SEC Charges Hedge Fund Manager with Lying to Investors

SEC Charges Atlanta-Based Hedge Fund Manager with Multimillion-Dollar Fraud

The Securities and Exchange Commission today announced charges against Craig Allen for defrauding investors in The Cheetah Fund L.P., an Atlanta-based hedge fund that Allen founded and controlled.

According to the SEC’s complaint, during the period between January 2019 and January 2023, Allen raised approximately $9.9 million from investors in the Cheetah Fund by lying about the fund’s supposedly superlative performance. In reality, the SEC states, Allen incurred over $4.59 million of realized trading losses in the accounts of the Cheetah Fund and of C.M. Allen, a related company also controlled by Allen. The complaint also states that Allen falsely indicated to investors that the Cheetah Fund used a specific accounting firm as an auditor and to prepare its Schedule K-1 tax forms. Allen’s compensation from the Cheetah Fund for managing its portfolio, according to the SEC, was performance-based, meaning that Allen was to be compensated only when the fund profited. But the complaint alleges that, despite incurring heavy trading losses and thus earning little if any legitimate compensation, Allen received at least $2.64 million from the Cheetah Fund and its investors. The SEC claims that, to date, Allen has returned only about $900,000 to Cheetah Fund investors, resulting in investor losses of approximately $9 million.

‘Bitcoin Sign Guy’ Has Sold His Original Sign for 16 BTC

The iconic ‘Buy Bitcoin’ sign held behind Janet Yellen during her televised Congressional testimony in July 2017 has been auctioned off for 16 BTC, or just over $1 million.

Scarce.City, the auction house that facilitated the deal, said it was a record amount for the auction platform.

The auction itself was held at PubKey, a Bitcoin-themed bar in New York City.

The sign’s new owner is someone who goes by the handle of Squirrekkywrath, according to a tweet from PubKey.

Not much is known about its new owner. The head of research at Galaxy, Alex Thorn, said he’s a “bitcoin OG that no one has ever heard of.”

Changpeng Zhao Apologizes Ahead of Sentencing, 161 Others Send Letters of Support

In the letter addressed to the U.S. Judge from the Western District of Washington, Richard A. Jones, Zhao said, “There is no excuse for my failure to establish the necessary compliance controls at Binance” and gave an assurance that this would be his only “encounter with the criminal justice system.”

Going forward, Zhao said, he wanted to support biotech startups and the youth. Along with Zhao’s letter, there were 161 other letters of support seeking leniency from family members, friends and others.

Will the Seventh Circuit’s Recent Opinion Deter Merger Objection Lawsuits?

In recent years, one of the curses of the corporate and securities litigation world has been the ubiquitous filing of merger objection lawsuits in connection with proposed M&A transactions. When a deal is announced, plaintiffs’ lawyers almost always file one or more of these suits in which they seek additional proxy disclosures. After the defendant company agrees to make additional disclosures, the plaintiffs’ lawyers dismiss the suits in exchange for the payment of a so-called “mootness fee.” It is a process that the well-respected jurist Richard Posner famously described as “no better than a racket.”

Now, in a recent decision written by Judge Frank Easterbrook, the Seventh Circuit has identified additional tools and ammunition that companies and other objectors can use to try to fight these kinds of lawsuits — which, the appellate court specially recognized, have no purpose other than to transfer money from companies to plaintiffs’ lawyers.

Crypto-Mixing Service Founders Charged in Money-Laundering Case

Two founders of the Samourai Wallet crypto-mixing service were charged by federal prosecutors with helping launder $100 million in crime proceeds.

Keonne Rodriguez and William Lonergan Hill were charged with a money laundering conspiracy and operating an unlicensed money transmitting business from 2015 through February 2024.

During that time, Samourai was used to process $2 billion in anonymous financial transactions, providing a “haven for criminals to engage in large-scale money laundering and sanctions evasion,” US prosecutors said in an indictment unsealed Wednesday in Manhattan.

The FTC Comes for Noncompetes

… In the financial industry, there is a common norm that, if you leave a job, you are not allowed to work for a competitor for some period of months or years, during which you are still paid by your old employer. This makes it harder for you to get a new job and reduces your negotiating leverage at your current job, and if you do leave, the enforced time off devalues your skills and holds back your career. On the other hand: year-long vacation! There are probably some people who structure their financial careers around maximizing gardening leave. Did the FTC end that?

Preparing for AI Whistleblowers

AI enforcement and whistleblower protection are priority areas for both the SEC and the DOJ. The longstanding whistleblower program at the SEC has yielded dozens of significant enforcement actions. The SEC has repeatedly warned market participants against “AI washing” and has charged its first-ever AI fraud cases. The U.S. Department of Justice (“DOJ”) similarly launched its AI enforcement program in February by announcing an initiative targeting the detection and prosecution of crimes perpetrated through AI. In March, the DOJ announced a new pilot whistleblower rewards program that reaffirmed its focus on AI, stating that prosecutors would integrate AI assessments into evaluations of corporate compliance programs and would seek “stiffer sentences” for AI misuse.

Given robust federal whistleblower incentive programs and rapidly emerging recent AI enforcement activity, companies adopting AI should consider updating their policies and procedures to prepare for AI whistleblower risks.