Category: SEC-2401

Securities and Exchange Commission (SEC)

January 2024 Press Releases

SEC-PR-2024-11

Categories Crypto Investment Fraud SEC-2401 Unregistered Offerings
SEC-PR-2024-11 (JAN. 29, 2024)
PRESS RELEASE | 2024-11

SEC Charges Founder of $1.7 Billion “HyperFund” Crypto Pyramid Scheme and Top Promoter with Fraud. Promoter Brenda Chunga (aka Bitcoin Beautee) agrees to settle fraud and unregistered offering charges.

Washington D.C., Jan. 29, 2024 — The Securities and Exchange Commission today charged Xue Lee (aka Sam Lee) and Brenda Chunga (aka Bitcoin Beautee) for their involvement in a fraudulent crypto asset pyramid scheme known as HyperFund that raised more than $1.7 billion from investors worldwide.

According to the SEC’s complaint, from June 2020 through early 2022, Lee and Chunga promoted HyperFund “membership” packages, which they claimed guaranteed investors high returns, including from HyperFund’s supposed crypto asset mining operations and associations with a Fortune 500 company. As the complaint alleges, however, Lee and Chunga knew or were reckless in not knowing that HyperFund was a pyramid scheme and had no real source of revenue other than funds received from investors. In 2022, the HyperFund scheme collapsed and investors were no longer able to make withdrawals.

“As alleged in our complaint, Lee and Chunga attracted investors with the allure of profits from crypto asset mining, but the only thing that HyperFund mined was its investors’ pockets,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “This case illustrates yet again how noncompliance in the crypto space facilitates schemes where promoters capitalize on the promise of easy money, without providing the detailed investor protection disclosures required by the registration provisions of the federal securities laws.”

The SEC’s complaint, filed in federal district court in the District of Maryland, charges Lee and Chunga with violating the anti-fraud and registration provisions of the federal securities laws. The complaint seeks permanent injunctive relief, conduct-based injunctions preventing the defendants from participating in multi-level marketing or crypto asset offerings, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties. Chunga agreed to settle the charges, to be permanently enjoined from future violations of the charged provisions and certain other activity, and to pay disgorgement and civil penalties in amounts to be determined by the court at a future date. The settlement is subject to court approval. The charges against Lee will be litigated.

In a parallel action, the U.S. Attorney’s Office for the District of Maryland today announced criminal charges against Lee and Chunga. Chunga pleaded guilty to conspiracy to commit securities fraud and wire fraud.

The SEC’s ongoing investigation is being conducted by David Snyder and Assunta Vivolo, assisted by Tom Bedkowski, of the SEC’s Crypto Assets & Cyber Unit (CACU). It is being supervised by David Hirsch and Jorge Tenreiro of the CACU and Nicholas Grippo and Scott Thompson of the Philadelphia Regional Office. The litigation will be conducted by Judson Mihok and Gregory Bockin of the Philadelphia Regional Office. The Commission appreciates the assistance of the U.S. Attorney’s Office for the District of Maryland; the Department of Justice, Fraud Section; Homeland Security Investigations New York; and the IRS.

The SEC’s Office of Investor Education and Advocacy directs investors to resources on detecting and avoiding pyramid schemes. Investors can find additional information about pyramid schemes at Investor.gov.

The SEC encourages victims of the alleged fraud to contact HyperFundVictims@sec.gov. Victims interested in learning about the criminal prosecution involving HyperFund should also visit the website https://www.justice.gov/criminal/case/hyperfund-and-associated-cases, which includes information about submitting a victim impact statement and details about potentially recovering their investments.

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SEC-PR-2024-10

Categories Misrepresentations SEC-2401
SEC NEWS - SEC-PR-2024-10SEC-PR-2024-10 (JAN. 25, 2024)

PRESS RELEASE | 2024-10

SEC Charges Northern Star SPAC for Material Misrepresentations in its IPO-Related Disclosures

Washington D.C., Jan. 25, 2024 — The Securities and Exchange Commission today announced that Northern Star Investment Corp. II, a special purpose acquisition company (SPAC), agreed to settle charges that it made misleading statements in forms filed with the SEC as part of its January 2021 initial public offering (IPO).

