This Week In Securities Litigation, Part I (Week of July 10, 2023)
Welcome back from the July 4 holiday. This report will update you on matters since shortly prior to the holiday until today. Because of its length it will be presented in two parts. Part I is below. Part II will be presented on Wednesday July 12, 2023.
Be careful; be safe this week.
SEC
Proposed rules: The Commission reopened the comment period on proposed rules related to reports on large security based swap positions, according to the release dated June 22, 2023 (here).
SEC Enforcement – Filed and Settled Actions
Statistics: Since June 16, 2023 the SEC has filed 18 civil injunctive actions and 4 administrative proceedings, excluding 12j and tag-along proceedings as well as those presenting conflicts for the author.
Manipulation: SEC v. DeFrancesco, Civil Action No. 23-Civ-00131 (S.D.N.Y.) is a previously filed action which named as defendants: Andrew DeFrancesco, a former stock broker turned investor; Marlio Mauricio Dias Cardona, a former director of Cool Holdings, Inc.; Carlos Felipe Rezk, also a former Director of Cool Holdings; and Nikola Faukovic, an assistant to Mr. DeFrancesco at a firm owned by his former wife, Defendant Catherine DeFrancesco. The complaint centered on a manipulation of Cool Holding’s shares by Mr. DeFrancesco and others in September 2018 for their benefit. The manipulation also ended an offering of shares about to be launched by Cool Holdings that would have diluted Mr. DeFrancesco’s control over the firm. The judgment as to Mr. DeFrancesco, enjoins future violations of Securities Act Sections 5 and 17(a) and Exchange Act Sections 10(b), 13(d) and 16(a). Defendant will pay disgorgement of $1,034,051.52, prejudgment interest of $242,018.97 and a civil penalty of $1,737,224.52. Defendant is also barred from serving as an officer or director of a public company. Note, the author represents the two former Cool Holdings directors in the on-going litigation. All other Defendants previously settled.
Manipulation: SEC v. Collins, Civil Action No. 4:23-cv-00676 (N.D. Tx. Filed June 30, 2023) is an action which names as defendants: Thomas Collins, sentenced to serve 41 months in prison for securities fraud in another matter; Patrick Thomas, sentenced to serve 18 months in prison for securities fraud in the same matter; Gary Kouletas, sentenced to serve 43 months in prison in the same case; Scott Levine, awaiting sentencing in the same case; and Brian Kingsfield, sentenced to serve 37 months in the same case. In this action Defendants are alleged to have profited from a fraudulent scheme yielding about $1.7 million. Defendants Collins and Thomas engaged a network of people to sell shares of Global Resource Energy, Inc., the distributor of a ready-to-drink hemp-infused cocktail called Hemp Hazed. Messrs. Collins and Thomas secretly obtained control of most of the outstanding shares which were restricted. An entity owned by Mr. Louletas was used to park the shares. Subsequently, the shares were sold to the public using sham consulting agreements to generate substantial profits. The complaint alleges violations of Securities Act Sections 17(a)(1) & (3) and Exchange Act Sections 10(b) and 15(a). The case is in litigation. In a separate proceeding Damon Surante, another sales person who worked for Defendants Collins and Thomas, consented to the entry of a cease-and-desist order based on Exchange Act Section 15(a) and was ordered to pay disgorgement, a civil penalty and, in addition, a penny stock bar was imposed and an industry bar. See Lit. Rel. No. 25761 (June 30, 2023).
Offering fraud: SEC v. Christensen, Civil Action No. 3:23-cv-00959 (D. Or. Filed June 30, 2023) is an action which names as defendants Robert Chrisensen, the founder of Foresee, Inc., and co-founder and partner of Commission PDX and Policy PDX and beneficial owner and controlling person of Innings 150; Anhony Matic, is the co-founder and a partner of Commission PDX and Policy PDX and benefidcial owner and controlling person of Innings 150; Foresee, Inc. is a company that issued promissory notes during the period of the case; Commission PDX, LLC, Policy PDX LLC, are beneficially owned and controlled by Messrs. Christensen and Matic; and Innings 150, LLC was beneficially owned and controlled by Defendants Christensen and Matic. Defendants Christensen and Maic initiated what appeared to be a simple business in the mid-west. They solicited investors to acquire promissory notes that paid interest at rates ranging from 9% to 15%. The idea was to invest the funds in real estate and pay returns to the investors. The business model was completely flawed. Defendant ended up using funds from other investor to make repayments on the notes which were securities. They also paid themselves from the investor funds. Essentially Defendants ended up operating a Ponzi scheme. 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.
