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SEC Nearly Doubles Size of Enforcement’s Crypto Assets and Cyber Unit

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"Bitcoin Crypto Coin Stock Photo" by Crypto360 is marked with CC BY 2.0.

Washington D.C., May 3, 2022 — The Securities and Exchange Commission today announced the allocation of 20 additional positions to the unit responsible for protecting investors in crypto markets and from cyber-related threats. The newly renamed Crypto Assets and Cyber Unit (formerly known as the Cyber Unit) in the Division of Enforcement will grow to 50 dedicated positions.

“The U.S. has the greatest capital markets because investors have faith in them, and as more investors access the crypto markets, it is increasingly important to dedicate more resources to protecting them,” said SEC Chair Gary Gensler. “The Division of Enforcement’s Crypto Assets and Cyber Unit has successfully brought dozens of cases against those seeking to take advantage of investors in crypto markets. By nearly doubling the size of this key unit, the SEC will be better equipped to police wrongdoing in the crypto markets while continuing to identify disclosure and controls issues with respect to cybersecurity.”

Since its creation in 2017, the unit has brought more than 80 enforcement actions related to fraudulent and unregistered crypto asset offerings and platforms, resulting in monetary relief totaling more than $2 billion. The expanded Crypto Assets and Cyber Unit will leverage the agency’s expertise to ensure investors are protected in the crypto markets, with a focus on investigating securities law violations related to:

  • Crypto asset offerings;
  • Crypto asset exchanges;
  • Crypto asset lending and staking products;
  • Decentralized finance (“DeFi”) platforms;
  • Non-fungible tokens (“NFTs”); and
  • Stablecoins.

In addition, the unit has brought numerous actions against SEC registrants and public companies for failing to maintain adequate cybersecurity controls and for failing to appropriately disclose cyber-related risks and incidents. The Crypto Assets and Cyber Unit will continue to tackle the omnipresent cyber-related threats to the nation’s markets.

“Crypto markets have exploded in recent years, with retail investors bearing the brunt of abuses in this space. Meanwhile, cyber-related threats continue to pose existential risks to our financial markets and participants,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “The bolstered Crypto Assets and Cyber Unit will be at the forefront of protecting investors and ensuring fair and orderly markets in the face of these critical challenges.”

The infusion of 20 additional positions into the Crypto Assets and Cyber Unit will bolster the ranks of its supervisors, investigative staff attorneys, trial counsels, and fraud analysts in the agency’s headquarters in Washington, DC, as well as several regional offices.

Press release distributed by the SEC.

Featured image: by Crypto360 is marked with CC BY 2.0.

President of Synergy Settlement Services accused of misusing beneficiaries’ funds on golf tournaments and beach parties

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"Golf Club Against Ball" by kulicki is marked with CC BY 2.0.

Defendants allegedly used funds from deceased beneficiaries’ accounts on golf tournaments and beach parties

Washington D.C., May 2, 2022 — The Securities and Exchange Commission today announced fraud charges against Synergy Settlement Services, Inc., CEO Jason D. Lazarus, Esq., both based in Orlando, FL, and President Anthony F. Prieto, Jr. of Tampa, FL, for allegedly defrauding individuals with disabilities into believing that the individuals were placing their funds in a pooled trust managed by a non-profit association. According to the SEC’s charges, the defendants instead used a non-profit trustee as a shell company to profit from disabled personal injury victims.

The SEC alleges that Lazarus and Prieto formed the Foundation for Those with Special Needs, Inc. as a non-profit company to “assist personal injury victims with special needs.” The defendants, however, concealed from the beneficiaries, the Internal Revenue Service, and the Social Security Administration that they diverted at least $775,000 in trustee and joinder fees directly from the beneficiaries’ accounts to their for-profit business, Synergy. The SEC also alleges the defendants improperly used funds from deceased beneficiaries’ accounts to reimburse themselves, sponsor events and parties, and promote Synergy’s for-profit business. Synergy, Lazarus, and Prieto allegedly also did not tell beneficiaries they were investing beneficiaries’ money in a certain class of mutual fund that doubled the fees the beneficiaries were told they were paying.

“We allege that Synergy Settlement Services and its executives took advantage of vulnerable victims with special needs, making unethical and illegal profits off of them,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “The alleged greed Synergy and its executives displayed, treating themselves and clients to golf tournaments and beach parties using a sham non-profit company, betrayed the trust of their victims.”

The SEC’s complaint charges Synergy, the Foundation, Lazarus, Prieto, and Special Needs Law Firm with violating the antifraud provisions of the federal securities laws. The SEC’s complaint also charges Synergy, Lazarus, and Prieto with violating the registration provisions of the federal securities laws. The SEC seeks permanent injunctions and disgorgement of ill-gotten gains plus prejudgment interest against all defendants, and civil money penalties against all defendants except the Foundation.