According to the SEC’s order, Northern Star stated in its SEC filings that neither the company nor anyone acting on its behalf had initiated any substantive discussions with any potential target companies prior to the IPO. However, the SEC’s order finds that Northern Star had engaged in discussions with a target company and that company’s controlling shareholder in connection with a potential SPAC business combination dating back to December 2020 and continuing for several weeks. Furthermore, according to the SEC’s order, after announcing a merger agreement with the target company, Northern Star did not adequately disclose its interactions with the target company in its Form S-4 filings.

“Northern Star’s failure to disclose discussions with its merger target kept investors in the dark about its future plans, information that would have been important in deciding whether to invest in this SPAC,” said Nicholas P. Grippo, Director of the SEC’s Philadelphia Regional Office. “Given that the purpose of a SPAC is to identify and acquire an operating business, SPACs should be transparent about any pre-IPO discussions with potential acquisition targets.”

The SEC’s order finds that Northern Star violated an antifraud provision of the Securities Act of 1933. Without admitting or denying the SEC’s findings, Northern Star agreed to a cease-and-desist order and to pay a $1.5 million penalty in the event it closes a merger transaction.

The SEC’s investigation was conducted by Oreste P. McClung and Brian R. Higgins and was supervised by Brendan P. McGlynn, Scott A. Thompson, and Mr. Grippo, all with the Philadelphia Regional Office.

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SEC-PR-2024-09

Categories Investment Advisers Misleading Public Pension Fund SEC-2401
SEC NEWS - SEC-PR-2024-09SEC-PR-2024-09 (JAN. 25, 2024)

PRESS RELEASE | 2024-9

SEC Charges Chicago-based Aon Investments and Former Partner with Misleading Pennsylvania Public Employees’ Pension Fund.

Washington D.C., Jan. 25, 2024 — The Securities and Exchange Commission today announced settled charges against Aon Investments USA Inc., a Chicago-based registered investment adviser, and the firm’s former partner, Claire P. Shaughnessy, for misleading their client, the Pennsylvania Public School Employees’ Retirement System (PSERS), about the reason for a discrepancy between two different calculations by Aon of PSERS’s investment returns for the same period.

The SEC’s orders find that Aon was responsible for calculating PSERS’s investment returns for “risk share,” a provision under Pennsylvania law that requires public school employees to contribute more to their pensions if the retirement fund does not meet certain investment return rates. If PSERS’s investment return rate for the nine-year period ending June 30, 2020 was lower than 6.36 percent, it would trigger risk share, requiring an increase in public-school employees’ contributions.

According to the SEC’s orders, in June 2020, Aon provided PSERS its quarterly returns for the purpose of estimating PSERS’s investment return rate. The orders find that some of the quarterly returns Aon provided to PSERS in 2020 did not match the historical returns that Aon previously provided PSERS for the same periods. According to the SEC’s orders, PSERS repeatedly questioned Aon’s calculations of the investment returns and asked Aon to investigate a discrepancy between the returns. The SEC finds that, in response to these inquiries, Aon and Shaughnessy, who led the PSERS engagement, failed to adequately investigate that discrepancy, instead providing PSERS with two reasons for the discrepancy that Aon had previously ruled out. The orders further find that Shaughnessy misrepresented to PSERS that the discrepancy was not due to errors when, in fact, she did not know the reason for the discrepancy. According to the orders, in December 2020, Aon and Shaughnessy reported to PSERS that the risk share return rate for that period was 6.38 percent – just high enough to avoid triggering risk share. Ultimately, the discrepancy turned out to be due to errors in the underlying data, and, when the rate was recalculated, the corrected return rate was 6.34 percent – triggering risk share and requiring additional employee contributions.

“Investment advisers must be scrupulously honest with their clients,” said LeeAnn G. Gaunt, Chief of the Public Finance Abuse Unit. “Pension funds and other municipal entities should be able to trust that their investment advisers are telling them the truth.”

Without admitting or denying the SEC’s findings, Aon consented to a settled order finding that it violated Section 206(2) of the Advisers Act, censuring it, and ordering it to pay a civil penalty of $1 million and disgorgement and prejudgment interest of $542,187. Without admitting or denying the SEC’s findings, Shaughnessy consented to a settled order finding that she also violated Section 206(2) of the Advisers Act, censuring her, and ordering her to pay a civil penalty of $30,000.

