This Week In Securities Litigation (Week of December 11, 2023)
Last week the Commission filed one new enforcement action. That case centered on an offering fraud directed by a securities law recidivist.
Be careful, be safe this week.
SEC Enforcement – Filed and Settled Actions
Statistics: This week the Commission filed 1 new civil injunctive action and no new administrative proceedings, excluding tag-along actions and those that present a conflict for the author.
Offering fraud: SEC v. Pirello, Jr., Civil Action NO. 1:23 -cv-08953 (E.D.N.Y. Filed December 6, 2023) is an action which names as defendants: Raymond J. Pirrello who previously settled insider trading charges with SEC and has been barred from the securities business; Robert Cassino, co-owner of Pre-IPO Marketing, branch office of Prior 2 IPO; Anthony Ditucci, formerly a registered representative; Joseph Rivera, owner of JL Rivera Enterprises; Prior 2 IPO Inc.; Late Stage Asset Management, LLC; Pre IPO Marketing Inc.; and JL Rivera Enterprises Ltd., a branch of Prior 2 IPO. Defendants created a network of unregistered sales agents to make on offerings of securities to investors that provided access to shares of pre IPO companies. Investors were told that the only fees were those charged post investment and IPO. In fact, this claim was false. Investors paid above market fees. Over a three-year period, beginning in March 2019 about $528 million was raised from investors. Defendants also concealed the identity of Mr. Pirello and violated the registration provisions of the federal securities laws. Mr. Pirello, in addition, acted as a broker despite being previously barred from the business. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a), and Exchange Act Sections 10(b), 15(a) and 15(b)(6)(B)(i). The case is in litigation. See Lit. Rel. No. 25907 (December 7, 2023).
Offering fraud: SEC v. CanaFarma Hemp Products, Corp., Civil Action No. 1:21-cv-8211 (S.D.N.Y.) is a previously filed action in which the Court entered final judgments against Defendants Frank Barone and Kirill Chumenko, both former Senior Vice Presidents of Sales & Marketing at CanaFarma Hemp. The judgment as to each precludes future violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and imposes an officer and director bar. The complaint alleged that Defendants engaged in a fraudulent offering which raised about $15 million from investors. The complaint also alleged that investors were told the company was fully integrated and processed hemp of its own. The claims were false. The complaint alleged violations of Securities Act Section 17(a) and Exchange Act Section 10(b). See Lit. Rel. No. 25906 (October 5, 2023).
Manipulation: SEC v. DeScala, Civil Action No. 1:14-cv-4346 (E.D.N.Y.) is a previously filed action which named as defendant Marc Wexler. The underlying complaint alleges that Defendant Wexler was involved with a scheme to manipulate the share price of CodeSmart Holdings, Inc. by actions such as flooding the market with shares. Mr. Wexler is also alleged to have dumped his own stock on the market while working with two brokers who were at the same time purchasing CodeSmart stock for their clients. Defendant Wexler is alleged to have made about $2 million from the scheme. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Sections 9(a) and 10(b). The final judgement enjoined Defendant Wexler from violating the provisions of the federal securities laws in the future cited in the complaint in the future. He was, in addition, ordered to pay disgorgement of $2,218,599 and prejudgment interest. The payments will be deemed satisfied by the restitution ordered in the parallel criminal proceeding, U.S. v. DiScala, No. 14 Cr. 399 (E.D.N.Y.). See Lit. Rel. No. 25905 (December 5, 2023).
ESMA
Initiative: The European Securities and Markets Authority or ESMA is initiating a sustainable framework, according to its co-chair Verena Ross. The purpose is to ensure consistent measures are taken to protect investors and focus on building and maintaining a sustainable finance roadmap, according to a release dated December 5, 2023 (here).
Hong Kong
Report: A report issued by the Hong Kong Securities and Futures Commission on December 7, 2023 highlights key regulatory work and market data for the quarter (here).
Singapore
Remarks: Ravi Menon, Managing Directors, Monetary Authority of Singapore, delivered remarks titled “Getting Transition Finance Right” on December 3, 2023 (here).