by T. GormanPosted on Posted in SECActions

Insider trading is well known as a violation of the federal securities laws. While many are not familiar with those statutes, insider trading has been discussed in films, news papers and other media, making it one of the more recognizable crimes. In addition, many companies have specific policies and procedures prohibiting the practice and the Commission has brought numerous cases, as has Department of Justice, based on insider trading. Yet it continues.

The Commission’s most recent case in the area centers on one family trading on inside information inside. SEC v. Perez, Civil Action No. 2:23-cv-08079 (C.D. Cal. Filed September 27, 2023). Named as defendants are: Marco Perez, an accounting manager from 2014 to 2021 at General Finance Corporation; Pedro Perez, Jr., an executive vice president of a privately held company and the brother of Marco; and Olivia Perez Durban, the sister of each Defendant.

In February 2021 Maro Perez learned that the world’s largest equipment rental company, United Rentals, Inc., was pursuing an acquisition of the storage business of his employer, General Finance. He used the information to trade despite the prohibition on such actions in the policies and procedures of his employer. Indeed, the General Counsel of the company had previously told him that all trades had to be pre-cleared. These were not.

Marco’s sister and brother followed, each trading in the securities of General fFnance. Following the deal announcement, the stock price increased 56%. Each Defendant sold the shares. The family had total profits of about $660,000. The complaint alleges violations of Exchange Act Section 10(b) and 14(e).

Each Defendant settled with the Commission. Marco Perez consented to the entry of a partial judgment enjoining him from future violations of the Sections cited in the complaint and agreeing to pay disgorgement, prejudgment interest and a penalty to be determined. The judgment also imposed a 5 year officer/director bar. Pedro Perez also consented to the entry of a permanent injunction based on the Sections cited in the compliant. He agreed to pay disgorgement and prejudgment interest of $141,251.79 and a civil penalty of $127,142.32. The judgement also imposed a five-year officer/director bar. Ms. Durbin consented to a similar injunction and agreed to pay disgorgement and prejudgment interest of $38,638.28 and a penalty of $34,867.17. The U.S. Attorney’s Office filed securities fraud charges against Marco Perez.

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by T. GormanPosted on Posted in SECActions

As the count down to the end of the government fiscal year nears an end, the Commission continues its race to file as many new enforcement cases as possible. Of course, in the immediate future piling up statistics may not be as big an accomplishment as in other years – a default looms on Saturday if a budget deal is not made. At the same time, of course, even if there is a default at some point Congress will again fund the Government and things will go on. At that point the question of how many cases were filed in the last fiscal year will be important as the new budget hearings begin.

While a large variety of cases are being filed as the deadline draws near, there appears to be a significant variety of actions being initiated. Some, of course, are in the typical categories that tend to dominate the statistics. For example, yesterday the agency brought another Ponzi scheme case crafted by a seemingly well-educated man residing in the suburbs of Cleveland, Ohio – SEC v. Motil, Civil Action No. 23-cv-1853 (N.D. Ohio. Filed September 25, 2023).

Named as defendants are Mathew Motil and three of his entities — North Shore Equity Sales, LLC, The Marie Paul Company and North Shore Equity Management, LLC. Defendant Matthew Motil is a principal of NS Sales and NS Management. He is also an Ohio-licensed engineer and claimed to be a real estate expert. In addition, he supposedly holds MBA, Ph.D and JD degrees.

Defendant Motile is alleged to have created a lucrative real estate investment scheme. He solicited investors by promising them short-term, low-risk and high-return promissory notes collateralized by residential real estate located throughout Ohio. A good example of how the plan worked involved the issuance of at least 20 investor promissory notes to cover over $1.3 million of investor capital. The notes were collateralized by a home acquired by Defendant Motil or one of his entities. The home had a value of $130,000. Ultimately Defendant Motile used investor funds to make over $3.7 million in Ponzi payments, spend over $1.6 million on personal expenses and divert millions of dollars in other investor funds to selected projects and his wife.

Over a period of about 4 years, beginning in October 2017, Defendant Motile used a number of his controlled entities, such as North Shore Equity Management, to raise over $11 million from 60 investors across the U.S. The scheme then collapsed, In March 2022 Mr. Motile filed for bankruptcy, listing the investors as creditors. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Section 10(b). The case is in litigation.

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