This Week In Securities Litigation (Week of December 5, 2022)
The FTX saga continued last week with the firm’s founder giving interviews while disregarding advice he apparently was given. While the interviews were being conducted, the CFTC was urging Congress to give it more authority over crypto assets. The SEC was also being named in a suit filed in New York for refusing to disclose its regulatory reform agenda on request of Virtu Financial, Inc. Finally, the agency did not file new enforcement actions last week although it did announce settlements in pending cases.
Be careful, be safe this week
Investor advisory committee: The committee is scheduled to discuss investor account statements, corporate tax transparency and single-stock ETFs on December 8, 2022 (here).
Whistleblowers: The Commission awarded $20 million to a whistleblower.
SEC Enforcement – Filed and settled actions
Last week the Commission filed no new civil injunctive actions and administrative proceedings, exclusive of 12j, default, conflicts (which are included in the tabulation of cases), tag-a-long and other similar proceedings.
Insider trading: SEC v. Yang, Civil Action No 20-cv-4427 (E.D.N.Y) is a previously filed action which named as defendants James Yang, a former senior index manager at a globally recognized index provider and Yuanbiao Chen, a sushi restaurant owner. The complaint claimed that between June and October 2019 Defendants repeatedly purchased call or put options of publicly traded companies hours before public announcements that those firms would be added to, or removed from, popular stock market indices. Mr. Yang obtained inside information from his employment in advance of the additions or deletions. Defendants had trading profits of $912,082. The Court entered a final judgments against each Defendant prohibiting future violations of Exchange Act Section 10(b). Mr. Chen was also ordered to pay a penalty of $246,000. In the parallel criminal case, filed in the Eastern District of New York, Mr. Yang was sentenced to time served followed by one year of supervised release, three month of home detention, 100 hours of community service, mandatory financial disclosures to the Department of Probation and a $100 special assessment. The Court also entered a forfeiture order against Defendant Yang for $912,082. See Lit. Rel. No. 25582 (November 30, 2022).
False statements: SEC v. Sadleir, Inc., Civil Action No. 1:20-cv-03997 (S.D.N.Y.) is a previously filed action which named as defendant William Sadleir, the former owner of a now defunct film distribution company. The complaint alleged that Defendant induced the BlackRock Multi-Sector Income Trust, a closed-ended management company, to invest about $75 million in Aviron Group LLC, a film distribution firm he owned. The funds were supposed to be used for the distribution of films. Defendant, however, diverted the funds to a sham entity and used fake documents to cover his misappropriation. In the parallel criminal case Mr. Sadleir pleaded guilty and was sentenced to serve 72 months in prison and directed to pay forfeiture of $31.6 million. U.S. v. Sadleir, No. 20-cr-0320 (S.D.N.Y Filed May 22, 2020). In this case the Court entered a final judgment to which Mr. Sadlier had previously consented, permanently enjoining him from future violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The injunction also precluded Defendant from participating in the offer or sale of any security except for his own account. In addition, it directs him to pay disgorgement of $13,834,239 and prejudgment interest of $3,979,140, all of which is deemed satisfied by the restitution order cited above. The Court also directed Defendant to forfeit his Tesla car. See Lit. Rel. No. 25581 (November 29, 2022).
Financial system: The Monetary Authority of Singapore published a Financial Stability Review on November 25, 2022, which analyzes the results of its assessment of Singapore’s financial system in 2022 (here).
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