FOR IMMEDIATE RELEASE
2012-31

Washington, D.C., Feb. 22, 2012 — The Securities and Exchange Commission today charged two China-based executives with defrauding investors into believing they were investing in a Chinese coal business when in fact they were investing in an empty shell company.

The SEC alleges that Puda Coal Inc.’s chairman Ming Zhao schemed with former CEO Liping Zhu to steal and sell Puda Coal’s sole revenue-producing asset, a coal mining company named Shanxi Puda Coal Group. Zhao secretly transferred Puda Coal’s controlling interest in Shanxi Coal to himself and then sold a substantial portion to a fund controlled by what is reported to be China’s largest state-owned financial firm. The scheme enabled Zhao rather than Puda Coal’s public shareholders to profit from a lucrative business opportunity.

The SEC alleges that Zhao and Zhu failed to disclose these transactions in Puda Coal’s periodic reports to the SEC, and continued to raise funds from U.S. investors by conducting two public offerings to purportedly raise capital to enable Shanxi Coal to acquire coal mines. Unbeknownst to investors, Puda Coal no longer had an ownership stake in that company after Zhao’s secret maneuvers. After the SEC began investigating, Zhao and Zhu further schemed to forge a letter from the Chinese financial firm purporting that Puda Coal investors weren’t harmed by the asset transfers. In reality, the scheme left Puda Coal as a shell company with no ongoing business operations.

“Zhao and Zhu duped investors with promises that their money would be invested in a Chinese coal company when in fact the company was an empty shell that had been looted by the defendants,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This enforcement action reflects our continuing commitment to hold accountable officers and directors of issuers who misuse their access to the U.S. capital markets to commit fraud for personal gain.”

George S. Canellos, Director of the SEC’s New York Regional Office, added, “The massive fraud perpetrated by Zhao and Zhu wiped out hundreds of millions of dollars in shareholder value and was compounded by their brazen obstruction of the SEC’s investigation.”

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Puda Coal entered the U.S. capital markets through a reverse merger in July 2005. Puda Coal’s common stock was listed and traded on the NYSE from September 2009 to August 2011.

The SEC alleges that Zhao embarked on the scheme with Zhu in September 2009 to enrich himself at the expense of Puda Coal’s public shareholders. Just weeks before Puda Coal announced that Shanxi Coal had received a highly lucrative mandate from the provincial government authorities to become a consolidator of smaller coal mining companies, Zhao quietly transferred Puda Coal’s 90 percent stake in Shanxi Coal to himself. In July 2010, Zhao transferred a 49 percent equity interest in Shanxi Coal to CITIC Trust Co Ltd., a Chinese private equity fund controlled by state-owned investment firm CITIC Group. CITIC Trust placed its 49 percent stake in Shanxi Coal in a trust and then sold interests in the trust to Chinese investors. Zhao caused Shanxi Coal to pledge 51 percent of its assets to CITIC Trust as collateral for a loan of RMB 3.5 billion ($516 million in U.S. dollars) from the trust to Shanxi Coal. In exchange, CITIC Trust gave Zhao 1.212 billion preferred shares in the trust.

According to the SEC’s complaint, the transactions were not approved by Puda Coal’s board or shareholders and not disclosed in Puda Coal’s SEC filings, which Zhao and Zhu signed knowing that they were materially false and misleading. During the two Puda Coal public offerings in 2010, CITIC Trust was separately selling interests in Shanxi Coal to Chinese investors while Zhao and Zhu were still telling U.S. investors that Puda Coal owned a 90 percent stake in that company.

The SEC further alleges that Zhao and Zhu continued their fraudulent scheme to deceive public investors even after the SEC began its investigation. Zhu forged a letter purportedly from CITIC Trust falsely stating that no funds had actually been loaned to Shanxi Coal and disclaiming any interest in Puda Coal’s or Shanxi Coal’s assets. Zhao’s counsel provided the forged letter to the SEC’s investigative staff and Puda’s audit committee. After Puda Coal disclosed the letter in an SEC filing and further misled shareholders about the ownership of Puda Coal’s assets, Zhu admitted forging the letter and resigned as CEO. Zhao remains the chairman.

