SEC and CFTC Update

A month-by-month recap of the U.S. Securities and Exchange Commission, and Commodity Futures Trading Commission enforcement activities and developments

The SEC sought an order to show cause why Elon Musk, the CEO of Tesla, should not be held in contempt for a violation of an October 2018 final judgment by the District Court for the Southern District of New York.  The judgment required Musk to obtain pre-approval of any written communications that “contained, or reasonably could contain, information material to Tesla or its shareholders.”  The SEC filed this motion after Musk tweeted about the…
Action against Defendants, two individuals and two movie companies under their control, for allegedly defrauding two investors in a forthcoming film.  According to the SEC, Defendants made multiple misrepresentations to the investors, falsified relevant documents that were sent to the investors, and misappropriated investor funds. SEC Complaint SEC Litigation Release
Action against Respondent, a former trader, for alleged spoofing.  According to the CFTC, Respondent placed orders for futures contracts with the intent to cancel the orders before execution in order to manipulate prices.  The CFTC has reserved decision on monetary sanctions pending Respondent’s fulfillment of a cooperation agreement with the CFTC. CFTC Order CFTC Press Release
Action against Defendants, two former executives of a now defunct public company that operated for-profit schools, for their roles in the company’s alleged failure to disclose material regulatory risks in public filings.  According to the SEC, the company improperly inflated its long-term debt in financial submissions to the Department of Education.  The SEC alleges that Defendants failed disclose in public filings that the inflation could affect the company’s access to education funds.  Defendants have agreed…
The CFTC and the Bank of England, including the Prudential Regulation Authority and the Financial Conduct Authority, issued a joint statement assuring the market that derivative trading and clearing activities will continue between the U.K. and U.S. after the U.K.’s withdrawal from the EU. The statement sets out a list of measures to ensure regulatory and financial stability, including continued supervisory cooperation, extension of existing CFTC relief and comparability for the U.K., and U.K. equivalence…
The U.S. District Court for the Western District of North Carolina entered a supplemental consent order against Defendants, an individual and his precious metals company, for alleged fraudulent solicitation of customers for precious metals transactions, misappropriation of customer funds, and false statements about purported transactions.  The Court’s supplemental order requires Defendants to pay, jointly and severally, a civil penalty of $15,761,432.  The supplemental consent order followed the Court’s consent order of permanent injunction and its…
Action against Defendant, a former employee of a biotechnology company, for alleged insider trading.  According to the SEC, Respondent traded while in possession of material nonpublic information regarding the FDA’s recommendation that the company withdraw some of its products from FDA consideration.  Defendant has agreed to pay disgorgement of $70,827, prejudgment interest of $6,247, and a civil penalty of $70,827. SEC Complaint SEC Litigation Release
Action against Defendants, a transfer agent, a broker-dealer, and its principals, for alleged creation and sale of sham companies.  According to the SEC, Defendants broker-dealer and transfer agents manufactured numerous fake public companies which they then sold.  The SEC further alleges that two Defendant principals signed and submitted FINRA and DTC applications that contained false information, and the third Defendant principal failed to acquire sufficient knowledge about the companies and investigate areas of concern raised…
Action against Respondent, a cybersecurity company, for alleged unregistered initial coin offering.  According to the SEC, Respondent conducted an initial coin offering without registering or qualifying for an exemption.  Respondent agreed to return funds to participating investors.  The SEC did not impose a penalty due to Respondent’s self-reporting and cooperation. SEC Complaint SEC Press Release
Action against Defendants, an investment fund and its principals, for allegedly defrauding investors.  According to the SEC, Defendants made misrepresentations about their investment portfolio and amount of capital.  The SEC further alleges that Defendant principals misappropriated investor funds. SEC Complaint SEC Litigation Release SEC Press Release