DoJ speech: policy discouraging "piling on" in enforcement actions

The DOJ has published the speech given by Deputy Attorney General Rod Rosenstein on DoJ's enforcement policy changes. In his remarks, Rosenstein announced that the DoJ will implement a policy change to discourage "piling on," i.e., disproportionate enforcement of laws by multiple authorities. There are four key features of the new policy:

  • First, the policy affirms that the federal government’s criminal enforcement authority should not be used against a company for purposes unrelated to the investigation and prosecution of a possible crime.
  • Second, the policy addresses situations in which DoJ attorneys in different components and offices may be seeking to resolve a corporate case based on the same misconduct.
  • Third, the policy encourages DoJ attorneys, when possible, to coordinate with other federal, state, local, and foreign enforcement authorities seeking to resolve a case with a company for the same misconduct.

Finally, the new policy sets forth some factors that DoJ attorneys may evaluate in determining whether multiple penalties serve the interests of justice in a particular case. Factors identified in the policy that may guide this determination include the egregiousness of the wrongdoing; statutory mandates regarding penalties; the risk of delay in finalizing a resolution; and the adequacy and timeliness of a company’s disclosures and cooperation with the DoJ.

SEC speech: cyber security, initial coin offerings, cryptocurrencies, cyber-related disclosures

The SEC has published the keynote address given by Steven Peikin, Co-Director of Enforcement to the UJA Federation in New York. In his remarks, Director Peikin focused on the potential for investor harm to flow from the rapid pace of technological change and increasing complexity in the financial markets. On cyber-related misconduct, Direct Peikin drew out four broad areas on which the SEC is focusing its resources:

  • illegal trading and manipulation resulting from hacking incidents;
  • failures by registrants to safeguard information or ensure system integrity;
  • cyber-related disclosures by public companies; and
  • initial coin offerings (ICOs), cryptocurrencies, and blockchain-related issues.

On the latter point, the Director confirmed that the SEC has "dozens" of ongoing investigations into ICOs.

Federal Communications Commission upholds $120 million fine

The Federal Communications Commission ("FCC") has approved its largest fine ever $120 million against Adrian Abramovich who was found to have placed 96.8 million fraudulent robocalls for holiday deals. The fine, which was originally imposed in 2017, was challenged but has been settled following the finding that Mr Abramvoich's activity and former Telephone Consumer Protection Act violations were sufficient to merit the fine imposed.

DoJ speech: policy discouraging "piling on" in enforcement actions

The DOJ has published the speech given by Deputy Attorney General Rod Rosenstein on DoJ's enforcement policy changes. In his remarks, Rosenstein announced that the DoJ will implement a policy change to discourage "piling on," i.e., disproportionate enforcement of laws by multiple authorities. There are four key features of the new policy:

  • First, the policy affirms that the federal government’s criminal enforcement authority should not be used against a company for purposes unrelated to the investigation and prosecution of a possible crime.
  • Second, the policy addresses situations in which DoJ attorneys in different components and offices may be seeking to resolve a corporate case based on the same misconduct.
  • Third, the policy encourages DoJ attorneys, when possible, to coordinate with other federal, state, local, and foreign enforcement authorities seeking to resolve a case with a company for the same misconduct.

Finally, the new policy sets forth some factors that DoJ attorneys may evaluate in determining whether multiple penalties serve the interests of justice in a particular case. Factors identified in the policy that may guide this determination include the egregiousness of the wrongdoing; statutory mandates regarding penalties; the risk of delay in finalizing a resolution; and the adequacy and timeliness of a company’s disclosures and cooperation with the DoJ.

United States announces complete withdrawal from the JCPOA, and provides winding-down period before sanctions re-imposition

On May 8, 2018, President Trump announced that the United States will completely withdraw from the Joint Comprehensive Plan of Action (the "JCPOA"). The JCPOA, signed in July 2015 and implemented on January 16, 2016, lifted most US nuclear related secondary sanctions and certain US primary sanctions targeting Iran. Prior to the JCPOA, the US had also imposed a broad range of "secondary sanctions" – applicable to dealings of non-US persons with sanctioned Iranian parties – in a number of key economic sectors in Iran, including automobile, energy and finance. The President's announcement today states that all pre-JCPOA nuclear related sanctions will be re-imposed (both primary and secondary), and indicates that the US may impose new and additional sanctions in the future, going beyond the already highly restrictive sanctions regime which preceded the JCPOA.

