This Week In Securities Litigation (Week of July 28, 2025)
The Commission undertook a series of actions related to enforcement last week reflecting either new cases filed, or actions taken with respect to pending cases. The actions involved cases based on the following topics: acting as a broker without registration; conducting a Ponzi scheme; insider trading; financial fraud and misappropriation. In addition, foreign regulators participated in a number of initiatives as briefly sketched below.
Have a good week. Be careful, be safe.
SEC Enforcement – Filed and Settled Actions
Statistics: Last week the Commission filed 10 new civil enforcement actions and continued to settle others.
ˆUnregistered broker: SEC v. Old South Trading Co., LLC, Civil Action No. 6:25-cv-00334 (S.D. Car.) is an action which names as defendants the company, Brendan H. Church and Edwin Church. The complaint alleges that Brendan Church, along with his father Chuck and their firm, Old South Trading, raised about $25.8 million from approximately 100 investors through the sale of unregistered notes. The sales were effectuated by Defendants, none of whom were registered brokers. While in the beginning some shares previously sold were redeemed, by June 2022 those payments were halted. About 79 investors remained who were owed about $11.6 million. The complaint alleged violations of Securities Act Sections 5(a) and (c) and Exchange Act Section 15(a)(1). Defendants settled the proceedings, consenting to the entry of permanent injunctions based on the Sections cited in the complaint. In addition, Brendan Church and Chuck Church were barred from taking part in the offer or sale of any security except for their own account. Brendan Church was also ordered to pay a penalty of $300,000 while Chuck Church was directed to pay a penalty of $250,000 plus disgorgement of $15,358. See Lit. Rel. No. 26361 (July 22, 2025).
Ponzi scheme: SEC v. Frost, Civil Action No. 1:25-cv-03826 (N.D Ga. Filed July 10, 2025) is an action which names as defendants: Edwin Brant Frost IV and First Liberty Building & Loan LLC, a firm founded by Mr. Frost. The complaint alleges that over a period of about 11 years defendants operated a Ponzi scheme that defrauded about 300 investors of at least $140 million. Investors were told that their funds would be used for certain types of investments in various financial instruments. In fact, portions of the funds were misappropriated by defendants. The complaint alleges violations of Securities Act Section 17(a) and Exchange Section 10(b) and Rule 10b-5. Following a request for emergency relief by the Commission, Defendants resolved the matter, consenting to the entry of permanent injunctions based on the Sections cited in the complaint. Subsequently, In an entry dated July 11, 2025, the court granted each request for relief made by the Commission. See Rel. No. 26358 (July 22, 2025).
Insider trading: SEC v. Thompson, Civil Action No. 3:24-cv-00800 (E.D. Va.) is a previously filed action which names as defendant Robert Brian Thompson, a former banking supervisor and examiner at the Federal Reserve Bank of Richmond. The complaint alleges that Mr. Thompson traded in the shares of two banks under his supervision. The first was in November 2024. There Mr. Thompson learned that a bank under his supervision was about to make a favorable earnings announcement. Prior to the announcement he purchased $678,000 in bank stock. Later Defendant learned that another bank under his supervision was about to announce loses. Before the announcement he traded in shares of the bank and obtained $584,873 in trading profits. The complaint alleges violations of Exchange Act Section 10(b) and Rule 10b-5. To resolve the action Defendant consented to the entry of permanent injunctions based on the provisions cited in the complaint. The bifurcated judgments directed the payment of $67,750 in disgorgement and $67,750 in prejudgment interest which are deemed satisfied based on payments made in the parallel criminal action, U.S. v. Thompson, No. 3:24-cr-00164 (E.D. Va.). See Lit. Rel. No. 26356 (July 21, 2025).