The SEC additionally charged registered investment adviser True Link Financial Advisors, LLC, headquartered in San Francisco, CA, and its CEO, Kai H. Stinchcombe of Healdsburg, CA, in their role as investment and asset manager for the pooled trusts. True Link and Stinchcombe agreed to settle their case in a separate cease-and-desist proceeding without admitting or denying the findings that they caused certain violations of the antifraud provisions of the federal securities laws. True Link and Stinchcombe agreed to pay $200,000 and $20,000, respectively, in civil money penalties.

The SEC’s investigation is ongoing and being conducted by Jeffrey Cook and Jordan Cortez.  The case is being supervised by Eric Busto and Glenn Gordon, and the SEC’s litigation will be led by Robert Levenson and Alice Sum under the supervision of Teresa Verges.

Press release distributed by the SEC.

Featured image: by kulicki is marked with CC BY 2.0.

Pharmacist Sentenced for $180 Million Health Care Fraud Scheme

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"Prescription Prices Ver3" by ccPixs.com is marked with CC BY 2.0.

A former Mississippi pharmacist was sentenced this week to 10 years in the Southern District of Mississippi for a multimillion-dollar scheme to defraud TRICARE and private insurance companies by paying kickbacks to distributors for the referral of medically unnecessary prescriptions. The conduct resulted in more than $180 million in fraudulent billings, including more than $50 million paid by federal health care programs.

According to court documents, Mitchell “Chad” Barrett, 55, now of Gulf Breeze, Florida, and formerly of Mississippi, participated in a scheme to defraud TRICARE and other health care benefit programs by distributing medically unnecessary compounded medications. Barrett was licensed as a pharmacist in Mississippi and was a co-owner of various compounding pharmacies. As part of this scheme, Barrett adjusted prescription formulas to ensure the highest reimbursement without regard to medical necessity. He solicited recruiters to procure prescriptions for high-margin compounded medications and paid those recruiters commissions based on the percentage of reimbursements paid by pharmacy benefit managers and health care benefit programs, including commissions on claims reimbursed by TRICARE. He further routinely and systematically waived and/or reduced copayments to be paid by beneficiaries and members, and utilized a purported copayment assistance program to falsely make it appear as if his pharmacy and its affiliate compounding pharmacies had been collecting copayments.

Barrett pleaded guilty on Aug. 25, 2021, to conspiracy to engage in monetary transactions in criminally derived property. In addition to the term of imprisonment, Barrett was ordered to pay restitution and forfeit all assets traced to his ill-gotten gains.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division; U.S. Attorney Darren J. LaMarca for the Southern District of Mississippi; Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division; and Special Agent in Charge Cyndy Bruce of the Department of Defense Office of Inspector General’s Defense Criminal Investigative Service (DoD OIG-DCIS) Southeast Field Office made the announcement.

The FBI Jackson Field Office and DoD OIG-DCIS are investigating the case.

Trial Attorneys Emily Cohen and Alejandra Arias of the Criminal Division’s Money Laundering and Asset Recovery Section and Assistant U.S. Attorney Kathlyn Van Buskirk of the Southern District of Mississippi are prosecuting the case with assistance from Sara Porter and Dustin Davis from the Criminal Division’s Fraud Section.

Press release distributed by the DOJ.

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Brazilian Mining Company Charged with Misleading Investors about Safety Prior to Deadly Dam Collapse

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"Mechanical shovel being assembled on site at a mine" by World Bank Photo Collection is marked with CC BY-NC-ND 2.0.

Since 2016, Vale manipulated safety audits and obtained fraudulent stability certificates

Washington D.C. — The Securities and Exchange Commission has charged Vale S.A., a publicly traded Brazilian mining company and one of the world’s largest iron ore producers, with making false and misleading claims about the safety of its dams prior to the January 2019 collapse of its Brumadinho dam. The collapse killed 270 people, caused immeasurable environmental and social harm, and led to a loss of more than $4 billion in Vale’s market capitalization.

According to the SEC’s complaint, beginning in 2016, Vale manipulated multiple dam safety audits; obtained numerous fraudulent stability certificates; and regularly misled local governments, communities, and investors about the safety of the Brumadinho dam through its environmental, social, and governance (ESG) disclosures. The SEC’s complaint also alleges that, for years, Vale knew that the Brumadinho dam, which was built to contain potentially toxic byproducts from mining operations, did not meet internationally-recognized standards for dam safety. However, Vale’s public Sustainability Reports and other public filings fraudulently assured investors that the company adhered to the “strictest international practices” in evaluating dam safety and that 100 percent of its dams were certified to be in stable condition.

