SEC charges Ripple – and other major enforcement actions of 2020

Although the ultimate outcome remains to be seen, the news this week that the SEC is charging Ripple and its top executives with an unregistered digital asset security offering is probably going to be the biggest action against a crypto project ever. Prior to this, the previous record holder was Telegram. In that case, the SEC action against it for breaching securities laws was finally resolved in June with Telegram agreeing to pay an $18.5 million civil fine and return over $1.2 billion to people who had bought into its ICO. This was far and away the biggest crypto settlement of the year – but there were other notable actions.

Famed rascal genius John McAfee was arrested in Spain in October and charged with promoting ICOs without revealing he was being paid to do so. The charges state that McAfee was paid around $23 million in digital assets and cashed out while investors were left holding assets the SEC describes as “essentially worthless”.

Actor and martial artist Steven Seagal also found out he wasn’t above the law in 2020 and settled charges of failing to disclose payments he received for shilling Bitcoiin2Gen. The SEC said that Seagal was promised $250,000 and $750,000 in tokens for the work – and his celebrity endorsement, without revealing he was being paid, was in breach of the anti-touting provisions of federal securities laws.

Other actions included;

• Boon Tech CEO Rajesh Pavithran being charged with fraud in relation to the $5 million Boon Coin ICO.

Rajesh Pavithran

• AML Bitcoin founder Marcus Andrade being charged with fraud and breaching securities laws concerning the $5.6 million ICO of AML Bitcoin – a token he claimed was a “new and improved version of bitcoin”. It wasn’t.
  Marcus Andrade with California governor Gavin Newsom

• The SEC halting the Meta 1 Coin ICO for being what it described as an ongoing securities fraud perpetrated by former Washington state senator David Schmidt, along with Florida couple Robert Dunlap and Nicole Bowdler.
  Former state senator David Schmidt and his co-accused Robert Dunlap and Nicole Bowdler.

• The SEC charging convicted criminal Boaz Manor with raising over $30 million from hundreds of investors in a fraudulent ICO relating to CG Blockchain Inc and BCT Inc. Boaz Manor

• San Jose firm BitClave settling with the SEC and agreeing to pay its investors monetary relief for its 2017 $25 million Consumer Activity Tokens (CAT) ICO which the SEC concluded was a securities offering.

The Telegram settlement aside, the fines and settlements brought against crypto players could best be described as ‘small potatoes’ when compared with the SEC’s actions against a rogue’s gallery of name brands and institutions – many of which also featured in 2019 (see below). Included this year are;

December 17th: Robinhood
The company behind the famed investment app is charged with not revealing to customers that it is being paid by trading firms to channel its users to them – and is failing to “satisfy its duty to seek the best reasonably available terms to execute customer orders.” Robinhood Financial agrees to pay $65 million to settle the charges.

December 9th: General Electric
GE will pay $200 million to settle charges relating to misleading investors about its profits.

December 8th: Bluecrest Capital
UK based investment advisor to pay $170 million and settle charges relating to inadequate disclosures, material misstatements, and misleading omissions.

November 13th: Wells Fargo
The SEC charges former Wells Fargo CEO John G. Stumpf and Wells Fargo’s Community Bank head Carrie L. Tolstedt with allegedly misleading investors about the success of the Community Bank.

October 22nd: Goldman Sachs
The investment bank is charged under the Foreign Corrupt Practices Act for a Malaysian bribery scheme – Goldman Sachs agrees to pay $1 billion to settle the matter.

September 30th: Morgan Stanley
The investment bank agrees to pay $5 million for breaches of short selling regulations.

September 29th: J.P Morgan
The investment bank agrees to pay $35 million to resolve charges of fraudulently engaging in manipulative trading of US Treasury securities.

September 28th: Fiat Chrysler
The car maker to pay $9.5 million to settle charges relating to misleading statements about emission control systems on its vehicles.

September 24th: BMW
German based carmaker agrees to pay $18 million for releasing inaccurate and misleading information to investors.

August 13th: Hertz
The SEC charges former Hertz CEO Mark Frissora with aiding and abetting the company in its filing of inaccurate financial statements and disclosures.

August 10th: Interactive Brokers
The brokerage agrees to pay $38 million to settle charges relating to repeatedly failing to file suspicious activity reports.

May 18th: KPMG
SEC settles charges against three former KPMG audit partners for cheating in exams.

May 12th: Morgan Stanley Smith Barney
MSSB agrees to pay $5 million to investors harmed by the company providing misleading information to its clients.

May 6th: Bloomberg Tradebook LLC
The SEC settles charges against Bloomberg Tradebook for material misrepresentation.

April 6th: Cantor Fitzgerald & Co
The company agrees to pay $3.2 million to settle charges relating to it providing incomplete and inaccurate securities trading information for almost five years.

Feb 27th: Wells Fargo
The SEC orders Wells Fargo to pay a $35 million penalty to compensate harmed investors after the bank failed to reasonably supervise its investment advisers and the recommendations being made to retail investors.