Offering fraud: SEC v. Guess, Civil Action No. 8:24-cv-00172 (D. Neb.) is a previously filed action in which the court entered judgment against Defendant Jerry D. Guess by default. The complaint alleges that Defendant Guess, a convicted felon, made multiple misrepresentations to raise funds from at least 57 prospective investors in 12 states and one foreign country for the firm. That firm claimed to be a diversified entity involved in energy, health care, technology and real estate. While Defendants projected millions in revenue, in 2019 and 2022 the firm made little money except from the sale of 19 computers – about $14,654. The default judgment entered is based on Securities Act Sections 17(a)(1) & (3). It also directs the payment of a civil penalty in the amount of $15,000. See Lit. Rel. No. 26357 (July 22, 2025).
Ponzi scheme: SEC v. Lickiss, Jr., Civil Action No. 4:250-cv-000126 (N.D. Cal. Filed July 21, 2025). According to the complaint, Defendant Emmett Lickiss, Jr., sold interests in a Ponzi scheme over a period of six years to about 80 investors. While Defendant Edwin Emmett Lickiss, Jr. was at one time a registered representative, he was not at the time of the transactions here. He had been suspended by FINRA from September 1987 to July 2014. He was ultimately suspended by FINRA for failing to disclose certain tax liens. His sales pitch varied among investors, but many understood that their funds would be invested in high yield return instruments. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. The U.S. Attorney’s Office for the Northern District of California filled a parallel criminal action. See Lit. Rel. No. 26360 (July 21, 2025).
Insider trading: SEC v. Kashman, Civil Action No. 2:25-cv-0254 (D.Ariz. Filed July 21, 2025) is an action which names as defendant, Brian Kashman. The action here centers on the then potential acquisition of US Xpress Enterprises, Inc. by Knight-Swift Transportation Holdings, Inc., a trucking company based in Phoenix, Arizona. Defendant Kashman met in person with a friend employed by Knight-Swift and was told about what were then confidential negotiations for a deal. He was supposed to hold the information in confidence and not use it to trade. The next day Mr. Kashman sold $30,000 worth of shares of a mutual fund and, along with additional cash, purchased 18,200 shares of US Express at $1.67 per share. Following the deal announcement the share price increased by almost 300% to about $5.95 per share. The complaint alleged violations of Exchange Act Section 10(b) and Rule 10b-5. To resolve the matter Defendant consented to the entry of a permanent injunction based on the Section and Rule cited in the complaint. He also agreed to the entry of an order directing him to pay disgorgement of $77,723 plus prejudgment interest of $12,201 and a penalty of $77,723. The judgment is subject to court approval. See Lit. Rel. No. 26359 (July 22, 2025).
False statements: SEC v. Mathias, Civil Action No. 1:25-cv-02313 (D.D.C. Filed July 18, 2025). Defendants in this action are: Shahnawaz Mathias aka Shah Mathias, American Metro, Inc., Penndel Land Development Co. and HSRF Trust. Beginning in July 2020, and continuing until at least April 2024, Defendant Mathias used his firm, American Metro, to offer for sale its shares to over 150 investors. The offers were made through two other firms he controlled, Penndel Land Development and HSRF Trust. During the offering, American Metro is alleged to have made two false filings. The first claimed that a subsidiary of American Metro had acquired the rights to develop a property in San Berardino, California purchased for $540 million. A similar filing was subsequently made – a Form 8-K filing — falsely claiming that a Greek real-estate firm had acquired a Greek real-estate real estate holding company worth over $1 billion. The financing for the deal supposedly came in the form of about $950 billion from large financial institutions. The claims were false. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Sections 10(b) and Rule 10b-5 as well as Rules 12b-20, 13a-1 and 13a-11. See Lit. Rel. No. 26353 (July 21, 2025).