Zhao and Zhu are charged with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, as well as violating the proxy solicitation rules and various corporate reporting, recordkeeping and internal controls provisions of the Exchange Act. The SEC’s complaint seeks a final judgment ordering Zhao and Zhu to disgorge their ill-gotten gains plus prejudgment interest, imposing financial penalties, barring them from acting as officers or directors of a public company, and permanently enjoining them from committing future violations of these provisions.

The SEC’s investigation, which is continuing, has been conducted by Sheldon Pollock, Scott York and George Stepaniuk of the SEC’s New York Regional Office with investigative support from Neil Hendelman and Desiree Marmita. The SEC’s Cross Border Working Group, which has representatives from each of the SEC’s major divisions and offices and focuses on U.S. companies with substantial foreign operations, has assisted the New York Regional Office enforcement staff in the investigation.

* * *

Over the past year, the SEC has moved to protect U.S. investors in U.S. companies with substantial foreign operations through:

• Trading suspensions of at least 20 U.S. issuers based abroad.
   
• Stop orders against two U.S. issuers based abroad to prevent further stock sales under materially misleading and deficient offering documents.
   
• Filing a subpoena enforcement action against a foreign-based audit firm to obtain documents.

In addition, the SEC has revoked the securities registration of at least a dozen U.S. issuers based in the People’s Republic of China and instituted administrative proceedings to determine whether to suspend or revoke the registrations of 27 more issuers.

# # #

For more information about this enforcement action, contact:

George S. Canellos
Director, New York Regional Office
(212) 336-1020

David Rosenfeld
Associate Director, New York Regional Office
(212) 336-0153

George N. Stepaniuk
Assistant Director, New York Regional Office
(212) 336-0173

FOR IMMEDIATE RELEASE
2012-30

Washington, D.C., Feb. 17, 2012 — The Securities and Exchange Commission today charged John Kinnucan and his Portland, Oregon-based expert consulting firm Broadband Research Corporation with insider trading. The charges stem from the SEC’s ongoing investigation of insider trading involving expert networks.

The SEC alleges that Kinnucan and Broadband claimed to be in the business of providing clients with legitimate research about publicly-traded technology companies, but instead typically tipped clients with material nonpublic information that Kinnucan obtained from prohibited sources inside the companies. Clients then traded on the inside information. Portfolio managers and analysts at prominent hedge funds and investment advisers paid Kinnucan and Broadband significant consulting fees for the information they provided. Kinnucan in turn compensated his sources with cash, meals, ski trips and other vacations, and even befriended some sources to gain access to confidential information.

In a parallel criminal case, Kinnucan has been arrested and charged with one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, and two counts of securities fraud.

“Obtaining important and unreported financial results from company insiders and selling that information to hedge funds is not legitimate expert networking services — it’s old-fashioned insider trading,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

The SEC has charged 22 defendants in enforcement actions arising out of its expert networks investigation, which has uncovered widespread insider trading at several hedge funds and other investment advisory firms. The insider trading has occurred in the securities of 12 technology companies — including Apple, Dell, Fairchild Semiconductor, Marvell Technology, and Western Digital — for illicit gains totaling nearly $110 million. Related SEC insider trading cases stemming from the Galleon investigation involved illicit gains in excess of $91 million.

According to the SEC’s complaint filed in federal court in Manhattan, Kinnucan’s misconduct occurred from at least 2009 to 2010, a period during which he generated hundreds of thousands of dollars in annual revenues for Broadband. Kinnucan obtained material nonpublic information from well-placed employees at a variety of publicly-traded technology companies.

The SEC’s complaint specifically alleges that in July 2010, Kinnucan obtained material nonpublic information from a source at F5 Networks Inc., a Seattle-based provider of networking technology. On the morning of July 2, Kinnucan learned that F5 had generated better-than-expected financial results for the third quarter of its 2010 fiscal year, with the public announcement scheduled for July 21. Within hours of learning the confidential details, Kinnucan had phone conversations or left messages with several clients to convey that F5’s revenues would exceed market expectations. At least three clients — an analyst and two portfolio managers — caused trades at their respective investment advisory firms on the basis of Kinnucan’s inside information. The insider trading resulted in profits or avoided losses of nearly $1.6 million.

The SEC’s complaint, which charges Kinnucan and Broadband with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, seeks a final judgment ordering them to disgorge their ill-gotten gains plus prejudgment interest, requiring them to pay financial penalties, and permanently enjoining them from future violations.