The SEC’s investigation was conducted by Heidi M. Mitza, Joseph O. Chimienti, and Creighton Papier of the Public Finance Abuse Unit and was supervised by Kevin B. Currid. Trial counsel Susan Cooke of the Boston Regional Office also assisted in the investigation.

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SEC-PR-2024-08

Categories Investor Protection SEC-2401
SEC NEWS - SEC-PR-2024-08SEC-PR-2024-08 (JAN. 24, 2024)

PRESS RELEASE | 2024-8

SEC Adopts Rules to Enhance Investor Protections Relating to SPACs, Shell Companies, and Projections

Washington D.C., Jan. 24, 2024 — The Securities and Exchange Commission today adopted new rules and amendments to enhance disclosures and provide additional investor protection in initial public offerings (IPOs) by special purpose acquisition companies (SPACs) and in subsequent business combination transactions between SPACs and target companies (de-SPAC transactions).

SPAC IPOs and de-SPAC transactions can be used as a means for private companies to enter the public markets. Given the complexity of these transactions, the Commission seeks to enhance investor protection in SPAC IPOs and de-SPAC transactions with respect to the adequacy of disclosure and the responsible use of projections. The rules also address investor protection concerns more broadly with respect to shell companies and blank check companies, including SPACs.

“Just because a company uses an alternative method to go public does not mean that its investors are any less deserving of time-tested investor protections,” said SEC Chair Gary Gensler. “Today’s adoption will help ensure that the rules for SPACs are substantially aligned with those of traditional IPOs, enhancing investor protection through three areas: disclosure, use of projections, and issuer obligations. Taken together, these steps will help protect investors by addressing information asymmetries, misleading information, and conflicts of interest in SPAC and de-SPAC transactions.”

The new rules and amendments require, among other things, enhanced disclosures about conflicts of interest, SPAC sponsor compensation, dilution, and other information that is important to investors in SPAC IPOs and de-SPAC transactions. The rules also require registrants to provide additional information about the target company to investors that will help investors make more informed voting and investment decisions in connection with a de-SPAC transaction.

The rules more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs. For example, in certain situations, the rules require the target company to sign a registration statement filed by a SPAC (or another shell company) in connection with a de-SPAC transaction. This would make the target company a “co-registrant” and assume responsibility for disclosures in that registration statement.  In addition, the rules make the Private Securities Litigation Reform Act of 1995 safe harbor from liability for forward-looking statements unavailable to certain blank check companies, including SPACs.

In connection with de-SPAC transactions, the rules include disclosure requirements related to projections, including disclosure of all material bases of the projections and all material assumptions underlying the projections. The rules also update and expand guidance on the use of projections in all SEC filings.

The adopting release is published on SEC.gov and will be published in the Federal Register. The rules will become effective 125 days after publication in the Federal Register. Compliance with the structured data requirements, which require tagging of information disclosed pursuant to new subpart 1600 of Regulation S-K in Inline XBRL, will be required 490 days after publication of the rules in the Federal Register.

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SEC-PR-2024-07

Categories SEC-2401 Whistleblower Protection

SEC-PR-2024-07 (JAN. 16, 2024)

PRESS RELEASE | 2024-7

J.P. Morgan to Pay $18 Million for Violating Whistleblower Protection Rule. The Firm’s confidential agreements impeded clients from communicating with the SEC.

Washington D.C., Jan. 16, 2024 — The Securities and Exchange Commission today announced settled charges against J.P. Morgan Securities LLC (JPMS) for impeding hundreds of advisory clients and brokerage customers from reporting potential securities law violations to the SEC. JPMS agreed to pay an $18 million civil penalty to settle the charges.

According to the SEC’s order, from March 2020 through July 2023, JPMS regularly asked retail clients to sign confidential release agreements if they had been issued a credit or settlement from the firm of more than $1,000. The agreements required the clients to keep confidential the settlement, all underlying facts relating to the settlement, and all information relating to the account at issue. In addition, even though the agreements permitted clients to respond to SEC inquiries, they did not permit clients to voluntarily contact the SEC.

