by T. GormanPosted on Posted in SECActions

Investment advisers have become a primary focus of Commission enforcement actions in recent years. The trend began several years ago and continues. Now each year cases involving investment advisers are one of the largest categories of cases brought by the Commission each year. The two cases discussed below – each recently filed – are examples of this trend.

SEC v. Goodman, Civil Action No. 21-cv-00365 (D. Minn. Filed Feb. 8, 2021) is an action which named as a defendant Isaiah Goodman. Becoming Financial, LLC, his firm, was a Minnesota registered investment adviser. Over a two-year period, beginning in the fall of 2018, the advisor informed clients that their funds would be invested in securities and mutual funds. The investments would be conservative. They would be made for the long term.

Over the period Mr. Goodman and his firm raised about $2.25 million from at least 20 advisory clients. Rather than invest the funds as promised, Defendant misappropriate significant portions of the capital raised. Portions were also used to make Ponzi like payments to certain investors. To conceal their wrongful conduct, Defendants furnished investors with false account statements. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The case is pending. See Lit. Rel. No. 25026 (February 9, 2021).

SEC v. Moleski, Civil Action No. 2:21-cv-01065 (C.D. CA. Filed February 5, 2021) is an action which names as defendants: Stephen Scott Moleski, David Michael and Erik C. Jones. A series of entities controlled by various Defendants were named as relief defendants.

Over a two-year period, beginning in June 2018, the individual Defendants promoted and solicited investments in the private funds they controlled. In doing this, Defendants made a series of misrepresentations. Those included false claims that: Investor funds would be put into high grade investments; the investment objective was “phenomenal returns. . .;” a full time “licensed” broker would monitor the investments daily; investors would achieve financial freedom; and that “WE TREAT YOUR MONEY LIKE IT’S OUR OWN!”

Defendants also solicited individuals to purchase securities. Two securities offerings were made. Over the course of the offerings Defendants collectively charged the investor over $400,000 in commissions. Yet no Defendant was a registered broker-dealer; the securities were not registered. The complaint alleges violations of Securities Act Section 5(a), 5(c) and 17(a), Exchange Act Sections 10(b) and 15(a)(1) and Advisers Act Sections 206(1), 206(2), and 206(4). The case is pending. See Lit. Rel. No. 25025 (February 5, 2021).

Tagged with: ,

by T. GormanPosted on Posted in SECActions

Insider trading has long been a key focus of the Commission’s enforcement program. In recent months interest seems to have shifted to offering fraud cases and those involving microcap securities. Yet Commission’s most recent insider trading cases is classic, almost — a former corporate board member and then consultant who worked on a lost acquisition target charged with insider trading by the Commission and DOJ. SEC v. Ahn, Civil Action No. 1:21-cv-10203 (D. Mass. Filed Feb. 5, 2021).

Mark Ahn, Defendant, was a member of the board of director of Abeona Therapeutics, Inc. In that role he helped the firm identify prospective business opportunities. He was subject to standard confidentiality provision.

In early 2017 Mr. Ahn became a consultant to the firm. His consulting agreement required that all material information he obtained from the firm be maintained as confidential. By May 2017 he was participating in weekly meetings at the firm, discussing business opportunities. One of the opportunities under consideration was publicly traded Dimension Therapeutics, Inc, a Massachusetts based pharmaceutical company.

The next month Mr. Ahn’s firm made an offer. Dimensions was interested. Talks continued. After a second offer Mr. Ahn began purchasing Dimensions stock. The company also entertained other offers. The stock price increased.

On August 17, 2017 Abeona submitted what it called the best and final offer. On August 25, 2017 Dimension announced that it had accepted an offer but not the one of Abeona but of another bidder. The firm’s share price spiked up, rising 162%. Several days later Mr. Ahn sold his shares for a profit of $48,874. The complaint alleges violations of Exchange Act Section 10(b). The case is pending. See Lit. Rel. No. 25024 (Feb. 5, 2021). The U.S. Attorney’s Office for the District of Massachusetts filed parallel criminal charges.

Tagged with: ,