SEC Sues Investment Adviser for Using Misleading Hypothetical Performance Metrics

SEC Charges FinTech Investment Adviser Titan for Misrepresenting Hypothetical Performance of Investments and other Violations

The Securities and Exchange Commission today announced charges against Titan Global Capital Management USA LLC, a New York-based FinTech investment adviser, for using hypothetical performance metrics in advertisements that were misleading. The SEC also charged Titan with multiple compliance failures that led to misleading disclosures about custody of clients’ crypto assets, the use of improper “hedge clauses” in client agreements, the unauthorized use of client signatures and the failure to adopt policies concerning crypto asset trading by employees.

According to the SEC’s order, for a period ranging from August 2021 to October 2022, Titan, which offers multiple complex strategies to retail investors through its mobile trading app, made misleading statements on its website regarding hypothetical performance, including by advertising “annualized” performance results as high as 2,700 percent for its Titan Crypto strategy. The order alleges that Titan’s advertisements were misleading because they failed to include material information, for example, that the hypothetical performance projections assumed that the strategy’s performance in its first three weeks would continue for an entire year. The order also finds that Titan violated the marketing rule by advertising hypothetical performance metrics without having adopted and implemented required policies and procedures or taking other steps required by the Commission’s marketing rule, which was amended in December 2020.

SBF lawyers blast 2 days a week trial prep time

Lawyers for Sam Bankman-Fried on Friday rejected as “entirely inadequate” the government’s plan for letting the jailed founder of the collapsed FTX cryptocurrency exchange prepare for his October fraud trial.

In a letter to US District Judge Lewis Kaplan in Manhattan, the lawyers said giving Bankman-Fried just two days a week, without a dedicated computer, to review the “extraordinary volume” of evidence violated his Sixth Amendment constitutional right to effective counsel and aid his defense.

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Bankman-Fried’s lawyers asked that he be allowed to meet with them five days a week at the Manhattan federal courthouse in preparation for the Oct. 2 trial. He is being held at the Metropolitan Detention Center in Brooklyn, NY.

Court Ordered to Tell Allen Stanford Why It Won’t Release Him

Robert Allen Stanford, who is serving a 110-year sentence for orchestrating a multi-billion dollar Ponzi scheme, was entitled to some explanation when a federal court denied his bid for compassionate release, the US Court of Appeals for the Fifth Circuit said Thursday.

Stanford asked to be released based on the dangers posed by the pandemic, his age, and a preexisting heart condition. He also argued that there were “extraordinary and compelling reasons” to grant him relief, claiming that his wire fraud conviction was wrongful because it was based on a “purely intrastate wire transmission….”

SEC Disclosure Rules Face ‘Sea Change’ Challenge From Business

Business groups’ First Amendment challenge to a Securities and Exchange Commission rule on stock buybacks threatens far-reaching consequences for the regulator’s efforts to require disclosure of corporate information.

Led by the US Chamber of Commerce, the groups have sued to vacate the rule, arguing the requirement that companies disclose their rationale for repurchasing stock shares violates the First Amendment’s protections against compelled speech.

Former Allianz Executive Loses Bid to Toss Fraud Charges

A federal judge in New York declined to throw out fraud charges against a former Allianz fund manager who claimed he was double-crossed by his lawyers, citing the terms of a joint defense agreement the executive entered into with the firm’s counsel.

The ruling by Judge Laura Taylor Swain allows federal prosecutors to forge ahead with their prosecution of Gregoire Tournant, a former chief investment officer for one of Allianz’s U.S. investing divisions who was blamed by the firm for losses it suffered during a market meltdown in 2020 sparked by the Covid-19 pandemic.

SEC lawyers subpoena fund managers over ESG disclosures

The US Securities and Exchange Commission enforcement division has sent document requests, including subpoenas, to several asset managers relating to their environmental, social and governance investment marketing this year, lawyers said, suggesting a potential crackdown looming for the sustainable fund world.

Among the SEC’s areas of inquiry are conventional investment funds that have repurposed themselves as ESG funds, the asset management industry lawyers said. Also in focus are cases where funds offered in the US and Europe may share strategies, holdings or portfolio managers but offer differing amounts of information on either side of the Atlantic.

How PayPal Upended the Crypto Debate in Washington D.C.

As the end of July arrived, House Financial Services Committee Republicans achieved its goal of passing a bipartisan stablecoins bill. Still, they left D.C. without the broad bipartisan vote Chair Pat McHenry had labored to achieve. The session ended with new recriminations over old disputes, namely the degree of federal vs. state regulation in a new regulatory framework, casting a dark cloud over the prospect of legislation that could garner support from McHenry, Ranking Member Maxine Waters, and the Biden White House.

And then PayPal and Paxos entered the chat. The surprise unveiling of PYUSD may be the accelerant needed to forge compromise in D.C. and bring about the legal enshrinement of a comprehensive regulatory framework for stablecoins. It may also represent a new, more aggressive strategy for how American fintech companies deal with the federal government and D.C. regulators.

SEC Charges Georgia Resident in Crypto-Related Affinity Fraud

The Securities and Exchange Commission today announced charges against Keith Crews of Kennesaw, Georgia for conducting an affinity fraud through two entities which he owned and controlled, Stem Biotech LLC and Four (4) Square Biz LLC.

According to the SEC’s complaint, between October 2019 and May 2021, Crews raised at least $800,000 from as many as 200 investors through the sale of “Stemy Coin,” a purported crypto asset. Many of the Stemy Coin investors were solicited through relationships in the African-American and church communities. The complaint alleges that Crews made several misrepresentations to investors, including that Stemy Coin was backed by Stem Biotech’s stem cell technology and other assets, that Stem Biotech had existing operations, products, and partnerships with entities involved in the stem cell industry, and that investment in Stemy Coin would provide substantial dividend returns. None of these statements were true, according to the SEC, and any possible returns on a Stemy Coin investment were highly speculative at best.

Cybersecurity Disclosure Rules: Don’t Panic!

While the SEC’s adoption of cybersecurity disclosure requirements last month was a long time in the making, that actual adoption of the rules and the relatively short compliance deadlines seems to have prompted some level of panic at public companies. Based on how the final rules came out, I hope to offer some reassuring words that your path to compliance with these requirements can build on your pre-existing efforts rather than recreating the wheel. To that end, I ask and answer some of the questions that have been emerging about the new rules. Please read them and take a few deep breaths.