SEC Ponzi fraud charges
The Securities and Exchange Commission (SEC) has charged six individuals, including Eliyahu Weinstein, with orchestrating a multi-million dollar Ponzi-like fraud scheme. The scheme involved raising funds from investors for purported deals to purchase and sell healthcare products. Weinstein, Bromberg, and Wittels concealed Weinstein’s criminal history and involvement from investors. Anderson and Curry joined in raising funds for the deals and also concealed Weinstein’s role. Hattab assisted in carrying out the scheme.
As some of the deals proved unprofitable, the defendants engaged in a fraudulent scheme, using funds raised from new investors to make Ponzi-like payments to earlier investors, mischaracterising them as investment returns. The fraudulent scheme raised at least $38 million from 150 investors.
Weinstein is a convicted felon with a history of fraud, having pleaded guilty in 2013 and 2014 for previous Ponzi and securities fraud schemes. Despite his criminal history, Weinstein’s identity was concealed from investors.
Gensler testimony and budget request
SEC chair Gary Gensler spoke before the Subcommittee on Financial Services and General Government US Senate Appropriations Committee.
For FY 2024, the SEC has requested a budget of $2.436 billion, with the majority allocated to support staffing levels due to inflation. This funding would help the SEC adapt to market changes and adequately address risks and misconduct.
Genlser noted that the Division of Enforcement and Examinations plays a crucial role in investigating and preventing fraud and misconduct, and additional resources would enable more effective oversight. He added that, even on a reduced budget in GY22, the Division brought more than 750 enforcement actions in FY 2022, a 9 percent increase over the prior year. SEC actions resulted in orders for $6.4 billion in penalties and disgorgement.
He added too that within the Examinations division, In FY 2022, more than 3,000 examinations were carried out across tens of thousands of registrants, from investment advisers to broker-dealers to exchanges, to ensure they are following their legal obligations to customers, including seniors and other vulnerable investors. The budget requested would help this division grow to more than 1100 full-time employees.
- Gensler’s budget request would lead to growing the corporation finance team to 454 full time employees (FTE).
- The investment management team would grow to 238 FTEs.
- Trading and markets have requested 309 FTEs.
- He has requested $393 million to support the Commission’s data analysis, cybersecurity, and other IT needs.
SEC charges firm for fraud
The Securities and Exchange Commission (SEC) has announced it has settled fraud charges against Digital World Acquisition Corporation (DWAC), a special purpose acquisition company (SPAC). The charges are related to material misrepresentations made by DWAC in forms filed with the SEC as part of its initial public offering (IPO) and proposed merger with Trump Media & Technology Group Corp. (TMTG).
According to the SEC’s order, DWAC failed to disclose its plan to acquire and pursue TMTG before the IPO. In early September 2021, DWAC filed an amended Form S-1 for its IPO, stating that it had not discussed with any potential target companies before the IPO. However, investigations revealed that DWAC’s CEO and others involved had extensive discussions with TMTG dating back to February 2021.
The order also found that DWAC’s CEO pursued discussions with TMTG on behalf of another SPAC but later formulated a plan to use DWAC for a potential merger with TMTG. DWAC failed to disclose this potential conflict of interest and signed agreement with TMTG in its IPO filing, making the amended Form S-1 materially false and misleading.
Furthermore, in a later Form S-4 filed after the announcement of the proposed merger, DWAC mischaracterised and omitted information about its history of interactions with TMTG.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasized that these disclosure failures are particularly problematic for SPACs, as investors rely on factors such as management teams and potential merger targets for their financial decisions.
As part of the settlement, DWAC agreed to a cease-and-desist order and to pay an $18 million penalty if it closes a merger transaction. It also committed to filing an amended Form S-4 that accurately reflects the SEC’s findings.
FATF reports improvements in Turkey AML
In its latest follow up report, the Financial Action Task Force (FATF) has re-rated Turkey on a number of recommendations made since the mutual evaluation report in October 2019.
As a result, the country has been re-rated on six recommendations:
- Recommendations 8, 22 and 28 are re-rated from Partially Compliant to Largely Compliant.
- Recommendation 12 is re-rated from Non Compliant to Compliant.
- Recommendation 15 is re-rated from Largely Compliant to Partially Compliant.
- Recommendation 26 is re-rated from Partially Compliant to Compliant.
EBA issues climate risk consultation
The European Banking Authority (EBA) has initiated a public consultation on draft templates to gather climate-related data from EU banks. This is part of the Fit-for-55 climate risk scenario analysis, involving the EBA, European Supervisory Authorities (ESAs), European Central Bank (ECB), and European Systemic Risk Board (ESRB). The templates aim to collect information on credit risk, market risk, and real estate risks. Banks are requested to report aggregated and counterparty level data as of December 2022, enabling assessment of concentration risk and broader climate-related risks in the banking sector.
The consultation period extends until 11th October 2023.
A selected summary of key developments for regulated financial institutions
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