This Week In Securities Litigation (Week of September 29, 2025)
The Commission filed three new actions last week. One centered on an account take over, a second on free riding and a third on false statements. In addition, the agency announced the settlement of several cases including one that was filed in 2001.
Be careful this week, be safe.
SEC Enforcement – Filed and Settled Actions
Statistics: Last week the Commission filed 3 new civil enforcement actions.
Offering fraud: SEC v. Lopez, Civil Action No. 1:25-cv-24356 (S.D. Fla.). Named as defendants in this case are Taino Loopez and Alexander Mehr. The two men were co-founders of Retail Ecommerce Ventures LLC. Also named as a defendant is the former Chief Operating Officer of the firm, Maya Burkenroad. The firm’s primary business was the acquisition of companies with brand name recognition. Over a period of about two years Messrs. Lopez and Mehr acquired a series of retail bands. Those included Pier I Imports Online, Inc., Dress Barn Online, LLC, Linens N’ Things Online, LLC, and RadioShack Online, LLC. To acquire these and other firms, the complaint claims that Defendants sold securities in the form of unsecured notes. Investors were promised up to 25% annual returns as well as equity plus a monthly preferential dividend as high as 2.083%. The purpose of the offerings was supposedly raising capital to acquire the predecessor entity with the brand name and sufficient operating capital to revive each firm. Defendants Loopez and Mehr, however, made material misstatements in connection with the offerings used to acquire the name-brand entities. In addition, about $5.9 million in investor funds was transferred directly between portfolio companies. Those actions were contrary to the written and oral representations made to each investor. About the same amount of cash that is claimed to have been distributed to investors was actually used for Ponzi-like payments funded by the other investors. Defendants are also alleged to have misappropriated about $16.1 million for personal use. The complaint charges Defendants Lopez and Mehr with violations of Securities Act Section 17(a)(1) & (3) and Exchange Act Section 10(b) and Rule 10b-5. Defendant Burkenroad is charged with aiding and abetting the violations of Messrs. Lopez and Mehrs of Securities Act Section 17(a)(2) and Exchange Act Section 10(b) and Rule b-5(b). See Lit. Rel. No. 26413 (Sept. 25, 2025).
Offering fraud: SEC v. Azarmehr, Civil Action No. 2:24-cv-00707 (D. Nev.) is an action which names as defendants: Lixin Azarmehr, JL, a California attorney who has been the CEO of JL REDC and has an ownership interest in it; JL Real Estate Development Corp., a real estate developer in California and Nevada; Nevada Skilled Nursing Lender, LLC, issuer of securities in this matter; and Nevada Skilled Nursing Development, LLC., recipient of investor funds in this action. Defendants Azarmehr and Nevada Skilled Nursing Lender are charged with having promised investors their money would be transferred to Nevada Skilled Nursing Development LLC and used solely for the financing and construction of three skilled nursing facilities. The investor funds were not used as promised. Rather, the funds were used for other facilities. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. Defendants consented to the entry of injunctions under each provision. In addition, they consented to the entry of permanent injunctions precluding them from participating in the offer or sale of any security qualifying under the commercial enterprise provision of the U.S. EB-5 program. The judgment ordered JL Real Estate Development to pay $500,000 in disgorgement, $200,000 in prejudgment interest and a civil penalty of $500,000. Defendant Azarmehr was ordered to pay a penalty of $75,000. See Lit. Rel. No. 26412 (Sept. 2025).
Offering fraud: SEC v. Hudson, Civil Action No. 3:25-cv-08106 (N.D. Cal. Filed Sept. 2, 2025). Named as defendant in the action is Matthew Derrick Hudson. He is the founder of Canadian private technology company Invenia Technical Computing company. The complaint alleges that about $120 million was fraudulently raised by Mr. Hudson for the private company.The funds were raised through solicitations that were initiated in October 2020. At that point, Mr. Hudson began raising capital from investors. Investors were told about the financial condition of the company, its performance and other metrics. Those solicited were provided with lists of investors, pertinent board resolutions and closing documents. Two rounds of solicitations were conducted. The solicitations and materials were not authorized and riddled with incorrect information. Indeed, one of the signatures on the closing documents had been forged. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. See Lit. Rel. No. 26411 (Sept. 24, 2025).
