SEC Sues Investment Adviser for Failing to Prevent Misuse of Material Nonpublic Information

SEC Charges Sound Point Capital Management for Compliance Failures in Handling of Nonpublic Information

The Securities and Exchange Commission today announced settled charges against New York-based registered investment adviser Sound Point Capital Management LP for failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information (MNPI) concerning its trading of collateralized loan obligations (CLOs). To settle the SEC’s charges, Sound Point agreed to pay a $1.8 million civil penalty.

According to the SEC’s order, as a significant component of its business, Sound Point managed CLOs and traded its own CLOs as well as CLOs managed by third parties. Sound Point also had a credit business for which it often participated in lender groups or creditors’ committees. As a result of this business, on occasion, Sound Point came into possession of MNPI about companies whose loans were held in the CLOs that Sound Point traded. After an incident in July 2019, Sound Point began conducting pre-trade compliance reviews of the potential impact of MNPI about loans in Sound Point-managed CLOs, though it did not adopt a written policy for these reviews until July 2022. Sound Point did not establish, maintain, or enforce any written policies or procedures concerning the potential impact of MNPI about the loans in third party-managed CLOs until June 2024.

SEC Charges Brothers Jonathan and Tanner Adam with $60 Million Ponzi Scheme

The Securities and Exchange Commission today announced that it obtained emergency asset freezes against Jonathan Adam, a resident of Angleton, Texas, and his brother, Tanner Adam, a resident of Miami, Florida, and against their respective entities, GCZ Global LLC and Triten Financial Group LLC, to halt an alleged $60 million Ponzi scheme impacting more than 80 investors across the country.

The SEC’s complaint alleges that, from January 2023 to June 2024, the Adam brothers solicited and lured victims with the promise of up to 13.5 percent monthly investment returns. According to the complaint, the duo falsely told investors that Jonathan Adam had created a “bot” that operated on a crypto asset trading platform to identify arbitrage trading opportunities, and that investor funds would be used in a lending pool that would, through smart contracts, fund “flash loans” to complete these arbitrage trades. The Adam brothers allegedly told investors that, short of a global market meltdown, investor funds were safe. The SEC alleges that, in reality, the lending pool as described to investors did not exist, and the defendants instead used millions of dollars of investor funds to pay supposed returns to existing investors and to support their lavish lifestyles. For example, the complaint alleges that Tanner Adam used investor funds to make the down and installment payments to build a $30 million condominium in Miami and Jonathan Adam used at least $480,000 of investor funds to purchase cars, trucks, and recreational vehicles. The SEC’s complaint also alleges that Jonathan Adam misrepresented his background in order to gain the trust of investors and failed to tell investors that he had previously been convicted of three counts of securities fraud.

SEC Charges Abra with Unregistered Offers and Sales of Crypto Asset Securities

The Securities and Exchange Commission today filed settled charges against Plutus Lending LLC, which does business as Abra, for failing to register the offers and sales of its retail crypto asset lending product, Abra Earn. The SEC also charged Abra with operating as an unregistered investment company.

According to the SEC’s complaint, in or around July 2020, Abra began to offer and sell Abra Earn in the United States. Abra Earn allowed U.S. investors to tender their crypto assets to Abra in exchange for Abra’s promise to pay a variable interest rate. At its height, the Abra Earn program had approximately $600 million in assets, with nearly $500 million from U.S. investors. The complaint alleges that Abra marketed Abra Earn as a means for investors to earn interest on their crypto assets “auto-magically,” and that Abra exercised its discretion to use investors’ crypto assets in various ways to generate income for itself and to fund interest payments. The complaint further alleges that Abra Earn was offered and sold as a security and that the offers and sales did not qualify for an exemption from SEC registration.

SEC Issues $24 Million Awards to Two Whistleblowers

The Securities and Exchange Commission today announced awards of more than $24 million to two whistleblowers whose information and assistance led to an SEC enforcement action and an action brought by another agency.

The first whistleblower will receive an award of $4 million, while the second whistleblower will receive an award of $20 million. While the first whistleblower reported first, prompting the opening of the investigation, the second whistleblower received the higher award, as their information and substantial cooperation proved critical to the success of the actions.

Crypto tax evasion is ‘pervasive’

One of the many things about Norway that blows people’s minds is that tax returns are public. For economists that means there’s a treasure trove of data to play with.

Tom Meling, Magne Mostad and Vestre have done precisely that for a paper just published by the National Bureau for Economic Research, which cross-references tax filings with data they obtained from crypto exchanges via the authorities.

Throw in surveys on crypto ownership and data on the Norwegian Tax Authority’s enforcements and you have the raw material needed to investigate whether allegations of mass tax evasion by crypto people were true. And lo:

“We found that crypto tax non-compliance is pervasive, even among investors trading on exchanges that share identifiable trading data with tax authorities.”

What exactly is “pervasive”? The paper estimates that 88 per cent of all Norwegian crypto holders fail to declare their hopium to the tax authorities.

Audit Leader Behind US Rule Revamp Defies Calls to Slow Down

Erica Williams has set a blistering pace to overhaul rules governing audits of public companies that in some cases are decades out of date.

Williams, who has been chair of the Public Company Accounting Oversight Board since 2022, has led the Enron-era regulator as it has finalized five projects and moved six others through various stages of adoption. Last year alone was the board’s most active period to modernize its rule book in a decade.

Audit firms, largely unsuccessfully, have demanded more opportunities to shape pending reforms and more time to adopt to changes that guide how they audit corporate accounting for juggernauts like Apple to small R&D firms.

Yet, Williams makes no apologies and has no plans to slow down.

Jailed Binance Crypto Exchange Exec Gambaryan’s Case to be Heard a Month Earlier Than Planned in Nigeria on Sept. 2

Nigeria’s money laundering case against crypto exchange Binance, detained executive Tigran Gambaryan and fugitive Nadeem Anjarwalla will resume on Sept. 2, a month earlier than planned, after defense lawyers asked for the trial to be brought forward, Gambaryan’s family said.

The hearing had been set for Oct. 11. Gambaryan and Anjarwalla were detained by officials in the country in February. Anjarwalla has since escaped. Binance is also facing a tax-evasion trial in the country.