The SEC’s investigation, which is continuing, has been conducted by Joseph Sansone and Daniel Marcus — members of the SEC’s Market Abuse Unit in New York — and Matthew Watkins, Neil Hendelman, Diego Brucculeri and James D’Avino of the New York Regional Office. The SEC thanks the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation for their assistance in the matter.

# # #

For more information about this enforcement action, contact:

George S. Canellos
Director, SEC’s New York Regional Office
(212) 336-1020

Sanjay Wadhwa
Associate Director, SEC’s New York Regional Office and Deputy Chief, Market Abuse Unit
(212) 336-0181

Joseph G. Sansone
Assistant Director, SEC’s New York Regional Office and Market Abuse Unit
(212) 336-0517

FOR IMMEDIATE RELEASE
2012-27

Washington, D.C., Feb. 10, 2012 — The Securities and Exchange Commission today charged a hedge fund manager and his Menlo Park, Calif.-based firm for their involvement in the insider trading ring connected to Raj Rajaratnam and hedge fund advisory firm Galleon Management.

The SEC alleges that Douglas F. Whitman and Whitman Capital illegally traded based on material nonpublic information obtained from Rajaratnam associate Roomy Khan, who was Whitman's friend and neighbor. Khan tipped Whitman with confidential details about Polycom Inc.'s fourth quarter 2005 earnings and Google Inc.'s second quarter 2007 earnings prior to the public announcements of those financial results by the companies. Whitman Capital reaped nearly $1 million in ill-gotten gains by trading on Khan's illegal tips.

"Whitman engaged in what even he termed 'slimeball' activity and together with Khan brought new illicit meaning to the maxim 'help thy neighbor,'" said George S. Canellos, Director of the SEC's New York Regional Office.

Sanjay Wadhwa, Associate Director of the SEC's New York Regional Office and Deputy Chief of the Market Abuse Unit, added, "This action should send a strong signal that the SEC will continue to pursue every angle of the Galleon investigation to hold accountable those who have undermined the integrity of our markets by engaging in illegal insider trading."

According to the SEC's complaint, filed in federal court in Manhattan, the inside information about Polycom and Google used by Whitman is the same information that the SEC has previously alleged Khan provided to many of her hedge fund contacts, including Rajaratnam as well as Robert Feinblatt and Jeffrey Yokuty at Trivium Capital.

The SEC alleges that Khan illegally tipped Whitman in January 2006 with information about Polycom's quarterly financial results, and she noted that these details were nonpublic and acquired from a source at Polycom. Whitman Capital accumulated 132,263 shares of Polycom stock in the next two weeks. When the company announced its results on January 25, Whitman Capital liquidated its entire Polycom position for a profit of more than $360,000. On at least one later occasion, in September 2008, Whitman asked Khan to contact her Polycom source to obtain inside information about the company's upcoming earnings so the two could "short it." When Khan rebuffed Whitman citing a fear of getting caught, Whitman suggested that she use "Skype" to avoid detection. Whitman later stated that he would stop speaking to Khan if she wasn't going to be a "slimeball" anymore.

The SEC further alleges that Khan illegally tipped Whitman with inside information about Google's quarterly financial results shortly before the company's post market-close earnings announcement on July 19, 2007. At Whitman's insistence, Khan identified her Google source as an employee of an investor relations firm used by Google. Whitman Capital funds then purchased 2,761 Google put option contracts based on the tip from Khan. On July 20, Whitman Capital closed the put option positions and generated ill-gotten profits of more than $620,000. Afterwards, Whitman sent Khan a large floral arrangement to thank her for the tip.

The SEC's complaint charges Whitman and Whitman Capital with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933. The complaint seeks a final judgment permanently enjoining the defendants from future violations of the above provisions of the federal securities laws, ordering them to disgorge their ill-gotten gains plus prejudgment interest, and ordering them to pay financial penalties.

The SEC has charged 30 defendants in its Galleon-related enforcement actions, which have exposed widespread and repeated insider trading at numerous hedge funds and by other traders, investment professionals, and corporate insiders located throughout the country. The insider trading occurred in the securities of more than 15 companies for illicit profits totaling more than $91 million.

