Saturday, September 20, 2014

Townhall Meeting for Receivership Held in Palm Beach

Jim Sallah of Sallah Astarita & Cox, LLC is the court appointed receiver of a number of entities who are accused of being part of a $70 million Ponzi scheme. At a town hall meeting Jim spoke to investors to explain the receivership process, and the work that has been done so far.

The Palm Beach Post has a video interview with Jim, explaining the process, and a lengthy article praising Jim, Sallah Astarita & Cox, and the rest of the receiver's team for the work done thus far.

Jupiter Ponzi scheme investors get update at town hall meeting

Friday, September 19, 2014

Tennessee-Based Animal Feed Company Agrees to Pay $18 Million to Settle Accounting Fraud Case

The SEC announced that a Tennessee-based animal feed company has agreed to pay back $18 million in illicit profits from an accounting fraud that resulted in an SEC enforcement action earlier this year.
AgFeed Industries, which is currently in Chapter 11 bankruptcy, was charged by the SEC in March along with top company executives for repeatedly reporting fake revenues from the company’s China operations in order to meet financial targets and prop up AgFeed’s stock price.  The company obtained illicit gains in stock offerings to investors at the inflated prices resulting from the accounting scheme.  The SEC also alleged that U.S. managers learned of the accounting fraud, but failed to take adequate steps to investigate and disclose it to investors. 

The $18 million to be paid by AgFeed to settle the SEC’s case will be distributed to victims of the company’s fraud.  Details of the settlement were presented to the bankruptcy court in Delaware earlier today, and the settlement is subject to court approval by the bankruptcy court as well as the district court in Tennessee where the case was filed.
Read the full article here.

Tuesday, September 16, 2014

CALPERS Withdrawing Its Hedge Fund Investments - Too Expensive, Too Complicated

The California Public Employees' Retirement System, the largest U.S. pension fund, said on Monday that it will pull all $4 billion it has invested in hedge funds because it finds them too costly and complicated. The $300 billion fund, known as Calpers, invests with firms including Och-Ziff Capital Management , Deepak Narula's Metacapital Management and Bain Capital's Brookside Capital and plans to pull the money out over the next year. The fund will also exit from fund-of-funds Pacific Alternative Asset Management Co and Rock Creek Group.

For more information visit Calpers dumps hedge funds citing cost, to pull $4 billion stake - Yahoo News

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Monday, September 15, 2014

SEC Announces $300,000 Whistleblower Award to Audit and Compliance Professional Who Reported Company’s Wrongdoing

The SEC announced a whistleblower award of more than $300,000 to a company employee who performed audit and compliance functions and reported wrongdoing to the SEC after the company failed to take action when the employee reported it internally.
It’s the first award for a whistleblower with an audit or compliance function at a company.
“Individuals who perform internal audit, compliance, and legal functions for companies are on the front lines in the battle against fraud and corruption.  They often are privy to the very kinds of specific, timely, and credible information that can prevent an imminent fraud or stop an ongoing one,” said Sean McKessy, Chief of the SEC’s Office of the Whistleblower.  “These individuals may be eligible for an SEC whistleblower award if their companies fail to take appropriate, timely action on information they first reported internally.”

This particular whistleblower award recipient reported concerns of wrongdoing to appropriate personnel within the company, including a supervisor.  But when the company took no action on the information within 120 days, the whistleblower reported the same information to the SEC.  The information provided by the whistleblower led directly to an SEC enforcement action.
Read more here.

Friday, September 12, 2014

FINRA's New Head of Dispute Resolution Search Narrows

With the retirement of Linda Fienberg, Reuters is reporting that FINRA has narrowed its search for a new head of its arbitration unit to two of its own long-time officials, according to a person familiar with the matter. FINRA, Wall Street's industry-funded watchdog, will replace the retiring chief of its arbitration unit with either Richard Berry,the unit's director of case administration, or Kenneth Andrichik, its mediation director.

