Federal law enforcement agencies disrupt networks of foreign fraudsters in three-month campaign
In a major operation, the Justice Department, FBI, US Postal Inspection Service (USPIS), and other federal law enforcement agencies have successfully completed a three-month campaign aimed at dismantling networks used by foreign fraudsters to acquire illicit gains. The operation specifically targeted “money mules,” individuals who play a crucial role in facilitating fraud by receiving money from victims and forwarding the proceeds to overseas perpetrators. While some of these individuals were aware of their involvement in illegal activities, others were initially victims themselves and may have been unaware of their contribution to criminal operations.
During the three-month operation, law enforcement authorities executed more than 4,000 actions against individuals responsible for aiding various types of fraud schemes. These schemes ranged from consumer-focused scams (like lottery fraud and romance scams) to those targeting businesses and pandemic relief funds.
The actions taken by law enforcement agencies included criminal prosecutions, civil actions, and warning letters. The primary objectives were to hold accountable those who knowingly assisted fraudsters and to inform those who unknowingly aided them about the criminal nature of their actions. The aim of these measures is to deter foreign fraudsters from relying on individuals based in the United States to facilitate their schemes, ultimately reducing the harm caused by international fraud operations.
This successful operation highlights the collaborative efforts of multiple federal agencies in combating fraud and protecting both consumers and businesses from falling victim to fraudulent activities. It is hoped that the crackdown sends a strong message to both domestic and foreign fraudsters that law enforcement agencies are committed to disrupting their networks and bringing them to justice.
SEC settles charges with company which violated whistleblowing provisions
Gaia, Inc, a Colorado-based company, has settled charges with the Securities and Exchange Commission (SEC) for overstating the number of its paying subscribers, while its CFO, Paul C Tarell, Jr, was also charged for his involvement in the overstatement. The SEC also accused Gaia of retaliating against a whistleblower and impeding former employees from reporting potential securities law violations. The SEC found that Gaia misrepresented its subscriber count for the first quarter of 2019 by including gifted free subscriptions and declined credit card payments in its reported figures. Gaia agreed to a cease-and-desist order, a $2 million civil penalty, and specified undertakings, while Tarell agreed to a $50,000 civil penalty
SEC obtains final judgment against investment adviser in microcap stock trading scheme
Thomas Carter Ronk has been hit with significant penalties by the US District Court for the Central District of California after being involved in fraudulent schemes. The court’s final consent judgment includes injunctive relief, a five-year officer-and-director bar, a five-year penny stock bar, and a $75,000 civil penalty.
Ronk was accused of engaging in fraudulent promotional efforts, making false statements to investors, and manipulating stock prices. The judgment permanently enjoins Ronk from violating securities laws and serves as a deterrent against future misconduct in the financial markets.
SEC shuts down Ponzi scheme business
The Securities and Exchange Commission (SEC) has obtained an emergency order to halt an alleged ongoing offering fraud and Ponzi-like scheme orchestrated by Integrated National Resources Inc., operating as WeedGenics. The owners of the company, Rolf Max Hirschmann and Patrick Earl Williams, have raised over $60 million from investors under the pretense of expanding their cannabis operations. However, most of the funds were diverted to make $16.2 million in Ponzi-like payments and to enrich themselves.
According to the SEC’s complaint, since at least June 2019 Hirschmann and Williams had promised investors significant returns of up to 36% by using the raised funds to expand WeedGenics facilities. In reality, the complaint alleges that Hirschmann and Williams never owned or operated any facilities — it was all a fraudulent scheme. Instead, they transferred investors’ money through multiple accounts to benefit others and for personal expenses such as entertainment, jewelry, luxury cars, and residential real estate.
To avoid detection, Hirschmann assumed the false identity of Max Bergmann when communicating with investors, while Williams, serving as the Vice President of the company, operated behind the scenes.
FRC issues corporate governance code consultation
The Financial Reporting Council (FRC) has published a consultation paper proposing limited changes to the UK Corporate Governance Code. The introduction to the consultation paper states: “The main proposed changes concern those parts of the Code which deal with the need for a more robust framework of prudent and effective risk management and internal controls. They are aimed at providing a stronger basis for reporting on, and evidencing the effectiveness of, the framework during the reporting period.”
This concise revision aims to strengthen the Code’s role in promoting sound corporate governance. The key changes include:
- Providing a revised framework of prudent and effective controls, enhancing the basis for reporting and demonstrating their effectiveness.
- Improving the functionality of the comply-or-explain approach, considering recent FRC research and reports.
- Reflecting the board and audit committee’s responsibilities for sustainability, ESG reporting, and related assurance, in accordance with the company’s audit and assurance policy.
- Updating the Code to align with changes in legal and regulatory requirements as outlined in the Government’s response to the White Paper, including reinforcing reporting on malus and clawback arrangements.
Changes to the Code will take place for accounting years commencing on or after 1st January 2025, and the consultation deadline is 13th September 2023.
UK economic crime minutes published
Minutes from the meeting of the Economic Crime Strategic Board on 29th March 2023 have been published by the UK government. The Board discussed measures being taken across tech, telcos and financial services to stop fraud and Board noted the need for the swift implementation of the Online Safety Bill, the importance of information and data sharing across the system, including with social media and telcos, and education to help stop fraud at source.
The board also briefly discussed money laundering noting the significant changes being made to Companies House and highlighting the importance of ensuring the integrity of the Beneficial Ownership register and the role information sharing could play in this.
A selected summary of key developments for regulated financial institutions
Access all of our daily regulatory content by using the login button below.
To find out more about how CUBE can help your business click here.