The SEC's investigation, which is continuing, has been conducted by John Henderson and Joseph Sansone - members of the SEC's Market Abuse Unit in New York - and Diego Brucculeri and James D'Avino of the New York Regional Office. Kevin McGrath and Valerie Szczepanik will lead the SEC's litigation effort. The SEC thanks the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation for their ongoing assistance in the matter.

# # #

For more information about this enforcement action, contact:

George S. Canellos
Director, SEC's New York Regional Office
(212) 336-1020

Sanjay Wadhwa
Associate Director, SEC's New York Regional Office and Deputy Chief, Market Abuse Unit
(212) 336-0181

Joseph G. Sansone
Assistant Director, SEC's New York Regional Office and Market Abuse Unit
(212) 336-0517

FOR IMMEDIATE RELEASE
2012-26

Washington, D.C., Feb. 9, 2012 — The Securities and Exchange Commission today charged that a former employee of Takeda Pharmaceuticals International, Inc. traded on inside information about the Japanese firm’s business alliances and corporate acquisitions.

Brent Bankosky, a former Senior Director in Takeda’s U.S.-based business development group, has agreed to pay more than $136,000 to settle the SEC’s charges. The proposed settlement is subject to the approval of Judge Harold Baer, Jr. of the U.S. District Court for the Southern District of New York. Under the proposed settlement, the Court, upon motion by the Commission, will determine whether to impose an officer-and-director bar against Bankosky.

The SEC’s complaint, filed in federal court in Manhattan, alleges that Bankosky reaped more than $63,000 of profits, achieving a 169% rate of return, by trading on non-public information about two business transactions in 2008. Takeda’s business development group worked on the transactions, a strategic alliance with Cell Genesys, Inc., and the acquisition of Millennium Pharmaceuticals, Inc., which were referred to internally by their code names, Project Ceres and Project Mercury. Bankosky’s trading violated U.S. securities laws and Takeda’s policies, which forbade employees from disclosing or trading based on inside information.

“Brent Bankosky was entrusted with highly confidential information of Takeda and betrayed that trust to line his own pocket,” said George S. Canellos, Director of the SEC’s New York Regional Office. “His is another cautionary tale of an employee who succumbed to greed and the delusion that he wouldn’t get caught.”

Sanjay Wadhwa, Associate Director of the SEC’s New York Regional Office and Deputy Chief of the Market Abuse Unit, added, “We are determined to rid the U.S. marketplace of illegal insider trading, and we will pursue it wherever we find it, irrespective of whether it’s a hedge fund reaping millions of dollars in illicit gains or an individual investor hoping to fly under the radar by making relatively small insider trading profits.”

According to the SEC’s complaint, almost immediately after Bankosky joined Takeda in January 2008 as a Director in its business development group, he began to misuse confidential corporate information for his personal benefit. In February 2008, Bankosky began placing trades in his personal brokerage account based on non-public information about Takeda’s proposed strategic alliance with Cell Genesys, which was announced in March. Starting in March 2008, Bankosky made additional trades for his own account based on non-public information about Takeda’s plan to acquire Millennium, which was announced in April. Bankosky also traded on other confidential information in 2009 and 2010, purchasing call options in the securities of Arena Pharmaceutical, Inc., and AMAG Pharmaceutical, Inc., respectively, when the firms were engaged in confidential discussions on business transactions with Takeda. Bankosky, who was promoted to Senior Director of Takeda’s business development group in September 2010, resigned from Takeda in May 2011.

The SEC’s complaint charges Bankosky with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, as well as Section 14(e) of the Exchange Act and Rule 14e-3. The complaint seeks a final judgment ordering Bankosky to pay a financial penalty and disgorge his ill-gotten gains plus prejudgment interest, preventing him from serving as an officer or director of a public company, and permanently enjoining him from future violations of those provisions of the federal securities laws.

The SEC’s investigation, which is continuing, has been conducted by Charles D. Riely and Amelia A. Cottrell – members of the SEC’s Market Abuse Unit in New York – and Layla Mayer of the SEC’s New York Regional Office.