“Many investors rely on ESG disclosures like those contained in Vale’s annual Sustainability Reports and other public filings to make informed investment decisions,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “By allegedly manipulating those disclosures, Vale compounded the social and environmental harm caused by the Brumadinho dam’s tragic collapse and undermined investors’ ability to evaluate the risks posed by Vale’s securities.”

“While allegedly concealing the environmental and economic risks posed by its dam, Vale misled investors and raised more than $1 billion in our debt markets while its securities actively traded on the NYSE,” said Melissa Hodgman, Associate Director of the Commission’s Division of Enforcement. “Today’s filing shows that we will aggressively protect our markets from wrongdoers, no matter where they are in the world.”

The SEC’s complaint, filed in U.S. District Court for the Eastern District of New York, charges Vale with violating anti-fraud and reporting provisions of the federal securities laws and seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.

The SEC’s investigation was conducted by Sharan Custer and Lauren Poper, with the assistance of Carlos Costa-Rodrigues. The investigation was supervised by Mark Cave and overseen by Ms. Hodgman. The litigation will be led by Dean M. Conway and David Nasse under the supervision of Melissa Armstrong. The SEC appreciates the assistance of the Brazilian Federal Prosecution Service, Ministério Público do Estado de Minas Gerais, and Brazil’s Comissão de Valores Mobilários.

The SEC announced in March 2021 the formation of a Climate and ESG Task Force in the Division of Enforcement with a mandate to identify material gaps or misstatements in issuers’ ESG disclosures, like the false and misleading claims made by Vale. More information about the Task Force can be found here.

Press release distributed by the SEC.

Featured image: by World Bank Photo Collection is marked with CC BY-NC-ND 2.0.

SEC Announces Older Investor Roundtable Virtual Event on April 28

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"An investor takes notes" by PeterThoeny is marked with CC BY-NC-SA 2.0.

Washington D.C. — The Securities and Exchange Commission will hold a virtual event on April 28 along with the North American Securities Administrators Association (NASAA) and the AARP to examine the latest challenges and issues affecting the senior investor community.

The Older Investor Roundtable will include panel discussions geared toward older investors, consumer advocates, and financial professionals nationwide as topics will include common frauds perpetrated against older investors, risks associated with digital assets and blockchain technology, and older client servicing and related issues.

SEC Chair Gary Gensler and SEC Commissioners Hester Peirce and Caroline Crenshaw will each deliver remarks.

The SEC’s Investor Advocate Rick Fleming, a host and organizer of the event, said, “We appreciate these roundtables because they allow us to hear directly from retail investors and draw from a diversity of thought, backgrounds, and experiences. Listening to the investors’ experiences allows the staff of the Commission to better anticipate the community’s needs, evaluate policy, and ultimately protect investors.”

Melanie Senter Lubin, NASAA President and Maryland Securities Commissioner, added, “This roundtable is an important and timely platform to bring together Main Street investors and the securities regulators who protect them from investment fraud. State securities regulators remain focused on protecting older investors and we look forward to working with the SEC and organizations such as the AARP to strengthen investor protection.”

“AARP is pleased to help the SEC and NASAA elevate the voices of the 50+ on the challenges they face regarding financial fraud and the importance of clear and concise disclosure,” said Nancy LeaMond, AARP’s Executive Vice President and Chief Advocacy & Engagement Officer and a member of the SEC’s Investor Advisory Committee. “The panelists represent the millions of voices of older adults across the country, particularly those who have been impacted by securities fraud.”

The SEC’s Office of the Investor Advocate organized the event as part of its role in providing a voice for investors. Among the office’s responsibilities are assisting retail investors, studying investor behavior, and facilitating the SEC’s Investor Advisory Committee.

The Older Investor Roundtable will take place from 10 a.m. to noon and will be webcast live on the SEC website.

Press release distributed by the SEC.

Featured image: by PeterThoeny is marked with CC BY-NC-SA 2.0.

Check out SEC’s updated list of firms using inaccurate information to solicit investors

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"Coal Reclaimer" by cypheroz is marked with CC BY-NC-ND 2.0.

Washington D.C. — The Securities and Exchange Commission today announced that it updated its list of unregistered entities that use misleading information to solicit primarily non-U.S. investors, adding 58 soliciting entities, 11 impersonators of genuine firms, and one bogus regulator.

The SEC’s list of soliciting entities that have been the subject of investor complaints, known as the Public Alert: Unregistered Soliciting Entities (PAUSE) list, enables investors to better inform themselves and avoid being a victim of fraud. The latest additions are firms that SEC staff found were providing inaccurate information about their affiliation, location, or registration. Under U.S. securities laws, firms that solicit investors generally are required to register with the SEC and meet minimum financial standards and disclosure, reporting, and recordkeeping requirements.