We have had extensive dealings with both gentlemen, and are sure that both will be excellent in that role.

For more information - Exclusive: Wall Street watchdog to pick insider as arbitration head - source | Reuters


The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the well over 600 securities arbitrations, on behalf of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

Thursday, September 11, 2014

Investor Alert - Frontier Funds

FINRA has issued an investor alert regarding "Frontier funds" which are funds that invest in securities of companies in countries with developing securities markets—like Argentina, Lebanon, Nigeria, Slovenia and Vietnam.

According to FINRA, some see investing in frontier funds as a way to diversify assets—going beyond funds that invest in established international and other more developed emerging markets. Frontier funds are also sparking the interest of some investors who are lured predominantly by potential gains.  

FINRA is issuing this alert to caution those interested in funds that invest in frontier markets to carefully consider the heightened risks in these markets. Frontier fund investments may provide potential diversification and periods of higher returns than can be obtained through more traditional investments. But products or asset niches that promise higher returns nearly always carry more risk—and the past performance of any fund is never a guarantee of future results.   Frontier Markets  

For more information - Investor Alert - Frontier Funds—Travel with Care - FINRA

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions and representation of investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

SEC Charges Offshore Business and Two Individuals Behind Scheme to Conceal Ownership of Microcap Stocks

The SEC charged two individuals managing an offshore business intended to help clients evade U.S. securities laws with concealing the ownership of certain microcap stocks as part of a larger money laundering scheme alleged by criminal authorities.
Under the federal securities laws, beneficial owners of more than 5 percent of certain stocks are required to report their acquisition and ownership of those stocks to the SEC and the investing public.  The SEC alleges that two Belize residents through a company called IPC Corporate Services have helped clients who own significant amounts of thinly-traded microcap stocks avoid these reporting requirements.  They created associated companies through which the clients could hide their ownership and spread the shares so that none of them contained more than 5 percent of the stock of any particular microcap issuer.  They stressed to their clients the importance of staying below the 5 percent reporting threshold for each associated entity.  However, because one of the individuals and IPC owned the associated entities used in this arrangement, they assumed beneficial ownership of all the clients’ shares of these microcap stocks.  Therefore, IPC and the owner were themselves required to report their beneficial ownership of more than 5 percent in each stock. 

In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York today announced criminal charges against these same individuals for violations of other federal laws extending beyond the SEC’s purview.
Read the full report here.

Wednesday, September 10, 2014

SEC Charges Minneapolis-Based Hedge Fund Manager With Bilking Investors and Portfolio Pumping

The SEC charged a Minneapolis-based hedge fund manager, his investment advisory firm, and an accomplice with bilking investors in two hedge funds out of more than $1 million under the guise of research expenses and fees. 
The SEC alleges that as the management fees earned by Archer Advisors LLC were shrinking due to the funds’ worsening performance, the firm’s owner and an employee implemented a scheme to enrich themselves at the expense of investors in the funds.  The owner routinely caused the funds to reimburse Archer for fake research expenses, and he eventually routed much of that money to his personal checking account and spent it on country club dues, boarding school tuition, and a Lexus among other luxury items.  Furthermore, the firm's owner devised a way to essentially charge fund investors twice for the same fake research expenses.  First, he billed the funds directly by falsely claiming that Archer had paid the specified employee to conduct “research” for the funds.  Second, he and the employee improperly diverted soft dollars from the hedge funds to the employee for the same purported “research” under the additional pretense that the employee was an independent consultant.  Soft dollars were supposed to be used to buy third-party investment research that benefited the funds.  The employee conducted no third-party research as an Archer officer whose main duties were placing trades and helping the owner find new investors.

The SEC’s complaint filed in federal court in Minneapolis also charges the two individuals with conducting a separate scheme to manipulate the stock price of the funds’ largest holding in order to inflate the monthly returns reported to investors and conceal the true extent of the funds’ mounting investment losses.
Read more here.