# # #

For more information about this enforcement action, contact:

George S. Canellos
Director, SEC’s New York Regional Office
(212) 336-1020

Sanjay Wadhwa
Associate Director, SEC’s New York Regional Office and Deputy Chief, Market Abuse Unit
(212) 336-0181

Amelia A. Cottrell
Assistant Director, SEC’s New York Regional Office and Market Abuse Unit
(212) 336-1056

FOR IMMEDIATE RELEASE
2012-25

Washington, D.C., Feb. 6, 2012 — The Securities and Exchange Commission today charged London-based medical device company Smith & Nephew PLC with violating the Foreign Corrupt Practices Act (FCPA) when its U.S. and German subsidiaries bribed public doctors in Greece for more than a decade to win business.

Smith & Nephew PLC and its U.S. subsidiary Smith & Nephew Inc. agreed to pay more than $22 million in agreements with the SEC and U.S. Department of Justice. The charges stem from the SEC’s and DOJ’s ongoing proactive global investigation of bribery of publicly-employed physicians by medical device companies.

The SEC’s complaint against Smith & Nephew PLC alleges that its subsidiaries used a distributor to create a slush fund to make illicit payments to public doctors employed by government hospitals or agencies in Greece. On paper, it appeared as though Smith & Nephew’s subsidiaries were paying for marketing services, but no services were actually performed. The scheme basically created off-shore funds that were not subject to Greek taxes to pay bribes to public doctors to purchase Smith & Nephew products.

“Smith & Nephew’s subsidiaries chose a path of corruption rather than fair and honest competition,” said Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit. “The SEC will continue to hold companies liable as we investigate the medical device industry for this type of illegal behavior.”

According to the SEC’s complaint against Smith & Nephew PLC filed in federal court in Washington D.C., U.S. subsidiary Smith & Nephew Inc. and German subsidiary Smith & Nephew Orthopaedics GmbH has sold orthopedic products in Greece since the 1970s through the Greek distributor. Greece has a national health care system in which most Greek hospitals are publicly-owned and operated, and doctors who work at those publicly-owned hospitals are government employees and “foreign officials” as defined in the FCPA.

The SEC alleges that the misconduct began in 1997, when Smith & Nephew’s subsidiaries developed a scheme to make payments to three shell entities in the United Kingdom controlled by the distributor. Those funds were used by the distributor to pay bribes to the Greek doctors on behalf of the Smith & Nephew subsidiaries. Smith & Nephew failed to act on numerous red flags of bribery as employees at the company and its subsidiaries became aware of the payments. In one e-mail exchange between employees at the U.S. subsidiary and the distributor concerning whether to reduce the distributor’s commissions, the distributor stated, “… In case it is not clear to you, please understand that I am paying cash incentives right after each surgery…” Smith & Nephew Inc. determined not to reduce the commissions.

Smith & Nephew PLC agreed to settle the SEC’s charges by paying more than $5.4 million in disgorgement and prejudgment interest. Its subsidiary Smith & Nephew Inc. agreed to pay a $16.8 million fine as part of a deferred prosecution agreement with the Department of Justice. Smith & Nephew PLC consented without admitting or denying the SEC’s allegations, to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and ordering it to retain an independent compliance monitor for a period of 18 months to review its FCPA compliance program.

The SEC’s investigation was conducted by Tracy L. Price of the Enforcement Division’s FCPA Unit along with Brent S. Mitchell and Reid A. Muoio. The SEC acknowledges the assistance of the U.S. Department of Justice Fraud Section and the Federal Bureau of Investigation. The SEC’s investigation into the medical device industry is continuing.

# # #

For more information about this enforcement action, contact:

Kara Novaco Brockmeyer
Chief, Foreign Corrupt Practices Act Unit, Division of Enforcement
202-551-4767

Tracy L. Price
Assistant Director, Foreign Corrupt Practices Act Unit, Division of Enforcement
202-551-4490

FOR IMMEDIATE RELEASE
2012-20

Washington, D.C., Jan. 27, 2012 — The Securities and Exchange Commission announced today that Noelle Maloney will serve as interim Inspector General for the agency following the departure of Inspector General H. David Kotz to join a private investigative services firm. Mr. Kotz’s last day at the Commission was Friday, Jan. 27.

Ms. Maloney will head the SEC’s Office of Inspector General (OIG) while the Commission searches for a permanent head. The 2010 Dodd-Frank Act requires the Inspector General to report to all SEC Commissioners, so SEC Chairman Mary Schapiro has directed the staff to work with the Commissioners to create a consensus process that will involve all the Commissioners in the hiring.

