Cattle Ponzi? Cattle Ponzi!!!

SEC Obtains Emergency Relief to Halt $191 Million Cattle Ponzi Scheme

The Securities and Exchange Commission today announced that it obtained a temporary restraining order, asset freeze, the appointment of a receiver, and other emergency relief to halt an ongoing $191 million cattle Ponzi scheme being perpetrated by Fort Worth, Texas company Agridime LLC, which claims to specialize in meat sales, distribution, and animal supply chain management, and its owners, Josh Link of Gilbert, Arizona, and Jed Wood of Fort Worth. The SEC alleges that the defendants diverted millions of dollars of investor funds to make Ponzi payments and to pay undisclosed sales commissions to themselves and others.

***

According to the SEC’s complaint, filed on Dec. 11, 2023, in the U.S. District Court for the Northern District of Texas and unsealed on Dec. 13, the defendants have raised at least $191 million from more than 2,100 investors in at least 15 states by offering and selling investments related to the supposed purchase and sale of cattle. The defendants told investors that Agridime would use their funds to acquire, feed, and raise cattle on its network of ranches, and investors would help provide “fellow Americans with the highest quality farm fresh beef available.” However, as alleged in the complaint, the defendants did not purchase nearly enough cattle or generate sufficient revenues from cattle operations to deliver the promised returns. Instead, the complaint alleges that, since December 2022, the defendants have used at least $58 million of new investor funds to make Ponzi payments to prior investors and more than $11 million to pay undisclosed sales commissions to Wood, Link, Link’s wife, and other Agridime sales representatives.

Musk Must Testify in SEC Twitter Stock Probe, Judge Signals

A San Francisco federal judge signaled that Elon Musk should testify about his purchase of Twitter Inc. stock ahead of his $44 billion buyout of the company last year as part of an investigation by the US Securities and Exchange Commission.

Despite the billionaire’s complaint that the agency was harassing him, Magistrate Judge Laurel Beeler on Thursday asked the two parties to work out an agreement on logistics themselves. If they don’t, she said she would side with the SEC in forcing Musk to testify over share purchases of Twitter, now known as X Corp.

SEC Dismisses Charges in Trading Scheme Involving Confidential Government Information

On November 17, 2023, the SEC dismissed its charges against David Blaszczak, Christopher Worrall, and Theodore Huber. The dismissal resolves all remaining claims arising out of the SEC’s May 24, 2017 complaint, which alleged, among other things, that Blaszczak, Worrall, and Huber engaged in a scheme to trade on nonpublic information about government plans to cut Medicare reimbursement rates, which affected the stock prices of certain publicly traded medical providers or suppliers. A fourth defendant, Jordan Fogel, previously settled with the SEC.

US law firm Orrick hit with lawsuit over March data breach

U.S. law firm Orrick, Herrington & Sutcliffe is facing a new class action lawsuit over a March 2023 data breach that allegedly compromised the personal information of more than 152,000 people.

The lawsuit filed Friday in Oakland federal court said Orrick did not inform the alleged victims of the data breach until June, more than three months after it occurred. The firm reported the breach to several state regulators last month.

The breach involved Orrick client data, including people who have dental plans with Delta Dental of California and people who have vision plans with EyeMed Vision Care, according to sample notification letters posted by the California attorney general.

Orrick represented EyeMed following a 2020 data breach that compromised the personal information of 2.1 million people. In May, EyeMed struck a $2.5 million settlement with Florida, New Jersey and Oregon over the breach.

Big Investors Bail on Class Actions in Pursuit of Bigger Payouts

Large shareholders are opting out of class-action settlements roughly twice as often as just a few years ago, chasing their own potential recoveries after a US Supreme Court ruling altered the timing calculus.

The spike in settlements that involve opt-outs from 2019 through the first half of 2022—the latest data available—changed a much more gradual 12-year trajectory, according to a Cornerstone Research report. Investors brought individual, or direct, actions in about a third of those more recent settling cases with opt-outs, Cornerstone found.

Semiconductor Company Hit with Securities Suit as EV Demand Declines

For some time now, one of the hottest bets in the U.S. economy has been the electric vehicle industry. Until recently, manufacturers struggled to meet consumer demand. However, as 2023 progressed, something unexpected happened. Consumer demand for electric vehicles began to decline. A number of factors – including heightened interest rates – contributed to this development, but the perception of declining demand has set off alarm bells, particularly among EV manufacturers’ suppliers.

In an example both of how the declining demand can affect EV suppliers and the way that the decline can translate into securities litigation, on December 13, 2023, a plaintiff shareholder filed a securities suit against electric vehicle semiconductor supplier ON Semiconductor after the company announced declining sales of its automotive business segment products because of declining consumer EV demand. A copy of the plaintiff’s complaint can be found here.

Cybersecurity Disclosure

Why use a materiality standard? I also have heard some people, perhaps less familiar with the Federal securities laws, asking why the standard for disclosure here is limited to “material” cybersecurity incidents. Some seem to prefer a more bright line rule. Materiality is a touchstone of securities laws. It connects disclosures back to the needs of investors. I don’t mean to suggest that all disclosures required under the Federal securities laws have or must have a materiality qualifier. Some required disclosures do not.[7] In this case, the Commission determined that a materiality qualifier was appropriate. In my view, this makes sense when you consider that some companies may experience cyber attacks on a daily basis if not more frequently.

***

Consultations with national security and law enforcement agencies may, of course, help companies to better understand the impact or severity of a particular incident and thus to assess whether the incident is material. But ultimately it is the company’s responsibility to make a materiality determination based on a consideration of all relevant facts and circumstances. In this regard, it’s worth bearing in mind that the analyses of cybersecurity incidents by these other agencies may take into account factors other than a focus on a reasonable investor….