December 19, 2016
Topical Highlights for Securities provides summaries of significant federal and state judicial decisions and legislative and administrative activities affecting Securities law. A Westlaw subscription is required to access the documents linked from this page.
Fraud: Founder of pyramid scheme acted with scienter to commit securities fraud. Securities and Exchange Commission v. CKB168 Holdings, Ltd. 2016 WL 6915859 (E.D.N.Y.)The founder of a multi-national pyramid scheme to sell shares of a non-public sham corporation acted with scienter to commit securities fraud, as required for Securities and Exchange Commission (SEC) claims for violation of Section 10(b) of the Securities Exchange Act, Rule 10b-5, and Section 17(a) of the Securities Act, when he helped to create a deceptive scheme and directed its promotional efforts. The founder helped create and distribute a plan based on the sale of shares in an online educational company that had no real products for retail sale. He made himself a top investor despite being warned that it would create a conflict of interest. H e explained to other investors how to arrange their downlines. He traveled frequently to the United States and other countries, appearing with and otherwise encouraging promoters. He falsely told audiences that they could earn active returns and claimed investors could get stock, even though he knew it was illegal for stock to be distributed, and he acted as the key source of misrepresentations about the operation. 2016 WL 6915859 (The full-text of the rest of the Topical Highlights is available within Thomson Reuters Westlaw, subscription required).
Sanctions: Assignee’s claims against trustee of trusts holding assigned residential mortgage-based securities did not warrant dismissal as discovery sanction. Royal Park Investments SA/NV v. U.S. Bank National Association 2016 WL 6705773 (S.D.N.Y.)
Fraud: SEC failed to establish that transfers by company controlled by defendant to him were subject to disgorgement in insider trading action. U.S. Securities and Exchange Commission v. Ferrone 2015 WL 6407456 (N.D.Ill.)