SEC Quietly Bringing Enforcement Actions During Shutdown

Bahamas Broker Ordered to Pay SEC $19 Million Over US Clients

Guy Gentile and his shuttered, Bahamas-based firm were ordered to fork over almost $19.2 million to the Securities and Exchange Commission after being found liable for operating as an unregistered broker-dealer in the US.

Gentile and SureTrader are jointly and severally liable for more than $16.5 million in ill-gotten gains plus prejudgment interest, Judge Beth Bloom ordered in the US District Court for the Southern District of Florida Monday. Gentile additionally owes $520,200 in disgorgement, more than $231,000 in prejudgment interest, and a nearly $1.89 million civil penalty.

Tax Startup CEO Defrauded Venture Capital Firms, SEC Says

The founder and CEO of a now-defunct online tax software startup fraudulently raised over $13 million from venture capital investors, the SEC said.

From October 2020 through September 2023, Shiloh Luckey vastly overstated the revenue and number of subscribers for her startup, ComplYant App Inc., and falsely claimed to be a licensed certified public accountant, according to the Securities and Exchange Commission’s complaint filed Monday in the US District Court for the Central District of California.

SEC Chief Fast Tracks Agenda, Averting Slog Through Rule Changes

SEC Chairman Paul Atkins is pursuing quick fixes to relax corporate reporting and restrict activist investors, with any lasting regulatory rollbacks many months, or even years, away.

The Securities and Exchange Commission under the Trump appointee in July urged a federal court to toss Biden-era climate reporting requirements, in part to avoid the lengthy rulemaking that would be needed to undo them. The SEC in September then advised companies they can funnel investors’ fraud claims into mandatory arbitration, without new rules. Atkins also suggested in a speech this month that companies could block votes on shareholders’ environmental and social proposals now, using existing Delaware law.

All three efforts raise the question of how far Atkins can go to make sweeping changes absent rulemaking….

Bored Ape NFTs Ruling Finds a Line Between Art and Investment

Issuers and promoters of blockchain-based collectibles sued under securities laws can now argue those were sold for personal use and enjoyment as a path to avoid liability, based on a recent ruling.

A federal judge in California recently rejected unregistered securities claims from people who bought cartoon images of “bored” apes—some wearing sunglasses—in the form of non-fungible tokens, or NFTs, because they were marketed for “consumption.” Now those token purchasers have refiled their class action complaint, trying to resurrect their original premise.

While the law governing cryptocurrency trading remains in flux, NFTs stand apart because each item is unique. Judge Fernando M. Olguin‘s ruling in favor of Yuga Labs Inc. and its promoters focused on how the company’s Bored Apes Yacht Club tokens were promoted and sold. […]

The recent decision pointed to allegations that Yuga Labs and its promoters said NFTs like Bored Ape Yacht Club provided membership in a digital club, “access to a collaborative art experience,” and, significantly, fun.

“None of these alleged promotional statements can be read to tout the NFTs as investments,” Olguin said. His ruling and reasoning, if it survives and propagates, could provide a path out of litigation for token issuers.