“With publication of the PAUSE list, the Commission continues to take action to protect retail investors,” said Jose M. Rodriguez, Acting Chief of the SEC’s Office of Market Intelligence. “We are issuing an increasing number of alerts to provide valuable information and aid investors in making informed investment decisions.”

In addition to alerting investors to firms falsely claiming to be registered, the PAUSE list flags those impersonating registered securities firms and bogus “regulators” who falsely claim to be government agencies or affiliates. Inclusion on the PAUSE list does not mean the SEC has found violations of U.S. federal securities laws or made a judgment about the merits of any securities being offered.

The PAUSE list is periodically updated by the SEC’s Office of Market Intelligence, in coordination with the Office of Investor Education and Advocacy and the Office of International Affairs.

How to protect yourself:

Press release distributed by the SEC.

Featured image: by cypheroz is marked with CC BY-NC-ND 2.0.

Sameday Health settles with LA over fake COVID-19 test results

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Administrator
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Los Angeles – Calling alleged actions by a COVID-19 testing company a serious violation of public trust, City Attorney Mike Feuer has announced two settlements valued at a total of $26,454,593. One settlement for $22.5 million resolved allegations that the Venice-based national COVID-testing chain Sameday Technologies (doing business as Sameday Health) and its CEO Felix Huettenbach faked and forged COVID-19 test results, and engaged in false advertising and insurance fraud. City Attorney Feuer also reached a $3.9 million settlement with Dr. Jeff Toll, M.D., a Los Angeles-based doctor, to resolve allegations that he was a partner in Sameday Health’s alleged insurance fraud.

Sameday Health operates 55 testing locations nationwide, with 16 locations in L.A. County and five in the City, and has made tens of millions in revenue since the beginning of the pandemic. The settlements require the defendants to pay restitution and civil penalties, and comply with permanent injunctions prohibiting them from participating in the alleged activities that led to the City Attorney’s investigation. L.A. County District Attorney George Gascón joined Feuer in this civil enforcement action.

“It’s beyond outrageous that anyone would falsify COVID tests, as we allege happened here. If you get a negative test, you assume it’s safe to go to work, visit family and friends, or take a vacation. But the victims of this alleged scheme might unknowingly have spread COVID to others or failed to receive timely and appropriate care themselves,” said Feuer. “I just got over COVID myself and know how essential it is to have accurate test results. This landmark resolution will stop this alleged scheme, give restitution to consumers and insurers, and impose severe penalties.”

“We’ve intervened to protect consumers in numerous major COVID-related matters, but this may be the most significant consumer protection case to emerge from the pandemic,” Feuer added.

“My office is dedicated to protecting the people of Los Angeles County from dangerous and costly scams like these and seeking appropriate action against those who take advantage of consumers through fraudulent business practices,” District Attorney Gascón said. “It is not only illegal but also unconscionable to defraud people seeking medical assistance in the midst of a public health crisis. We will continue to work to bring justice to victims of all crimes, including fraud.”

According to the complaint, Sameday Health and Huettenbach allegedly falsely advertised that they could deliver COVID-19 test results to consumers within 24-hours, knowing they could not truthfully make that guarantee. When they could not fulfill their false promises, Sameday Health and Huettenbach allegedly faked, falsified and forged COVID-19 test results for at least 500 customers by manipulating old PDF lab reports and results from previous tests. The complaint alleges that, in some cases, Sameday Health sent these fake results to customers before their tests had been run or even delivered to the lab for testing. The complaint also alleges that Sameday Health sometimes sent fake results to customers whose tests were never processed by a lab—meaning that even though the customer received a “negative” result from Sameday Health, Sameday Health had no way of knowing whether the customer actually tested positive for COVID-19.

The two complaints further allege that Sameday Health and Huettenbach partnered with Toll to engage in insurance fraud by charging insurance companies that were already paying for COVID-19 tests an additional fee for medically unnecessary medical consultations. According to the complaint against Sameday Health, Sameday Health and Huettenbach required customers paying with insurance to consent to and participate in medically unnecessary consultations with doctors in order obtain a COVID-19 test. On the other hand, consumers paying with cash, the complaints allege, were not required or even able to obtain these consultations. Sameday Health allegedly targeted its insured consumers and steered them to Toll for superficial, two to three-minute-long telemedicine visits for which they charged health insurers approximately $450. In exchange for steering these customers to him, Toll allegedly gave Sameday Health a large portion of his profits from the consultations as a kickback. In all, the Sameday Health complaint alleges that Sameday Health made millions of dollars from California-based insurance claims alone.

