SEC[1] and DOJ[2] Bring Parallel Actions in $275 Million Ponzi Schemes Involving Water Vending Machines There has not been much news regarding SEC enforcement lately, but today the SEC and DOJ both charged a founder of a Washington-based water vending machine manufacturer Water Station Management, LLC and two related companies for perpetrating two separate, albeit related, Ponzi schemes. This is not what Michael Burry meant when he said he was investing in water.
Recently, in SEC v. Spartan Securities Group, Ltd, et al.[1], a Florida federal court held that the Securities and Exchange Commission (“SEC”) could seek disgorgement and direct funds to the Treasury because the defrauded victims could not be identified.[2]
Continue Reading Florida District Court Permits the SEC to Pay Disgorgement to the US Treasury Where Victims of the Fraud Could not be Identified
The government cannot take action against abuses of the various aid programs associated with the CARES Act without first identifying abuses. In a recent round of inquiries, FINRA sent requests to numerous individuals it has identified as having obtained aid under the CARES Act (e.g., the Paycheck Protection Program (PPP) or Economic Injury Disaster Loan (EIDL)). FINRA has acknowledged the existence of these requests and has stated the focus of the inquiries is the representatives and not FINRA member firms.
Continue Reading When PPP met OBA – An Investigation was Born
By Toby M. Galloway, Matthias Kleinsasser, Joe Wielebinski
In sports, it is often said that “winning cures everything.” The same concept applies to uncovering fraud. When the economy is strong and most investors are making money, there is little incentive to ask difficult questions about a company’s performance. Once the economy craters, however, investors begin demanding answers and harsh truths are often revealed. As Warren Buffett has said, “only when the tide goes out do you discover who’s been swimming naked.”
Continue Reading Fraud in the Time of Covid-19