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Enforcement Actions: Week in Review - May 9th, 2014


SEC Charges Three Friends and Business Associates of Former Chairman of Home Diagnostics, Inc., in Insider Trading Scheme
May 7, 2014, (Litigation Release No. 22987)
John Campani, John Mullin, and Alan Posner have all been charged with trading on insider information concerning Nipro Corporation's acquisition of Home Diagnostics, Inc for combined profits of "more than $105,000." The defendants were allegedly tipped this information by former Chairman of the Board at Home Diagnostics, George H. Holley. Holley and other tippees were previously charged by the SEC in the case SEC v. George H. Holley, et al.The SEC has charged the defendants with violating the Exchange Act. The defendants have consented to a final judgment that permanently enjoins them from future violations, and orders them to pay over $166,000 combined in pre-judgment interest, disgorgement, and civil penalties.

SEC Charges Toronto-Based Consultant and Four Others with Multiple Chinese Reverse Merger Schemes
May 7, 2014, (Litigation Release No. 22986)
According to the complaint, S. Paul Kelly, George Tazbaz, Roger D. Lockhart, Robert S. Agriogianis, and Shawn A. Becker were involved in a scheme to take China Auto Logistics, Inc. and Guanwei Recycling Corp "public through reverse mergers with U.S. public shell companies, hide their control over the companies' stock through a vast network of U.S. and international entities, sell that stock in unregistered distributions, and manipulate trading in the stock, ultimately obtaining millions in profits as a result." The SEC has charged the defendants with violating various provisions of the securities laws and seeks permanent injunctions, disgorgement, civil penalties, and other relief. Kelley, Lockhart, and Agriogianis consented to a final judgment that enjoins them from future violations, orders Kelley and Lockhart to pay over $6.5 million in disgorgement, pre-judgment interest, and penalties, and imposes penny stock bars against Lockhart and Agriogianis. "The amount of disgorgement and civil penalties to be assessed against Agriogianis will be determined by the court at a later time." The claims against Tazbaz and Becker "will be determined after a trial, which has not been set."

SEC Charges Ohio-Based Investment Adviser and President for Fraudulently Hiding Account Shortfall
May 5, 2014, (Litigation Release No. 22985)
The SEC has charged investment advisor "Professional Investment Management, Inc...and its president, Douglas E. Cowgill...for repeatedly hiding a shortfall of more than $700,000 in client assets." The complaint charges PIM and Cowgill with violating various provisions of the Exchange Act and Investment Advisers Act. "A hearing on the SEC's motion for a preliminary injunction has been scheduled for May 12."

SEC Charges Florida Lawyer in Connection with Multi-Million Dollar Prime Bank Scheme
May 5, 2014, (Litigation Release No. 22984)
Attorney Allen Ross Smith has been charged with"violating the anti-fraud and securities offering provisions of the federal securities laws for his role in an advance fee investment scheme" orchestrated by Malom Group AG, which "involv[ed] prime bank transactions and overseas debt instruments." According to the SEC, Smith used his position as an attorney to make "several false and misleading statements to investors." The SEC has charged Smith with violating the Securities Act and Exchange Act and seeks permanent injunctions, disgorgement, pre-judgment interest, and civil penalties.


CFTC Amends Complaint against Banc de Binary, Ltd. to Charge Three Affiliated Corporate Entities with Violating the CFTC's Ban on Trading Options Contracts Off-Exchange
May 2, 2014, (CFTC Press Release No. 6923-14)
According to the amendedcomplaint,Banc de Binary, Ltd. and its three corporate affiliates, E.T. Binary Options Ltd., BO Systems Ltd., and BDB Services Ltd., "violat[ed] the CFTC's ban on off-exchange options trading by offering commodity option contracts to U.S. customers for trading, as well as soliciting, accepting orders and funds, or confirming the execution of orders, from U.S. customers." The amended complaint findsOren Shabat Laurent liable "for the corporate Defendants' alleged violations of the Commodity Exchange Act and the CFTC's Regulations." The CTFC seeks civil penalties, restitution, disgorgement, rescission, and "a permanent injunction preventing the Defendants from engaging in certain commodity options activity with U.S. customers."