SEC Charges Three Execs at Austal USA with Fraudulent Revenue Recognition Scheme

SEC Charges Three Executives at U.S. Navy Shipbuilder Austal USA with Accounting Fraud

The Securities and Exchange Commission today charged three executives of Mobile, Alabama-based shipbuilder, Austal USA LLC, for orchestrating a fraudulent revenue recognition scheme that allowed its parent company to meet or exceed analyst expectations.

The SEC alleges that, from at least January 2013 through July 2016, Austal USA’s former president, Craig D. Perciavalle, its current director of financial analysis, Joseph A. Runkel, and former director of the Littoral Combat Ships program, William O. Adams, engaged in a scheme to artificially reduce the cost estimates to complete certain shipbuilding projects for the U.S. Navy by tens of millions of dollars. The complaint alleges that Perciavalle, Runkel, and Adams knew that Austal USA’s shipbuilding costs were rising and higher than planned, but they directed others to arbitrarily lower the cost estimates to meet Austal USA’s revenue budget and revenue projections.

The complaint further alleges that Austal USA’s parent company, Australia-based Austal Limited, prematurely recognized revenue and, as a result, met or exceeded analyst consensus estimates for earnings before interest and tax (EBIT), a key financial metric for the company.

FTX’s Law Firm Hit With Queries on Work Before Crypto Collapse

FTX’s legal troubles are reaching its law firm, Fenwick & West, which faces federal law enforcement subpoenas and a class-action lawsuit tied to the failed crypto exchange.

Bankruptcy counsel for FTX has discussed “federal law enforcement subpoenas to Fenwick” with the law firm’s general counsel, Kathryn Fritz, according to a court document filed in March. The document, which details work by Sullivan & Cromwell lawyers on FTX’s bankruptcy in January, doesn’t say what the subpoenas requested or which investigation they pertained to.

Silicon Valley Bank’s risk model flashed red. So its executives changed it.

In buying longer-term investments that paid more interest, SVB had fallen out of compliance with a key risk metric. An internal model showed that higher interest rates could have a devastating impact on the bank’s future earnings, according to two former employees familiar with the modeling who spoke on the condition of anonymity to describe confidential deliberations.

Instead of heeding that warning — and over the concerns of some staffers — SVB executives simply changed the model’s assumptions, according to the former employees and securities filings. The tweaks, which have not been previously reported, initially predicted that rising interest rates would have minimal impact.

Elon Musk seeks to end $258 billion Dogecoin lawsuitElon Musk asked a U.S. judge on Friday to throw out a $258 billion racketeering lawsuit accusing him of running a pyramid scheme to support the cryptocurrency Dogecoin.

In an evening filing in Manhattan federal court, lawyers for Musk and his electric car company Tesla Inc called the lawsuit by Dogecoin investors a “fanciful work of fiction” over Musk’s “innocuous and often silly tweets” about Dogecoin.

The lawyers said the investors never explained how Musk intended to defraud anyone or what risks he concealed, and that his statements such as “Dogecoin Rulz” and “no highs, no lows, only Doge” were too vague to support a fraud claim.

“There is nothing unlawful about tweeting words of support for, or funny pictures about, a legitimate cryptocurrency that continues to hold a market cap of nearly $10 billion,” Musk’s lawyers said. “This court should put a stop to plaintiffs’ fantasy and dismiss the complaint.”

Republic First Is ‘NOT’ First Republic, But Try Telling Traders That

A case of mistaken identity is sparking a selloff in Republic First Bancorp Inc., which had fallen by more than 40% this month because investors have it confused with embattled First Republic Bank.

“We are NOT First Republic Bank,” Republic First Chief Executive Officer Thomas Geisel wrote in a letter on the company’s website. “It’s important to fully understand there are significant differences between these banks, other ‘Start-up’ or ‘Crypto-focused’ banks versus Republic Bank and the thousands of other community banks.”

Goldman, Morgan Stanley win dismissal of investors’ Archegos lawsuits

A U.S. judge on Friday dismissed seven lawsuits by investors who accused Goldman Sachs Group Inc and Morgan Stanley of market manipulation and insider trading before the collapse of Bill Hwang’s $36 billion Archegos Capital Management LP.

U.S. District Judge Paul Crotty in Manhattan rejected claims that the Wall Street banks, two of Archegos’ prime brokers, should be liable for dumping stocks they knew Archegos would be forced to sell after failing to meet margin calls in March 2021.

Investors who bought the stocks, which included ViacomCBS, Discovery and Baidu , said the combined selling left them with huge losses, while enabling Goldman and Morgan Stanley to avoid billions of dollars of their own losses.

SEC Awards More Than $12 Million to Two Whistleblowers

The Securities and Exchange Commission today announced awards of more than $12 million to two whistleblowers who provided information and assistance in a successful SEC enforcement action.

The first whistleblower prompted the opening of the investigation and provided information on violations that would otherwise have been difficult to detect. This whistleblower identified key witnesses, helped staff understand complex fact patterns and issues, and made persistent efforts to remedy the issues. As a result, this whistleblower will receive an award of more than $9 million. The second whistleblower submitted important new information during the course of the investigation and will receive an award of more than $3 million.

Bitcoin Thief Who Held $3.4 Billion in Crypto Deserves Prison, US Says

The seized Bitcoin is now worth $1.48 billion, but James Zhong, 32, should do time behind bars for his heist in 2012 from the Silk Road darkweb site, prosecutors told a federal judge Friday, noting he deserves leniency for helping authorities recover the stolen crypto. Zhong pleaded guilty in November and wants the judge to spare him a prison term.

Zhong hid his caper for a decade, and spent $16 million of the proceeds on real estate investments, luxury hotels, nightclubs and cars like Lamborghinis and a Tesla, prosecutors wrote in a filing in federal court in New York. The Bitcoin he sold for that high life was valued at $142 million at the time of the seizure, they said.