrise also misled investors by telling them that investments were insured by an investment bank.  The SEC charged Inter Reef with violating Sections 5(a),   5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5.  The SEC obtained a temporary restraining order and asset freeze.  The SEC seeks permanent injunctive relief, civil monetary penalties and disgorgement.

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The SEC Approves Use of Social Media for Company Disclosures if Investors Are Advised of Where to Look

Posted on April 4, 2013 by BraunHagey & Borden

A propos of my appearance on Bloomberg West TV, the SEC announced yesterday that companies may use social media for company announcements if investors are advised about which social media outlets will be used to convey the information.  The SEC’s press release is here.  Public companies have been wondering when the SEC would catch up with current trends and now the wait is over.

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SEC Regulation FD and Social Media

Posted on April 2, 2013 by BraunHagey & Borden

Yesterday, I was invited on Bloomberg TV to discuss whether disclosure of corporate information through social media outlets like Twitter and Facebook may violate Reg. FD.

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SEC Settles S.A.C. Capital Insider Trading Case for $600 Million

Posted on March 19, 2013 by BraunHagey & Borden

SEC v. CR Intrinsic Investors, LLC et al., Case No. 12 Civ. 8466 VM (S.D.N.Y.).  On March 18, 2013, the SEC announced it settled insider trading charges against CR Intrinsic Investors, an affiliate of S.A.C. Capital for more than $600 million.  The SEC charged CR Intrinsic with insider trading in November 2012, alleging that portfolio manager Mathew Martoma obtained inside information about a clinical trial from Dr. Sidney Gilman, who was selected by pharmaceutical companies Elan Corporation and Wyeth to present the final drug trial results to the public.  After receiving the tip, Martoma and CR Intrinsic caused several hedge funds to sell more than $960 million in Elan and Wyeth stock.  In an amended complaint filed March 15, 2013, the SEC added investment advisory firm S.A.C. Capital Advisors, LLC and hedge funds CR Intrinsic Investments, LLC, S.A.C. Capital Associates, LLC, S.A.C. International Equities, LLC, and S.A.C. Select Fund, LLC as relief defendants.  Without admitting or denying the charges, CR Intrinsic agreed to pay $274,972,541 in disgorgement, $51,802,381.22 in prejudgment interest, and a $274,972,541 penalty.  This is the largest financial penalty ever obtained by the SEC in an insider trading case.  The case against Martoma continues.

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SEC Obtains Asset Freeze Against Investment Adviser Gregg Caplitz Charged with Stealing Client Money

Posted on March 19, 2013 by BraunHagey & Borden

SEC v. Gregg D. Caplitz, et al., Case No. 1:13-cv-10612 MLW (D. Mass.).  On March 18, 2013, the SEC announced it obtained an asset freeze against investment adviser Gregg D. Caplitz.  The SEC alleges that Caplitz and Insight Onsite Strategic Management raised more than $1 million from clients.  Instead of using investor money to buy shares in a hedge fund or to manage or develop a hedge fund as promised, Caplitz transferred control of client money a friend and others.  The investor money was then used to pay for personal expenses.  Caplitz also obtained funds from a real estate investment trust (“REIT”) by falsely claiming that a hedge fund he operated was interested in making an investment in that trust.  The REIT gave Caplitz money so he could conduct due diligence before making a $5 million investment that never materialized.  The SEC charged Caplitz and Insight Onsite Strategic Management with violating Section 10(b) of the Exchange Act and Rule 10b-5, Section 17(a) of the Securities Act, and Sections 206(1) and 206(2) of the Investment Advisers Act.  The SEC seeks a injunctive relief, disgorgement, and civil monetary penalties.

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SEC Files Settled Fraud Action against the State of Illinois for Misleading Pension Disclosures

Posted on March 12, 2013 by BraunHagey & Borden

In the Matter of State of Illinois, Admin. Proc. File No. 3-15237.  On March 11, 2013, the SEC announced it issued a settled cease-and-desist order against the State of Illinois.  This is the second time the SEC has charged a state with violating the federal securities laws in their public pension disclosures.  The SEC charged the State of New Jersey in 2010.   Without admitting or denying the allegations, Illinois consented to the SEC’s order.  The order finds that Illinois established a 50-year pension contribution schedule in the Illinois Pension Funding Act that was enacted in 1994.  The schedule, however, did not adequately fund both the cost of benefits accrued in a current year and the payment to amortize the plans’ unfunded actuarial liability.  Continue reading →

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SEC Obtains Emergency Order Halting Alleged Investment Scheme by John Rohner

Posted on March 11, 2013 by BraunHagey & Borden

SEC v. Inteligentry, Ltd., PlasmERG, Inc., PTP Licensing, Ltd. and John P. Rohner, Case No. 2:13-cv-00344 GMN (D. Nev.).  On March 8, 2013, the SEC announced it obtained an emergency order halting an alleged investment scheme.  The SEC alleged that John P. Rohner and his companies Inteligentry, Ltd., PlasmERG, Inc. and PTP Licensing, Ltd., solicited investors by claiming that they have developed, tested and patented an operational “plasma engine” fueled by inexpensive noble gases (like helium).  The Defendants told investors that the engine dot not pollute and can generate electricity in homes, businesses, boats, and airplanes.  Continue reading →

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SEC Charges Attorney Brian Reiss with Fraud for Legal Opinion Letters

Posted on March 8, 2013 by BraunHagey & Borden

SEC v. Brian R. Reiss, Case No. 13-cv-1537 (S.D.N.Y.).  On March 7, 2013, the SEC announced fraud charges against California attorney Brian Reiss for issuing legal opinion letters without any basis.  A legal opinion letter is one provided to transfer agents so that holders of restricted stock can remove the restricted legend and sell the stock in the public markets.  Transfer agents generally require a legal opinion letter that sets forth the basis for lifting the restriction on the stock.  According to the SEC, Brian Reiss created “144letters.com” to promote his legal opinion letter business.  He offered volume discounts to his customers.  Continue reading →

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SEC Charges Robert Crane with Market Manipulation of Penny Stocks

Posted on March 8, 2013 by BraunHagey & Borden

SEC v. Robert Crane, Case No. 1:13-cv-00261 CMH (E.D. Va.).  On March 7, 2013, the SEC announced a settled fraud action against Robert Crane for manipulating the market for certain penny stocks.  The SEC alleges that Crane executed six wash sales to create a false appearance of a real market for two securities.  Crane would order stock over the internet to trade in different accounts at different brokerage firms.  However, there was never a change in beneficial ownership of the stock.  Crane did not make any money from his conduct.  Without admitting or denying the charges, Crane consented to entry of a final judgment enjoining him from violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.  Crane also agreed to a penny stock bar against. He did not pay any financial penalties due to his sworn representations concerning his financial condition.

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SEC Charges Stock Promoter Colin McCabe with Fraud

Posted on March 7, 2013 by BraunHagey & Borden

SEC v. Colin McCabe (D/B/A Elite Stock Report, The Stock Profiteer, and Resource Stock Advisor), Case No. 2:13-cv-00161 (D. Utah).  On March 4, 2013, the SEC announced fraud charges against Canadian stock promoter Colin McCabe.  According to the SEC, McCabe made false statements about how he selected the stocks he was recommending; did not tell his newsletter subscribers that he was being paid large sums of money to recommend certain stocks; and made untrue statements about the assets of one of the issuers he recommended.  McCabe claimed that his publications were the result of extensive research conducted by researchers with relevant expertise.  Continue reading →

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