According to the SEC’s complaint, while serving as the CEO of Alfi, a Florida-based advertising technology company, and under the pseudonym “Uptix12,” Pereira allegedly posted shortly after Alfi’s May 2021 initial public offering that he “wouldn’t doubt” that Alfi “has $10 mm to $20 mm in revenues already in their back pocket,” when, in reality, the company was set to report only $17,450 in revenue. Soon thereafter, in another alleged attempt to boost Alfi’s stock price, Pereira stated in a YouTube interview that the company was entering into a contract with the founder of a successful restaurant chain to deploy Alfi technology in the founder’s restaurants. In fact, as alleged, the restaurant chain founder never discussed such a contract with Pereira or any other Alfi personnel. The complaint further alleges that, on August 17, 2021, with the company’s stock price opening at its lowest level in nearly two months, Pereira made false and misleading statements on social media and in a company-issued press release about the company’s advertising inventory, including that “available advertising inventory by the end of 2021 is expected to be in excess of $100 million.” Contrary to Pereira’s statements, according to the complaint, the company had less than $5 million in advertising inventory at the time, and Pereira did not have a reasonable basis to believe that Alfi would achieve $100 million in advertising inventory by the end of 2021. The company filed for bankruptcy in October 2022.

“As alleged in our complaint, Pereira tried to boost the company’s stock price through his false and misleading statements,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “This case further demonstrates the SEC’s commitment to holding officers of public companies accountable when they violate their legal obligation of candor and fair and full disclosure to investors.”

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, charges Pereira with violating the anti-fraud provisions of the federal securities laws. The SEC seeks a permanent injunction, an officer-and-director bar, and a civil penalty against Pereira.

The SEC’s investigation was conducted by Alex Charap with assistance from Kathleen Strandell, and it was supervised by Jessica M. Weissman, Fernando Torres, and Glenn S. Gordon, all of the Miami Regional Office. The SEC’s litigation is being led by Russell O’Brien and Mr. Charap and supervised by Teresa Verges.

“I am pleased to support this adoption because it requires that firms that act like dealers register with the Commission as dealers, thereby protecting investors as well as promoting market integrity, resiliency, and transparency,” said SEC Chair Gary Gensler. “These measures are common sense. Congress did not intend for registration and regulatory requirements to apply to some dealers and not to others. Absent an exemption or exception, if anyone trades in a manner consistent with de facto market making, it must register with us as a dealer – consistent with Congress’s intent.”

The final rules, Exchange Act Rules 3a5-4 and 3a44-2, further define the phrase “as a part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Securities Exchange Act of 1934 to identify certain activities that would cause persons engaging in such activities to be “dealers” or “government securities dealers” and be subject to the registration requirements of Sections 15 and 15C of the Act, respectively, in connection with certain liquidity-providing roles.

Under the final rules, any person that engages in activities as described in the rules is a “dealer” or “government securities dealer” and, absent an exception or exemption, required to: register with the Commission under Section 15(a) or Section 15C, as applicable; become a member of an SRO; and comply with federal securities laws and regulatory obligations and applicable SRO and Treasury rules and requirements.

The adopting release for the final rules will be published in the Federal Register. The final rules will become effective 60 days after publication of the adopting release in the Federal Register. The compliance date for the final rules will be one year after the effective date of the final rules.

The SEC alleges that, from approximately November 2018 through January 2022, the defendants opened brokerage accounts (the victim accounts) that provided the defendants an instant deposit credit once the defendants initiated a transfer of funds to those accounts from related bank accounts, but before the fund transfer was completed. The complaint alleges that, during this short window of time between initiating the transfer and when the bank funds reached the victim accounts, the defendants took advantage of the instant deposit credit feature to purchase illiquid securities from other brokerage accounts that they controlled, for prices at which no rational investor would have purchased them, thereby generating profits in the other brokerage accounts. Later, usually on the same day, the defendants caused those other brokerage accounts to repurchase the same securities from the victim accounts at or near the much lower market price, thereby closing out the positions and leaving the victim accounts with trading losses close to the amount of the instant deposit credits extended to the victim accounts. The defendants then allegedly directed that the victim accounts be abandoned, never actually funding those accounts from the bank accounts. The complaint alleges that, through this scheme in which the defendants controlled both sides of the transactions, they were able to generate guaranteed profits at the victim accounts’ brokerage firm’s expense. All told, during the relevant period, defendants allegedly conducted the fraudulent scheme through at least 600 brokerage accounts.

