by T. GormanPosted on Posted in SECActions

The Commission filed three new enforcement actions last week.  One centered on investment fraud, a second on misappropriation and a third on financial fraud.

Be careful this week, be safe.

SEC Enforcement – Filed and Settled Actions

Statistics:  Last week the Commission filed 3 new civil enforcement actions.

Offering fraud:  SEC v. Agridime, LLC,  Civil Action No. 4:23-cv-01224 (N.D. Tex.).  The case  named as defendants  Agridime LLC,  Jed Wood and Joshua Link.  The complaint alleged that defendants raised over $191 million over a two-year period beginning in January 2021.  Defendants sold investment contracts tied to cattle. Specifically, defendants promised to sell cattle to investors for a fixed price and repurchase them at a higher price a year later with a specific guaranteed profit. The promised profit ranged up to  a 32% increase.  In fact, a sufficient number of cattle were not purchased to fulfil the agreement.  In part Ponzi type payments were made to some investors. The case settled after the Court entered a temporary restraining order.  The final judgments enjoined defendants from future violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5.  The orders entered also prohibit Messrs. Link and Wood from acting as officers or directors or participating in the issuance, purchase or sale of  securities.  Mr. Wood was directed to pay disgorgement of $1,959,309.67, prejudgment interest of $373,676.49 and a civil penalty of $236,451.  Mr. Link was directed to pay disgorgement of $3,106,957.00 and a civil penalty of $236,451; and Agridimer was directed to pay disgorgement of $102,936,957.09 and prejudgment of interest of $17,310,965.32.  The disgorgement and prejudgment interest ordered as to Agridimer is deemed satisfied by the receiver’s  collection efforts.  See Lit. Rel. No. 26415 (Sept. 30, 2025).

Investment fraud:  SEC v. Prophecy Assent Management, LP,  Civil Action No. 3:25-cv-165058 (D. N.J. Filed Sept. 29, 2025) is an action which named as Defendants Prophecy Asset Management LP, CEO and CIO, Jeffrey Spotts, and its largest sub-advisor, Brian Kahn.  Over a 5 year period, beginning in 2014, Prophecy Asset raised over $500 from  hedge funds it advised. The complaint, however, claims that investors were deceived. Prophecy Asset and Defendant Spotts told investors that the Fund’s capital was allocated among dozens of sub-advisers who traded in liquid securities.  In fact, most of the funds’ capital went to Defendant Kahn, according to the complaint, who worked with Chief Compliance Officer John Hufhes to deceive the funds’ auditor and administrator through fabricated documents and also engaged in a series of sham transactions to cover-up the true financial condition of the funds. The complaint alleges violations of Securities Act Section 17(a), Exchange Act Section 10(b) and Rule 10b-5 and Investment Advisers Act Sections 206(1), 206(2) and 206(4) as well as Advisers Act Rules 206(4)-8(a)(2). A parallel action was filed by the U.S. Attorneys Office for the District of New Jersey,  See  Lit. Rel. No. 26414 (Sept. 29, 2025).

Fraudulent offerings: SEC v. Lopez,  Civil Action No. 1:25-cv-356 (S.D.Fla. Sept. 25, 2025). The action named as defendants Taino Lopez and Alexander Mehr, co-founders of Retail Ecommerce Venture LLC or REV, and its CFO , Maya Burkenroad for conducting a series of fraudulent offerings. The complaint claims that over a two year period, beginning in April 2020, Defendants raised about $112 million from the offerings. The primary business of  REV was supposedly purchasing distressed retail companies that had name recognition such as Dress Barn On Line, Franklin Mint Online, LLC and others. During the period Defendants sold securities with the stated purpose of raising capital to purchase the predecessor firm of the name brand entities and investors were assured that the companies had strong cash flow.  Investors were also told that the firms never failed to pay a single investor. In fact, none of the firms involved made money. Indeed, about $16.1 million of the funds raised were diverted to Defendants Lopez and Mehrs personal use. The complaint alleges violations of Securities Act Sections 17(a)(1) & (3) and Exchange Act Section 10(b) and Rule 10b-5. See  Lit. Rel. No. 26413 (Sept. 25, 2025).

