Among recent enforcement actions by the SEC were an $18 million settlement with a Tennessee-based animal feed company over accounting fraud charges; charges against a former hedge fund manager for fraud; charges against an IT employee for insider trading; and an asset freeze against a Turks and Caicos company for a Ponzi scheme.
In addition, the Consumer Financial Protection Bureau went after for-profit Corinthian Colleges for predatory lending.
Animal Feed Company Settles SEC Charges for $18 Million
Tennessee-based AgFeed Industries, which is currently in Chapter 11 bankruptcy, has agreed to repay $18 million in illicit profits to settle SEC charges of accounting fraud after it was charged in March with accounting fraud. The company neither admitted nor denied the charges.
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According to the agency, the company repeatedly reported fake revenues from its China operations so that it could meet financial targets and prop up its stock price.
The company got the illicit profits from stock offerings sold to investors at inflated prices as a result of the accounting scheme. The agency also said that despite the fact that U.S. managers found out about the fraud, they did not take adequate action to investigate or to disclose it to investors.
The settlement is subject to court approval by the bankruptcy court as well as the district court in Tennessee where the case was filed.
Meanwhile, the SEC’s case against five former company executives and a former audit committee chair continues.
Former Hedge Fund Manager Charged With Pocketing Extra Fees to Buy Porsche
Sean Cooper, a former hedge fund manager for San Francisco-based investment advisory firm WestEnd Capital Management LLC, has been charged with fraud by the SEC for taking excess management fees from the accounts of fund clients and using their money to remodel his multimillion-dollar home and buy a Porsche.
According to the agency, Cooper took more than $320,000 from client accounts, far in excess of the 1.5% annual management fees that WestEnd had disclosed to them, and put the money into personal accounts. He started in March 2010, and characterized the withdrawals from client accounts as management fees in the fund’s books and records.
However, the amount of his withdrawals had nothing to do with the actual fees earned by the fund. He had sole authority to transfer money out of the fund, and there was no mechanism in place at the firm to stop him. In addition to spending the money on other things, Cooper bought himself a $187,000 Porsche. This went on for two years; he only stopped when the SEC began to examine WestEnd in April 2012.
Although it expelled Cooper and reimbursed the hedge fund, WestEnd Partners L.P., WestEnd was also charged for failing to supervise Cooper effectively once it found out what he was up to. The firm has agreed to pay $150,000 to settle the SEC’s charges.
IT Employee Charged With Insider Trading by SEC
Dimitry Braverman, a senior information technology professional in the IT department of international law firm Wilson Sonsini Goodrich & Rosati, was charged by the SEC with insider trading ahead of several mergers and acquisitions involving firm clients being advised on the deals.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges against Braverman.
According to the agency, Braverman had access to nonpublic information in the firm’s client-related databases and used it, beginning around 2010, to make about $300,000 on trades executed before merger announcements. He would sell the stocks or exercise the options he’d bought shortly after the news went public.
He also tipped his brother to two of the deals, and his brother made approximately $1,800.
Braverman made trades on four companies before he was scared off from trading in his own name by an SEC investigation into a lawyer at his own firm in an unrelated insider trading case in 2011. He sold off all the stocks and sat tight.