Patrick Churchville, a defendant in an ongoing SEC litigation, was sentenced to seven years in federal prison following his guilty plea to five counts of wire fraud and one count of tax evasion in connection with orchestrating a $21 million Ponzi scheme and misappropriating additional money from funds he advised.
The court also ordered Churchville to perform 2,000 hours of community service, and to pay restitution to harmed investors in an amount that will be determined at a future hearing.
The SEC previously charged Churchville, the owner and president of ClearPath Wealth Management LLC, an investment adviser formerly located in Providence, Rhode Island, and ClearPath in a civil action filed on May 7, 2015.
According to the SEC’s complaint, from at least December 2010, ClearPath and Churchville diverted deposits from investors to pay other investors, used proceeds from selling particular investments to pay unrelated investors, used investors’ funds as collateral for loans to make investments for their own benefit then used other investors’ money to repay the loans, and converted investor funds into investments for ClearPath’s own benefit.
Churchville borrowed money by using investors’ funds as collateral, without investors’ knowledge, and stole $2.5 million of the borrowed money in order to purchase his waterfront home in Barrington, Rhode Island.
The SEC’s litigation against Churchville and ClearPath continues.
SEC Charges Virginia Man With Insider Trading
The SEC charged on March 23 an Alexandria, Virginia man with insider trading in the securities of Verso Corp. in advance of a Jan. 6, 2014, announcement that Verso would acquire NewPage Holdings Inc.
The SEC’s complaint, filed in federal court in Alexandria, alleges that Christopher Ludwig purchased the securities of Verso on the basis of material nonpublic information he learned from his longtime friend who was performing work as a consultant to Verso.
The complaint alleges that, despite agreeing not to act on the information that he learned from his friend, Ludwig traded on the information and realized illegal profits of more than $30,000.
Without admitting or denying the allegations in the SEC’s complaint, Ludwig agreed to pay a total of $49,320.03, consisting of disgorgement of $30,616.69, and prejudgment interest of $2,263.33, and a civil penalty of $16,440.01. The proposed settlement is subject to the court’s approval.
SEC: Oil Company Principal Lied About Marijuana License
The SEC charged Jerry Miller, the principal of a Florida-based consulting firm to several microcap issuers, with fraud for falsely claiming that Petrotech Oil and Gas Inc., one of its microcap issuer clients, had obtained a marijuana license in connection with its purported marijuana business.
The SEC’s complaint, filed in federal court in Miami, alleges that on Feb. 26, 2014, Petrotech falsely announced in a press release that it had secured a medical and recreational marijuana license from Colorado in conjunction with Petrotech’s newly founded marijuana business. The release also included marijuana production capacity projections based, in part, on Petrotech purportedly having secured the license.
In reality, as alleged in the SEC’s complaint, Petrotech had not received a license to conduct a marijuana business in Colorado. Miller allegedly wrote the press release and was responsible for publishing it.
The SEC’s complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, a penalty, an officer and director bar, and a penny stock bar against Miller.
Credit Suisse Censured and Fined Nearly $500,000 by FINRA Over OATS Reporting
According to the Financial Industry Regulatory Authority’s list of March disciplinary actions, Credit Suisse Securities submitted an Accept, Waiver and Consent form in which the firm was censured, fined $487,500, and required to revise its supervisory system, including, but not limited to, its written supervisory procedures.
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it transmitted reports to the Order Audit Trail System that contained inaccurate, incomplete or improperly formatted data.
According to FINRA, the firm failed to report the correct symbol indicating whether the transaction was a buy, sell or sell short for 5,632 transactions to the FINRA/Nasdaq Trade Reporting Facility. The findings also stated that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to certain applicable securities laws and regulations, and FINRA rules, concerning OATS reporting.
—Related on ThinkAdvisor: