SEC Settles Insider Trading Charges Against Kris Chellam In Connection With The Galleon Funds

Posted on October 30, 2012 by BraunHagey & Borden

SEC v. Kris Chellam, Case No. 12-CIV-7983 (S.D.N.Y).  On October 26, 2012, the SEC announced settled insider trading charges against Silicon Valley executive Kris Chellam.  Chellam tipped convicted insider trader Raj Rajaratnam by telling him that Xilinx, Inc. would not meet its revenue projections.  Rajaratnam engaged in short selling based on the information and made more than $975,000 in illegal profits.  Chellam tipped Rajaratnam when he was invested in the Galleon funds and when he was in discussions about employment with Galleon.  Chellam was subsequently hired.  Continue reading →

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SEC Charges Former J. Crew Director Frank LoBue With Insider Trading

Posted on October 30, 2012 by BraunHagey & Borden

SEC v. Frank LoBue, Case No. 12 CIV 7944 (S.D.N.Y).  On October 25, 2012, the SEC announced insider trading charges against Frank LoBue, a former Director of Store Operations at J Crew.  LoBue regularly received confidential information about J. Crew’s “Stores” component, which accounted for about 70% of the company’s sales.  LoBue received information about the company’s sales and expenses that reflected that financial results were strong.  He purchased J. Crew stock based on the confidential information before the company issued a public earning’s release.  After releasing the results, J. Crew’s stock closed up more than 26%.  Continue reading →

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CFTC Obtains Order Requiring Joshua Russo To Pay More Than $1.8 Million To Settle Options Fraud

Posted on October 29, 2012 by BraunHagey & Borden

In the Matter of Joshua T.J. Russo, CFTC Docket No. 13-04.  On October 26, 2012, the CFTC announced it obtained an administrative order requiring Joshua Russo to pay restitution of $960,000, a civil monetary penalty of $645,000, and barring him from engaging in any commodity-related activity.  Without admitting or denying the allegations, Russo consented to the order finding that he fraudulently solicited a customer by telling the customer that he would be a general partner in a fictitious commodity pool.  Russo issued false statements in the form of fake audited financial statements and weekly spreadsheets that claimed to represent customer account values.  The reported values were grossly over-inflated.  In addition, Russo engaged in numerous unauthorized trades.  Russo has also been charged with fraud in a related criminal action.

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CFTC Obtains Default Order Requiring Nicholas Cosmo To Pay $240 Million

Posted on October 29, 2012 by BraunHagey & Borden

CFTC v. Nicholas Cosmo et al., Case No. 2:09-cv-00351-KDW-ARL (E.D.N.Y).  On October 25, 2012, the CFTC announced it obtained a default judgment against Nicholas Cosmo.  Cosmo had engaged in a scheme to solicit investors to invest in bridge loans.  Instead, he used investor money to trade commodity futures that resulted in millions of dollars in trading losses that were never disclosed to investors.  The default order requires Cosmo to pay a $240 million civil monetary penalty, imposes trading and registration bans, and bars Cosmo from engaging in any commodity futures trading activity.  In a related criminal case, Cosmo was sentenced to 300 months in prison and ordered to pay in excess of $179 million to investors.

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CFTC Orders Robert A. Christy And His Company To Pay $2.6 Million To Settle Forex Fraud

Posted on October 29, 2012 by BraunHagey & Borden

CFTC v. Crabapple Capital Group, LLC and Robert A Christy, Case No. 1:12-cv-1346-RWS (N.D. Ga.).  On October 23, 2012, the CFTC announced it obtained a settlement requiring Robert A. Christy and Crabapple Capital Group to pay more than $2.6 million in sanctions for forex fraud.  The order finds that defendants defrauded investors who invested in Crabapple to trade forex.  Crabapple provided clients with false statements that misrepresented the trading history and profits when, in reality, Crabapple suffered significant trading losses.  Defendants also misappropriated investor money and tried to hide their fraud by proving false information to the National Futures Association.  Without admitting or denying the allegations, Defendants consented to an order enjoining them from violating the anti-fraud provisions for the Commodity Exchange Act, prohibiting them from engaging in commodity trading activity or associating with entities registered with the CFTC, requiring restitution in the amount of $1,099,598 and civil monetary penalties in the amount of $1,541,882.