“Whether it’s in your employment contracts, settlement agreements or elsewhere, you simply cannot include provisions that prevent individuals from contacting the SEC with evidence of wrongdoing,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “But that’s exactly what we allege J.P. Morgan did here. For several years, it forced certain clients into the untenable position of choosing between receiving settlements or credits from the firm and reporting potential securities law violations to the SEC. This either-or proposition not only undermined critical investor protections and placed investors at risk, but was also illegal.”

“Investors, whether retail or otherwise, must be free to report complaints to the SEC without any interference,” said Corey Schuster, Co-Chief of the Enforcement Division’s Asset Management Unit. “Those drafting or using confidentiality agreements need to ensure that they do not include provisions that impede potential whistleblowers.”

The SEC’s order finds that JPMS violated Rule 21F-17(a) under the Securities Exchange Act of 1934, a whistleblower protection rule that prohibits taking any action to impede an individual from communicating directly with the SEC staff about possible securities law violations. Without admitting or denying the SEC’s findings, JPMS agreed to be censured, to cease and desist from violating the whistleblower protection rule, and to pay the $18 million civil penalty.

The SEC’s investigation was conducted by Marie DeBonis and Jessica Neiterman, with assistance from John Farinacci, and supervised by Virginia Rosado Desilets, Brianna Ripa, Mr. Schuster, and Andrew Dean, all of the SEC’s Asset Management Unit. Rua Kelly of the Trial Unit also assisted in the investigation.

The SEC strongly encourages the public to submit any tips, complaints, and referrals via https://www.sec.gov/tcr. 

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SEC-PR-2024-06

Block Trading Fraud Categories SEC-2401

SEC NEWS - SEC-PR-2024-06SEC-PR-2024-06 (JAN. 12, 2024)

PRESS RELEASE | 2024-6

SEC Charges Morgan Stanley and Former Executive Pawan Passi with Fraud in Block Trading Business. The Firm agrees to pay more than $249 million to settle fraud charges and for failing to enforce information barriers.

Washington D.C., Jan. 12, 2024 — The Securities and Exchange Commission today charged investment banking giant Morgan Stanley & Co. LLC and the former head of its equity syndicate desk, Pawan Passi, with a multi-year fraud involving the disclosure of confidential information about the sale of large quantities of stock known as “block trades.” The SEC also charged Morgan Stanley with failing to enforce its policies concerning the misuse of material non-public information related to block trades.

“Sellers entrusted Morgan Stanley and Passi with material non-public information concerning upcoming block trades with the full expectation and understanding that they would keep it confidential,” said SEC Chair Gary Gensler. “Instead, Morgan Stanley and Passi abused that trust by leaking that same information and using it to position themselves ahead of those trades. While their conduct may have earned them tens of millions of dollars on low-risk trades, it violated the federal securities laws. Thanks to the hard work of the SEC staff, they are being held accountable.”

“Despite assuring selling shareholders that they would keep their efforts to sell large blocks of stock confidential, Morgan Stanley and Pawan Passi instead leaked that material non-public information to mitigate their own risk, win more block trade business, and generate over a hundred million dollars in illicit profits,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “When market participants game the system for personal gain in this way, it erodes investor confidence and undermines market integrity. Today’s fraud charges underscore our commitment to holding wrongdoers accountable, no matter how complicated the fraud or sophisticated the perpetrators.”

A block trade generally involves the sale of a large quantity of shares of an issuer’s stock, privately arranged and executed outside of the public markets. According to the SEC’s orders, from at least June 2018 through August 2021, Passi and a subordinate on Morgan Stanley’s equity syndicate desk disclosed non-public, potentially market-moving information concerning impending block trades to select buy-side investors despite the sellers’ confidentiality requests and Morgan Stanley’s own policies regarding the treatment of confidential information. The SEC’s orders find that Morgan Stanley and Passi disclosed the block trade information with the understanding that those buy-side investors would use the information to “pre-position” by taking a significant short position in the stock that was the subject of the upcoming block trade. According to the SEC orders, if Morgan Stanley eventually purchased the block trade, the buy-side investors would then request and receive allocations from the block trade from Morgan Stanley to cover their short positions. This pre-positioning reduced Morgan Stanley’s risk in purchasing block trades.

