The Securities and Exchange Commission recently fined the mayor of Harvey, Illinois, for municipal bond fraud and froze a trader’s assets to prevent him from profiting from a false filing.
In addition, the Financial Industry Regulatory Authority censured and fined a firm for anti-money laundering failures and failures involving its market access business.
Illinois Mayor Settles With SEC on Hotel Bond Fraud Charges
Eric Kellogg, mayor of Harvey, Illinois, has agreed to settle fraud charges from the SEC for his involvement in a scheme that diverted money from municipal bond sales for purposes other than that of the bonds: to develop and construct a Holiday Inn hotel in Harvey.
According to the agency, investors were told that their money would be used to develop and construct a Holiday Inn hotel in Harvey, but instead city officials diverted at least $1.7 million in bond proceeds to fund the city’s payroll and other operational costs unrelated to the hotel project.
Kellogg exercised control over Harvey’s operations and signed important documents the city used to offer and sell the bonds. Based on his control of the city, Kellogg is liable for fraud, the SEC says.
Without admitting or denying the charges, Kellogg agreed to pay a penalty of $10,000 and never participate in a municipal bond offering again. The settlement is subject to court approval.
SEC Wins Asset Freeze Against Trader in False Filing Case
The SEC has gotten a court order to freeze the assets of Nauman Aly after it traced a false regulatory filing in manipulation of a technology stock to a computer in Pakistan.
According to the agency, on April 12 at 11:50 a.m. Eastern time, Aly, of Pakistan, bought 1,850 call options in Silicon Valley-based Integrated Device Technology (IDT) in his U.S. brokerage account for $18,500.
At 12:08 p.m., Aly filed a Schedule 13D form on the SEC’s EDGAR system that claimed his group of six Chinese investors had a 5.1% beneficial ownership of IDT and had sent a letter to the board of directors offering to acquire all of the company’s shares for a price that represented a 65% premium.
The market reacted quickly to the filing, and IDT’s stock price increased by more than 25% in less than 10 minutes. Then, at 12:18 p.m., Aly sold all the options for a profit of $425,000. He then filed another Schedule 13D stating that his group of investors no longer owned more than 5% of IDT after his options sales.