Insider trading: SEC v Meadow, Civil Action No. 1:23-cv-05573 (S.D.N.Y. Filed June 29, 2023) is an action which names as defendants Jordan Meadow and Steven Teixeira, respectively, an employee of a brokerage firm and an employee of an international payment processing firm who serves as its Chief Compliance Officer. The action centers on insider trading in several stocks based on information Mr. Teixeira misappropriated from his romantic partner’s laptop while both worked from home during the COVID-19 pandemic. The romantic partner was an executive assistant at a New York based investment bank. The inside information was misappropriated from late 2020 through May 2022. It related to M&A deals for Domtar Corporation, Proofpoint Inc., Score Media and Gaming Inc, and VMWare, Inc. The trading profits for Mr. Teixeira exceeded $28,000. Mr. Teixeira shared the information with several friends. Mr. Meadow was tipped by Individual 1 and Mr. Teixeria. His trading profits from two stocks totaled $730,000. The complaint alleges violations of Exchange Act Section 10(b). The case is in litigation. The U.S. Attorney’s Office filed parallel criminal charges against Messrs. Meadow and Teixeira. The cases are pending.
Insider trading: SEC v. Dagar, Civil Action No. 1:23-cv-5564 (S.D.N.Y. Filed June 29, 2023) is an action which names as defendants: Amit Dagar and Atul Bhiwapurkar, respectively an employee of Pfizer Inc. and an engineer for a publicly traded computer drive manufacturer. The action centers on insider trading in the securities of Phizer in advance of a November announcement that its COVID -19 antiviral treatment significantly reduced hospitalization and death – it was a game changer. Mr. Dagar was a senior member of the team that collected the statistical information on the trials. He was blinded. Before the company announced the results, however, on November 5, 2021 he learned the results. Within hours he traded in Pfizer call options and tipped his friend, Mr. Bhiwapurkar who then traded. The firm’s stock price increased 11% on the announcement. Mr. Dager had a one day profit of $214,395; his friend had a one day profit of $60,300. An individual tipped by Mr. Bhiwapurkar had profits of $29,770. The complaint alleges violations of Exchange Act Section 10(b). The case is in litigation. A parallel action was filed by the Manhattan U.S. Attorney’s Office.
Insider trading: SEC v. Dupont, Civil Action No. 23 Civ. 5565 (S.D.N.Y. Filed June 29, 2023) is an action which names as defendants: Joseph Dupont, v.p. of business operations at Alexion Pharmaceuticals, Inc.; Shawn Cronin, a Sargent in the Dghton Police Department who later became chief; Stanley Kaplan, a medical doctor; Paul Feldman, also a medical doctor; and Jarett Mendoza, regional sales director at a medical supply company. The case centers on insider trading by Defendant in advance of the May 5, 2020 announcement of a tender offer for Alexion shares. Mr. Dupont a senior employee at Alexin, worked on the firm’s acquisition of Portola – the Alexion-Portola Deal. He tipped Mr. Cronin, one of his closest friends, who traded. Mr. Cronin, in turn tipped his friend, Mr. Kaplan, who then passed the information to a colleague, Mr. Feldman. Both traded. Mr. Cronin also tipped his close friend, Mr. Mendoza who traded. The complaint alleges violations of Exchange Act Sections 10(b) and 14(e). The case is in litigation.
Insider trading: SEC v. Garelick, Civil Action No. 23-CV-5567 (S.D.N.Y. Filed June 29, 2023) names as defendants: Bruce Garelick, a director of SPAC DWAC; Michael Shv Artsman, the owner of several businesses who took the Fifth Amendment in testimony; Rocket One Capital LLC, a venture capital firm owned by Michael Shvartsman; and Gerald Shv Artsman, the owner of a furniture store who also took the Fifth Amendment in testimony. The case centers on trading in the securities of Digital World Acquisition Corporation or SWAC by each Defendant. The SPAC was supposed to raise money to acquire another firm. Defendants Garelick and the Shvartsman brothers executed a confidentiality agreement that precluded trading on inside information and in the shares of the SPAC. Defendants Garelick and the Shvartsman brokers were given inside information stating that DWAC planned to pursue a merger with Trump Media and Technology Group Corp. While Defendant Garelick had a duty not to trade as the deal progressed, he repeatedly purchased shares. He also shared inside information on the deal progress with Trump Media, his employer, and Michael Shvartsman who also purchased SWAC securities on the basis of that information. In addition, Michael Shvartsman tipped his brother who also traded. Following the deal announcement Defendants sold their DWAC securities, realizing profits of $23 million. The case is in litigation. The U.S. Attorney for the Southern District of New York announced parallel charges against Messrs. Garelick and Shvartsmans. See Lit. Rel. No. 25760 (June 30, 2023).