“As alleged, the SEC uncovered that the defendants sought to enrich themselves by placing losing trades in hundreds of unfunded brokerage accounts that they later abandoned, leaving the brokerage firm to bear the cost,” said Joseph Sansone, Chief of the SEC’s Market Abuse Unit. “This fraudulent conduct undermines the integrity of our markets, and the SEC will continue to use data analysis to identify those who perpetrate these complex schemes and hold them accountable.”

The SEC’s complaint, filed in U.S. District Court for the Eastern District of New York, charges Hernandez and Flagg with violating the antifraud provisions of the Securities Exchange Act of 1934 and Ortiz and Lloyd with aiding and abetting those violations. The SEC also seeks permanent injunctive relief, conduct-based injunctions, disgorgement with prejudgment interest, and civil penalties. The U.S. Attorney’s Office for the Eastern District of New York today announced parallel criminal charges.

The SEC’s ongoing investigation is being conducted by Cynthia Matthews, David Austin, Matthew Lambert, John Marino, Pat McCluskey, and Lindsay Moilanen of the New York Regional Office and the SEC Enforcement Division’s Market Abuse Unit and is being supervised by Mr. Sansone. The SEC’s Office of Market Intelligence provided assistance. The SEC’s litigation will be conducted by Ms. Matthews and Christopher Dunnigan. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York and the FBI.

According to the SEC’s complaint, from approximately January 2021 through October 2021, Sumchai convinced retail investors to acquire shares of an investment she created called “Tongi Tupe” by falsely claiming that she would use a secret algorithm to generate guaranteed high returns. The complaint alleges that Sumchai first targeted respected Tongan American leaders, who were paid substantial returns on their investments, which convinced many of the leaders to believe that Tongi Tupe was legitimate. Sumchai then organized meetings hosted by these leaders at which Sumchai promoted Tongi Tupe to other members of the Tongan American community. As alleged, Sumchai promised exceedingly high returns, including a $146,000 return in 16 weeks on a $3,000 investment. In reality, the complaint alleges, Tongi Tupe did not generate any returns; instead, Sumchai operated a Ponzi scheme that relied on new investor money to pay earlier investors. Additionally, as alleged in the complaint, Sumchai used investor money for unauthorized and undisclosed purposes, including to pay for casino trips, travel, and shopping.

“As we allege in our complaint, Sumchai sought to enrich herself by exploiting retail investors within the Tongan American community,” said Monique C. Winkler, Director of the SEC’s San Francisco Regional Office. “The SEC will continue to aggressively pursue affinity frauds, which prey on the trust that members of a close-knit community have in each other.”

The SEC’s complaint, filed in U.S. District Court for the Eastern District of California, charges Sumchai with violating the antifraud provisions of the federal securities laws. The SEC seeks permanent injunctions, including a conduct-based injunction, disgorgement with prejudgment interest, a civil penalty, and an officer and director bar.

The SEC’s Office of Investor Education and Advocacy has issued an Investor Alert with tips on how investors can avoid becoming a victim of an affinity fraud.

The SEC’s investigation was conducted by Kashya Shei and Ellen Chen and supervised by Jason H. Lee and David Zhou of the San Francisco Regional Office. The litigation will be led by Sheila O’Callaghan and Ms. Shei.

According to the SEC’s order, from October to December 2021, Impact Theory offered and sold three tiers of NFTs, known as Founder’s Keys, which Impact Theory called “Legendary,” “Heroic,” and “Relentless.” The order finds that Impact Theory encouraged potential investors to view the purchase of a Founder’s Key as an investment into the business, stating that investors would profit from their purchases if Impact Theory was successful in its efforts. Among other things, Impact Theory emphasized that it was “trying to build the next Disney,” and, if successful, it would deliver “tremendous value” to Founder’s Key purchasers. The order finds that the NFTs offered and sold to investors were investment contracts and therefore securities. Accordingly, Impact Theory violated the federal securities laws by offering and selling these crypto asset securities to the public in an unregistered offering that was not otherwise exempt from registration.

