On November 18, 2021 the The Securities and Exchange Commission (SEC) announced a large increase in enforcement actions compared to 2020. Cryptocurrency and SPAC were seen as emerging threats. For instance, the Commission notes that it charged a company for operating an unregistered online digital asset exchange, charged a crypto lending platform and top executives alleging $2 billion in fraud, and brought an action against a special purpose acquisition company and others for alleged misconduct in a SPAC transaction.
Rooting Out Misconduct in Crypto
- Charged entities and individuals with unregistered and/or fraudulent offerings of digital asset securities, including: fraud and unregistered offering charges against three individuals who founded and promoted digital asset companies; charges against an issuer and its founders for allegedly defrauding more than a thousand investors in an unregistered offering of digital asset securities; and charges against Ripple Labs and two of its executives alleging a $1.3 billion unregistered offering.
- Took action against other misconduct in the crypto market, including charging the operator of ICO listing website Coinschedule.com with unlawfully touting digital asset securities.
Following is a list of other enforcement actions:
- Involving securities using decentralized finance, or “DeFi,” technology;
- Charging securities law violations on the “dark web”;
- Involving Regulation Crowdfunding;
- A case charging General Electric with violating the antifraud, reporting, disclosure controls, and accounting controls provisions of the securities laws;
- Actions charging Kraft-Heinz and two former executives with a years-long expense management scheme;
- A case against TIAA-CREF’s subsidiary for alleged violations in retirement rollover recommendations;
- A case charging Robinhood Financial with misleading customers about its compensation for routing customer orders;
- An action charging three media companies with illegal offerings of stock and digital assets;
- Insider trading cases against a global IT manager at a pharmaceutical company and an investment bank compliance analyst;
- Charged corporate executives and other players, including the former CEO and Chairman of Wells Fargo and the former head of Wells Fargo’s Community Bank; the founder and former CEO of alternative fuel truck manufacturing company Nikola; the former CEO and CFO of WageWorks; and the former CEO and CFO of FTE Networks.
- Charged a CPA with failing to register his firm with the Public Company Accounting Oversight Board (PCAOB) and failures in auditing and reviewing the financial statements of a public company client.
- Charged two attorneys – one of whom was previously disbarred – for their roles in an alleged scheme to fraudulently facilitate the sale of millions of shares of microcap securities to retail investors.
- Barred a securities lawyer from practicing or appearing before the SEC.
- Charged investment advisers and their portfolio managers with misleading investors and others about their risk management practices over funds that lost more than $1 billion in two trading days.
- Charged a fund manager with fraudulently raising and misappropriating tens of millions of dollars in a private fund.
- Charged an unregistered investment adviser for allegedly defrauding a Puerto Rican municipality and misappropriating more than $7 million of taxpayer funds.
- Charged a rogue trader with causing millions of dollars of losses through unauthorized trading and bankrupting his broker-dealer firm.
- Charged a robo-adviser with breaching its fiduciary duties in connection with its investment of client assets into exchange-traded funds sponsored by its parent company.
- Charged an investment adviser for breaching its fiduciary duties in connection with its receipt of revenue sharing payments.
- Charged two individuals for alleged wash trading in the options of certain “meme stocks” in early 2021.
- Charged the co-founders of a San Francisco-based medical testing company for allegedly defrauding investors out of $60 million by falsely portraying the company as a successful start-up with a proven business model and strong prospects for future growth, and the former CEO of another Silicon Valley technology company for allegedly defrauding investors out of $80 million by falsely claiming strong and consistent growth.
- Obtained an asset freeze and other emergency relief in an enforcement action against a Los Angeles-based actor and his company in connection with an alleged $690 million Ponzi scheme.
- Filed an emergency action, and obtained a temporary restraining order and asset freeze against several defendants, in a case alleging a $110 million Ponzi scheme.