The SEC’s order further finds that Morgan Stanley failed to enforce information barriers to prevent material non-public information involving certain block trades from being conveyed by the equity syndicate desk, which sits on the private side of Morgan Stanley, to a trading division on the public side of the firm. As a result, the firm was unable to sufficiently scrutinize whether trades by that division, placed while the equity syndicate desk was in discussions with selling shareholders regarding potential block trades, were based on such confidential discussions.

The SEC’s order concerning Morgan Stanley finds that the firm willfully violated Sections 10(b) and 15(g) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder, censures the firm, and orders it to pay approximately $138 million in disgorgement, approximately $28 million in prejudgment interest, and an $83 million civil penalty. The SEC’s order concerning Passi finds that he willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, orders him to pay a $250,000 civil penalty, and imposes associational, penny stock, and supervisory bars.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal resolutions with Morgan Stanley and Passi. The SEC’s ordered disgorgement and prejudgment interest for Morgan Stanley will be deemed partially satisfied by the forfeiture and restitution paid by the firm, which totals $136,531,223, pursuant to its criminal resolution.

The SEC’s investigation was conducted by David Bennett and Colby Steele in the Enforcement Division’s Market Abuse Unit with the assistance of John Marino, Darren Boerner, and Matthew Koop of the Market Abuse Unit’s Analysis and Detection Center and trial counsel Suzanne Romajas and James Connor, and Carmen Taveras, Frank Brown, and Adam Yonce in the Division of Economic and Risk Analysis. The case was supervised by Paul Kim and Joseph Sansone.

The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the FBI, and the Financial Industry Regulatory Authority.

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SEC-PR-2024-05

Categories Disclosure Failures Manipulative Trading SEC-2401

SEC NEWS - SEC-PR-2024-05SEC-PR-2024-05 (JAN. 11, 2024)

PRESS RELEASE | 2024-5

SEC Charges Future FinTech CEO Shanchun Huang With Fraud and Disclosure Failures.

Washington D.C., Jan. 11, 2024 — The Securities and Exchange Commission today charged Shanchun Huang with manipulative trading in the stock of Future FinTech Group Inc., using an offshore account shortly before he became Future FinTech’s CEO in 2020. The SEC also charged Huang with failing to disclose his beneficial ownership of Future FinTech stock as well as transactions in such stock.

According to the SEC’s complaint, in late 2019 or early 2020, Huang was approached by Future FinTech’s founder and former CEO about the possibility of Huang becoming CEO of Future FinTech. Huang allegedly used an account in Hong Kong to place trades in Future FinTech stock beginning in January 2020, at a time when Future FinTech was at risk of being delisted from NASDAQ because its stock price had fallen below NASDAQ’s minimum bid price requirement of $1.00 per share. Huang allegedly bought more than 530,000 shares of Future FinTech over a two-month period and repeatedly traded at a volume so large that his trades constituted a high percentage of the daily volume of Future FinTech stock transactions. Huang also allegedly placed multiple buy orders in short timeframes, placed limit buy orders with escalating limit prices from one order to the next, and made trades that generally would not make economic sense for an investor seeking to buy the stock at the lowest available price. The SEC’s complaint alleges that Huang’s trades were intended to, and at times did, push the Future FinTech stock price up. For example, on February 6, 2020, when Huang’s trading constituted 60 percent of the daily trading volume, he placed multiple buy orders within nine minutes, driving the price up from $0.89 to $1.05, at which point his trading stopped.

Huang was named Future FinTech’s CEO in March 2020. Upon becoming CEO of Future FinTech, Huang was required to file initial, annual, and change of ownership forms about his holdings of Future FinTech stock, but he failed to do so for the year after he became CEO. As alleged in the complaint, in March 2021, after he no longer owned any Future FinTech stock, Huang belatedly filed a misleading initial form representing that he owned no Future FinTech stock.

