Source: https://www.sec.gov/news/digest/2013/dig061213.htm
Timestamp: 2019-04-25 12:46:50+00:00

Document:
The Securities and Exchange Commission (Commission) and the Financial Industry Regulatory Authority (FINRA) today issued a warning to investors about a sharp increase in e-mail linked to "pump-and-dump" stock schemes.
The investor alert entitled Inbox Alert – Don't Trade on Pump-And-Dump Stock E-mails notes that the latest McAfee Threats Report confirms a steep rise in spam e-mail linked to bogus "pump-and-dump" stock schemes designed to trick unsuspecting investors. These false claims could also be made on social media such as Facebook and Twitter as well as on bulletin boards and chat room pages.
"Investors should always be wary of unsolicited investment offers in the form of an e-mail from a stranger," said Lori Schock, Director of the SEC's Office of Investor Education and Advocacy. "The best response to investment spam is to hit delete."
"Spam e-mail is the bait used to lure people into making bad investment decisions. No one should ever make an investment based on the advice of an unsolicited email," said Cameron Funkhouser, Executive Vice President of FINRA's Office of Fraud Detection and Market Intelligence.
Pump-and-dump promoters frequently claim to have "inside" information about an impending development. Others may say they use an "infallible" system that uses a combination of economic and stock market data to pick stocks. These scams are the inbox equivalent of a boiler room sales operation, hounding investors with potentially false information about a company.
The fraudsters behind these scams stand to gain by selling their shares after the stock price is "pumped" up by the buying frenzy they create through the mass e-mail push. Once these fraudsters "dump" their shares by selling them and stop hyping the stock, investors lose their money or are left with worthless or near worthless stock.
The Commission today charged the former head of the Miami office at brokerage firm Direct Access Partners (DAP) for his role in a massive kickback scheme to secure the bond trading business of a state-owned Venezuelan bank.
The SEC charged four individuals last month who enabled the global markets group at DAP to generate more than $66 million in revenue from transaction fees related to fraudulent trades they executed for Banco de Desarrollo Económico y Social de Venezuela (BANDES). A portion of this revenue was illicitly paid to the Vice President of Finance at BANDES, who authorized the fraudulent trades.
The SEC alleges that as managing partner of the global markets group, Ernesto Lujan was an integral participant in the wide-ranging fraudulent scheme that included sham arrangements to hide the kickback payments and route money to the BANDES official through shell corporations. Lujan and others charged in the scheme deceived DAP's clearing brokers, executed internal wash trades, interpositioned another broker-dealer in the trades to conceal their role in the transactions, and engaged in massive roundtrip trades to pad their revenue.
"For a scheme this bold to succeed, it required the sneaky collaboration of several individuals including the head of the Miami office," said Andrew M. Calamari, Director of the SEC's New York Regional Office. "Lujan and the others may have believed they were covering their tracks, but the SEC's exam and enforcement teams unraveled their fraud."
In a parallel action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against Lujan.
The SEC's amended complaint filed in federal court in Manhattan charges Lujan and the other defendants with fraud and seeks final judgments that would require them to return ill-gotten gains with interest and pay financial penalties.
Commission Files Subpoena Enforcement Action against Bridge Securities, LLC, Bridge Equity, LLC, Bridge Equity, Inc. and FOGFuels, Inc.
On June 12, 2013, the Securities and Exchange Commission (Commission) filed an application with the United States District Court for the Northern District of Georgia for an order to enforce investigative subpoenas served on Bridge Securities, LLC, Bridge Equity, LLC, Bridge Equity, Inc. and FOGFuels, Inc. located in Atlanta, Georgia. All of the entity respondents are under the control of Paul James Marshall, a resident of Atlanta, Georgia.
The Commission's application and supporting papers allege that on March 14, 2013, the Commission issued a Formal Order Directing Private Investigation entitled In the Matter of Bridge Securities, LLC. According to the Commission's application, the four entity respondents have failed to comply with validly issued and served subpoenas for documents relating to this investigation, which involves, but is not limited to, the possible offerings and sales of securities interests in one or more of the entity respondents, for which no registration statement was in effect and for which no exemption from registration is available. The investigation relates to possible false and misleading statements by the respondent companies and/or their principals in effecting those transactions in or inducing or attempting to induce the purchase or sale of securities.
