This is the week of the “final Judgement” – that is, all of the litigation releases announced this week were for a final judgment entered in an enforcement action except for one case which was discussed in an earlier post. The final judgments announced this week are:

Aiding & abetting: SEC v. Knox, Case No. 1:18-cv-1258 (D. Mass.). The action named as defendants: Roger Knox, Wintercap SA, Michael Gastauer, WB21 US Inc., Silverton SA Inc., C Capital Corp., Wintercap SA Inc. and B2 Cap Inc. The judgement was entered as to Relief Defendant. It orders the payment of disgorgement in the amount of $3,316,305 and prejudgment interest of $1,347,326. The complaint alleged that Defendant Michael Gastauer, and the six U.S. based entities he controlled, with aiding and abetting a microcap fraud orchestrated by U.K. citizen, Defendant Gastauer. Defendants helped Mr. Knox and Wintercap SA firms evade the U.S. securities laws. The court granted the Commission’s motion for summary judgment. See Lit. Rel. No. 26241 (Feb. 6, 2025).

Insider trading: SEC v. Poerico, Civil Action No. 2:24-cv-00700 (W.D. Pa.) is an action that alleged Defendant Frank T. Poerico, Jr. engaged in insider trading in the securities of Dick’s Sporting Goods Inc. Defendant is alleged to have misappropriated inside information from a firm employee. The illegal trading resulted in profits of over $800,000. Defendant consented to the entry of a final judgment based on Exchange Act Section 10(b). He will pay disgorgement and prejudgment interest of $823,367. A parallel criminal case was also filed. U.S. v. Poerio, 2:24-cr-0010 (W.D. Pa.). See Lit. Rel. No. 26240 (Feb. 6, 2025).

Cherry picking: SEC v. Susoeff, Civil Action No. 2:23-cv-00173 (D.Nev.) is an action which named as defendants Steven Susoeff and Steve Susoef, LLC. The action centered on a cherry-picking scheme. The judgment is based on Securities Act Sections 17(a)(1) & (3), Exchange Act Section 10(b) and Advisers Act Sections 206(1) and 206(2). Defendant Susoeff agreed to pay disgorgement of $54,232, prejudgment interest of $11,695 and a penalty of $144,566. See Lit. Rel. No. 26239 (Feb. 5, 2025).

False statements: SEC v. Laura, Civil Action No. 1:18-cv-05075 (E.D.N.Y.) is an action that names as defendants Joseph Laura and Anthony Sichenzio. The complaint alleged that from 2013 through 2017 Defendants defrauded about 80 investors through the sale of securities in a company that falsely claimed to have exclusive rights to a crude oil processing technology. The judgment, based on Securities Act Section 17(a) and Exchange Act Sections 10(b) and 15(a), requires the payment of $3,431,860 in disgorgement, $1,732,128 in prejudgment interest and a penalty of $292,016 as to Mr. Laura. Mr. Sichenzio was directed to pay disgorgement of $1,629,369, prejudgment interest of $822,375 and a penalty of $165,689. See Lit. Rel. No. 26238 (Feb. 5, 2025).

Insider trading: SEC v. Wong, Civil Action No. 1:24-cv-04231 (S.D.N.Y.) is an action which names Andre Wong as a defendant. He is alleged to have traded in the securities of NeoPhotonics Corp. while in possession of inside information – that is, while having information that his then employer, Lumentum Holdings, Inc., had agreed to acquire NeoPhortonics. The case was resolved with a consent to the entry of a permanent injunction based on Exchange Act Section 10(b) and the payment of disgorgement in the amount of $62,574, prejudgment interest of $12,924 and a penalty of $3,861. See Lit. Rel. No. 26237 (Feb. 4, 2025).

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Inside information is something that many tend to think of only in the classic insider trading model — participants in a merger or other non-public corporate transaction trading in the company shares prior to the deal announcement. Most do not think about the reverse of such a transaction such as “follow on transaction.” Yet it is essentially the same – trading with material, non-public inside information to garner what are riskless profits. For example, when a firm conducts a follow-on offering, the share price goes down because the addition of more shares to the market dilutes the share price – the share price will drop. The Commission’s latest “inside information” case is built on such transactions. SEC v. Lowe, Civil Action No. 2:25-cv-00260 (E.D.N.Y. Filed Jan 15, 2025).

Named as defendants in this action are a number of individuals and entities: John Lowe, Jr., JJL Capital LLC, Great South Bay Capital, LLC, Randy Grewal, Kierland Capital, LLC Richard Ringel, and David Cooper. The scheme began in 2018 and continued through March 2024. In the scheme Defendant Cooper and Representative A provided Defendants Lowe and/or Ringel with inside information. Defendant Cooper, a registered representative at a broker-dealer, provided Mr. Lowe or Mr. Ringel, with material non-public information concerned the timing and/or price of numerous follow-on offerings of public company stock prior the transaction announcement.

Mr. Lowe also provided information about the timing and/or price of follow-on offerings to Defendant Grewal. He in turn shorted the stock of companies involved before the information was disclosed. Similarly, Defendant Copper and Representative A received material, non-public information about such offerings from employees at underwriting firms that engaged the brokerage firm to be part of a group or selling syndicate that underwriters partnered with to sell allocations of shares of in follow-on offerings. In exchange Defendants Lowe and Ringel agreed to buy shares of stock in the offerings, generating sales credits that the underwriters paid to the brokerage firm which paid Mr. Copper and Representative A. They in turn provided the information to Defendants Lowe and/or Ringel which was prohibited by the broker’s controls.

Overall, Defendant Lowe and his two controlled firms traded through Defendants JJL and Great South Bay, selling short in advance of at least 200 offerings. The trading generated profits of at least $900,000. Defendant Grewal and his associated entity sold short in advance of over 90 offerings, earning at least $140,000. Defendant Ringel and his associated entity and another firm sold short in advance of over 300 offerings, yielding at least $1,500,000 in profits. The brokerage firm earned about $1 million in sale credits. Mr. Cooper received a portion of the compensation. Total illegal profits for the group exceeded $3 million. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). See Lit. Rel. No. 26236 (Feb. 3, 2025).

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