Account takeover scheme: SEC v. Kushnarev, Civil Action No. 1:25-cv-05412 (N.D. Ga. Filed Sept. 22, 2025) is an action which names as defendants Dmitrii Yeevgenyevich Kushnarey, a Russian national, and a series of entity names. Beginning in March 2014, and continuing until May 2021, Defendant engaged in an “account takeover attack.” Key to the scheme is compromising a series of non-owned securities accounts. Each of those accounts was hacked and used without the owners consent. The shares and prices were also manipulated. Hundreds of U.S. and Canadian accounts were involved as well as over 380 different securities. Defendant generated about $31 million in gross proceeds and $1.5 million in net profits. To try and evade discovery Defendant established numerous false accounts. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Sections 9(a) and 10(b) and Rule 10(b). See Lit. Rel. No. 26410 (Sept. 24, 2025).
Prime bank scheme: SEC v. Harrold, Civil Action No. 1:01-cv-01318 (S.D. Ind.). The complaint, filed in Sept. 2001, alleged that defendants James Harrold, Franklin Management and Consulting, LLC, Accipter, LLC, Franklin Asset Management and Consulting, LLC, Franklin Management and Consulting, Inc., and Concord Development Group LLC. The case centered on a prime bank scheme. The Court entered judgment based on alleged violations of Securities Act Sections 5 and 17(a) and Exchange Act Section 10(b) and Rule 10b-5 thereunder on a bifurcated basis. The judgment orders payment by Defendants on a joint and several basis of: $3,635,126.52 in disgorgement, $145,206.,08 of prejudgment interest which has been collected by the receiver in the action and the DOJ in a parallel criminal action. See Lit. Rel. No. 26409 (Sept. 23, 2025).
Insider trading: SEC v. Pizzello, Civil Action No. 1:25-cv-l00553 (N.D. Ill.) is a previously filed action which named as defendants Arthur P. Pizzello, Jr., and Robert Qiattrocchi. The complaint alleges violations of insider trading in the stock of a cannabis firm in advance of a February 1, 2022, announcement that the company was being acquired. The complaint alleged that Defendants had unrealized gains from trading in the amount of $124,456 as to Goodness Growth and $28,136 as to Defendant Quattrocchi. The Court entered consent judgments enjoining each defendant from future violations of the provisions cited in the complaint. Defendant Pizzello also consented to the entry of a final judgment directing that he pay $$26,933 in prejudgment interest and $124,456 as a penalty. See Lit. Rel. No. 26408 (Sept. 23, 2005).
Free riding: SEC v. Freeman, Civil Action No. 7L25-cv-01514 (E.D.N.C. Filed Sept. 19, 2025) is an action that names as defendants Aaron O’Brian Freeman. The complaint alleged that he engaged in a free riding scheme beginning in January 2024 and continuing through the next month. The complaint alleges that Mr. Freeman used about $3.5 million in unfunded check deposits to implement his scheme. After making the deposits he placed purchases valued at about $889.087.04 based on unfunded credit along with $4,000 from a debit card. Ultimately the broker-dealers involved suffered losses of about $5,463.26. The complaint alleges violations of Exchange Act Section 10(b) and Rule 10b-5. See Lit. Rel. No. 26407 (Sept. 22, 2025).
False statements: SEC v. Patel, Civil Action No. 7:25-cv-01603 (N.D. Ala. Filed Sept. 19, 2025) is an action which names as defendant Pathyam Patel. The complaint alleges that Mr. Patel and his firm, Infinity Wealth Management, LLC, obtained over $430, 000 from about 15 individuals, beginning in January 2019, based on false statements. Specifically, during the period Defendant told prospective and current clients that as an investment adviser he would invest their funds with a wide range of clients. In fact, Defendant misappropriated most of the client funds. To resolve the matter, Mr. Patel consented to the entry of permanent injunctions based on Securities Act Section 17(a) and Advisers Act Sections 206(1) and 206(2). He was also enjoined for five years from participating in the issuance, purchase, offer or sale of any security with the exception of transactions for his own account. See Lit. Rel. No. 26406 (Sept. 22, 2025).
Other Regulatory Actions (available on their website)
Australia
Rules: The Australian Securities and Futures Commission revamped certain rules thereby providing regulatory relief as to select issues, according to a release issued September 25, 2025.
BaFin
Regulations: The European regulator’s recent Omnibus regulatory package includes good approaches to simplifying reporting and due diligence obligations that surround sustainability, according to Rupert Schaefer, Chief Executive Director of the European regulator in remarks published on September 18, 2025.
Hong Kong
Regulation: The Securities and Futures Commission of Hong Kong or SFC and the Hong Kong Monetary Authority or SFC announced what they are calling a “road map” for the development of four pillars of market insurance, secondary market liquidity, certain off-shore business and the next generation infrastructure, in a release issued on Sept. 25, 2025.
Singapore
Initiative: The Monetary Authority of Singapore (MAS) introduced initiatives to promote responsible online Financial Content in a release dated Sept. 25, 2025.