SEC Charges Pot Exec in Sale of Unregistered Securities on Craigslist: Enforcement

The SEC charged 1 Global Capital LLC and its former chief executive officer for allegedly defrauding at least 3,400 retail investors, more than one-third of whom invested their retirement funds.

The Florida-based cash advance company and former CEO Carl Ruderman allegedly fraudulently raised more than $287 million since 2014 in unregistered securities sold through a network that included barred brokers, the SEC said.

According to the SEC’s complaint, investors were promised profits from 1 Global’s loans to small and midsize companies; however, a large portion of their money went to Ruderman’s lavish personal spending and to his consumer-loan companies, Bright Smile Financing and Ganador Enterprises, which had nothing to do with 1 Global’s cash advance business.

“We allege that 1 Global’s business model was a sham because instead of using investor funds as promised, 1 Global and Ruderman diverted significant funds, including to Ruderman himself for his personal benefit,” said Eric Bustillo, director of the SEC’s Miami Regional Office, in a statement. “The SEC’s investigation effectively stopped 1 Global’s offering and prevented further harm to investors and retirement funds.”

Investors in 1 Global allegedly were given bogus account statements and were falsely told that it had an independent auditor, and that its secured loans, typically for small amounts, had low default rates. According to the complaint, in contrast to what it told investors, 1 Global marketed itself to business borrowers as a low-hassle way to access cash quickly, often made large, unsecured loans, and had significant problems with collections.

1 Global declared bankruptcy in July and Ruderman resigned from the company.

“The misconduct that we’ve alleged occurred in this case directly impacted retail investors,” said Stephanie Avakian, co-director of the SEC’s Division of Enforcement. “We filed this action on an emergency basis to protect those investors from further harm.”

The SEC’s complaint seeks disgorgement of allegedly ill-gotten gains and prejudgment interest from the defendants and relief defendants, and financial penalties against the defendants.

The SEC also requested a temporary asset freeze against Ruderman and other Ruderman companies charged by the SEC as relief defendants.

SEC Charges New Jersey Man With Fraud in Selling Online Gaming Company Stock

The SEC announced charges against Sandy Masselli, Jr. and several associated entities — including Carlyle Gaming & Entertainment Ltd. and Carlyle Entertainment Ltd. — for perpetrating a securities fraud that enabled Masselli to misappropriate retail investor funds for his personal use.

The SEC’s complaint alleges that Masselli, who was chairman and CEO of the Carlyle entities, raised approximately $3 million from investors from 2012 through 2017.

As part of the scheme, Masselli allegedly sold certain investors stock in the Carlyle entities, which were purportedly engaged in online gaming, by falsely claiming that the companies were on the verge of conducting a lucrative initial public offering and were soon to be listed on major U.S. stock exchanges. However, the SEC alleges that neither Carlyle entity had an actual plan or the capability to conduct an IPO and had not even filed applications to be listed on these exchanges.

According to the complaint, Masselli then used those investors’ money to pay personal expenses, like rent and payment of his utility bills, credit card bills and other expenses, including groceries, clothing, cosmetics, restaurants, high-end hair products, StubHub tickets, a health spa and an automobile.

BNP Paribas to Pay $90 Million Penalty to CFTC for Attempted Manipulation of Benchmark Swap Rates

The Commodity Futures Trading Commission (CFTC) issued an order filing and settling charges against BNP Paribas Securities Corp. for attempted manipulation of the ISDAFIX benchmark and requiring BNP Paribas to pay a $90 million civil monetary penalty.

The CFTC order finds that over a five-year period — beginning in or about May 2007 and continuing through at least August 2012 — BNP attempted to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX), a leading global benchmark referenced in a range of interest rate products, to benefit its derivatives positions in instruments such as cash-settled options on interest rate swaps and certain exotic structured products.

BNP Paribas’ unlawful conduct involved multiple traders and included supervisors, according to the CFTC.

ISDAFIX rates and spreads are published daily and are meant to indicate the prevailing mid-market rate, at a specific time of day, for the fixed leg of a standard fixed-for-floating interest rate swap.

The CFTC finds that BNP, through its traders, bid, offered and executed transactions in interest rate swap spreads in a manner deliberately designed to influence the published USD ISDAFIX in order to benefit BNP Paribas in its derivatives positions.

In addition, the CFTC finds that BNP, through its employees making the bank’s USD ISDAFIX submissions, also attempted to manipulate and made false reports concerning the USD ISDAFIX by skewing the its submissions in order to benefit BNP Paribas at the expense of its derivatives counterparties and clients.