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Regulation and Compliance > Federal Regulation > SEC

Botox Doctor Charged in Insider Trading Case: Enforcement

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The SEC filed an amended complaint naming James Shaoul as an additional defendant in an insider trading case the agency filed earlier this year against his brother and another trader who allegedly profited by more than $925,000 trading in advance of a merger between technology companies Intel Corp. and Mobileye N.V.

The SEC’s amended complaint alleges that James Shaoul has professional and personal relationships with Mobileye founders who directly participated in negotiations that resulted in Intel’s tender offer. Mobileye is a software and technology developer for Advanced Driver Assistance Systems used for autonomous driving.

According to the SEC’s amended complaint, James Shaoul resides in Israel where Mobileye’s principal offices are located. Shaoul is a physician specializing in nonsurgical cosmetic procedures, including botox and laser hair removal. A Mobileye director and his wife have received treatment at Shaoul’s clinic.

Shaoul allegedly tipped his brother Roger Shaoul with nonpublic information about the impending merger prior to the public announcement, and gave him detailed directions to buy specific Mobileye options. The directions allegedly included specific purchase prices, strike prices, and expiration dates as well as a price per share discussed in confidential Mobileye-Intel discussions and an estimated date range for a public announcement.

Roger Shaoul allegedly then tipped Lawrence Cluff Jr. with nonpublic information about the tender offer. All of the suspicious trading allegedly occurred in two accounts held in Cluff’s name, including an account that had been dormant since 2011 before Cluff purchased Mobileye stock on Jan. 30, 2017.

Roger Shaoul and Cluff reside in Virginia, according to the SEC’s complaint. The SEC filed the initial complaint against them in April 2017.

The SEC’s amended complaint charges all three defendants with violating the Securities Exchange Act of 1934 and seeks a final judgment ordering Roger Shaoul and Cluff to disgorge their allegedly ill-gotten gains with interest and ordering all defendants to pay penalties and be permanently enjoined from future violations.

Braskem Agrees to Pay Investors $10 Million for Role in Petrobras Corruption Scandal

Petrochemical giant Braskem S.A. will pay U.S. investors $10 million for concealing the company’s role in the corruption scandal centered around Petrobras, Brazil’s state-owned oil company, according to an press release from Cohen Milstein Sellers & Toll PLLC.

Shareholders had filed a class action suit claiming Braskem defrauded investors by hiding the role bribery played in keeping the price of materials low, creating an artificially inflated stock value.

“Braskem investors were sadly the victims of a shadowy bribery scheme and a scandal that has engulfed Brazil and reverberated worldwide,” said Steven J. Toll, co-chair of Cohen Milstein’s Securities Fraud and Investor Protection practice and lead counsel for the plaintiff class, in a statement. “This settlement not only brings financial relief to our clients, but is a victory for all who have been hurt by Braskem, Petrobras and the other participants in an unprecedented system of political and corporate corruption.”

The lawsuit alleged that Braskem had for years misled investors into believing the company’s operations were legitimate. However, the law firm says that Braskem executives failed to disclose at least $5 million in annual payments between 2006-2012 to Petrobras officials and others in exchange for lower prices on naphtha, a critical ingredient in Brazilian petrochemicals. It is estimated that Braskem bought 70% of its naphtha from Petrobras, and that this accounted for as much as half of its operating costs, according to the suit.

A group of institutional and individual investors originally filed the lawsuit in 2015 after reports emerged implicating Braskem in the Petrobras scandal. The investors argued that they had been misled by the company’s statements into believing that its operations were legitimate and legal.

Last December, Braskem agreed to pay the U.S., Brazilian and Swiss governments approximately $957 million in criminal and regulatory penalties arising out of the bribery scheme.

SEC Obtains Final Judgments Against Officers of TelexFree Scheme

The SEC obtained final judgments in a fraud case against the co-owner and president and the CFO of a pyramid scheme targeting Latino communities.

The final judgments permanently enjoin James Merrill, of Ashland, Massachusetts, and Joseph Craft, of Kevil, Kentucky, from violating the Securities Exchange Act of 1934. The judgements also impose conduct-based injunctions on both men, a permanent officer-and-director bar on Merrill, and a five-year officer-and-director bar on Craft.

Merrill’s final judgment deems his liability of approximately $3.6 million in disgorgement and prejudgment interest satisfied by the order of restitution in the related criminal case.

Craft’s final judgment to pay $299,000 in disgorgement and prejudgment interest and a $50,000 penalty is deemed satisfied by the order requiring Craft to transfer certain assets to settle an adversary action against Craft and his business filed by Stephen Darr, the Chapter 11 Trustee of TelexFree LLC, TelexFree, Inc., and TelexFree Financial, Inc. in the bankruptcy case.

In settling the SEC’s charges, Craft admitted to preparing financial statements provided to telecommunications regulators, as well as a financial regulator, materially overstating the pyramid scheme’s income.

Merrill and Carlos Wanzeler, the other co-owner and treasurer of TelexFree, were previously charged criminally. Merrill pleaded guilty to the criminal charges and was sentenced to six years’ imprisonment. Wanzeler is a fugitive from justice.

The SEC has previously obtained final judgments by consent against the international sales director and a promoter of TelexFree, who also was ordered to jail for civil contempt arising from his repeated violations of court orders. 


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