SEC Sues Trader for SPAC Insider Trading Scheme

SEC Charges Hedge Fund Trader and Broker-Dealer Partner in Multi-Million Dollar SPAC Insider Trading Scheme

The Securities and Exchange Commission today filed insider trading charges against Sean Wygovsky, a former trader at a Canadian asset management firm, and Christopher Matthaei, a former partner at a U.S. broker-dealer, for using nonpublic information in advance of at least seven merger announcements involving Special Purpose Acquisition Companies (SPACs) to earn illicit profits of more than $3.4 million.

The SEC’s complaint alleges that Wygovsky learned material non-public information about upcoming SPAC mergers from his employer’s involvement in transactions related to the mergers. The complaint further alleges that, from May 2020 through April 2021, Wygovsky used encrypted messaging to tip his close friend and trading client, Matthaei, about the upcoming mergers. According to the complaint, Matthaei, who ran a trading and research group focused on SPACs during the relevant period, allegedly traded on Wygovsky’s tips.

SEC’s Gary Gensler Asks for $2.4 Billion to Fight Crypto ‘Misconduct’ The SEC’s proposed 2024 budget would be around a $200 million increase from 2023. The agency is requesting funding for 170 new positions, in addition to funding for staff hired the year prior, testified Gensler.

A significant portion of these jobs would entail adding to the SEC’s enforcement and examinations divisions, which account for around half of the agency’s staff, he said. In 2022, the enforcement division received more than 35,000 tips, complaints and referrals from whistleblowers and others, more than double the number received in 2016, despite the agency shrinking by five percent during the same time period, said Gensler.

“Meanwhile, rapid technological innovation in the financial markets has led to misconduct in emerging and new areas, not least in the crypto space,” he testified. “Addressing this requires new tools, expertise, and resources.”

U.S. Crypto Crackdown Sure Looks Like an Attempt to Kill a Promising Industry

But whether this is a coordinated effort against crypto or not may be irrelevant. Some people are convinced it’s real, and not just my friend Harry. The idea is rampant now: The U.S. has it in for crypto. So some firms are looking at moving overseas, while others are worried they will lose or be unable to obtain bank accounts. And it’s not just industry folk who believe this. Bankers, for instance, are declining invitations to speak at crypto gatherings, fearful of painting targets on their institutions’ backs.

Without a significant change of course by the Biden administration, the view that the U.S. is anti-crypto will soon become too entrenched to uproot. The fact that most of the U.S. government’s actions have been punitive rather than constructive is a huge factor.

Sushi Swap CEO Says He No Longer Feels ‘Inspired’ Amid U.S. Regulators’ Crypto CrackdownSushi Swap Head Chef Jared Grey is no longer feeling “inspired” after a wave of regulatory crackdowns on crypto exchanges, including the decentralized exchange (DEX) he manages, has put immense pressure on the crypto industry, according to comments he made during the protocol’s ask-me-anything call on Thursday.

Grey spoke candidly about his feelings toward U.S. regulators and the general state of his industry to three other speakers during the first few minutes of the hour-long public meeting before community members trickled into the Discord call, which CoinDesk attended.

“It really feels like over this last cycle that the majority of that feeling [of excitement] is gone now,” Grey said. “Look at what’s going on on the regulatory side of things. Like this morning, Senator [Elizabeth] Warren [was] stating she’s putting together an anti-crypto army to regulate the space into obedience.”

Judge axes Biogen class action, rips shareholder lawyers for ‘constant misrepresentation’

But few dismissal decisions, at least in my experience, castigate plaintiffs’ lawyers for trying to do just that – which is why a ruling on Wednesday from U.S. District Judge William Young caught my eye.

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Young concluded that none of the 25 allegedly false statements was actually false and that the complaint failed to show Biogen’s fraudulent intent.

But that’s not all. The complaint, he said, had repeatedly mischaracterized what Biogen executives actually said in order to make their statements seem misleading. This “constant misrepresentation,” Young said, was fatal.

“A securities fraud complaint cannot rest on a house of cards made of mischaracterized statements,” the judge wrote.

That’s more than a dismissal. It’s an accusation.

Target Hit with Securities Suit Over Pandemic-Related Inventory OverhangAs I have noted in prior posts (most recently here), a recurring type of pandemic-related securities suit involves companies whose fortunes prospered at the outset of the pandemic but whose performance sagged as the coronavirus outbreak evolved. The latest lawsuit of this type is the securities suit filed earlier this week against the retailer Target Corp., in which the plaintiffs allege that the surge in consumer demand at the outset of the pandemic led the company to overstock inventory, causing an inventory overhang that later undercut the company’s financial performance. A copy of the March 29, 2023, complaint against Target can be found here.

Location Drives Tough Calls on Confessing Corporate Crime to DOJ

Lawyers for corporations thinking about confessing misdeeds in exchange for heightened leniency from prosecutors are weighing where they can get the better deal: Justice Department headquarters or a US attorney’s office.

Counsel may have a clearer path to avoiding charges through a process known as declination by walking into the Criminal Division in Washington. DOJ’s January policy revision spelled out how even companies with aggravating circumstances, such as senior executive involvement or recidivism, can earn a declination by voluntarily disclosing misconduct.

Israeli Universities Escape Madoff Trustee’s $50 Million US Suit

Four universities in Israel successfully defeated a New York bankruptcy court lawsuit brought by the trustee for Bernie Madoff’s defunct investment firm but still face claims abroad over their receipt of roughly $50 million in funds derived from Madoff’s Ponzi scheme.

Judge Cecelia Morris of the US Bankruptcy Court for the Southern District of New York ruled that trustee Irving Picard doesn’t have jurisdictional grounds to bring fraudulent transfer claims against the universities in her court.

SEC Pursues ‘Dealer’ Definition Expansion, to Industry’s Dismay

The Securities and Exchange Commission is finalizing a rule that, as proposed, would clarify and expand the definition to include some financial firms—such as high-frequency traders—that have traditionally not been considered a dealer.

Industry advocates say the agency also is using recent lawsuits against penny-stock flippers to go further than it’s likely to do in its rulemaking—to stake out the position that a “dealer” is any company whose business model is based on buying and selling securities.

SBF Bribery Charge Has Me Shaking My Head

According to the indictment, the accounts in question were unfrozen in November 2021. As it happens, in September of that year, FTT hit its highest value ever, at $85. As of this writing, the token trades at about $1.35. That means that $40 million in cryptocurrency in the fall of 2021 is worth about $636,000 today. That’s not pocket change — but it’s not mid-eight figures either.

Nothing I’ve said should be taken to defend the practice of bribery, which is wrong for the reasons I’ve listed and many more. Nevertheless, I cannot resist the tiniest shiver of schadenfreude at the thought that the recipient, if indeed there is one, quite possibly got scammed.