Fraudulent offerings:  SEC v.  Azarmehr,  Civil Action No.  2:24-cv-00707 (D. Nev.) is an action which names as defendants Lixin Azarmehr, JL Real Estate Development Corporation,  Nevada Skilled Nursing Lender, LLC and Nevada Skilled Nursing Development, LLC who was previously charged with fraud by the Commission.  The complaint alleges that investors were assured  their funds would be transferred to Nevada Skilled Nursing Development, LLC and used solely for the construction of three skilled nursing facilities in the Las Vega metro areas. The representations false.  In fact the investor funds were diverted to other projects.  To resolve the matter, Defendants consented to the entry of a final judgment based on Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. The judgments also preclude Defendants from participating in any public offering constituting a qualified investment in an EB-5 immigrant Investment Program. It also directs Real Estate Development to pay $500,000 in disgorgement. Defendant Azarmehr was directed to pay a penalty of $75,000.  See,  Lit. Rel. No. 26412 (Sept. 25, 2025).

 

Other Regulatory Actions 

 Australia

 Paper:   The publication focuses on Advancing Australia’s Public Markets.  It provides an update on recent events.  The paper is as of September 22, 2025 (here).

 ESMA

 Paper: The European Securities and Markets Authority published a paper providing updated instructions for reporting weekly commodity derivative positions, dated Sept. 25 2024 (here).

 Hong Kong

 Remarks:   Kelvin Wong delivered remarks titled Financial Services Sector’s Celebration of the 76 celebration  of People’s Republic of China dated Sept. 29, 2025 (here).

 

Singapore

 

Remarks:   Chee Hong Tat, Minister for National Development and Deputy Chairman of the Monetary Authority of Singapore, delivered remarks at the WMI Global-Asia Family Office Summit, September 29, 2025 (here).     

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by T. GormanPosted on Posted in SECActions

The point of investing is to try and make additional money by investing the funds profitably. The crucial point for investors is thus the returns an investment strategy generates – no returns, no investors; big returns, lots of investors.

The point is illustrated by the Commission’s newest case involving a group of investors who continually placed their funds into two investment vehicles, one called Prophecy (really a group of funds) and the other called  Special Opportunities.  The two funds were operated by Prophecy Asset Management, LP, a New York based firm called PAM, and  individuals Jeffrey Spots and  Brian Kahn.

Defendants Spots and Hughes, along with PAM (previously a registered investment adviser) raised over $500 million from investors who were convinced to trust their funds to Defendants despite the fact that the two funds continued to lose money. The investments in the two funds created in excess of $15 million and incentive fees.

Defendants used what they claimed was a “first loss” business model. This model supposedly allocated Prophecy’s capital to dozens of sub-advisors.  Those advisers were required to trade in liquid securities and post cash collateral to absorb losses generated by the trading.

In reality, Defendants PAM, Spotts and Hughes caused the trading to be conducted in high risk investments for which they undertook little work. Defendants concealed these facts by fabricating documents which depicted successful trades. Those documents and so-called “fact sheets” were shown to investors. The documents depicted successful trades and due diligence to select the investments. All that work – reflected in the documents – supposedly generated success. Those strategies were supposedly augmented by other “trading strategies” shared with investors.  Thus, by the end of March 2020 investors were told there were profits for each quarter, not $350 million in losses, the true facts. Defendants had $15 million in fees charged for the trades.

The complaint alleges violations of Securities Act Section 17(a), Exchange Act Section 10(b) and Rule 10b-5, and Advisers Act Sections 206(1), (2), and (4) and Rule 206(4)-8. The U.S. Attorney’s Office for the District of New Jersey filed a parallel action as to Defendant Spotts.  See  Lit. Rel. No. 26414 (Sept. 29, 2025).