Financial fraud: SEC v. Hunsicker, Civil Action No. 1:25-cv-05897 (S.D.N.Y. Filed July 18, 2025). Named as defendant in the case is Christine M. Hunsicker. She was the co-founder, CEO and Chair of CaaStle, Inc. The company was a start-up that offered a new monetization model called “Clothing-as-a-Service” to the apparel industry. Supposedly, the firm began with rapid growth. Following a rebrand in 2018, the firm achieved profitability in December 2022. It was believed to be close to ready for an IPO. The growth was aided by Ms. Hunsicker, however. For each period Ms. Hunsicker took the financial statements and redid them, including the audit reports which were ultimately signed by her. Following the resignation of the firm’s long-time auditors, Ms. Hunsicker created her own audit reports. She falsified the numbers, audit opinion letters and notes, according to the complaint for the fiscal years ended 2022 and 2023. The scheme began to unravel in late 2024 when multiple investors reviewed CaaStle’s falsified 2023 Audit Report in Ms. Hunsicker’s office and noticed a missing page and several errors inconsistent with the document being presented as the final audit report. When investors reached out to the audit firm whose name had been forged onto the report, they were told the audit firm had not done work for CaaStle for a considerable period. Ms. Hunsicker was forced to resign from the firm’s board of directors on December 14, 2024. Nevertheless, she was able to circumvent restrictions imposed by the board for a period. For example, in the fall of 2024 she engaged in self-dealing transactions in which she sold about $10 million of her personal shares of CaaStle to existing investors that were not aware of her fraud. Ms. Hunsicker resigned her position as CEO on Marh 24 2024. At that point the company began notifying investors. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. The U.S. Attorney’s Office for the Southern District of New York filed parallel criminal charges. See Lit. Rel. No. 26352 (July 18, 2025).
Fraudulent trading: SEC v. Gu, Civil Action No. 1:21-cv-17578 (D.N.J.) is an action in which the complaint alleged that Defendant Suyun Gu, and others, engaged in fraudulent trading. Specifically, Defendant is alleged to have been one member of a group that traded in a fraudulent manner to deprive the exchanges of what are called liquidity rebates in the option markets paid to facilitate transactions in those venues. Previously, the court granted the Commission’s motion for summary judgment against Defendant Gu. Here the court entered a final judgment against Mr. Gu in the amount of $621,703 for disgorgement, $134,663 for prejudgment interest and $621,703 as a penalty. See Lit. Rel. No. 26355 (July 21, 2025).
Misappropriation: SEC v. D’Ambrosio, Civil Action No. 1:25-cv-05884 (S.D.N.Y. Filed July 17, 2025) is an action in which defendant Joseph J. D’ambrosio is alleged to have arranged a multi-year investment fraud through Hereford Holdings, LLC, an entity he created on behalf of family and friends. Rather than permit the entity to operate as intended, Defendant misappropriated the profits and furnished friends and family false reports. Eventually the fund had insufficient resources to pay investors for redemptions. Defendant then self-reported his fraud. The complaint alleged violations of Investment Act Sections 206(1), 206(2) and 206(4) along with Rule 206(4)-8. Defendant settled the action, consenting to the entry of permanent injunctions based on the provisions cited. The judgment provides that upon motion by the Commission the court will determine if it is appropriate to award disgorgement and/or a civil penalty. See Lit. Rel. No. 26354 (July 21, 2025).
Australia
Alert: The Australian Securities and Futures Commission issued a consumer alert. It warns about what it terms “pushy” sales tactics urging investors to make “quick superannuation switches, according to a release published July 3, 2025.
BaFin
Remarks: President Mark Branson of the European Federal Financial Supervisory Authority explained the predicate for BaFin to establish ten strategic objectives for years 2026 to 2029, identifying their key new points.
ESMA
Publication: The regulator published the latest edition of its newsleters on July 18, 2025.
Hong Kong
Appointment: The Securities and Futures Commission of Hong Kong welcomed the appointment of a new executive director on July 18, 2025.
Singapore
Remarks: Chia Der Jiun, Managing Director, Monetary Authority of Singapore, delivered remarks at the Media Conference on 15 July 2025.