“Timely disclosure of insider stock transactions is a fundamental component of the federal securities laws that ensures the fair operation of our securities markets,” said Sheldon L. Pollock, Associate Regional Director of the SEC’s New York Regional Office. “CEOs should assume that the use of an offshore account will not prevent the staff of the SEC from identifying manipulative trading.”

The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Huang with violating the antifraud and beneficial ownership disclosure provisions of the Securities Exchange Act of 1934 and seeks permanent injunctive relief, a civil penalty, and an officer-and-director bar.

The SEC’s investigation has been conducted by Yitzchok Klug, Howard Kim, and Adam S. Grace, and supervised by Mr. Pollock. The SEC’s litigation will be led by Travis Hill.

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SEC-PR-2024-04

Categories FCPA Violations SEC-2401

SEC NEWS - SEC-PR-2024-04SEC-PR-2024-04 (JAN. 10, 2024)

PRESS RELEASE | 2024-4

SEC Charges Global Software Company SAP for FCPA Violations. German multinational agrees to monetary sanctions of nearly $100 million to settle SEC’s bribery charges.

Washington D.C., Jan. 10, 2024 — The Securities and Exchange Commission today announced charges against global software company SAP SE for violations of the Foreign Corrupt Practices Act (FCPA) arising out of bribery schemes in South Africa, Malawi, Kenya, Tanzania, Ghana, Indonesia, and Azerbaijan. The company agreed to monetary sanctions of nearly $100 million in disgorgement and prejudgment interest to settle the SEC’s charges.

The SEC’s order finds that SAP, whose American Depositary Shares are listed on the New York Stock Exchange, violated the FCPA by employing third-party intermediaries and consultants from at least December 2014 through January 2022 to pay bribes to government officials to obtain business with public sector customers in the seven countries mentioned above. According to the SEC’s order, SAP inaccurately recorded the bribes as legitimate business expenses in its books and records, despite the fact that certain of the third-party intermediaries could not show that they provided the services for which they had been contracted. The SEC’s order finds that SAP failed to implement sufficient internal accounting controls over the third parties and lacked sufficient entity-level controls over its wholly owned subsidiaries.

“Our order holds SAP accountable for misconduct that spanned seven jurisdictions and persisted for several years and serves as a stark reminder of the need for global companies to be attuned to both the risks of their business and the need to maintain adequate entity-level controls over all their subsidiaries,” said Charles E. Cain, Chief of the SEC Division of Enforcement’s FCPA Unit.

In 2016, the SEC charged SAP ⊗ with books and records and internal accounting controls violations in connection with a bribery scheme in Panama.

SAP consented to the SEC’s order finding that it violated the anti-bribery, recordkeeping, and internal accounting controls provisions of the Securities Exchange Act of 1934. SAP agreed to cease and desist from committing or causing any violations of these provisions and to pay disgorgement of $85 million plus prejudgment interest of more than $13.4 million, totaling more than $98 million, which will be offset by up to $59 million paid by SAP to the South African government in connection with its parallel investigations into the same conduct.

The SEC’s action is part of a coordinated global settlement that includes the United States Department of Justice (DOJ) and criminal and civil authorities in South Africa. In its parallel case, SAP agreed to pay the DOJ a $118.8 million criminal fine and to a forfeiture of approximately $103 million, of which $85 million will be satisfied by the company’s payment of disgorgement pursuant to the SEC’s order.

The SEC’s investigation was conducted by Sana Muttalib and Sonali Singh and was supervised by Ansu N. Banerjee of the SEC’s FCPA unit.

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SEC-PR-2024-03

Categories SEC-2401

SEC NEWS - SEC-PR-2024-03SEC-PR-2024-03 (JAN. 5, 2024)

PRESS RELEASE | 2024-3

Securities and Exchange Commission Appoints Stacey Bowers as Small Business Advocate

Washington D.C., Jan. 5, 2024 — The Securities and Exchange Commission today announced that University of Denver law professor Stacey Bowers has been named the new director of the SEC’s Office of the Advocate for Small Business Capital Formation (OASB). Ms. Bowers, a seasoned practitioner in corporate and securities law, began her legal career as a staff attorney in the SEC’s Division of Corporation Finance before entering private practice to counsel public companies through initial public offerings and represent entrepreneurs seeking to raise capital to advance their businesses.

