Among recent enforcement actions were charges filed by the Securities and Exchange Commission against a New York man for conducting fraudulent securities offerings and stealing investor funds and a Financial Indistry Regulatory Authority fine and censure against a broker-dealer that allowed reps to use personal email accounts for client communications.
In addition, the secretary of the commonwealth of Massachusetts charged four men and their company with fraudulently selling unregistered securities in a pyramid scheme.
SEC: New Yorker Touted Fake Offerings to Pay for Vacation, Plastic Surgery
Anthony Coronati, the operator of an online stock recommendation business, was charged by the SEC with conducting several fraudulent securities offerings and siphoning some of the money raised from investors for a Caribbean vacation and plastic surgery.
According to the agency, Coronati initially held himself out as an investment advisor to a hedge fund that he claimed would invest in equity securities. But the hedge fund never existed, and instead Coronati used the money he raised for himself.
When that source of money dried up, Coronati, who operates the website BidToAsk.com that offers stock recommendations to subscribers, sold membership interests in the company for the purpose of investing in promising technology companies that had not yet held IPOs.
Investors were told that BidToAsk would invest directly in pre-IPO Facebook shares without charging any fees, commissions or markups to investors. But Bidtoask's Facebook-related investments actually did require the payment of significant fees, which Coronati and Bidtoask hid from investors. Bidtoask did not even own the shares of other technology companies in which it was supposedly investing, and these companies were not actually in the process of an IPO.
To cover what he was doing, Coronati used money from later investors to pay earlier ones, and went so far as to issue fictitious statements indicating holdings in the fake hedge fund and detailing its equally fake holdings. Meanwhile, he used investor money to pay for business expenses, the Caribbean vacation and plastic surgery, and also to purchase securities in a personal brokerage account he held in his own name.
The SEC filed a subpoena enforcement action against Coronati last year after he failed to show up to testify or to produce documents. As a result, he was held in contempt of court and arrested earlier this year.
Coronati and Bidtoask have agreed to settle the SEC's charges. Coronati must pay back $400,000 in funds stolen from investors, and the money will be deposited into a fair fund for distribution to victims of the fraud schemes. Coronati also agreed to be permanently barred from the securities industry.
Rajaratnam Brother to Pay More Than $840,000 for Insider Trading
The SEC announced that former hedge fund manager Rajarengan "Rengan" Rajaratnam has agreed to pay more than $840,000 and accept securities industry bars in order to settle the agency's insider trading case against him.
The SEC filed civil charges in March 2013 against Rengan Rajaratnam for his role in the widespread insider trading scheme conducted by his brother Raj Rajaratnam and hedge fund advisory firm Galleon Management. The insider trading occurred in securities of more than 15 companies for illicit gains totaling nearly $100 million. The SEC has now obtained court judgments or settlements in Galleon-related enforcement actions against 35 defendants, resulting in approximately $165 million in monetary sanctions.
Rengan Rajaratnam, who became a portfolio manager at Galleon after co-founding hedge fund advisory firm Sedna Capital Management, neither admitted nor denied the SEC's allegations in agreeing to the settlement that is subject to court approval.
The proposed final judgment would permanently enjoin Rengan Rajaratnam from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and require him to pay $372,264.42 in disgorgement, $96,714.27 in prejudgment interest and a $372,264.42 penalty.