False opinions: SEC v. Rubin, Civil Action No. 20-civ-10084 (S.D.NY.) is a previously filed action which named as defendants two attorneys, Richard Rubin and Thomas Craft, Jr. The complaint alleged that the two attorneys issued fraudulent legal opinions to facilitate the sale of shares of unregistered securities. Each attorney separately consented to the entry of permanent injunctions based on Section 17(a) of the Securities Act and Exchange Act Section 10(b). Penny stock bars were also imposed. Previously, Defendants had each pleaded guilty to one count of securities fraud in a parallel criminal case. Defendant Rubin was sentenced to one year of probation and ordered to forfeit $117,068.15 and was directed to pay a $1,000 penalty. Mr. Craft was sentenced to 4 months of home confinement and ordered to forfeit $55,000 and to perform 200 hours of community service. He also agreed to surrender his law license. See Lit. Rel. No. 25756 (June 27, 2023).
Financial fraud: SEC v. Casutto, Civil Action No. 2:23-cv-05104 (C.D. Cal. Filed June 27, 2023) is an action which names as defendants: Brian Casutto, a.v.p. of sales at MusclePherm, Inc.; Matthew Zucco, an analyst at the same firm; and Kevin Harris, CPA, was the CFO at the same firm. The firm materially overstated revenues by: 1) prematurely recognizing $9.2 million in revenue by booking sales at quarter end even though it did not ship the product; 2) recognized $12.8 million by recognizing revenue at the time of shipment and before delivery despite the terms of the contract that required delivery prior to revenue recognition; and 3) overstating revenues by $15.5 million by classifying credits the company granted to certain customers as expenses rather than reductions of revenue as required by GAAP. As a result of these practices the company financial statements were materially incorrect. Defendant Harris also failed to ensure that all perquisites were properly disclosed. The complaint alleges violations of Securities Act Sections 17(a)(1), (2) and (3), and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5), and 14(a). The case is in litigation. See Lit. Rel. No. 25757 (June 29, 2023).
Offering fraud: SEC v. Baston, Civil Action No. 23 Civ. 5347 (S.D.N.Y. Filed June 23, 2023) is an action which names as defendant William Baston a/k/a Chanon Gordon, a name he used to conceal his criminal background. Since 2018 Defendant has raised over $10 million from investors based on false representations about his business, Gordon Management Group. The funds were supposedly used to invest in real estate and pay substantial returns. Eventually Defendant began to run short of cash from making Ponzi type payments. The complaint alleges violations of Securities Act Section 10(b) and 17(a). The case is in litigation. A parallel criminal action was filed by the Manhattan U.S. Attorney’s Office. See Lit. Rel. No. 25759 (June 28, 2023).
Offering fraud: SEC v. Legend Venture Partners, LLC, 23 Civ. 5326 (S.D.N.Y. Filed June 22, 2023) is an action which names as defendant the firm, founded in 2021, which acts as the investment adviser for the Legend Funds which are not registered. Over a three-year period, beginning in 2019, Legend’s principals worked as sales agents for StraightPath, running boiler rooms used to sell interests in private pre-IPO funds. At about the same time, StraightPath’s principals in about February 2022 commenced operations. Legend was presented as a new division of StraightPath. See SEC v. StraightPath Venture Partners, LLC, 22 Civ. 3897 (S.D.N.Y Filed May 13, 2022). Investment advisers like Legend seek to make pre-IPO shares available. Legend’s business was to sell interests in a series of its Funds. From about February to October 2022 the firm raised over $35 million from 300 investors. The solicitations from Legend were based on misrepresentations regarding the fees charged and the profits made by those conducting the solicitations. The complaint alleges violations of Securities Act Section 17(a), Exchange Act Section 10(b) and Advisers Act Sections 206(1), 206(2), 206(3) and 206(4). The case is in litigation. The Commission obtained a preliminary injunction in this action. See Lit. Rel. No. 25758 (June 28, 2023).
