SEC Charges Miami Real Estate Developer with $93 Million Fraud

SEC Charges Florida Real Estate Developer Rishi Kapoor with Perpetuating $93 Million Fraud Scheme and Obtains Emergency Relief

The Securities and Exchange Commission today announced that it obtained an asset freeze and other emergency relief concerning an alleged $93 million real estate investment fraud perpetrated by Miami-based developer Rishi Kapoor. The SEC also charged Location Ventures LLC, Urbin LLC, and 20 other related entities in connection with the fraud scheme.

According to the SEC’s complaint, from approximately January 2018, until at least March 2023, Kapoor and certain of the defendant entities solicited investors by, among other things, making several material misrepresentations and omissions regarding Kapoor, Location Ventures, Urbin, and their real estate developments. The false statements allegedly included misrepresenting Kapoor’s compensation; his cash contribution to the capitalization of Location Ventures; the corporate governance of Location Ventures and Urbin; the use of investor funds; and Kapoor’s background. The SEC’s investigation uncovered that Kapoor allegedly misappropriated at least $4.3 million of investor funds and improperly commingled approximately $60 million of investor capital between Location Ventures, Urbin, and some of the other charged entities. The complaint also alleges that Kapoor caused some entities to pay excessive fees and to represent higher returns to investors by significantly understating cost estimates.

How the Misappropriation Theory Affects the Amount of Insider Trading

Few types of behavior attract as much attention in corporate and securities law as insider trading – that is, securities transactions based on material non-public information (MNPI).[1] Yet there is very limited empirical evidence on whether the law effectively deters insider trading, and particularly whether the adoption of the main doctrine behind its prohibition – the “misappropriation theory” – has any deterrent effect. In a new paper, I examine this question by studying the impact of the Supreme Court’s decision in O’Hagan, which adopted the misappropriation theory and, in doing so, significantly expanded the scope of the insider trading prohibition.

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The results show that the run-ups in fact decreased significantly in relation to the announcement returns after O’Hagan. Before O’Hagan, the average relative run-up was 7 percentage points lower than the announcement returns; after the decision, the difference became 9 percentage points. In this sense, after O’Hagan, there was less anticipatory trading explaining the overall valuation effect of M&A bids, which is consistent with the notion of less insider trading.

Mark Uyeda Sworn in for Second Term as SEC Commissioner

Securities and Exchange Commission Commissioner Mark T. Uyeda was sworn in for his second term as a Commissioner at the Securities and Exchange Commission on Dec. 28, 2023. Commissioner Uyeda began his first term as an SEC Commissioner on June 30, 2022, after being nominated by President Joseph Biden and confirmed by the U.S. Senate for a term expiring in 2023. In June 2023, President Biden nominated Commissioner Uyeda for a term expiring in 2028, and the U.S. Senate confirmed Commissioner Uyeda on Dec. 20, 2023.

SEC enforcement against public companies – A recap of 2023

Overall, 2023 included examples of the SEC’s willingness to push the enforcement envelope by asserting claims against non-financial individuals at public companies, focusing on disclosures beyond financial performance, alleging accounting control violations in cases seemingly unrelated to accounting and alleging disclosure control violations even without an underlying false disclosure. The SEC also displayed its willingness to litigate against public companies and executives, including by alleging its most serious violation, Section 10(b) intentional fraud. We expect to see these trends continue in 2024.

India’s Adani wins court relief on scrutiny after Hindenburg attack

India’s Supreme Court on Wednesday said the Adani Group does not need to face more investigations beyond the current scrutiny of the market regulator, a major relief for the conglomerate hit hard by a U.S. short-seller’s allegations of wrongdoing.

The Securities and Exchange Board of India (SEBI) has been probing the Adani group, led by billionaire Gautam Adani, after Hindenburg Research in January 2023 alleged improper use of tax havens and stock manipulation by the group.

SEC, stock exchange officials meet ahead of potential spot bitcoin ETF approval

FOX Business has learned that SEC staff attorneys from the Division of Trading and Markets are meeting Wednesday with officials from the major exchanges — the New York Stock Exchange, Nasdaq and Chicago Board Options Exchange — where the ETFs would trade.

The meetings are seen as a positive sign that the SEC is nearing approval of some or all of the dozen applications by major money managers and crypto firms for the product, according to people at the firms who asked not to be quoted by name. Specifically, the SEC is asking the exchanges to revise and finalize their so-called 19b-4 filings, submitted by the exchanges on behalf of issuers, which must receive SEC clearance before the ETF can be sold to the public.

While the final decision has not been made, sources close to the proceedings say the SEC could begin notifying issuers of approval on Friday with trading beginning as early as next week. ETF analysts and issuers alike remain confident that a favorable decision from the SEC will be made on or before Jan. 10, as the SEC continues to meet with key players on the matter.

Ex-Citi Execs Plan Bitcoin Securities That Don’t Need OK From US

As speculation about the upcoming approval or denial of spot-Bitcoin ETFs reaches a fever pitch, a group of former Citigroup Inc. executives is starting to offer securities backed by the oldest cryptocurrency that they say don’t need the blessing of US regulators.

The new offering, called Bitcoin depositary receipts, will be similar to American depositary receipts that represent foreign stocks. The startup, called Receipts Depositary Corporation, or RDC, said it plans to issue the first Bitcoin depositary receipts to qualified global institutional investors in transactions exempt from registration under the Securities Act of 1933.

Known as BTC DRs, the offering will give institutions access to Bitcoin securities through US regulated market infrastructure and cleared through the Depository Trust Co., according to a release from the company.