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June 16, 2016 at 08:00 AM
The Securities and Exchange Commission recently charged two hedge fund managers and a former government official with insider trading in a scheme that brought them nearly $32 million and charged a Connecticut man with bilking women he met on a dating site.
In addition, the agency won settlements from a former consultant to two China-based private equity firms in an insider trading case, from two municipal advisory firms and their executives for deceptive business practices and from a private fund administrator who was charged with gatekeeper failures.
SEC: Accused Scammer Used Dating Site to Find Victims
A Connecticut man has been charged with fraud by the SEC and his assets have been frozen after the agency said he misled people into investing in his company but then took their money for his personal use. His victims include several women he met through an online dating website.
According to the SEC, Thomas Connerton told investors that his company Safety Technologies LLC was developing a material to make surgical gloves better resistant to cuts or punctures. He claimed that several major glove manufacturers wanted the technology and that Safety Technologies was on the brink of imminent deals that would result in large payouts for investors in his company.
But no deals have ever been close to materializing, and Connerton has emptied the company’s bank account by writing a series of checks to himself and using investor funds for his own expenses.
Among those expenses was $20,000 for an engagement ring for his latest online date-turned-investor. There are more than 50 investors in Safety Technologies, including six women Connerton met through online dating and 14 others who are family or friends of those women.
Connerton not only failed to comply with the requirements for private offerings exempt from registration under the federal securities laws, he is also not registered to sell investments.
The SEC seeks a permanent injunction, as well as the return of ill-gotten gains plus interest and a penalty.
Hedge Fund Managers, Former FDA Official Charged With Insider Trading
Hedge fund managers Sanjay Valvani and Christopher Plaford have been charged separately by the SEC with insider trading on information that came from former government official Gordon Johnston, who also faces charges.
In parallel actions, the U.S. Attorney’s Office for the Southern District of New York has announced criminal charges.
According to the SEC, Valvani received confidential, nonpublic information from Johnston, who worked at the Food and Drug Administration for a dozen years and remained in close contact with former colleagues while working for a trade association representing generic drug manufacturers and distributors.
Johnston hid his separate role as a hedge fund consultant, getting confidential information about anticipated FDA approvals for companies to produce enoxaparin, a generic version of the anti-clotting drug Lovenox. He then passed along to Valvani the details of his conversations with FDA personnel, including a close friend he mentored during his time at the agency.
Valvani then traded in advance of public announcements concerning FDA approvals for such companies as Momenta Pharmaceuticals, Watson Pharmaceuticals and Amphastar Pharmaceuticals.
But Valvani didn’t stop there, the SEC says; he tipped fellow hedge fund manager Christopher Plaford, who not only used the information from Valvani but also traded on other data he received confidentially from a former Centers for Medicare and Medicaid Services official about an impending cut to Medicare reimbursement rates for certain home health services.
Plaford allegedly made approximately $300,000 by trading based on inside information in hedge funds he managed. He has cooperated with the SEC’s investigation.
A third hedge fund manager working at the same investment advisory firm as Valvani and Plaford was charged with falsely inflating assets in portfolios he managed. A separate SEC complaint against Stefan Lumiere alleges that he and Plaford falsely inflated the value of securities held by a hedge fund advised by their firm.
For an 18-month period, Lumiere used sham broker quotes to mismark as many as 28 securities per month, surreptitiously passing his desired prices along to brokers via his personal cell phone or a flash drive delivered by a courier. The fund consequently reported artificially inflated returns and monthly net asset values, and paid out more than $5.9 million in inflated management and performance fees to its investment advisor.
The SEC seeks disgorgement of ill-gotten gains plus interest and penalties as well as permanent injunctions against future violations. The investigation is continuing.
Consultant to China-Based Private Equity Firms Fined by SEC
