News and Articles

Monthly Archives: April 2020

SEC Awards $5 Million to Whistleblower

On April 20, 2020 the SEC announced a $5 million award to a whistleblower who provided significant information that led to a successful enforcement action. The whistleblower provided critical evidence of wrongdoing, which saved the SEC a significant amount of time and resources. Additionally, the SEC noted that the informant suffered a unique hardship as a result of raising concerns internally.

The SEC has awarded approximately $430 million to 80 individuals since issuing its first award in 2012. According to the CEO of the SEC’s Office of the Whistleblower, “The whistleblower award today is the seventh award the SEC has announced to individual whistleblowers in the last month.” “These awards demonstrate the valuable contributions whistleblowers make to the protection of markets and investors and we encourage people to move forward with information about possible securities law violations.”

All payments through this program are made from an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. The Commission emphasizes, that no money has been taken or withheld from harmed investors to pay whistleblower awards. The informant’s award is based on a percentage of the money collected in fees and sanctions paid by the violators they uncovered, and if they provided the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10% to 30% of the money collected when the monetary sanctions exceed $1 million.

As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not discloses information that could reveal a whistleblower’s identity. If you believe you have information of a material nature that would be helpful to the SEC’s mission, David A. Weintraub, P.A. may be able to represent you in connection with your whistleblower claim.

SEC Orders Merrill Lynch to Reimburse Investors for Violating Mutual Funds Share Class Selection Disclosures

Today the SEC announced settled charges against Merrill Lynch, Pierce, Fenner & Smith, Incorporated and two other self-reporting advisory firms and ordered more than $139 million to be returned to investors as part of the agreement.  According to the Order, against Merrill Lynch, the proceedings arise out of breaches of fiduciary duty and inadequate disclosures in connection with its mutual fund share class selection practices and the fees it received.  During the relevant period, Merrill Lynch purchased, recommended, or held for advisory clients’ mutual fund share classes that charged higher fees instead of lower-cost share classes of the same funds for which the clients were eligible. Mutual Funds typically offer investors different types of shares or shares classes.  Each class represents an interest in the same portfolio of securities with the same investment objective; making the fee structure their main difference.   For instance, Institutional shares, or Class I shares typically pay lower annual fund operating expenses over time, equaling to higher returns than other classes that charge 12b-1 fees.   The recurring 12b-1 fees are included in the total annual fund operating expenses and deducted automatically from the mutual funds’ assets.  These recurring fees are paid generally to the broker-dealer that distributed or sold the shares, Merrill Lynch, in this case.    Additionally, the SEC found that Merrill Lynch failed to disclose these conflicts of interest relating to its receipt of the fees and/or its choice of mutual fund class that would pay such fees.  

The order states that they are censured, and that they cease and desist from future related violations and that they pay disgorgement and prejudgment interest totaling over $425,000 and that they comply with certain undertakings, including returning the money to investors.   It’s worth noting that, Merrill Lynch, self-reported to the SEC the aforementioned violation. 

SEC Awards Over $27 Million to Whistleblower

Today the SEC announced an award of more than $27 million to a whistleblower who alerted the agency to misconduct occurring, in part, overseas.  The record demonstrated that the informer voluntarily provided original information to the Commission that led to the successful enforcement of the action.  The whistleblower provided a substantial amount of ongoing assistance and cooperation by meeting with staff numerous times and providing relevant documents and critical investigative leads that advanced the investigation and saved the Commission a significant amount of time and resources.  Additionally, the SEC noted that the informant repeatedly and strenuously raised its concerns internally. 

The SEC has awarded approximately $430 million to 80 individuals since issuing its first award in 2012.  All payments through this program are made from an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  The Commission emphasizes, that no money has been taken or withheld from harmed investors to pay whistleblower awards.  The informant’s award is based on a percentage of the money collected in fees and sanctions paid by the violators they uncovered, and if they provided the SEC with original, timely, and credible information that leads to a successful enforcement action.  Whistleblower awards can range from 10% to 30% of the money collected when the monetary sanctions exceed $1 million.

As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not discloses information that could reveal a whistleblower’s identity.  If you believe you have information of a material information that would be helpful to the SEC’s mission, David A. Weintraub, P.A. may be able to represent you in connection with your whistleblower claim.