The second portion of this article will be published on Wednesday, July 13, 2023
This Week In Securities Litigation, Part I (Week of July 10, 2023)
Welcome back from the July 4 holiday. This report will update you on matters since shortly prior to the holiday until today. Because of its length it will be presented in two parts. Part I is below. Part II will be presented on Wednesday July 12, 2023.
Be careful; be safe this week.
SEC
Proposed rules: The Commission reopened the comment period on proposed rules related to reports on large security based swap positions, according to the release dated June 22, 2023 (here).
SEC Enforcement – Filed and Settled Actions
Statistics: Since June 16, 2023 the SEC has filed 18 civil injunctive actions and 4 administrative proceedings, excluding 12j and tag-along proceedings as well as those presenting conflicts for the author.
Manipulation: SEC v. DeFrancesco, Civil Action No. 23-Civ-00131 (S.D.N.Y.) is a previously filed action which named as defendants: Andrew DeFrancesco, a former stock broker turned investor; Marlio Mauricio Dias Cardona, a former director of Cool Holdings, Inc.; Carlos Felipe Rezk, also a former Director of Cool Holdings; and Nikola Faukovic, an assistant to Mr. DeFrancesco at a firm owned by his former wife, Defendant Catherine DeFrancesco. The complaint centered on a manipulation of Cool Holding’s shares by Mr. DeFrancesco and others in September 2018 for their benefit. The manipulation also ended an offering of shares about to be launched by Cool Holdings that would have diluted Mr. DeFrancesco’s control over the firm. The judgment as to Mr. DeFrancesco, enjoins future violations of Securities Act Sections 5 and 17(a) and Exchange Act Sections 10(b), 13(d) and 16(a). Defendant will pay disgorgement of $1,034,051.52, prejudgment interest of $242,018.97 and a civil penalty of $1,737,224.52. Defendant is also barred from serving as an officer or director of a public company. Note, the author represents the two former Cool Holdings directors in the on-going litigation. All other Defendants previously settled.
Manipulation: SEC v. Collins, Civil Action No. 4:23-cv-00676 (N.D. Tx. Filed June 30, 2023) is an action which names as defendants: Thomas Collins, sentenced to serve 41 months in prison for securities fraud in another matter; Patrick Thomas, sentenced to serve 18 months in prison for securities fraud in the same matter; Gary Kouletas, sentenced to serve 43 months in prison in the same case; Scott Levine, awaiting sentencing in the same case; and Brian Kingsfield, sentenced to serve 37 months in the same case. In this action Defendants are alleged to have profited from a fraudulent scheme yielding about $1.7 million. Defendants Collins and Thomas engaged a network of people to sell shares of Global Resource Energy, Inc., the distributor of a ready-to-drink hemp-infused cocktail called Hemp Hazed. Messrs. Collins and Thomas secretly obtained control of most of the outstanding shares which were restricted. An entity owned by Mr. Louletas was used to park the shares. Subsequently, the shares were sold to the public using sham consulting agreements to generate substantial profits. The complaint alleges violations of Securities Act Sections 17(a)(1) & (3) and Exchange Act Sections 10(b) and 15(a). The case is in litigation. In a separate proceeding Damon Surante, another sales person who worked for Defendants Collins and Thomas, consented to the entry of a cease-and-desist order based on Exchange Act Section 15(a) and was ordered to pay disgorgement, a civil penalty and, in addition, a penny stock bar was imposed and an industry bar. See Lit. Rel. No. 25761 (June 30, 2023).
Offering fraud: SEC v. Christensen, Civil Action No. 3:23-cv-00959 (D. Or. Filed June 30, 2023) is an action which names as defendants Robert Chrisensen, the founder of Foresee, Inc., and co-founder and partner of Commission PDX and Policy PDX and beneficial owner and controlling person of Innings 150; Anhony Matic, is the co-founder and a partner of Commission PDX and Policy PDX and benefidcial owner and controlling person of Innings 150; Foresee, Inc. is a company that issued promissory notes during the period of the case; Commission PDX, LLC, Policy PDX LLC, are beneficially owned and controlled by Messrs. Christensen and Matic; and Innings 150, LLC was beneficially owned and controlled by Defendants Christensen and Matic. Defendants Christensen and Maic initiated what appeared to be a simple business in the mid-west. They solicited investors to acquire promissory notes that paid interest at rates ranging from 9% to 15%. The idea was to invest the funds in real estate and pay returns to the investors. The business model was completely flawed. Defendant ended up using funds from other investor to make repayments on the notes which were securities. They also paid themselves from the investor funds. Essentially Defendants ended up operating a Ponzi scheme. 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.
