In Memory: Former SEC Chairman Harvey Pitt

Former Coinbase Manager and His Brother Agree to Settle Insider Trading Charges Relating to Crypto Asset Securities

The Securities and Exchange Commission today announced that former Coinbase product manager Ishan Wahi and his brother, Nikhil Wahi, agreed to settle charges that they engaged in insider trading through a scheme to trade ahead of multiple announcements regarding at least nine crypto asset securities that would be made available for trading on the Coinbase platform. Ishan and Nikhil Wahi each agreed to be permanently enjoined from violating Section 10(b) of the Securities Exchange Act and Rule 10b-5 and to pay disgorgement of ill-gotten gains, plus prejudgment interest. As is often the case when a criminal court has already ordered defendants to forfeit their ill-gotten gains, the disgorgement and prejudgment interest in the SEC’s case would be deemed satisfied by the orders of forfeiture of the Wahi brothers’ assets in the criminal action, if approved by the court, and the SEC determined not to seek civil penalties in light of the Wahi brothers’ prison sentences.

The SEC’s complaint, filed on July 21, 2022, in the U.S. District Court for the Western District of Washington, alleged that, while employed at Coinbase, Ishan Wahi helped to coordinate the platform’s public listing announcements that included what crypto assets would be made available for trading. According to the complaint, Coinbase treated such information as confidential and warned its employees not to trade on the basis of, or tip others with, that information. However, from at least June 2021 to April 2022, in breach of his duties, Ishan repeatedly tipped the timing and content of upcoming listing announcements to his brother, Nikhil Wahi, and his friend, Sameer Ramani. Ahead of those announcements, which usually resulted in an increase in the assets’ prices, Nikhil Wahi and Ramani allegedly purchased at least 25 crypto assets, at least nine of which were securities, and then typically sold them shortly after the announcements for a profit. The Wahi brothers agreed, as part of the settlement, not to deny the SEC’s allegations.

Sam Bankman-Fried Points to Law Firm Advice of Counsel as FTX Fraud Defense

FTX co-founder Sam Bankman-Fried is laying the groundwork for a defense that argues he relied upon the advice of a prominent Silicon Valley law firm in taking many of the actions for which he is now facing fraud charges.

Bankman-Fried’s defense lawyers on Tuesday asked the judge overseeing his criminal case to force prosecutors to hand over documents given to the government by former FTX law firm Fenwick & West. If the government doesn’t agree, Bankman-Fried wants permission to subpoena the Mountain View, California-based firm.

The legal advice Fenwick & West provided to FTX and Bankman-Fried between 2017 and 2022 is “material to preparing a defense,” his lawyers said in their Tuesday filing.

SEC Queries Private Equity Firms That Yanked Cash as Silicon Valley Bank Failed

A top US financial regulator is inquiring about how private equity firms steered deposits, including client funds, out of Silicon Valley Bank before its collapse.

The Securities and Exchange Commission’s examinations unit has requested records of some investment firms’ money transfers and investor communications over the first three weeks of March, as well as emails with SVB, according to people familiar with the matter who asked not to be identified discussing confidential information. Some questions focused on whether executives with personal accounts at the bank cashed out before clients — and where deposits went, they said.

Former Wells Fargo Senior Executive Carrie Tolstedt Agrees to Settle SEC Fraud Charges for Misleading Investors About Abusive Sales Practices to Inflate a Key Performance Metric

The Securities and Exchange Commission today announced its settlement with the former head of Wells Fargo & Co.’s Community Bank, Carrie L. Tolstedt, in which she has agreed to pay a $3 million penalty stemming from charges brought in 2020 for her role in allegedly misleading investors about the success of the Community Bank, Wells Fargo’s core business. The SEC previously settled related charges against Wells Fargo and its former CEO and Chairman, John Stumpf.

According to the SEC’s complaint against Tolstedt, from mid-2014 through mid-2016, Tolstedt publicly described and endorsed Wells Fargo’s “cross-sell metric” as a means of measuring Wells Fargo’s financial success despite the fact that this metric was inflated by accounts and services that were unused, unneeded, or unauthorized. The complaint further alleges that Tolstedt knew the cross-sell metric did not accurately track accounts or products that customers needed or used, since she was aware of misconduct at the Community Bank that led to bankers pushing products on customers that they did not need or want, including the unauthorized opening of accounts. The complaint alleges that Tolstedt made misleading public statements to investors at Wells Fargo’s investor conferences in 2014 and 2016, and signed misleading sub-certifications as to the accuracy of Wells Fargo’s public disclosures when she knew or was reckless in not knowing that statements in those disclosures regarding Wells Fargo’s cross-sell metric were materially false and misleading.

Company Insiders Made Billions Before SPAC Bust

The SPAC boom cost investors billions. Insiders in the companies that went public were on the other side of the trade.

Executives and early investors in companies that went public via special-purpose acquisition companies sold shares worth $22 billion through well-timed trades, profiting before share prices collapsed.

Some of the biggest winners were Detroit Pistons owner Tom Gores’s investment firm Platinum Equity, British billionaire Richard Branson and convicted Nikola founder Trevor Milton. They were among many insiders who got shares on the cheap and sold them as they rose in value, according to a Wall Street Journal analysis of insider-trading disclosures associated with more than 200 companies that did SPAC deals.