SEC Charges Accounting Firm With Aiding and Abetting Massive Securities Fraud

SEC Charges Olayinka Oyebola and His Accounting Firm With Aiding and Abetting Massive Fraud

The Securities and Exchange Commission today charged Olayinka Oyebola and his Public Company Accounting Oversight Board-registered accounting firm, Olayinka Oyebola & Co. (Chartered Accountants), with aiding and abetting a massive securities fraud perpetrated by Mmobuosi Odogwu Banye, also known as Dozy Mmobuosi, and three related U.S. companies that Mmobuosi controlled (the Tingo entities). The SEC recently obtained a $250 million final judgment against Mmobuosi and the Tingo entities.

The SEC’s complaint alleges that Oyebola and his firm deliberately failed to take action upon learning that businessman Mmobuosi and the Tingo entities created multiple fake audit reports bearing Oyebola’s signature and included them in SEC filings as though they were issued by Oyebola’s firm. Oyebola allegedly made material misstatements to the then-auditor of one of the Tingo entities, and Oyebola and the firm helped Mmobuosi conceal that the audit reports were fake, resulting in the auditor, investors, and regulators relying upon the misstatements and fake audit reports to their detriment. According to the SEC’s complaint, Oyebola and his firm’s assistance enabled Mmobuosi and the Tingo entities to carry out a multi-year scheme to inflate financial performance metrics and defraud investors worldwide.

Advisory Firm Marathon Asset Management Charged with Policies Failures Regarding Potential Receipt of Confidential Information from Ad Hoc Creditors’ Committees

The Securities and Exchange Commission today announced settled charges against registered investment adviser Marathon Asset Management LP for failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information relating to its participation on ad hoc creditors’ committees.

According to the SEC’s order, one of Marathon Asset Management’s core strategies has been to invest in distressed corporate bonds and other similar debt in the United States, Europe, and Asia. As part of this strategy, and because of the nature of its business and its holdings, Marathon Asset Management regularly participated on ad hoc creditors’ committees where participants may receive material nonpublic information or engage advisers who are often tasked with analyzing debtors’ material nonpublic information. However, the firm failed to establish, maintain, and enforce policies and procedures that were reasonably designed to address the specific risks associated with receiving and identifying potential material nonpublic information as a result of its participation on ad hoc creditors’ committees.

SEC Charges Fund Principals With Pitching Fund Investors Using A Fake Performance History

The Securities and Exchange Commission today filed charges against brothers Akshay and Dev Kamboj, principals of the Crawford Ventures Absolute Return Fund (the “Fund”), with defrauding investors by using offering materials that fraudulently presented their trading track record. The Fund raised more than $16 million from investors in 2022 and 2023.

According to the SEC’s complaint, filed in the United States District Court for the Southern District of New York, the Fund told prospective investors that it would engage in currency trading using a successful strategy previously employed by Akshay and Dev Kamboj for other clients prior to the Fund’s formation. As alleged in the complaint, the Kamboj brothers provided proof of the purported success of the strategy, including an “Audit Report” and a “Performance Audit” purportedly issued by an Australian audit and consulting firm. In reality, according to the complaint, the auditor had never performed an audit for the Kamboj brothers, and the Audit Report and the Performance Audit, which were furnished to a number of prospective investors, was fake. The complaint further alleges that the Kamboj brothers created a fictitious email address to impersonate the auditor in communications with potential investors.

Deadline looms for SEC to appeal Ripple ruling

The future of U.S. crypto regulation could hinge on a long-awaited decision by Wall Street’s top cop on whether to appeal a ruling from its high-profile legal battle with blockchain payments company Ripple.

The Securities and Exchange Commission has until Oct. 7 to decide if it will challenge the July 2023 ruling by U.S. District Judge Analisa Torres that deemed only some of Ripple’s sales of the XRP crypto token violated securities laws, a decision that has garnered criticism from securities lawyers and other federal judges.

Andrew Left Previews Defense in SEC Case Over Short Seller’s Trading Activities

Last week, Left’s lawyer said the SEC case against the famed short seller is so unusual that he should be allowed to file a motion to dismiss that spans 10,000 words instead of the court-mandated limit of 7,000. The seemingly mundane request hinted at his defense strategy, including arguing that Left’s often-blistering social media posts about publicly traded companies were accurate and that there’s no hard rule about short sellers revealing their trading activity.

“This is the SEC’s first-ever enforcement action alleging fraud by omission based on the allegation that a publisher of truthful information about companies must also disclose private trading strategy with the truthful information,” Left’s lawyer, James Spertus, said in a Sept. 26 filing.

FTX creditors to receive only ‘10–25% of their crypto back,’ CZ walks free

FTX creditors will receive only 10–25% of their cryptocurrency holdings from the defunct exchange after bankruptcy documents were revised to award the value of assets lost when the petition was filed.

Sunil Kavuri told Cointelegraph that many FTX customers are still suffering from “mental distress, panic attacks, divorces and suicidal thoughts” due to their life savings being “stolen.”

The FTX creditor-activist noted that in light of the revision, creditors will receive reimbursements according to the date of the petition. This means that creditors will receive the value of their holdings when the price of Bitcoin was about $16,000, significantly lower than today.

Trio of SEC Enforcement Actions Underscores Importance of Internal Controls, Including in M&A Context

In the past few weeks, the Securities and Exchange Commission (“SEC”) has announced three settled enforcement actions alleging violations of the internal controls provisions of the federal securities laws. The cases are notable less for the SEC penalties involved—which ranged from no penalty to $400,000—but rather for the other, more dire consequences the companies experienced as a result of internal controls failures, such as financial restatements, delayed SEC filings that led to an exchange delisting, and serious employee misconduct that went unchecked. The cases underscore the importance of establishing and maintaining effective systems of internal control over financial reporting.

All of the cases – which the companies settled while neither admitting nor denying the SEC’s allegations – highlight the importance of integrating new subsidiaries into the parent’s system of internal controls; maintaining adequate accounting personnel and clear lines of communication; and, when accounting problems are discovered, of acting quickly to investigate and remediate.