In the settlement, Sameday Health and Huettenbach both agree to be subject to a permanent injunction that prohibits them from engaging in the unlawful business practices alleged in the complaint. The injunction also prohibits Huettenbach personally from accessing any test result or medical record belonging to any of Sameday Health’s customers. In addition to the permanent injunction, Sameday Health and Huettenbach have agreed to pay more than $9.5 million in restitution and nearly $13 million in civil penalties. In addition, the settlement requires Sameday Health to hire, and spend up to $100,000 to retain, an independent monitor to ensure that it does not send customers fake COVID-19 test results. Toll, on the other hand, agrees to be enjoined from engaging in any of the conduct alleged against him in the complaint and to pay $1.15 million in civil penalties and more than $2.8 million in restitution.

In all, these settlements require defendants to pay nearly $26.5 million, including more than $12.4 million in restitution and almost $14 million in civil penalties.

All of the defendants cooperated with the investigation into this matter.

Feuer advises those seeking COVID-19 tests to book one through a trusted healthcare provider or with Health Services of L.A. County. He reminds Angelenos to confirm in advance whether the testing service requires customers to pay for services with insurance or cash—especially those that advertise “free” services.

Feuer also advises those obtaining COVID-19 tests to be vigilant concerning tests with possible fake results. Customers should be on the lookout for COVID-19 testing services claiming that they will deliver results to customers one way (such as through a link to an online portal) but actually deliver the results in a different way (such as by attaching a PDF or simply writing the result in an email) or sending results that include any suspicious or incorrect information (such as incorrect dates or locations). These practices could indicate that the results are not trustworthy. Please report any suspicious COVID-19 testing services on the City Attorney’s online Consumer Complaint portal.

Los Angeles Supervising Deputy City Attorney Christina Tusan and Deputy City Attorneys William Pletcher, Alex Bergjans, Carr Tekosky, Louisa Kirakosian and Sarah Spielberger, all of the City Attorney’s Consumer Protection Unit, and Head Deputy District Attorney Hoon Chun and Deputy District Attorney Seza Mikikian, of the Los Angeles County District Attorney’s Consumer Protection Division, are litigating this matter.

Read the Complaints and settlement documents:

Since the beginning of the COVID-19 pandemic in Los Angeles in March 2020, City Attorney Feuer has worked to protect Angelenos and has been a national leader in the prosecution of COVID-19 related scams and price gouging, including:

  • Obtaining multiple convictions for criminal price gouging of goods by online retailers and brick and mortar stores, resulting in orders of restitution to victims, criminal fines and the donation of personal protective equipment;

  • Issuing cease and desist letters to local stores allegedly engaged in price gouging; and

  • Filing numerous civil law enforcement actions against companies and individuals who allegedly marketed and sold unauthorized COVID-19 tests and treatments, obtaining orders stopping the unlawful conduct and obtaining hundreds of thousands of dollars in restitution for victims and substantial civil penalties.

Press release distributed by the LA City Attorney Mike Feuer..

DOJ announces nationwide coordinated law enforcement action to combat health care-related COVID-19 fraud

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Administrator
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Criminal Charges Brought Against Owners and Executives of Medical Businesses, Physicians, Marketers, and Manufacturers of Fake COVID-19 Vaccination Record Cards with Losses Exceeding $149 Million

The Department of Justice today announced criminal charges against 21 defendants in nine federal districts across the United States for their alleged participation in various health care related fraud schemes that exploited the COVID-19 pandemic. These cases allegedly resulted in over $149 million in COVID-19-related false billings to federal programs and theft from federally-funded pandemic assistance programs. In connection with the enforcement action, the department seized over $8 million in cash and other fraud proceeds.

“The Department of Justice’s Health Care Fraud Unit and our partners are dedicated to rooting out schemes that have exploited the pandemic,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “Today’s enforcement action reinforces our commitment to using all available tools to hold accountable medical professionals, corporate executives, and others who have placed greed above care during an unprecedented public health emergency.”

“This COVID-19 health care fraud enforcement action involves extraordinary efforts to prosecute some of the largest and most wide-ranging pandemic frauds detected to date,” said Director for COVID-19 Fraud Enforcement Kevin Chambers. “The scale and complexity of the schemes prosecuted today illustrates the success of our unprecedented interagency effort to quickly investigate and prosecute those who abuse our critical health care programs.”

