Hedge Funds: SEC Weekend Fraud Roundup

    • SECFollowing a plea deal struck in April, Oregon-based hedge fund manager Yusaf Jawed has been sentenced to six years in prison for defrauding investors of $37 million. Jawed plead guilty to 17 counts of mail and wire fraud and was ordered to pay $6.4 million in forfeitures, he paid a $34 million settlement to the SEC.
    • The SEC charged a Manhattan-based independent filmmaker with insider trading on confidential information about impending takeovers of two biotechnology companies. The SEC alleges that Lawrence Robbins reaped illicit profits by trading Millennium Pharmaceuticals Inc. and Sepracor Inc. securities based on confidential information that he received from his business partner John Michael Bennett in advance of the acquisition announcements by the two companies.  Bennett had received the inside information from his friend Scott Allen.  The SEC previously charged Bennett and Allen for their roles in the scheme. Robbins, who lives in New York City, has agreed to settle the SEC’s charges by paying more than $1 million.
    • 10 former brokers at an Albany, N.Y.-based firm at the center of a $125 million investment scheme have been charged by the SEC. The co-owners have already received jail sentences. The SEC filed an emergency action in 2010 to halt the scheme at McGinn Smith & Co. and freeze the assets of the firm and its owners Timothy M. McGinn and David L. Smith, who were later charged criminally by the U.S. Attorney’s Office for the Northern District of New York and found guilty.
    • The SEC charged a former executive at Qualcomm Inc. and his former financial advisor with insider trading ahead of major announcements by the San Diego-based wireless technology company for more than a quarter-million dollars in profits. The SEC alleges that Jing Wang, a former executive vice president and president of global business operations at Qualcomm, used a secret offshore brokerage account to make illegal trades based on confidential information that he learned on the job.  Gary Yin, a former registered representative at Merrill Lynch, helped Wang set up the account.  Yin also created a secret offshore account of his own and traded on the non-public information gleaned from Wang.  When Wang eventually realized that insider trading in the offshore accounts still may be discovered by the SEC or other regulators, he concocted a plan to conceal his trading activity by claiming the trades were made by his brother.
    • A father and son in Lexington, S.C., have been charges with operating a fraudulent investment program designed to illegally profit from the deaths of terminally ill individuals. The SEC alleges that Benjamin S. Staples and his son Benjamin O. Staples deceived brokerage firms and bond issuers and made at least $6.5 million in profits by lying about the ownership interest in bonds they purchased in joint brokerage accounts opened with people facing imminent death who were concerned about affording the high costs of a funeral.  The Stapleses recruited the terminally ill individuals into their program by offering to pay their funeral expenses if they agreed to open the joint accounts and sign documents that relinquished their ownership rights to the accounts or any assets in them.
    • A Massachusetts-based technology firm has been charged for illegally tipping non-public information about the company’s financial predicament as part of the insider trading scheme operated by now-imprisoned Galleon Management hedge fund founder Raj Rajaratnam. The SEC alleges that Kieran Taylor, who was the senior director of marketing for Akamai Technologies, illegally tipped hedge fund portfolio manager Danielle Chiesi with confidential information about the company’s plans to lower its revenue guidance for 2008.  Chiesi in turn tipped Rajaratnam with the non-public information so they and others could trade ahead of the negative news and make millions of dollars in illegal profits.  Taylor also traded on the non-public information by selling 2,500 shares of Akamai stock that he held in a personal brokerage account to avoid losses of $20,635. Taylor, who now lives in New York City, has agreed to settle the SEC’s charges by paying more than $145,000 and being barred from serving as an officer or director of a public company.
    •  The SEC yesterday charged TD Bank and a former executive with violating securities laws in connection with a massive South Florida-based Ponzi scheme conducted by Scott Rothstein, who is now serving a 50-year prison sentence. The SEC alleges that TD Bank and its then-regional vice president Frank A. Spinosa defrauded investors by producing a series of misleading documents and making false statements about accounts that Rothstein held at the bank and used to perpetuate his scheme. Spinosa falsely represented to several investors that TD Bank had restricted the movement of the funds in these accounts when, in fact, Rothstein could transfer investor money however he desired.  Spinosa also orally assured investors that certain accounts held balances totaling millions of dollars, but each account actually held zero to $100. TD Bank agreed to settle the SEC’s charges in an administrative proceeding and pay $15 million.

About Alex Akesson

Alex has been specializing in hedge fund and alternative investment news since April 2006. Working mainly in research and manager interviews, she has published breaking news on the hedge fund industry on her blog, as well as several industry publications. Her access to hedge fund managers gives her insight into news stories as well, and the ability to track press releases and other breaking news in real time.
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