Ms. Maloney has been Deputy Inspector General at the agency since July 2008. In that role, she oversees the OIG’s Office of Investigations and the OIG’s Office of Audits, which conducts independent audits and evaluations of SEC programs and operations. Ms. Maloney also is responsible for supervising the OIG’s administrative, financial, and personnel matters, information systems management, strategic planning, and policy development.

Ms. Maloney joined the SEC in January 2005 as a Senior Counsel in the Office of the General Counsel of the SEC. In that capacity, Ms. Maloney served as an agency subject matter expert on issues of privacy and information sharing.

Before coming to the SEC, Ms. Maloney was the Director of Policy and Public Information for the Peace Corps, where she supervised the audit and evaluation of agency policy, operating plans, and programs, and the drafting of new policy. She also served as the agency’s Freedom of Information and Privacy Act Officer. Ms. Maloney began her federal career at the National Institutes of Health, where she worked in offices of administration and management as well as legislative and intergovernmental affairs.

Ms. Maloney received her bachelor’s degree in English from the College of New Jersey, and her law degree from Rutgers School of Law-Camden, where she graduated with awards for her pro bono work and brief writing. Before moving to Washington, D.C., to begin her federal career, Ms. Maloney clerked for the Honorable Donald A. Smith, Jr., Presiding Civil Judge of the New Jersey Superior Court, and was an associate at the law firm of Sterns & Weinroth, PC.

###

FOR IMMEDIATE RELEASE
2012-18

Washington, D.C., Jan. 26, 2012 – The Securities and Exchange Commission today charged a Fort Lauderdale-based firm and its founder with conducting a fraudulent boiler room scheme in which they hyped stock in two thinly-traded penny stock companies while behind the scenes they sold the same stock themselves for illegal profits.

The SEC alleges that First Resource Group LLC and its principal David H. Stern employed telemarketers who fraudulently solicited brokers to purchase stock in TrinityCare Senior Living Inc. and Cytta Corporation. While recommending the securities in these two microcap companies, Stern sold First Resource’s shares of TrinityCare and Cytta stock unbeknownst to investors who were purchasing them – a practice known as scalping. As Stern was selling the stocks, he also purchased small amounts in order to create the false appearance of legitimate trading activity and induce investors to purchase shares in both companies.

“First Resource and Stern used a telephone sales boiler room to make inflated claims and defraud investors while simultaneously manipulating the price of the stocks and making profits for themselves,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “The SEC will continue to aggressively pursue perpetrators of microcap stock fraud schemes that hound potential investors to buy stock.”

Since the beginning of fiscal year 2011, the SEC has filed more than 50 enforcement actions for misconduct related to microcap stocks, and issued 63 orders suspending the trading of suspicious microcap issuers. Microcap stocks are issued by the smallest of companies and tend to be low priced and trade in low volumes. Many microcap companies do not file financial reports with the SEC, so investing in microcap stocks entails many risks. The SEC has published a microcap stock guide for investors and an Investor Alert about avoiding microcap fraud perpetrated through social media.

According to the SEC’s complaint filed against Stern and First Resource in U.S. District Court for the Southern District of Florida, they violated federal securities laws by acting as unregistered broker-dealers. Stern hired and trained First Resource’s salespeople and gave them information about TrinityCare to prepare sales scripts and pitch the stock to potential investors. Stern reviewed the draft scripts, made edits, and approved the scripts before the salespeople were allowed to use them.

The SEC alleges that Stern gave the salespeople a list of potential investors to cold call and pitch the stocks. First Resource’s salespeople falsely claimed TrinityCare stock “is going to be $5-7 in 6-12 months” and the company “is going to be a half-a-billion dollar company in five years or roughly a $40 stock.” Stern also disseminated a research report on Cytta to investors and falsely touted: “Sales projections for 2010-2014 should exceed $500 million with a pre-tax net of over $400 million.”

The SEC’s complaint alleges that First Resource Group and Stern violated Section 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC is seeking permanent injunctions, disgorgement plus prejudgment interest, and financial penalties as well as a penny stock bar against Stern.

The SEC’s investigation was conducted by Jorge L. Riera under the supervision of Elisha L. Frank in the SEC’s Miami Regional Office in coordination with an examination of First Resource conducted by Anson Kwong, Michael J. Nakis, George Franceschini, and Nicholas A. Monaco of the SEC’s Miami office. Edward D. McCutcheon will lead the SEC’s litigation efforts.