This announcement builds on the success of the May 2021 COVID-19 Enforcement Action and involves the prosecution of various COVID-19 health care fraud schemes. For example, several cases announced today involve defendants who allegedly offered COVID-19 testing to induce patients to provide their personal identifying information and a saliva or blood sample. The defendants are alleged to have then used the information and samples to submit false and fraudulent claims to Medicare for unrelated, medically unnecessary, and far more expensive tests or services. In one such scheme in the Central District of California, two owners of a clinical laboratory were charged with a health care fraud, kickback, and money laundering scheme that involved the fraudulent billing of over $214 million for laboratory tests, over $125 million of which allegedly involved fraudulent claims during the pandemic for COVID-19 and respiratory pathogen tests. In two separate cases in the District of Maryland and the Eastern District of New York, owners of medical clinics allegedly obtained confidential information from patients seeking COVID-19 testing at drive-thru testing sites and then submitted fraudulent claims for lengthy office visits with the patients that did not, in fact, occur. The proceeds of these fraudulent schemes were allegedly laundered through shell corporations in the United States, transferred to foreign countries, and used to purchase real estate and luxury items.

“Throughout the pandemic, we have seen trusted medical professionals orchestrate and carry out egregious crimes against their patients all for financial gain,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “These health care fraud abuses erode the integrity and trust patients have with those in the health care industry, particularly during a vulnerable and worrisome time for many individuals. The actions of these criminals are unacceptable, and the FBI, working in coordination with our law enforcement partners, will continue to investigate and pursue those who exploit the integrity of the health care industry for profit.”

In another type of COVID-19 health care fraud scheme announced today, defendants allegedly exploited policies that the Centers for Medicare and Medicaid Services (CMS) put in place to enable increased access to care during the COVID-19 pandemic. For example, in the Southern District of Florida, one medical professional was charged with a health care fraud, wire fraud, and kickback scheme that allegedly involved billing for sham telemedicine encounters that did not occur and agreeing to order unnecessary genetic testing in exchange for access to telehealth patients. Late last year, one defendant previously was sentenced to 82 months in prison in connection with this scheme.

“The attempt to profit from the COVID-19 pandemic by targeting beneficiaries and stealing from federal health care programs is unconscionable,” said Inspector General Christi A. Grimm of the Department of Health and Human Services (HHS). “HHS-OIG is proud to work alongside our law enforcement partners at the federal and state levels to ensure that bad actors who perpetrate egregious and harmful crimes are held accountable.”

Today’s announcement includes charges against two additional defendants for schemes targeting the Provider Relief Fund (PRF). The PRF is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a federal law enacted in March 2020 that provided financial assistance to medical providers to provide needed medical care to Americans suffering from COVID-19. In total, 10 defendants have been charged with crimes related to misappropriating PRF monies intended for frontline medical providers and three have pleaded guilty.

Today’s announcement also includes charges against manufacturers and distributors of fake COVID-19 vaccination record cards who, according to the allegations, intentionally sought to obstruct the HHS and Centers for Disease Control and Prevention in their efforts to administer the nationwide vaccination program and provide Americans with accurate proof of vaccination. For example, in the Northern District of California, three additional defendants were charged in a scheme to sell homeoprophylaxis immunizations for COVID-19 and falsify COVID-19 vaccination record cards to make it appear that customers received government-authorized vaccines. One defendant allegedly misused her position as the Director of Pharmacy at a northern California hospital to obtain real lot numbers for the Moderna vaccine that were then used to falsify COVID-19 vaccination record cards. Another defendant pleaded guilty in April 2022. In a separate case in the Western District of Washington, one manufacturer was charged in the multistate distribution of fake COVID-19 vaccination record cards after allegedly telling an undercover federal agent that “until I get caught and go to jail, [expletive] it I’m taking the money, ha! I don’t care.”

Additionally, the Center for Program Integrity, Centers for Medicare & Medicaid Services (CPI/CMS) separately announced today that it has taken an additional 28 administrative actions against providers for their alleged involvement in fraud, waste, and abuse schemes related to the delivery of care for COVID-19, as well as schemes that capitalize upon the public health emergency.

“We are committed to working closely with our law enforcement partners to combat fraud, waste and abuse in our federal health care programs,” said CMS Administrator Chiquita Brooks-LaSure. “The administrative actions CMS has taken protect the Medicare Trust Funds while also safeguarding people enrolled in Medicare.”

Today’s enforcement actions were led and coordinated by Assistant Chief Jacob Foster and Trial Attorney D. Keith Clouser of the National Rapid Response Strike Force, and Assistant Chief Justin Woodard of the Health Care Fraud Unit’s Gulf Coast Strike Force in the Criminal Division’s Fraud Section. The Fraud Section’s National Rapid Response Strike Force and the Health Care Fraud Unit’s Strike Forces (SF) in Brooklyn, the Gulf Coast, Miami, Los Angeles, and Newark, as well as the U.S. Attorneys’ Offices for the District of Maryland, District of New Jersey, District of Utah, Northern District of California, and Western District of Tennessee are prosecuting these cases. Descriptions of each case involved in today’s enforcement action are available on the department’s website at: https://www.justice.gov/criminal-fraud/health-care-fraud-unit/case-summaries.

