Source: https://www.sec.gov/news/digest/2013/dig102913.htm
Timestamp: 2019-04-21 20:50:39+00:00

Document:
The Securities and Exchange Commission (Commission) announced today that on October 21, 2013, The Honorable Richard J. Sullivan of the United States District Court for the Southern District of New York, entered a final judgment against Joseph M. Mancuso ("Mancuso") in SEC v. Mancuso, 13-CV-2555, an insider trading case the SEC filed on April 17, 2013. The SEC alleged in its complaint that Mancuso, a former proprietary trader at the registered broker-dealer Schottenfeld Group, LLC, used inside information he received from his good friend and colleague Zvi Goffer ("Goffer") to trade ahead of five separate corporate acquisition announcements in 2007, resulting in illicit profits of approximately $350,000.
The SEC's complaint alleged that Mancuso used the material, nonpublic information he was tipped by Goffer to trade ahead of the announced acquisitions of Avaya, Inc., 3Com Corp., Axcan Pharma Inc., Hilton Hotels Corp. and Kronos Inc. As alleged in the complaint, certain of the tips originated from Arthur Cutillo ("Cutillo") and Brien Santarlas ("Santarlas"), attorneys at the law firm Ropes & Gray. The SEC alleged that Cutillo and Santarlas had access to inside information about potential acquisitions involving their firm's clients, and that Goffer paid them kickbacks in exchange for the information, using their mutual friend Jason Goldfarb as a conduit. The SEC alleged that other tips passed from Goffer to Mancuso came through Gautham Shankar ("Shankar"), another former proprietary trader at Schottenfeld. As alleged in the complaint, Shankar was tipped the inside information by Thomas Hardin, a managing director at the hedge fund adviser Lanexa Management. The SEC alleged that Goffer also paid kickbacks in exchange for this information.
To settle the SEC's charges, Mancuso consented to the entry of a final judgment that: (i) permanently enjoins him from violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and (ii) orders disgorgement of $349,489, plus prejudgment interest of $112,171. Those payment obligations will be waived, and no civil penalty will be imposed, in light of Mancuso's financial condition. In addition, Mancuso consented to the entry of an SEC Order, which was issued today, barring him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and barring him from participating in any offering of a penny stock.
The judgment against Mancuso concludes the SEC's investigation in this matter, which resulted in insider trading charges against more than 20 individuals and entities, including all of the individuals named above. In these cases, the SEC obtained judgments totaling more than $16 million in disgorgement and civil penalties, and in related administrative proceedings barred 15 individuals from the securities industry. Many of these individuals also were charged and convicted in parallel criminal actions, including Goffer, who is currently serving a ten-year prison sentence.
In the Matter of Ronald Baldwin, Jr.
The Commission today announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions (Order) against Ronald Baldwin, Jr.
The Order finds that from January 1, 2010 until his resignation effective March 28, 2011, Baldwin, a certified public accountant licensed to practice in the State of Florida since 1996, was employed by JBI, Inc. (JBI) as its Chief Financial Officer. The Order finds that JBI's common stock was quoted on the OTC Bulletin Board. The Order also finds that the Commission filed fraud charges against Baldwin in an action titled Securities and Exchange Commission v. JBI, Inc. et al., Civil Action Number 1:12-cv-10012-MLW (District of Massachusetts, Complaint filed January 4, 2012).
The Order finds that the Commission's complaint alleges, among other things, that Baldwin and others engaged in a scheme to commit securities fraud by stating materially false and inaccurate financial information on the financial statements of JBI for two reporting periods during 2009. Specifically, the complaint alleges that in an effort to boost JBI's value as a company, Baldwin and others overstated by almost 1,000% the value of certain of JBI's assets on the company's financial statements for the third quarter of 2009 and the year end 2009. JBI and others then used the overvalued financial statements in two private capital raising efforts that raised more than $8.4 million from unwitting investors.
The Order finds that on October 16, 2013, the court entered a final judgment by consent against Baldwin, permanently enjoining him from violating Section 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1 and 13a-14 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder, and ordered Baldwin to pay a civil penalty of $25,000. Baldwin also was barred for five years from acting as an officer or director of a public company.
On October 29, 2013, the Commission filed a civil injunctive action in federal court in the Northern District of Georgia against Dennis Rosenberg ("Rosenberg"). The Commission alleges that Rosenberg traded in the securities of Carter's Inc., ("Carter's), the Atlanta-based public issuer and clothing marketer, on the basis of material non-public information provided by a former Carter's executive, and tipped two investment advisers about this information.
The Commission's complaint alleges that, between 2005 and 2010, Rosenberg, a retired hedge fund investment consultant and market analyst who had previously covered the stock of Carter's, traded in advance of market-moving news concerning Carter's anticipated earnings, after having been tipped by a former Carter's executive regarding the substance of the upcoming announcements. Rosenberg also disclosed this information to two investment advisers for two separate hedge funds, according to the complaint, who then also traded on the inside information. Rosenberg's total ill-gotten gains, losses avoided, and consulting fees (based on tips to one hedge fund client) totaled approximately $500,000, according to the complaint, while the combined losses avoided and profits by Rosenberg's tippees totaled approximately $2 million.
The Commission's complaint alleges that Rosenberg violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Without admitting or denying any of the allegations in the complaint, Rosenberg consented to the entry of an order enjoining him from future violations of these provisions, and ordering him to disgorge approximately $500,000 of ill-gotten gains and approximately $108,000 in prejudgment interest. The amount of civil monetary penalties to be imposed, if any, will be decided at a later date.
This is the second insider trading case that the Commission has brought in connection with its ongoing investigation of trading in the securities of Carter's, see SEC v. Eric Martin, et al., http://www.sec.gov/litigation/litreleases/2012/lr22458.htm, and the Commission's fifth overall case as part of its broader Carter's investigation. See SEC v. Joseph Elles, http://www.sec.gov/litigation/litreleases/2010/lr21784.htm, SEC v. Joseph Pacifico, http://www.sec.gov/litigation/litreleases/2012/lr22517.htm, SEC v. Michael Johnson, http://www.sec.gov/litigation/litreleases/2012/lr22520.htm.
In the Matter of Patch International, Inc.
An Administrative Law Judge has issued an Initial Decision dismissing the proceeding as to all allegations in Miguel A. Ferrer, Admin. Proc. File No. 3-14862. The Securities and Exchange Commission issued an Order Instituting Proceedings on May 1, 2012, in which the Division of Enforcement alleged that Respondents, employees of UBS Financial Services, Inc. of Puerto Rico (UBS PR), misrepresented and omitted to disclose material facts to investors, and thereby misled investors into buying and holding hundreds of millions of dollars in UBS PR–affiliated, non-exchange-traded closed-end funds in 2008 and 2009.
DBX ETF Trust, et al.
In most cases, recent 8-K reports may be viewed by using the search function on the Commission's Web site located at http://www.sec.gov/edgar/searchedgar/currentevents.htm.

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