“Absent a valid exemption, offerings of securities, in whatever form, must be registered,” said Antonia Apps, Director of the SEC’s New York Regional Office. “Without registration, investors of all types are deprived of the protections afforded them by the robust disclosures and other safeguards long provided by our securities laws.”

Without admitting or denying the SEC’s findings, Impact Theory agreed to a cease-and-desist order finding that it violated registration provisions of the Securities Act of 1933 and ordering it to pay a combined total of more than $6.1 million in disgorgement, prejudgment interest, and a civil penalty. The order also establishes a Fair Fund to return monies that injured investors paid to purchase the NFTs. Impact Theory agreed to destroy all Founder’s Keys in its possession or control, publish notice of the order on its websites and social media channels, and eliminate any royalty that Impact Theory might otherwise receive from future secondary market transactions involving the Founder’s Keys.

The SEC’s investigation was conducted by Benjamin Mishkin, Jessica Quinn, and Judith Weinstock of the SEC’s New York Regional Office. Hane L. Kim of the Division of Examinations, Gwen Licardo, Pamela Sawhney, and Mark R. Sylvester of the Enforcement Division’s Crypto Assets and Cyber Unit (CACU) and Carmen Taveras Alam, Ignacio Franceschelli, and Joshua Mallett of the Division of Economic and Risk Analysis provided assistance. The investigation was supervised by Sheldon Pollock, David Hirsch, and Jorge Tenreiro.

According to the SEC’s complaint, from the Blazar Token’s launch in November 2021 to its eventual collapse, DeSalvo raised at least $620,000 from approximately 220 investors. As the complaint alleges, DeSalvo claimed that the Blazar Token would replace existing state pension systems and falsely told investors that Blazar Token was registered with the SEC; that he had arranged for Blazar Token to be purchased by automatic payroll deduction; and that investors were guaranteed to receive extraordinary returns. Ultimately, DeSalvo misappropriated and misused investor funds. According to the complaint, DeSalvo targeted law enforcement and first responders with his fraudulent schemes.

Additionally, the SEC’s complaint alleges that, in an earlier fraud scheme, beginning in late January 2021, DeSalvo solicited investors, primarily through social media, to participate in an investment venture where he was to invest their funds in stocks, options, and crypto asset securities. The complaint alleges that, within weeks of depositing the $95,000 he raised from 17 investors into his brokerage account, DeSalvo lost about $17,000 of those funds in speculative investments, misappropriated the remaining $78,000, and told investors that the group’s securities had lost all value due to poor market conditions.

“We allege that DeSalvo orchestrated several fraudulent investment schemes that targeted law enforcement personnel and promised astronomical returns, including one involving a crypto asset security that would somehow replace traditional state pension systems. Rather than producing any returns or revolutionary technology, he instead misappropriated and misused investor money,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “What’s particularly offensive about this case is that DeSalvo used his status as a former corrections officer to gain the trust of fellow law enforcement personnel, a number of whom invested their savings with him. I am proud that the SEC is able to deliver some measure of justice to those brave first responders who DeSalvo victimized by holding him accountable for his appalling conduct.”

“Our complaint alleges a brazen affinity fraud that preyed on retail investors’ trust and sense of community,” said David Hirsch, Chief of the Crypto Assets and Cyber Unit in the SEC’s Division of Enforcement. “Too often in crypto, we see promoters perpetrate familiar frauds in shiny new wrappers by making claims that are difficult for investors to independently verify. Registering the offer and sale of securities enables critical oversight and improves disclosures to investors, and we will continue to pursue those who fail to abide by the securities laws’ registration requirements.”

The complaint, filed in the U.S. District Court for the District of New Jersey, charges DeSalvo with violating the antifraud and offering registration provisions of the securities laws. It seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.

In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against DeSalvo.

The SEC’s investigation was conducted by Brian Higgins and Brian Thomas of the Philadelphia Regional Office and David Snyder of the Crypto Assets and Cyber Unit. It was supervised by Assunta Vivolo, Scott A. Thompson, Nicholas P. Grippo, Jorge G. Tenreiro, and David Hirsch. The SEC’s litigation will be handled by Christopher R. Kelly and supervised by Gregory R. Bockin.