Insider trading: SEC v Meadow, Civil Action No. 1:23-cv-05573 (S.D.N.Y. Filed June 29, 2023) is an action which names as defendants Jordan Meadow and Steven Teixeira, respectively, an employee of a brokerage firm and an employee of an international payment processing firm who serves as its Chief Compliance Officer. The action centers on insider trading in several stocks based on information Mr. Teixeira misappropriated from his romantic partner’s laptop while both worked from home during the COVID-19 pandemic. The romantic partner was an executive assistant at a New York based investment bank. The inside information was misappropriated from late 2020 through May 2022. It related to M&A deals for Domtar Corporation, Proofpoint Inc., Score Media and Gaming Inc, and VMWare, Inc. The trading profits for Mr. Teixeira exceeded $28,000. Mr. Teixeira shared the information with several friends. Mr. Meadow was tipped by Individual 1 and Mr. Teixeria. His trading profits from two stocks totaled $730,000. The complaint alleges violations of Exchange Act Section 10(b). The case is in litigation. The U.S. Attorney’s Office filed parallel criminal charges against Messrs. Meadow and Teixeira. The cases are pending.
Insider trading: SEC v. Dagar, Civil Action No. 1:23-cv-5564 (S.D.N.Y. Filed June 29, 2023) is an action which names as defendants: Amit Dagar and Atul Bhiwapurkar, respectively an employee of Pfizer Inc. and an engineer for a publicly traded computer drive manufacturer. The action centers on insider trading in the securities of Phizer in advance of a November announcement that its COVID -19 antiviral treatment significantly reduced hospitalization and death – it was a game changer. Mr. Dagar was a senior member of the team that collected the statistical information on the trials. He was blinded. Before the company announced the results, however, on November 5, 2021 he learned the results. Within hours he traded in Pfizer call options and tipped his friend, Mr. Bhiwapurkar who then traded. The firm’s stock price increased 11% on the announcement. Mr. Dager had a one day profit of $214,395; his friend had a one day profit of $60,300. An individual tipped by Mr. Bhiwapurkar had profits of $29,770. The complaint alleges violations of Exchange Act Section 10(b). The case is in litigation. A parallel action was filed by the Manhattan U.S. Attorney’s Office.
Insider trading: SEC v. Dupont, Civil Action No. 23 Civ. 5565 (S.D.N.Y. Filed June 29, 2023) is an action which names as defendants: Joseph Dupont, v.p. of business operations at Alexion Pharmaceuticals, Inc.; Shawn Cronin, a Sargent in the Dghton Police Department who later became chief; Stanley Kaplan, a medical doctor; Paul Feldman, also a medical doctor; and Jarett Mendoza, regional sales director at a medical supply company. The case centers on insider trading by Defendant in advance of the May 5, 2020 announcement of a tender offer for Alexion shares. Mr. Dupont a senior employee at Alexin, worked on the firm’s acquisition of Portola – the Alexion-Portola Deal. He tipped Mr. Cronin, one of his closest friends, who traded. Mr. Cronin, in turn tipped his friend, Mr. Kaplan, who then passed the information to a colleague, Mr. Feldman. Both traded. Mr. Cronin also tipped his close friend, Mr. Mendoza who traded. The complaint alleges violations of Exchange Act Sections 10(b) and 14(e). The case is in litigation.
Insider trading: SEC v. Garelick, Civil Action No. 23-CV-5567 (S.D.N.Y. Filed June 29, 2023) names as defendants: Bruce Garelick, a director of SPAC DWAC; Michael Shv Artsman, the owner of several businesses who took the Fifth Amendment in testimony; Rocket One Capital LLC, a venture capital firm owned by Michael Shvartsman; and Gerald Shv Artsman, the owner of a furniture store who also took the Fifth Amendment in testimony. The case centers on trading in the securities of Digital World Acquisition Corporation or SWAC by each Defendant. The SPAC was supposed to raise money to acquire another firm. Defendants Garelick and the Shvartsman brothers executed a confidentiality agreement that precluded trading on inside information and in the shares of the SPAC. Defendants Garelick and the Shvartsman brokers were given inside information stating that DWAC planned to pursue a merger with Trump Media and Technology Group Corp. While Defendant Garelick had a duty not to trade as the deal progressed, he repeatedly purchased shares. He also shared inside information on the deal progress with Trump Media, his employer, and Michael Shvartsman who also purchased SWAC securities on the basis of that information. In addition, Michael Shvartsman tipped his brother who also traded. Following the deal announcement Defendants sold their DWAC securities, realizing profits of $23 million. The case is in litigation. The U.S. Attorney for the Southern District of New York announced parallel charges against Messrs. Garelick and Shvartsmans. See Lit. Rel. No. 25760 (June 30, 2023).