Florida Attorney General collaborates with Florida’s Senior Groups to Protect Older Floridians from COVID-19 Scams

Florida Attorney General Ashley Moody, together with leaders from the American Association of Retired Persons, Association of Mature American Citizens, American Seniors Association and the Florida Council on Aging, met virtually on April 9, 2020, to discuss emerging scams targeting older Floridians amid COVID-19 pandemic. According to Attorney General Moody, “Seniors are uniquely vulnerable to COVID-19 and to scams designed to exploit the fear surrounding the pandemic to rip off Floridians. That is why we are working with the top senior groups in Florida to make sure older Floridians have the resources necessary to avoid falling prey to these fraudsters.” During the virtual meeting, the panel discussed some of the most common COVID-19 scams victimizing elderly citizens, such as: cyber scams, telephone and text messaging scams, counterfeit product offers, bogus door to door testing offers, offers to sell fake virus cures and phony charity donation solicitations.

The report warns in reference to cyber scams that citizens should be wary of all emails claiming to be from the Centers for Disease Control and Prevention, the World Health Organization and other healthcare organizations, offering to share information about the virus. Also, be on the lookout for emails asking for the verification of personal data in exchange for receiving economic stimulus funds or other benefits from the government. Government agencies are not sending out emails asking for sensitive personal information in order to receive government funds or other official pandemic financial relief.

The panel also discussed the ongoing robocall problem. Now that many Floridians are working remotely and are home there has been an increasing volume of phone calls, making it hard to ignore unknown numbers. The panel advises that if anybody receives a robocall, just hang up! Do not press any numbers or characters on your phone. Scammers are calling with offers involving everything from COVID-19 treatments and cures to work from home schemes. Like email phishing scams, text messages from unknown sources may offer hyperlinks to what appears to be automated pandemic updates or interactive infection maps. Clicking on these links gives scammers a way of installing malware on mobile electronic devices, putting the recipient of the message at increased risk of identity theft and financial exploitation.

Other points of conversation were offers for COVID-19 vaccinations and home test kits. Currently, no vaccines, pills, lotions, medications or other prescription or over the counter products are available to treat or cure the novel coronavirus. Do not answer the door or allow inside any unknown individual or business representatives offering to sell consumer products, medical kits, vaccines, cures or in person COVID-19 testing. It is recommended that when buying consumer products that are in extreme demand, like sanitizers, personal hygiene products, and health and medical supplies that are offered online, the consumer be very cautious and confirm that the website is legitimate, additionally it is recommended that the consumer pays with a credit card rather than a debit card, and keep a record of the transaction. If you believe a company is capitalizing through prize gouging, bring your concerns to the attention of the Attorney General’s office by contacting the Price Gouging Hotline at 1.866.9NO-SCAM.

Lastly, the panel warns about phony charities and donation requests that take advantage of the good will and generosity by creating fictitious charitable organizations and seeking donations that never go to the fake charity’s stated cause and take money away from those in need. Be sure to research where a charitable donation is going. Additionally, Attorney General Moody issued a Consumer Alert warning Floridians about scammers using the new coronavirus stimulus package to target Floridians. News of the historic stimulus is providing ammo for scammers already trying to exploit the COVID-19 pandemic to rip off Floridians.

Alabama Securities Commission Issues a Cease and Desist Order Against Ultra BTC Mining LLC

The Alabama Securities Commission issued a Cease and Desist Order against Ultra BTC Mining LLC aka Ultra Mining (Ultra) and its CEO and registered agent David Taylor, as well as Laura Branch, an agent for Ultra. Through the Order the Commission requested the parties to stop a purportedly fraudulent cryptocurrency cloud mining scheme. Ultra is also under investigation for its fraudulent misrepresentations related to Coronavirus 2019 (COVID-19) donations.

The Commission reviewed Ultra’s website representations and found that the firm claims to provide a modern, high efficiency platform for rental services for cryptocurrency cloud mining. The firm offers an investment opportunity, on their website, in the form of “mining plans” where investors invest in two-year plans for the purpose of mining cryptocurrencies. The mining activities are to be performed or leased by Ultra and the investment return is based on the hash rate purchased. Through its website Ultra offers an earnings-calculator to simulate investment returns of approximately 105% per annum. These projections are unrealistic based on any reasonable investment assumptions, unsustainable, and are per se fraudulent. According to the website, investors will benefit from the connection to mining pools. It also offers an “affiliate program” wherein investors earn a commission for referring business to the company. Furthermore, the Order states that Ultra placed an unsubstantiated claim on their website that they had donated $100,000 to UNICEF to fight COVID-19.

The Commission asserted that neither Ultra nor Ms. Branch had any registrations or licenses, in any capacity. Furthermore, Ultra violated Alabama’s securities laws by issuing and acting as agents in the sales of securities, in this case the mining plans. The Order does not prevent the Commission from seeking such other civil or criminal remedies that are available. If you believe you have been the victim or this or other investment scams, David A. Weintraub, P.A. would be interested in speaking with you.