As the year drew to a close the Commission continued to file enforcement actions. Specifically, the agency filed actions centered on a misappropriation, policies and procedures and an offering frauds.

SEC

Whistleblowers: The SEC awarded over $28 million to seven whistleblowers, accordingly to a December 22, 2023 release.

Be careful, be safe this week.

SEC Enforcement – Filed and Settled Actions

Statistics: This week the Commission filed 3 new civil injunctive actions and 2 new administrative proceedings, excluding tag-along actions and those that present a conflict for the author.

Misappropriation: In the Matter of Chingyuan “Gary” Chang, Adm. Proc. File No. 3-21820 (December 26, 2023) is a proceeding which names the registered investment adviser at a large financial institution as Respondent. The Order alleges that from September 2021 through June 2022, Respondent misappropriated about $58,560 from four customers and/or clients of the firm where he was employed. He did this largely through the unauthorized use of the Automated Clearing House disbursement. The Order alleges violations of Exchange Act Section 10(b) and Advisers Act Sections 206(a) and 206(2). To resolve the matter Respondent consented to the entry of a cease-and-desist order based on the Sections cited in the order. He is also barred from the securities business and from participating in any penny stock offering. In addition, Respondent will pay a penalty of $58,560.00.

Policy & procedures: In the Matter of OEP Capital Advisors, LP, Adm. Proc. File No. 3-21819 (December 26, 2023) names the registered investment adviser as Respondent. The Order alleges that over a three year period, beginning in 2019, the firm failed to effectively implement policies and procedures to prevent the misuse of material non-public information regarding mergers, although the firm had policies on the subject. Similarly, during the same period the firm’s policies and procedures also prohibited the use of Fund asset and securities holdings valuations other than as authorized by the firm’s valuation committee. Nevertheless, senior personnel repeatedly violated the policies by, among other things, sending certain communications to current investors and industry contacts. The Order alleges violations of Advisers Act Sections 204A and 206(4) and Rule 206(4)-7. To resolve the matter Respondent consented to the entry of a cease-and-desist order based on the Sections and Rule cited and to a censure. Respondent also agreed to pay a penalty of $4 million,

Offering fraud: SEC v. Fernandez, Civil Action No. 5:23-cv-00372 (N.D.W.Va. Filed December 21, 2023) is an action which names as defendant Diana Mae Fernandez, the founding member of Diana Mac K., LLC and Self-Made Success. Over a two-year period, beginning in 2018, she raised about $364,000 from investors. Investors were told that she was a successful businesswoman and would invest their funds in no-risk investments. To the contrary, she misappropriated their funds for herself. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The case is in litigation. See Lit. Rel. No. 25918 (December 28, 2023).

Offering fraud: SEC v. Perryman, Civil Action No. 1:230-cv-010985 (S.D.N.Y. Filed December 19, 2023) is an action which names as defendant Laura Tyler Perryman, the co-founder of Stimwave Technologies, Inc., a privately held medical device startup co-founded by Defendant. During a Series D funding round Ms. Perryman made false statements about the firm’s key product, a neurostimulation device system or PNS Device. Specifically, Ms. Perryman told investors the device functioned and had FDA approval. In fact, it was a sham and did not work. In November 2019 Ms. Perryman resigned as CEO of the company when her role in the transaction emerged. Subsequently, the company instituted a voluntary recall of the product. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The case is in litigation. See Lit. Rel. No. 25916 (December 19, 2023).

Offering fraud: SEC v. Banye, Civil Action No. 1:23-cv-10928 (S.D.N.Y. Filed December 18, 2023) is an action which names as defendants: Mmobuosi Odogwu Banye; Tingo Group, Inc; AgriFintech Holdings, Inc; and Tingo International Holdings, Inc. This action centers on an ongoing fraud being conducted by Defendant Banye through three entities, Tingo International Holdings, Agri-Fintech Holdings and Tingo Group. Since 2019 Defendants have booked billions of dollars of fictitious transactions through two Nigerian subsidiary companies. As a result, the Tingo Group’s FY 2022 Form 10-K for March 2023 reports cash and cash equivalents of $461.7 million. In fact, the account should have reflected a balance of about $50. The fraud traces back years to one based largely on Tingo Mobile, PLC, a private company Defendant Banye founded which was based on false financial documents and forged records. While that company claimed to be worth millions, in reality it had no meaningful operations in 2019 and a bank account with a balance of $15. In early 2023 Defendant Banye replicated the Tingo Mobile fraud with a new and fraudulent venture, Tingo Foods. While it was sold to Tingo Group for over $200 million, in fact it was largely worthless as a research analyst reported in a June 6, 2023. The complaint alleges violations of Securities Act Sections 17(a)(1) & (3) and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) and the related rules. The case is pending. See Lit. Rel. No. 25915 (December 19, 2023).

Offering fraud/manipulation: SEC v. Larmore, Civil Action No. 2:23-cv02470 (D.Az. Filed November 28, 2023) is an action which names as defendants: Jonathan Larmore and his wife controlled CSL Investments LLC which directly or indirectly controlled the AcciTerra companies; ArcoTerra Companies, LLC; ArciTerra Note Advisors II, LLC; ArciTerra Strategic Retail Advisors, LLC; and Cole Capital Funds, LLC whose CEO is Defendant Larmore. Beginning in at least January 2017 Defendant Larmore engaged in a scheme through which he misappropriated millions of dollars from the Funds by using Defendant ArciTerra Strategic Retail Advisors for his personal use. By September 2023 he supposedly abdicated direct control over ArciTerra but began implementing a new scheme centered on manipulating the shares of WeWork, Inc., an unrelated company. On November 3, 2023 Defendant Larmore circulated a statement about an imminent Cole Capital tender offer for We Work shares. Because he mistimed the announcement his options for WeWork shares expired shortly prior to the large price increase in WeWork shares. The complaint alleges violations of Advisers Act Sections 206(1) and 206(4) and Exchange Act Sections 10(b) and 14(e). See Lit. Rel. No. 25917 (December 26, 2023). The case is in litigation.

FinCEN

Rules: The regulator issue its final rule regarding access to beneficial ownership information, according to a release dated December 21, 2023 (here).

ESMA

Fund names: The European Securities and Market Authority issued a proposal to change and update the timeline for its guidance on funds’ names, as detailed in a release dated December 14, 2023 (here).

UK

Proposed rules: The Financial Conduct Authority or FCA issued proposed rules on December 20, 2023 designed to encourage issuers to register in the U.K. (here).