DOJ and SEC Bring "Groundbreaking" Charges for Misuse of 10b5-1 Trading Plan

CEO of Publicly Traded Health Care Company Charged for Insider Trading Scheme

An indictment was unsealed today charging Terren S. Peizer, the CEO and Chairman of the Board of Directors of Ontrak Inc., a publicly traded health care company, for allegedly engaging in an insider trading scheme in which he fraudulently used Rule 10b5-1 trading plans to trade Ontrak stock.

“Today’s groundbreaking insider trading indictment demonstrates that the Department of Justice, together with our law enforcement partners, will not allow corrupt executives to misuse 10b5-1 plans as a shield for insider trading,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “As this case shows, we have embraced the use of data to proactively identify and investigate fraud as we continue to ensure that ordinary investors are on an equal playing field with corporate insiders.”

According to court documents, between May and August 2021, Peizer, 63, a resident of Puerto Rico and Santa Monica, California, allegedly avoided more than $12.5 million in losses by entering into two Rule 10b5-1 trading plans while in possession of material, nonpublic information concerning the serious risk that Ontrak’s then-largest customer would terminate its contract….

Glencore sentenced to pay $700 million in US after bribery guilty plea

A U.S. judge on Tuesday ordered Glencore Plc (GLEN.L) to pay $700 million in connection with its guilty plea over a decade-long scheme to bribe foreign officials across several countries.

The sentence handed down by U.S. District Judge Lorna Schofield in Manhattan federal court consisted of a $428.5 million fine and $272 million in forfeiture, in line with a plea deal reached last May between the mining and commodity trading giant and federal prosecutors in Manhattan.

Silvergate Stock Plunges as Bank Says It May Face DOJ, Congressional and Bank Regulator Inquiries

Silvergate Bank announced it would delay the filing of its annual report on Wednesday, sending its stock price plunging over 10% in after-hours trading.

The crypto-friendly bank has said it would have to delay the filing of its annual 10-K report for the 2022 fiscal year, and would need more than an additional two weeks to complete it.

“The Company is currently analyzing certain regulatory and other inquiries and investigations that are pending with respect to the Company,” the filing said. Silvergate’s accounting firm is also requesting further information, as are its independent auditors.

Arthur Hayes, the Original King of Crypto, Is BackAnd then there’s the biggest difference: Where Bankman-Fried effectively (but still allegedly) stole billions of dollars from regular people around the world, Hayes has never been accused of taking anything that didn’t belong to him, or lying to his customers, or running a crooked business. “He’s absolutely one of the good guys of crypto,” says Nic Carter, the co-founder of Castle Island Ventures, a blockchain-focused investment firm. “BitMEX never screwed over their clients, never got hacked, never lost money.” If anything, Hayes has become something of a bitcoin martyr….

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On April 6, 2021, Hayes touched down at an airport in Honolulu and surrendered to federal agents on the tarmac. He pleaded guilty to a single charge of violating the Bank Secrecy Act, paid a $10 million fine, and, last summer, began a six-month term of house arrest. For Hayes, it was an extended period of relative silence. He still tweeted and blogged about crypto from time to time, but he was careful not to further piss off the Department of Justice and jeopardize the fairly lenient sentence. When it was up in the middle of January, he flew the hell out of America and eventually landed in Japan, where he has been skiing six days a week and dreaming up his next move.

US SEC Plans to Keep Growing Crypto Unit as Enforcement Ramps Up

The regulator, which has been hammering away at the crypto sector under the direction of Chair Gary Gensler, sent a loud message to the industry in May 2022 by announcing it was adding 20 people to its newly named Crypto Assets and Cyber Unit. That nearly doubled the size of the 50-person operation, and an SEC spokesperson told CoinDesk that the added slots “are nearly filled.”

Now the agency is “planning to add additional staff” to that unit, the spokesperson said Wednesday, further underlining the priority that digital assets enforcement has become for the SEC. The spokesperson didn’t disclose how many new positions would be added.

Life Sciences Companies Remained Frequent Securities Suit Targets in 2022

The number of securities class action lawsuits filed against life sciences companies in 2022 declined compared to 2021 but remained relatively steady as a proportion of the total number of securities class action lawsuits filed during the year, according to a new report from the Dechert law firm. The report, entitled “Dechert Survey 2022 Edition: Developments in Securities Fraud Class Actions Against U.S. Life Sciences Companies,” states that there were a total of 43 securities suits filed against life sciences companies in 2022, compared to 59 in 2021….

Covington & Burling was hacked, SEC is now suing the D.C. law firm

Covington said it had already engaged in an “extensive internal review,” court filings show, and devoted nearly 500 hours of attorney time in an effort to comply with the SEC’s requests for information. The review involved nine Covington attorneys, including a former SEC associate director, and concluded that the compromised data of only seven of the 298 impacted clients “might possibly contain MNPI.”

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Covington shared its findings with the SEC, but the agency refused to accept the limited data, according to a filing from the firm, and demanded the names of all of unidentified clients. Covington described itself as an “innocent third party,” and said the SEC’s attempts to access client information were unprecedented.

“An attorney is supposed to stand between his client and the power of the government,” Covington’s opposition filing reads.

“Despite all of this, the SEC is again demanding to invade a sacred precinct of trust and confidence,” Covington’s filing said. “This Court should bar the door.”

Former Indiana Congressman Goes on Trial for Insider Trading

Former Congressman Stephen Buyer criminally profited from his access to power and confidential information, a federal prosecutor told jurors in the first of a batch of New York insider trading cases to reach trial.

“You can make a lot of money in the stock market if you know what is going to happen before it happens,” Assistant US Attorney Margaret Graham told the jury during opening statements in Buyer’s trial on Wednesday. “He abused that trust and used his clients’ information to trade in the stock market not once but twice.”

Prosecutors’ Case Against FTX’s Sam Bankman-Fried Becomes Clearer“In November 2022, the general counsel of FTX.US warned employees that they should preserve documents because of the involvement of regulators, and then posted in a company Slack channel that FTX would need to be shut down,” one section of the superseding indictment said. “Bankman-Fried, however, deleted the general counsel’s message about FTX being shut down, continued to use Signal messaging and proceeded to delete some of his own statements on Twitter, including his tweets about customer assets being ‘fine.’”

The FTX founder also allegedly directed the creation of North Dimension, a U.S.-based company, purely to act as an intermediary between FTX and U.S. banks. Prosecutors claim Bankman-Fried lied about North Dimension’s true purpose to get through a bank’s due diligence process.

Moreover, prosecutors hold that Bankman-Fried never segregated FTX customer assets from Alameda assets or other assets, despite “representations … to the contrary.”