The Commission announced today that on June 11, 2013, the Honorable Andrew L. Carter, Jr. of the United States District Court for the Southern District of New York, entered a final judgment against Robert W. Kwok, in SEC v. Reema D. Shah and Robert W. Kwok, 12-CV-4030, an insider trading case the SEC filed on May 21, 2012. The SEC alleged that Kwok, a former Senior Director of Business Management at Yahoo! Inc., illegally tipped and traded on material, nonpublic information concerning Yahoo and Moldflow Corporation.
The SEC's complaint alleged that in April 2008, Reema Shah, a former mutual fund and hedge fund portfolio manager at RiverSource Investments, LLC, tipped Kwok material, nonpublic information concerning an upcoming acquisition of Moldflow by Autodesk, Inc., which had been misappropriated by an Autodesk insider and tipped to Shah. The SEC alleged that, based on this tip, Kwok purchased 1,500 shares of Moldflow in a personal account, which he sold after announcement of the acquisition, realizing profits of approximately $4,750. The SEC also alleged that in July 2009, Kwok, in breach of his duty to Yahoo, tipped Shah material, nonpublic information concerning an upcoming announcement of an internet search engine partnership agreement between Yahoo and Microsoft Corporation. The SEC alleged that, based on Kwok's tip, Shah caused certain of the mutual funds and hedge funds she helped manage to purchase shares of Yahoo.
Previously in this action, the Court entered a consent judgment against Kwok ordering injunctive relief and barring Kwok from serving as an officer or director of a public company. The final judgment, also entered by consent, orders disgorgement of $4,754 plus prejudgment interest of $848, and a civil penalty of $4,754. In a parallel criminal action brought by the U.S. Attorney's Office for the Southern District of New York, Kwok previously pled guilty to conspiracy to commit securities fraud and was sentenced to two years of probation and ordered to forfeit $4,754 and pay a fine of $1,000. [United States v. Robert Kwok, 12-CR-405 (S.D.N.Y.)](LR-22726).
On June 11, 2013, the Commission filed a civil injunctive action in the Northern District of Ohio against Andrew W. Jacobs (A. Jacobs) and his brother Leslie J. Jacobs II (L. Jacobs). The Commission alleges that A. Jacobs provided L. Jacobs material non-public information about a pending tender offer for Chattem, Inc. securities. L. Jacobs then traded on the basis of the information he received from his brother.
According to the Commission's complaint, on December 21, 2009, Sanofi-Aventis (Sanofi), a French pharmaceutical company, announced its intent to make a tender offer for Chattem, a Tennessee-based distributor of over-the-counter pharmaceutical products, at the price of $93.50 per share (Announcement). Shares of Chattem closed 32.60% higher on the day of the Announcement than the prior trading day's close of $69.98 and volume increased more than 3,000% to 10.3 million shares.
The Commission alleges that A. Jacobs learned of the tender offer in a confidential conversation with his brother-in-law, who was at the time a Chattem executive. The executive, with whom A. Jacobs had been friends since business school and who was married to his wife's sister, requested that A. Jacobs keep their discussion confidential. A. Jacobs agreed to do so. Nonetheless, according to the complaint, the next day, A. Jacobs called his brother L. Jacobs A and told him that Chattem was going to be acquired. A few days later, L. Jacobs purchased 2000 shares of Chattem at a cost of $136,579.85. After the Announcement, L. Jacobs sold those shares for a profit of $49,457.21.
The Commission's complaint, filed in the United States District Court for the Northern District of Ohio, alleges that each defendant violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder, and seeks against each defendant permanent injunctions, disgorgement with prejudgment interest and civil monetary penalties pursuant to Section 21A of the Exchange Act. The Commission also seeks an officer and director against A. Jacobs, who was a high-level executive of a public company at the time of the tip.
This is the eighth case that the Commission has brought alleging insider trading in connection with the acquisition of Chattem by Sanofi. See SEC v. Lazorchak, et al., Lit. Rel. No. 22485; SEC v. Coots, et al, Lit. Rel. No. 22466; SEC v. Jackson, Lit. Rel. No. 22467; SEC v. Berry, Lit. Rel. No. 22465; SEC v. Melvin, et. al, Lit. Rel. No. 22468; SEC v. Rooks, Lit. Rel. No. 22469; SEC v. Condroyer, et al., Lit. Rel. No. 21347.

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