“Stacey will bring deep experience to the role of Director of the Office of the Advocate for Small Business Capital Formation,” said SEC Chair Gary Gensler. “I look forward to working with her to advance the SEC’s important work on behalf of small businesses and their investors. I’d also like to thank Amy Reischauer for helping carry out the Office’s work in her capacity as Acting Deputy Director.”

Ms. Bowers said, “The capital formation process is both rewarding and challenging, and the SEC’s Small Business Advocate can help make it a little less daunting for entrepreneurs to succeed in raising the capital they need for their businesses and their investors to thrive. I’ve thoroughly enjoyed serving on the SEC’s Small Business Capital Formation Advisory Committee this past year and look forward to returning to work at the agency where my legal career began, working alongside such talented SEC staff, particularly within OASB, who are so devoted to ensuring our capital markets work fairly and efficiently for everyone.”

OASB is an independent office established in January 2019 to advance the interests of small businesses and their investors in the capital formation process. The office proactively works to identify and address unique capital formation challenges faced by small businesses, particularly those that are minority-owned or women-owned or located in rural or natural disaster areas.

Since 2018, Ms. Bowers has served as Director of the Corporate and Commercial Law Program at the University of Denver’s Sturm College of Law, where she earned her own law degree in 1992. She joined the Sturm faculty in 2007 and has taught many courses on corporate and securities law, including capital raising. As a practitioner, Ms. Bowers has represented business owners from startups to more established companies as they navigated the capital formation process.

Ms. Bowers earned her bachelor’s degree in business/accounting (cum laude) from the University of Pittsburgh. In addition to her law degree, Ms. Bowers also earned a master’s degree in library and information science and a Ph.D. in curriculum and instruction studies at the University of Denver.

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SEC-PR-2024-02

Categories Real Estate Investment Fraud SEC-2401

SEC NEWS - SEC-PR-2024-02SEC-PR-2024-02 (JAN. 3, 2024)

PRESS RELEASE | 2024-2

SEC Charges Florida Real Estate Developer Rishi Kapoor with Perpetuating $93 Million Fraud Scheme and Obtains Emergency Relief

Washington D.C., Jan. 3, 2024 — The Securities and Exchange Commission today announced that it obtained an asset freeze and other emergency relief concerning an alleged $93 million real estate investment fraud perpetrated by Miami-based developer Rishi Kapoor. The SEC also charged Location Ventures LLC, Urbin LLC, and 20 other related entities in connection with the fraud scheme.

According to the SEC’s complaint, from approximately January 2018, until at least March 2023, Kapoor and certain of the defendant entities solicited investors by, among other things, making several material misrepresentations and omissions regarding Kapoor, Location Ventures, Urbin, and their real estate developments. The false statements allegedly included misrepresenting Kapoor’s compensation; his cash contribution to the capitalization of Location Ventures; the corporate governance of Location Ventures and Urbin; the use of investor funds; and Kapoor’s background. The SEC’s investigation uncovered that Kapoor allegedly misappropriated at least $4.3 million of investor funds and improperly commingled approximately $60 million of investor capital between Location Ventures, Urbin, and some of the other charged entities. The complaint also alleges that Kapoor caused some entities to pay excessive fees and to represent higher returns to investors by significantly understating cost estimates.

“As alleged in our complaint, Kapoor was the architect of a multi-pronged real estate offering fraud that misappropriated millions from more than 50 investors,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “This emergency action reflects our commitment to protecting investors and holding those who defraud them accountable for their actions.”

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, charges Kapoor, Location Ventures, Urbin, and the 20 related entities with violating provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC seeks permanent injunctions, civil monetary penalties, an officer-and-director bar against Kapoor, and disgorgement of ill-gotten gains with prejudgment interest against Kapoor and certain of the charged entities.

The SEC’s continuing investigation is being conducted by Jordan A. Cortez, John T. Houchin, Fernando Torres, and Mark Dee, and supervised by Eric R. Busto and Glenn Gordon, with the assistance of Russell R. O’Brien and Regional Trial Counsel Teresa Verges. The litigation will be led by Mr. O’Brien and will be supervised by Ms. Verges.

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