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CFTC Charges Recidivist Christopher Smithers With Fraud

Posted on October 25, 2012 by BraunHagey & Borden

CFTC v. Christopher Smithers., Case No. 9:12-cv-81165-KAM (S.D. Florida.).  On October 23, 2012, the CFTC announced fraud charges against Christopher Smithers.  The case concerns Smithers’s representations to customers that his commodity futures trading was profitable when in reality he had significant losses.  He also lied to futures commission merchants about the identity of the person who opened and controlled commodity trading accounts in order to conceal his trading activity because he was subject to court orders prohibiting him from trading commodity futures contracts.  Specifically, Smithers was enjoined from certain conduct in connection with two prior cases brought by the CFTC.  Smithers also misappropriated client funds that were given to him to purchase gold bullion and used the money to pay for personal expenses including commodity futures trading.  The CFTC seeks injunctive relief, disgorgement, civil monetary penalties and a trading suspension.

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CFTC Orders David Kaup And His Companies To Pay More Than $1.89 Million To Settle Fraud Charges

Posted on October 25, 2012 by BraunHagey & Borden

In the Matter of David Kaup, et al., CFTC Docket No. 13-03.  On October 23, 2012, the CFTC announced it issued an order settling fraud charges against David Kaup and his companies.  Kaup and his companies solicited investments from individuals by claiming a profitable trading history of 5% to 30% in profits and by providing false documents showing a successful forex trading history.  They also misappropriated customer funds to make payments to other customers and to pay for personal expenses.  Without admitting or denying the allegations, Kaup and his companies have settled with the CFTC by agreeing to an order requiring them to pay a $500,000 civil monetary penalty and restitution of $1,396,316.  The order also permanently prohibits Kaup and his companies from engaging in certain commodity-related activities, including trading, and from registering or seeking exemption from registration with the CFTC.  The order permanently prohibits them from committing further violations of anti-fraud provisions of the Commodity Exchange Act.

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SEC Charges James Mulholland, Jr. and Thomas Mulholland in Real Estate Offering Fraud

Posted on October 24, 2012 by BraunHagey & Borden

SEC v. James C. Mulholland, Jr. and Thomas Mulholland, Case No. 12-cv-14663 (E.D. Mich.).  On October 23, 2012, the SEC announced fraud charges against James Mulholland, Jr. and his brother Thomas Mulholland.  The case concerns the Mulhollands’ real estate business which bought and rented residential real estate.  The brothers raised money to fund their business from investors through demand notes.  Although their business had significant financial troubles, the Mulhollands continued to seek money from investors, raising about $2 million.  The brothers mislead investors by telling them that the business was profitable, that they would earn 7% on their investments, that the returns came from profits, and that the principal and interest were guaranteed.  The Mulhollands are charged with violating Sections 5(a), 5(c) and 17(a) of the Securities Act, Sections 10(b) and           15(a)(1) of the Exchange Act, and Rule 10b-5 thereunder.  The SEC seeks injunctive relief, civil monetary penalties, and disgorgement.

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CFTC Orders Morgan Stanley To Pay $200,000 For Failure To Supervise Customer Accounts

Posted on October 23, 2012 by BraunHagey & Borden

In the Matter of Morgan Stanley Smith Barney LLC, CFTC Docket No. 13-02.  On October 22, 2012, the CFTC announced it issued an order filing and settling charges that Morgan Stanley failed to diligently supervise the handling of customer accounts.  Morgan Stanley’s “Customer A” provided trust services for its clients.  Customer A accepted orders to trade commodity futures contracts on behalf of its own third-party client, accepted the third-party client’s money to place those trades, and effected the trades via a contract market on the third-party client’s behalf.  Continue reading →

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CFTC Charges David Nunn In Illegal Trading Scheme

Posted on October 23, 2012 by BraunHagey & Borden

CFTC v. David M. Nunn, Case No. 12-civ-7786 (S.D.N.Y.).  On October 18, 2012, the CFTC announced it filed charges against David M. Nunn, a former broker of ICE Futures U.S. Inc.  Dunn engaged in non-competitive and fictitious sales of coffee futures contracts.  There were more than 1300 trades involving more than $1.5 million.  The transactions were “wash sales,” which are fictitious sales or sales used to cause a price to be recorded that is not a bona fide price.  Nunn also made false statements to ICE staff which is registered with the CFTC.  The CFTC seeks injunctive relief, a trading suspension, a registration bar, and civil monetary penalties.

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