by T. GormanPosted on Posted in SECActions

Telling the truth is key to the federal securities laws. Viewed in this context it is fundamental that  advisers, their owners and others are candid with clients. Indeed, advisers have a fiduciary duty to clients, the highest duty under the law. Accordingly, it is axiomatic that funds and their affiliates are obligated by tell the truth to clients. A recent case filed by the Commission illustrates the point.  SEC. v. Vukota Capital Management, LLC,  Civil Action No. 1:25 – cv – 02821 (D. Colo. Filed Sept. 9, 2025).

Named as defendants in this action are: 1) Vukota Capital,  an unregistered investment adviser founded and owned by Defendant Vukota;  2). VCM Global Asset Management LTD, an exempt reporting adviser, also founded by Mr. Vukota and owned by him; and 3)  Tomislav Vukota, a former resident of Colorado who owns the entities but is not registered as an adviser or in any capacity with the Commission.  He now resides in Nassau, the Bahamas.

Defendants engaged in three types of negligent conduct in the matters involved here. First, over a five – year period beginning in 2017, Defendants Vukota and VCM caused various private funds they advised to make short term loans to VCM at unfavorable rates. Indeed, the partnership agreements prohibited the rates being offered.

Second, in early February and March 2021, Mr. Vukota used VCM tried to  buy out four Private Funds.  This was attempted by sending buyout letters that failed to disclose certain conflicts the firm had as to such transactions. Stated differently, investors were never told about the undisclosed conflicts.

Third, over a period of six years, beginning in 2017, Defendants Vukota and VGAM made material misstatements in marketing and offering materials for the Vukota Multi – Strategy  Fund.  The materials used clamed that the fund was audited which it was not while misstating its filing status as an exempt reporting fund  — it was not. The complaint alleges violations of Securities Act Sections 17(a)(2) and 17(a)(3), and Advisers Act Sections 206(2)  and 206(4)-8. See  Lit. Rel. No. 26393 (Sept. 9, 2025).

 

by T. GormanPosted on Posted in SECActions

Last week the Commission filed three new actions.  Those cases centered on offering fraud cases.

Be careful this week,  be safe.

SEC Enforcement – Filed and Settled Actions

Statistics:  Last week the Commission initiated  3 new case civil enforcement actions including the seven new cases cited above. Each new article is highlighted below.

Insider trading:  SEC v. Squillaante,  Civil Action No. 25-cv-01457 (D. Conn. Filed Sept. 5, 2025) is an action which charges defendant with multiple counts of insider trading.  Specifically, Defendant Ryan Squillante, who was employed from May 2021 through December 2023 at an investment firm with trading on inside information  from his employer. In each instance he sold the stock short. The complaint alleges violations of Exchange Act Section 10(b) and Rule 10b-5 thereunder. The action is pending.  See  Lit. Reel. No. 26388 (Sept. 5, 2025).

Offering fraud:  SEC v. Guess,  Civil Action No. 25-civ-o1655 (D. Nev. Filed Sept. 4, 2025) is an action which names as defendants: Calvin Guess, Marcus Ligon – each a resident of Las Vegas — and their now defunct entity, 5 Fruits Enterprises LLC.  Beginning in 2021, and continuing for the next two years, Defendants sold interests in 5 Fruits to over 140 investors who were told that their money would be invested.  Those investments were supposedly made by trading botts who would make incredible investment returns. About $4.7 million was raised.  Most of the money was never invested while a small portion was used to make Ponzi type payments to other investors.  Defendants manufactured false statements for investors.  The complaint alleged violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5.  To resolve the matter each Defendant consented to the entry of permanent injunctions based on the Sections cited in the complaint.  Each Defendant will pay, jointly and severally, $1,156,166.13 in disgorgement plus $253,048.11 in prejudgment interest.  Defendant Guess will also pay $839,272.,95 in disgorgement plus $161,148.29 in prejudgment interest.  Mr. Ligon will pay $1,035,527.11 in disgorgement plus $198,081.95 in prejudgment interest.  Defendants Guess and Ligon are also prohibited from participation in securities offerings in the future. See Lit. Rel. No. 26390 (Sept. 5, 2025).

Offering fraud:  SEC v. Ellison-Meade,  No. 2:23-cv-00521 (C.D. Cal.) is a previously filed action which named as defendants Austin D. Ellison-Meade. He had previously been charged in a action centered on raising funds for an investment club he managed called Baucap.io.  The complaint claimed that over a period beginning in 2019 and continuing until 2021 Defendant raised about $2.8 million from about 31 individuals.  Investors were told that their money would be used to raise funds for engaging in algorithmic investments.  In fact, most of the investor funds were diverted to other uses.  The court recently entered a default judgment against Mr. Ellison-Meade. The judgment precludes future violations of Securities Act Section 17(a), Exchange Act Section 10(b) and Rule 10b-5, and Advisers Act Sections 206(1), (2),  and (4). The judgment also directs Defendant to pay disgorgement in the amount of $2,917,751.02, and prejudgment interest of $820,668.13 all of which is deemed satisfied by the restitution paid in the parallel criminal action.  See  Lit. Rel. No. 26389 (Sept. 5, 2025).

Offering fraud:  SEC v. Paramount Management Group, LLC,  Civil Action No. 5:25-cv-05038 (E.D. Pa. Filed Sept. 3, 2025).  Named as defendants in this action are:  Daryl E. Heller, Paramount Management Group, LLC and Prestige Investment Group, LLC. Mr. Heller is the founder and chairman of the board of directors of Paramount as well as Heller Capital Group LLC which is the majority owner of Paramount and Prestige.  Defendant Paramount Management LLC is a Pennsylvania firm.  Defendant Prestige Investor Group, is an LLC based in Pennsylvania.  Beginning in 2017, and continuing until June 2024, Defendants raised funds from over 2,700 investors who were convinced to purchase interests in what were effectively Ponzi schemes. Defendant Heller and his team convinced over 1,700 investors to purchase interests in what was  supposed to be  a chain of automatic teller machines or ATMs. The sales pitch focused on telling investors about what they called their “ATM Funds,” supposedly a chain of automatic teller machines. Investors were told there were at least 26 investment funds which threw off substantial amounts of money.  From 2017 through 2024 Defendants were able to operate the chain as if it  threw off millions of dollars. In addition, Defendant Heller misappropriated about $185 million. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. A parallel criminal action was filed by the U.S. Attorney’s Office for the Eastern District of Pennsylvania.  See  Lit. Rel. No. 26387 (September 3, 2025).

 Other Regulatory Actions

 ESMA

 Information:   The regulator is collecting input and comments to aid its effort to to simplify the reporting obligations.  Comments are currently being collected.

 Hong Kong

 Report:   The SFC-HKMA (Hong Kong Monetary ‘Authority) published a report, dated September 4, 2025, which surveyed the distribution of non-exchange traded investment products.  It shows record sales and levels of market participation for certain products during 2024.

 

 

Tagged with: , ,