Through the holidays the filing of new enforcement actions slowed. Similarly, the filing of new rule making projects slowed. With the end of that period look for increased enforcement activities and a flurry of rule making activity on existing and new projects.

Be careful, be safe this week – all the best in the new year.

SEC Enforcement – Filed and Settled Actions

Statistics: This week the Commission filed 2 new civil injunctive actions and no new administrative proceedings, excluding tag-along actions and those that present a conflict for the author.

Offering fraud: SEC v. Carmovale, Civil Action No. 1:21-cvf-11938 (D.Mass.) is a previously filed action which named as defendants Armar Bahadoorsingh and Vincenzo Carnovale. Defendants were alleged to have fraudulently used a number of microcap issuer to defraud unsuspecting investors. Defendants were alleged to have misled brokers and others into believing shares of a number of microcap firms could be traded when in fact they could not. On March 31, 2023, the District Court in Boston, Massachusetts entered a final judgment against defendant Bahadoorsingh by default. The judgment precludes future violations of Securities Act Sections 5 and 17(a) and Exchange Act ection 10(b). Defendant was also ordered to pay disgorgement of $231,020, prejudgment interest of $28,416 and a penalty of $207,183. See Lit. Rel. No. 25685 (March 31, 2023).

Insider trading: SEC v. Giguiere, Civil Action No. 1:21-cv-05923 (S.D.N.Y. ) is an action which named as defendant Gannon Giguiere. He was charged with insider trading in advance of an announcement by Long Blockchain Company, that it was going to move from its existing beverage business to blockchain technology. Defendant Giguiere is allaged to have traded in the shares shortly after being tipped by a close friend who furnished the information about the deal based on a tip from an insider who furnished it to him in violation of a confidentially agreement. The announcement of this information caused the stock price to spike up dramatically. The complaint alleges that within hours of the deal announcement he sold his shares for a profit of over $160,000. To resolve the matter, Defendant Giruiere consented to the entry of a permanent injunction prohibiting future violations of Exchange Act Section 10(b) and agreed to pay a penalty of $325,000. See Lit. Rel. No. 25920 (January 3, 2024).

Offering fraud: SEC v. Kapoor, Civil Action No. 1:23-cv-24903 (S.D. Fla. Filed December 27, 2023) is an action which names defendants: Rishi Kapoor, the CEO of Location Ventures until he was removed from that position in August 2023 and as the manager of URBIN; Location Ventures, LLC; URBIN, LLC and other affiliates. Location Ventures purportedly invested in real estate; URBIN claimed to invest in certain specialized real estate projects. Investors were told that Mr. Kapoor and his partners made a $13 million investment in the ventures. He used a plethora of entities to conceal the claimed investment. Potential investors were given budgets for various entities that were false. He also told investors that their money was segregated and not comingled. Both claims were false. As investor fund were shuffled among a long list of entities, the funds were comingled and Mr. Kapoor misappropriated part of the money. Eventually, the Location Ventures and URBIN projects stalled from a lack of funds. About $93 million had been raised from approximately 50 investors over a five-year period beginning in January 2018. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Sections 10(b) and 20(a). The case is in litigation. See Lit. Rel. No. 25921 (January 3, 2024).

FinCEN

Registration: The Financial Crimes Network or FinCEN announced in January 1, 2024 that existing firms must register with the agency within one year and newly formed firms within 90. The reports need only be amended update or correct information in the future (here).