False opinions: SEC v. Rubin, Civil Action No. 20-civ-10084 (S.D.NY.) is a previously filed action which named as defendants two attorneys, Richard Rubin and Thomas Craft, Jr. The complaint alleged that the two attorneys issued fraudulent legal opinions to facilitate the sale of shares of unregistered securities. Each attorney separately consented to the entry of permanent injunctions based on Section 17(a) of the Securities Act and Exchange Act Section 10(b). Penny stock bars were also imposed. Previously, Defendants had each pleaded guilty to one count of securities fraud in a parallel criminal case. Defendant Rubin was sentenced to one year of probation and ordered to forfeit $117,068.15 and was directed to pay a $1,000 penalty. Mr. Craft was sentenced to 4 months of home confinement and ordered to forfeit $55,000 and to perform 200 hours of community service. He also agreed to surrender his law license. See Lit. Rel. No. 25756 (June 27, 2023).
Financial fraud: SEC v. Casutto, Civil Action No. 2:23-cv-05104 (C.D. Cal. Filed June 27, 2023) is an action which names as defendants: Brian Casutto, a.v.p. of sales at MusclePherm, Inc.; Matthew Zucco, an analyst at the same firm; and Kevin Harris, CPA, was the CFO at the same firm. The firm materially overstated revenues by: 1) prematurely recognizing $9.2 million in revenue by booking sales at quarter end even though it did not ship the product; 2) recognized $12.8 million by recognizing revenue at the time of shipment and before delivery despite the terms of the contract that required delivery prior to revenue recognition; and 3) overstating revenues by $15.5 million by classifying credits the company granted to certain customers as expenses rather than reductions of revenue as required by GAAP. As a result of these practices the company financial statements were materially incorrect. Defendant Harris also failed to ensure that all perquisites were properly disclosed. The complaint alleges violations of Securities Act Sections 17(a)(1), (2) and (3), and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5), and 14(a). The case is in litigation. See Lit. Rel. No. 25757 (June 29, 2023).
Offering fraud: SEC v. Baston, Civil Action No. 23 Civ. 5347 (S.D.N.Y. Filed June 23, 2023) is an action which names as defendant William Baston a/k/a Chanon Gordon, a name he used to conceal his criminal background. Since 2018 Defendant has raised over $10 million from investors based on false representations about his business, Gordon Management Group. The funds were supposedly used to invest in real estate and pay substantial returns. Eventually Defendant began to run short of cash from making Ponzi type payments. The complaint alleges violations of Securities Act Section 10(b) and 17(a). The case is in litigation. A parallel criminal action was filed by the Manhattan U.S. Attorney’s Office. See Lit. Rel. No. 25759 (June 28, 2023).
Offering fraud: SEC v. Legend Venture Partners, LLC, 23 Civ. 5326 (S.D.N.Y. Filed June 22, 2023) is an action which names as defendant the firm, founded in 2021, which acts as the investment adviser for the Legend Funds which are not registered. Over a three-year period, beginning in 2019, Legend’s principals worked as sales agents for StraightPath, running boiler rooms used to sell interests in private pre-IPO funds. At about the same time, StraightPath’s principals in about February 2022 commenced operations. Legend was presented as a new division of StraightPath. See SEC v. StraightPath Venture Partners, LLC, 22 Civ. 3897 (S.D.N.Y Filed May 13, 2022). Investment advisers like Legend seek to make pre-IPO shares available. Legend’s business was to sell interests in a series of its Funds. From about February to October 2022 the firm raised over $35 million from 300 investors. The solicitations from Legend were based on misrepresentations regarding the fees charged and the profits made by those conducting the solicitations. The complaint alleges violations of Securities Act Section 17(a), Exchange Act Section 10(b) and Advisers Act Sections 206(1), 206(2), 206(3) and 206(4). The case is in litigation. The Commission obtained a preliminary injunction in this action. See Lit. Rel. No. 25758 (June 28, 2023).
The second portion of this article will be published on Wednesday, July 13, 2023