This Week In Securities (Week of May 12, 2025)
The Commission filed two new enforcement actions last week. It also dismissed more cases that were tied to crypto. Be careful, be safe this week.
SEC Enforcement – Filed and Settled Actions
Statistics: Last week the Commission filed 2 new civil injunctive actions and no new administrative proceedings.
Offering fraud: SEC v. Safeguard Metals LLC, Civil Action No. 26307 (C.D. Cal.) is a previously filed action in which the company and Jeffrey Ikahn, each named a defendant, acted as unregistered investment advisers. Defendants were successful in convincing investors to take their assets from existing accounts and put them into Safeguard’s care to invest in coins that had a 64% markup. On June 14, 2024, the court granted partial summary judgment on behalf of the Commission. Subsequently, the court entered final judgments that imposed permanent injunctions based on Advisers Act Sections 206(1) and (2) as to each Defendant. The judgments also required Defendants to pay, jointly and severally, disgorgement in the amount of $25,569,303, prejudgment interest of $4.821.263 and penalties of $25,588,300. See Lit. Rel. No. 26307 (May 9, 2025).
Offering fraud: SEC v. Ripple Labs, Inc. Civil Action No. 1:20-cv-10832 (S.D.N.) is a previously filed action that is pending on appeal. The Commission and defendants agreed to the entry of an order requesting the court to dismiss the action and dissolve prior orders. This relief is sought to assist the Commission in reforming its approach regarding crypto assets. See Lit. Rel. No. 26306 (May 8, 2023).
Offering fraud: SEC v. Kim, Civil Action No. 25 Civ. 3796 (S.D.N.Y. Filed May 7, 2025). Named as defendant is Richard T. Kim, the former CEO of Zero Edge. The firm was founded in 2018. From that point Mr. Kim served as a general partner and Chief Operating Officer of a company that was a crypto asset entity based in New York City. Mr. Kim also served as the COO of Global Foreign Exchange and Emerging Markets Trading for a Commission registered broker-dealer. In addition, he was co-COO of Foreign Exchange and Emerging Markets Trading for another registered broker-dealer and a member of the New York State Bar from 2007 through 2012. While serving as CEO of Zero Edge Corporation at the beginning of June 2024, he is alleged to have misappropriated and lost about $3.7 million of $3.8 million raised from investors over a period of about 4 days. The losses stem from trading crypto assets in his personal account and gambling. Mr. Kim raised the funds in a “seed fundraising round” for the company. The purpose was to develop a block-chain based casino. The funding round began in early June; it ended on June 24, 2024. On June 21 and 22, 2024, just under $100,000 was sent to Mr. Kim’s personal bank account. By June 24, 2024, almost one quarter of a million dollars had been sent to certain unknown crypto asset wallets. On June 30, 2024, Mr. Kim emailed certain equity investors. He informed those investors that he had an “urge” to use the funds in a series of risky crypto asset trades. The losses totaled $3.7 million. He asked for three months to rectify the situation. Subsequently, he fled to Dubai and later South Korea. The firm was liquidated. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. See Lit. Rel. No. 26304 (May 7, 2024). The U.S. Attorney’s Office for the Southern District of New York filed parallel criminal action.
Fraud scheme: SEC v. Schuster, Civil Action No. 25 Civ. 3800 (S.D.N.Y. Filed May 7, 2025). Named as defendants are: Joshua Schuster, a resident of Boca Raton, Florida; and Schuster Enterprises LLC (d/b/a Silverback), a New Yor real estate development company organized in February 2016. The firm is owned by Defendant Schuster and his family. The focus of the action is the sale of interests in Schuster Enterprise and the theft of the resulting funds. Beginning in August 2018, the firm’s shares were sold to investors by Mr. Schuster. The sales pitch focused on selling interests in limited liability companies. Each was suppose to develop high-end condos located at Second Avenue, New York City. Investors raised about $6 million. The funds, however, were not used to develop the properties. To the contrary, over $2 million was diverted to making payments for the personal benefit of Mr. Schuster. Some were also used to fund real estate projects developed by Defendants. For one, Ponzi-like payments were made to investors in other projects. In connection with the proposed projects Defendants also failed to disclose certain financial information about the so-called Second Avenue Project. Despite having raised substantial sums, Defendants continued to sell interests in the claimed projects. Defendants attempted to conceal their conduct by providing investors with periodic reports on the progress of the claimed development. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). See Lit. Rel. No. 26305 (May 7, 2025).
Unregistered offering: SEC v. Langemeier, Civil Action No. 3:22-cv-00269 (D.Nev.) is a previously filed action which named as defendants Loral L. Langemeier and her company, Live Out Loud, Inc. The complaint alleged that over a two-year period, beginning in. 2016, Defendants developed a rooster of clients. Many of those clients were convinced to liquidate relatively conservative investments and transfer the funds to self-directed IRAs. Defendants obtained significant amounts of cash through the payment of large commissions when the clients purchased oil and gas securities and from the undisclosed interests in the securities held by Defendants. The court previously entered summary judgment in favor of the SEC. More recently, the court entered judgment against Defendants based on Exchange Act Section 15(a) as well as Securities Act Sections 5(a) and 5(c) and Advisers Act Sections 206(2). See Lit. Rel. No. 26303 (May 7, 2025).
Ponzi scheme: SEC v. Alexander, Civil Action No. 4:25-cv-446 (E.D.Tx.) is a previously filed action which named as defendants: Kenneth W. Alexander II, Robert D. Welsh and Caedynn E. Conner. Over about three years, beginning in May 2021, Defendants participated in creating and operating a Ponzi scheme. The scheme raised funds from over 200 investors. During the period Defendants Alexander and Welsh promoted Vanguard Holdings Group Irrevocable Trust or VHG. Investors were told the firm was a very profitable international bond trading operation. Supposedly, it would repay investors over a 14 month period through the payment of 12 monthly payments. Investors were also offered the opportunity to acquire “pay orders” which would supposedly protect them from loss. By July Alexander and Welsh authorized Conner to invest in the Vanguard IV Cash Program. This program operated like Benchmark except its payouts were larger. Conner raised about $54.9 from investors. More than $46 million of the funds were funneled into VHG. Throughout the time VHG had no material sources of revenue. During the period Defendant Alexander misappropriated millions of investor dollars for his personal use. By early 2023 the VHG and Benchmark schemes began to collapse. Payments to investors ceased. Ultimately there were huge investor losses. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Section 10(b) and Rule 10b-5. See Lit. Rel. No. 26301 (May 2, 2025).
Australia
Guidance: The Australia Securities and Futures Commission released new regulatory guidance to support buy now pay latter industry reforms, on May 8, 2025 (here3333).
Hong Kong
Announcement: The Securities and Futures Commission of Hong Kong announced the launch of Technology Enterprises Channel. The purpose is to facilitate new listings, according to the May 6, 2025, announcement (here).
Singapore
Consultation: The Monetary Authority of Singapore Consulted on Amendments to the Singapore Code on Take Overs and Mergers with the Securities Industry Counsel, according to a release dated May 5, 2025 (here).