SEC charges hedge fund firm for asset mismarking and insider trading

The SEC has announced that a firm has agreed to settle charges related to asset mismarking and insider trading by its privately managed hedge funds and portfolio managers. Separately, the firm’s CFO agreed to settle charges that he failed to respond appropriately to red flags that should have alerted him to the asset mismarking. The SEC’s order finds that two portfolio managers falsely inflated the value of securities held by hedge funds it advised, causing the funds to falsely inflate returns, overstate their aggregate net asset value, and pay approximately $3.15 million in excess fees. The order also finds that certain portfolio managers traded in the securities of pharmaceutical companies in advance of two generic drug approvals by the US Food and Drug Administration (FDA). The firm agreed to settle the SEC’s charges by, among other things, disgorging illicit profits totaling more than $4.7 million plus interest of $720,711, and paying a penalty of more than $4.7 million. The CFO agreed to pay a $100,000 penalty and to be suspended from the securities industry for twelve months. The firm and its CFO each consented to the applicable SEC order without admitting or denying the findings.

US extradites hackers in $18 million fraud

Teodor Costea and Robert Dumitrescu have been extradited on federal charges from Romania to the US and face 31 counts of charges including wire fraud conspiracy, wire fraud, computer fraud and abuse, and aggravated identity theft, having obtained more than $18 million through such measures. It is alleged that between October 2011 and February 2014 both individuals installed interactive voice response software to initiate thousands of automated telephone calls and text messages purported to be from financial institutions, directing victims to a helpline where they could enter security details, due to purported issues with their bank accounts.

Former hedge fund manager sentenced to 6 years imprisonment

A former hedge fund manager, Yasuna Murakami has been sentenced to 6 years imprisonment and ordered to pay $10,520,634 in restitution for defrauding hedge fund investors. Mr Murakami pleaded guilty to SEC allegations of misappropriating more than $8 million for business and personal expenses and making approximately $1.3 million in Ponzi-like payments. The SEC charged Mr Murakami, his former business partner Avi Chiat, and their Cambridge-based investment advisory businesses MC2 Capital Management, LLC and MC2 Canada Capital Management, LLC with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8.

SEC obtains final consent judgments in insider dealing case

On April 17, 2018, the US District Court for the Southern District of New York approved settlement agreements between the SEC and a defendant, whom the SEC charged with insider trading, and a second defendant, who tipped material nonpublic information to the first. In the parallel criminal proceeding, the first defendant was convicted of securities fraud and wire fraud and the second pled guilty to those same offenses, among others.

Following the conclusion of the criminal case, the SEC obtained the settlements. The settlement with the first defendant (1) permanently enjoins him from violating Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and (2) orders him to pay disgorgement of $19,004,429.26 and prejudgment interest of $3,552,429.20, but will deem that obligation satisfied if the conditions specified (relating to the parallel criminal proceeding) occur. The settlement with the second defendant (1) permanently enjoins him from violating Exchange Act Section 10(b) and Rule 10b-5 thereunder and (2) prohibits him from acting as an officer or director of any issuer that has a class of securities registered pursuant to Exchange Act Section 12 or that is required to file reports pursuant to Exchange Act Section 15(d).

Commodities Futures Trading Commission: $3.5million in final judgments – commodity futures and forex fraud case

The CFTC has announced that on April 11, 2018, the US District Court for the District of Colorado entered Default Judgment against a Defendant and his holding company. The judgment resolves a CFTC enforcement action filed on August 6, 2014, charging three individuals with commodity futures and off-exchange retail foreign currency (forex) fraud and misappropriation. In total, the Court awarded $2,072,181.64 in restitution to the Defendants’ victims; $1,485,920 in civil monetary penalties; and made permanent trading and registration bans against all the Defendants. The Court also awarded the CFTC $31,812.35 in attorneys’ fees and costs as sanctions for refusal to respond to the CFTC’s discovery requests during the litigation.