In addition to the FBI, HHS-OIG, and CPI/CMS, the U.S. Postal Inspection Service; Department of Defense Office of Inspector General; Department of the Interior Office of the Inspector General; Department of Labor Office of the Inspector General; Food and Drug Administration Office of Criminal Investigations; Homeland Security Investigations; U.S. Department of Veterans Affairs Office of the Inspector General; and other federal and local law enforcement agencies participated in the law enforcement action.

The Fraud Section leads the Health Care Fraud Strike Force. Since its inception in March 2007, the Health Care Fraud Strike Force, which maintains 15 strike forces operating in 24 federal districts, has charged more than 4,200 defendants who have collectively billed the Medicare program for nearly $19 billion. In addition, the CMS, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.

The Department of Justice needs the public’s assistance in remaining vigilant and reporting suspected fraudulent activity. To report suspected fraud, contact the National Center for Disaster Fraud (NCDF) at (866) 720-5721 or file an online complaint at: https://www.justice.gov/disaster-fraud/webform/ncdf-disaster-complaint-form. Complaints filed will be reviewed at the NCDF and referred to federal, state, local, or international law enforcement or regulatory agencies for investigation.

An indictment, complaint, or information is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Press release distributed by the DOJ.

16 defendants charged in international $194M “pump and dump” plots

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Administrator
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SEC Uncovers $194 Million Penny Stock Schemes that Spanned Three Continents

This week the Securities and Exchange Commission announced charges against 16 defendants, located in the Bahamas, the British Virgin Islands, Bulgaria, Canada, the Cayman Islands, Monaco, Spain, Turkey, and the United Kingdom, for participating in multi-year fraudulent penny stock schemes that generated more than $194 million in illicit proceeds. The SEC investigations leading to these charges involved assistance from securities regulators and other law enforcement authorities in more than 20 countries and are associated, in part, with parallel criminal actions announced by the United States Attorney’s Office for the Southern District of New York.

“We allege that the defendants in these actions orchestrated some of the most complex microcap stock fraud schemes ever charged by the SEC,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “By locating their operations overseas, using encrypted messaging and operating through a convoluted network of offshore accounts, the defendants hoped to avoid detection of the massive frauds we allege they perpetrated on US markets and investors. However, investigative teams from three SEC offices doggedly kept on their trail, working across borders, and ended this alleged global scheme.”

The SEC’s complaints, filed in the United States District Court for the Southern District of New York, charge all of the defendants with violating the antifraud and registration provisions of the federal securities laws. The charges, contained in three separate complaints, allege that several defendants played a variety of roles to accumulate the majority of shares in penny stocks via difficult to unveil, offshore nominee companies. It is also alleged that some of the defendants frequently used encrypted text and phone applications to avoid detection by regulators, and arranged to buy and sell penny stocks from multiple offshore accounts, in furtherance of the fraud.

According to the complaints, once some of the defendants had amassed a significant majority of the shares of the stocks, certain defendants secretly funded promotional campaigns to promote the stocks to unsuspecting investors in the United States and elsewhere. As alleged, when those campaigns triggered increases in the demand for and price of the stocks, some of the defendants sold the stocks via trading platforms in Asia, Europe and the Caribbean for significant profits.

The SEC is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, and civil penalties against all the defendants; penny stock bars against all the individual defendants; conduct-based injunctions against 11 of the 15 individual defendants; and officer and director bars against eight of the individual defendants. On the emergency applications, the Court issued orders on April 12 and April 15 freezing and directing repatriation of the assets of six defendants.

The SEC’s investigations were conducted by Trevor Donelan, Alicia Reed, Michael Moran, David D’Addio, and Amy Gwiazda in the SEC’s Boston Regional Office; Benjamin D. Brutlag, Shipra G. Wells, Karaz S. Zaki, and J. Lee Buck II in the SEC’s Headquarters, with the assistance of Yongping Zheng of the Enforcement Division’s Office of Investigative & Market Analytics; and by Kristine Zaleskas, Michael Paley, and Judith Weinstock in the New York Regional Office. All of the investigations received assistance from the SEC’s Office of International Affairs, including Owen Granke, Matthew Greiner, Andrew Lewczyk, and Marlee Miller. The litigations will be led, respectively, by David London and Martin Healey; Kenneth W. Donnelly, David Nasse, and Frederick L. Block; and Paul Gizzi and Ms. Zaleskas.

