A federal court sentenced a Chicago-based investment advisor to 151 months in prison in a criminal action that stemmed from a similar case with the Securities and Exchange Commission.
The U.S. District Court for the Northern District of Illinois entered judgments against Daniel Glick, his unregistered investment advisory firm Financial Management Strategies Inc., and his accounting firm, relief defendant Glick Accounting Services Inc.
The SEC charged Glick and FMS in March 2017 with misappropriating millions from elderly investors, including his in-laws, who had entrusted Glick and his advisory firm with their retirement savings. According to the SEC’s complaint, Glick and Financial Management Strategies provided clients with false account statements that hid Glick’s improper use of client funds to pay personal expenses and his improper transfers of funds to two other individuals.
The SEC’s civil action named Glick Accounting Services as a relief defendant that obtained ill-gotten funds from the fraud. The judgments include permanent injunctive relief, repatriation of assets, and orders to pay disgorgement and civil penalties in amounts to be determined by the Court.
Glick was also ordered to pay $5.2 million in restitution.
SEC Charges Additional Defendant in Fraudulent ICO Scheme
The SEC announced additional fraud charges stemming from an investigation of Centra Tech Inc.’s $32 million initial coin offering that was touted by the boxer Floyd Mayweather.
In an amended complaint, the SEC charged another of Centra’s co-founders, Raymond Trapani, in a fraudulent scheme related to Centra’s 2017 ICO, in which the company issued “CTR Tokens” to investors.
Earlier this month, the SEC and criminal authorities charged Centra’s two other co-founders, Sohrab “Sam” Sharma and Robert Farkas, for their roles in the scheme.
The SEC’s amended complaint alleges that Trapani was a mastermind of Centra’s fraudulent ICO, which Centra marketed with claims about nonexistent business relationships with major credit card companies, fictional executive bios, and misrepresentations about the viability of the company’s core financial services products. The amended complaint further alleges that Trapani and Sharma manipulated trading in the CTR Tokens to generate interest in the company and prop up the price of the tokens.
Text messages among the defendants reveal their fraudulent intent.
After receiving a cease-and-desist letter from a major bank directing him to remove any reference to the bank from Centra’s marketing materials, Sharma texted to Farkas and Trapani: “[w]e gotta get that s[***] removed everywhere and blame freelancers lol.” And, while trying to get the CTR Tokens listed on an exchange using phony credentials, Trapani texted Sharma to “cook me up” a false document, prompting Sharma to reply, “Don’t text me that s[***] lol. Delete.”
The SEC’s amended complaint charges Trapani with violating the antifraud and registration provisions of the federal securities laws. The amended complaint seeks permanent injunctions, the return of allegedly ill-gotten gains plus interest and penalties, as well as bars against Trapani prohibiting him from serving as a public company officer or director and from participating in any offering of digital or other securities.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Trapani.
SEC Charges and Fines Company Formerly Known as Yahoo With Failing to Disclose Massive Cybersecurity Breach
The entity formerly known as Yahoo! Inc. has agreed to pay a $35 million penalty to settle charges that it misled investors by failing to disclose one of the world’s largest data breaches in which hackers stole personal data relating to hundreds of millions of user accounts, according to the SEC.
According to the SEC’s order, within days of the December 2014 intrusion, Yahoo’s information security team learned that Russian hackers had stolen what the security team referred to internally as the company’s “crown jewels”: usernames, email addresses, phone numbers, birthdates, encrypted passwords, and security questions and answers for hundreds of millions of user accounts.
Although information relating to the breach was reported to members of Yahoo’s senior management and legal department, Yahoo failed to properly investigate the circumstances of the breach and to adequately consider whether the breach needed to be disclosed to investors.