Feb 7th: Wells Fargo
The SEC charges the bank with misleading investors, opening fake accounts for customers who did not ask for them, and selling unnecessary products. Wells Fargo agrees to pay $3 billion to the SEC and the Department of Justice – part of which will be returned to harmed investors.

2019

December 18th: MetLife
The SEC charges the insurance giant with violating the books and records and internal accounting controls provisions of federal securities law. MetLife agrees to pay $10 million to settle.

December 16th: Goldman Sachs
Goldman Sachs executive Tim Leissner is charged with being engaged in a corruption scheme, by which he obtained millions of dollars by paying unlawful bribes to various government officials to secure lucrative contracts for Goldman Sachs – all in breach of the Foreign Corrupt Practices Act (FCPA). Liessner agrees to settle for around $43 million.

December 9th: Jefferies LLC
The SEC announces that broker-dealers Jefferies LLC will pay nearly $4 million to settle charges of improper handling of “pre-released” American Depositary Receipts.

December 6th: Ericsson
Sweden-based Telefonaktiebolaget LM Ericsson is charged with engaging in a large-scale bribery scheme involving the use of sham consultants to secretly funnel money to government officials in multiple countries. The bribes netted Ericsson hundreds of millions in profits. Ericsson agrees to pay more than $1 billion to the SEC and the U.S. Department of Justice.

September 27th: Fiat Chrysler
The SEC charges Fiat Chrysler with misleading investors about the number of new vehicles sold each month in the United States and thus falsely portraying the company’s financial position. FCA US and Fiat Chrysler Automobiles agreed to pay $40 million to settle the charges.

September 27th: HerbaLife
Herbalife Nutrition agrees to pay $20 million to settle charges that it made false and misleading statements about its China business model in numerous U.S. regulatory filings over a six-year period.

September 27th: Mylan
The SEC charges mega drug company Mylan with overcharging Medicaid by hundreds of millions of dollars for Epipen, its largest revenue and profit generating product. Mylan agrees to settle for $30 million.

September 23rd: PwC
PricewaterhouseCoopers LLP is charged with improper professional conduct in connection with 19 engagements on behalf of 15 SEC-registered issuers and violating auditor independence rules in connection with engagements for one issuer where the firm performed prohibited non-audit services. PwC agrees to pay over $7.9 million to settle the matter.

September 23rd: Nissan
The SEC files fraud charges against Nissan, its former CEO Carlos Ghosn, and its former director Greg Kelly related to false financial disclosures that omitted more than $140 million that was to be paid to Ghosn in retirement – thus falsely portraying the company’s financial position.. Nissan settles and agrees to pay a $15 million civil penalty.

August 16th: Cantor Fitzgerald and BMO Capital
The SEC announces that Cantor Fitzgerald will pay more than $647,000 and broker BMO Capital Markets Corporation will pay over $3.9 million to settle charges of improper handling of "pre-released" American Depositary Receipts (ADRs).

July 24th: Facebook
The SEC announces charges against Facebook for making misleading disclosures regarding the risk of misuse of Facebook user data. Facebook agrees to pay $100 million to settle the case.

July 15th: Nomura
The SEC institutes two related enforcement actions against Nomura Securities International for its failure to adequately supervise traders in mortgage-backed securities. Nomura agrees to repay approximately $25 million to harmed customers.

June 27th: State Street
State Street agrees to pay the SEC $88 million to settle for overcharging mutual funds and other registered investment company clients for expenses related to the firm’s custody of client assets.

June 20th: Walmart
The SEC charges Walmart with violating the Foreign Corrupt Practices Act (FCPA) by failing to operate a sufficient anti-corruption compliance program for more than a decade. Walmart agrees to pay more than $144 million to settle the SEC charges and approximately $138 million to resolve parallel criminal charges by the U.S. Department of Justice – for a combined total of more than $282 million.

June 17th: KPMG
The SEC charges KPMG with altering past audit work after receiving stolen information about inspections of the firm that would be conducted by the Public Company Accounting Oversight Board (PCAOB). The SEC also finds that numerous KPMG audit professionals cheated on internal training exams by improperly sharing answers and manipulating test results. KPMG agrees to settle the charges and pay a $50 million penalty.

March 22nd: Merrill Lynch
The SEC announces that Merrill Lynch, Pierce, Fenner & Smith Incorporated will pay over $8 million to settle charges of improper handling of “pre-released” American Depositary Receipts (ADRs).

March 14th: Volkswagen
The SEC charges Volkswagen and its former CEO with defrauding bond investors as part of the "Clean Diesel" emissions fraud. By concealing the emissions scheme, Volkswagen reaped hundreds of millions of dollars in benefit by issuing securities at more attractive rates for the company.

February 13th: Deloitte
The SEC charges Deloitte Japan with violating auditor independence rules – Deloitte agrees to pay $2 million to settle the case.