The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority. The investigations also involved assistance from the following securities regulators and other government authorities: the Alberta Securities Commission, the Securities Commission of the Bahamas, the British Columbia Securities Commission, the Cayman Islands Monetary Authority, the Curaçao Korps Landelijke Politiediensten, the Cyprus Securities and Exchange Commission, the Financial Supervisory Authority of Denmark, the Guernsey Financial Services Commission, the Hong Kong Securities and Futures Commission, the Italian Commissione Nazionale per le Società e la Borsa, the Japan Financial Services Agency, the Jersey Financial Services Commission, the Latvia Financial and Capital Market Commission, the Liechtenstein Financial Market Authority, the Malta Financial Services Authority, the Mauritius Financial Services Commission, the Mexican Comisión Nacional Bancaria y de Valores, the New Zealand Financial Markets Authority, the Ontario Securities Commission, the Panamanian Superintendencia del Mercado de Valores, the Securities Commission of Serbia, the Québec Autorité des Marchés Financiers, the Royal Canadian Mounted Police, the Monetary Authority of Singapore, the Swiss Financial Market Supervisory Authority, the United Arab Emirates Securities and Commodities Authority, the Dubai Financial Services Authority, and the United Kingdom Financial Conduct Authority.

Also see: An illustration of the alleged schemes’ global reach.

Defendants (in alphabetical order)

Antevorta Capital Partners, Ltd.

Craig James Auringer

Ronald Bauer

Domenic Calabrigo

Henry Clarke

Julius Csurgo

Daniel Mark Ferris

Alon Friedlander

Adam Christopher Kambeitz

Curtis Lehner

Petar Dmitrov Mihaylov

Massimiliano Pozzoni

Hasan Sario

Dean Shah

David Sidoo

Courtney Vasseur

Press release and featured illustration distributed by the SEC.

Former CFO of Publicly Traded Brazilian Company Charged in Fraud Scheme

By
Administrator
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"Investing" by 401(K) 2013 is marked with CC BY-SA 2.0.

A superseding indictment was unsealed today in the Southern District of Iowa charging the former Chief Financial Officer (CFO) of publicly traded reinsurance company, IRB Brasil Resseguros SA, aka IRB Brasil RE (IRB), for fraudulently propping up its stock price by spreading false information that U.S. investment firm Berkshire Hathaway Inc. had invested in IRB.

According to court documents, Fernando Passos, 39, of Brazil, allegedly executed the fraud scheme beginning in February 2020, after an investment company published a report questioning the accuracy of IRB’s financial statements and announcing that the investment company had taken a short position against IRB’s stock. IRB’s stock price dropped in the wake of the report. In response, Passos allegedly developed and executed a scheme to mislead shareholders and the investing public by disseminating and causing to be disseminated materially false information that Berkshire Hathaway had invested in IRB, despite knowing the U.S. investment firm had not made such an investment. Passos discussed his plans to spread this materially false information with IRB investor relations employees. In one text message described in the indictment, Passos stated, “I will spread this story that berk [i.e., Berkshire Hathaway] bought 28MM of shares,” and added, “then it becomes true.”

As part of the fraud scheme, the superseding indictment alleges, Passos falsified documents and information to support his claims that Berkshire Hathaway was an IRB shareholder and caused this information to be provided to members of the press, several of IRB’s directors, and IRB investors. News outlets in both Brazil and the United States began incorrectly reporting that Berkshire Hathaway had invested in IRB. Following the news coverage, on the evening of March 3, 2020, Berkshire Hathaway issued a press release stating that it was not currently, had never been, and had no intention of becoming a shareholder in IRB. On March 4, 2020, after Berkshire Hathaway’s press release, IRB’s stock price dropped, causing significant shareholder losses.

IRB, which is based in Brazil, trades on Brazil’s B3 exchange and has shareholders around the world, including in the United States.

Passos is charged with one count of securities fraud and three counts of wire fraud. If convicted, he faces up to 20 years in prison on each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors. He remains at large.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division and Inspector in Charge Eric Shen of the U.S. Postal Inspection Service’s Criminal Investigations Group made the announcement.

The U.S. Postal Inspection Service is investigating the case.

Trial Attorney Kate McCarthy of the Criminal Division’s Fraud Section is prosecuting the case.

The Fraud Section uses the Victim Notification System (VNS) to provide victims with case information and updates related to this case. Victims with questions may contact the Fraud Section’s Victim Assistance Unit by calling the Victim Assistance phone line at 1-888-549-3945 or by emailing Victimassistance.fraud@usdoj.gov. To learn more about victims’ rights, please visit: https://www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas. If you believe you are a victim of the conduct described in the Passos indictment, please visit https://www.justice.gov/criminal-vns/case/Passos.

An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Press release distributed by the DOJ.

Featured image: by 401(K) 2013 is marked with CC BY-SA 2.0.

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