The SEC’s investigation is continuing.

# # #

For more information about this enforcement action, contact:

Eric I. Bustillo, Regional Director
Glenn S. Gordon, Associate Regional Director
Elisha L. Frank, Assistant Regional Director
Edward D. McCutcheon, Senior Trial Counsel
SEC Miami Regional Office
(305) 982-6300

FOR IMMEDIATE RELEASE
2012-17

Washington, D.C., Jan. 26, 2012 – The Securities and Exchange Commission today charged a trader in Latvia for conducting a widespread online account intrusion scheme in which he manipulated the prices of more than 100 NYSE and Nasdaq securities and caused more than $2 million in harm to customers of U.S. brokerage firms.

The SEC also instituted related administrative proceedings today against four electronic trading firms and eight executives charged with enabling the trader’s scheme by allowing him anonymous and unfiltered access to the U.S. markets.

According to the SEC’s complaint filed in federal court in San Francisco, Igors Nagaicevs broke into online brokerage accounts of customers at large U.S. broker-dealers and drove stock prices up or down by making unauthorized purchases or sales in the hijacked accounts. This occurred on more than 150 occasions over the course of 14 months. Nagaicevs – using the direct, anonymous market access provided to him by various unregistered firms – traded those same securities at artificial prices and reaped more than $850,000 in illegal profits.

“Nagaicevs engaged in a brazen and systematic securities fraud, repeatedly raiding brokerage accounts and causing massive damages to innocent investors and their brokerage firms,” said Marc J. Fagel, Director of the SEC’s San Francisco Regional Office.

According to the SEC’s orders instituting administrative proceedings against the four electronic trading firms, they allowed Nagaicevs to trade through their electronic platforms without first registering as brokers. Each of the trading firms provided him online access to trade directly in the U.S. markets through an account held in the firm’s name. These firms gave Nagaicevs a gateway to the U.S. securities markets while circumventing the protections of the federal securities laws, including requirements for brokers to maintain and follow adequate procedures to gather information about customers and their trading.

“These firms provided unfettered access to trade in the U.S. securities markets on an essentially anonymous basis,” said Daniel M. Hawke, Chief of the SEC’s Market Abuse Unit. “By failing to register as brokers, the firms and principals in this case exposed U.S. markets to real harm by evading crucial safeguards of the federal securities laws. We will not allow firms like these to fly under the radar and become safe havens for market abuse.”

The electronic trading firms and individuals named in the SEC’s administrative proceedings are:

• Alchemy Ventures, Inc. of San Mateo, Calif.
  • Mark H. Rogers, the firm’s president, who lives in San Carlos, Calif.
  • Steven D. Hotovec, the firm’s vice president, who lives in Redwood City, Calif.
• KM Capital Management, LLC of Philadelphia
  • Joshua A. Klein, the firm’s founder and co-owner, who lives in Philadelphia.
  • Yisroel M. Wachs, the firm’s co-owner, who lives in Philadelphia.
• Zanshin Enterprises, LLC of Boise, Idaho
  • Frank K. McDonald, managing member of the firm, who lives in Boise.
  • Richard V. Rizzo, an associate of the firm, who lives in Oceanside, N.Y.
• Mercury Capital of La Jolla, CA
  • Lisa R. Hyatt, the firm’s president, who lives in Escondido, Calif.
  • Douglas G. Frederick, an associate of the firm, who lives in Brighton, Mich.

Mercury Capital, Hyatt, and Rizzo each agreed to a settlement in which they consented to SEC orders finding that they committed or aided and abetted and caused broker registration violations. Hyatt and Rizzo each agreed to pay a $35,000 penalty.

The SEC’s administrative action will determine whether the non-settling trading firms and principals violated the broker registration provision of the federal securities laws, or whether the non-settling principals aided and abetted and caused the firms’ violations, and what sanctions, if any, are appropriate as a result. The SEC’s complaint alleges that Nagaicevs violated the antifraud provisions of the federal securities laws and seeks injunctive relief, disgorgement with prejudgment interest, and financial penalties.

The SEC’s Market Abuse Unit, headed by chief Daniel M. Hawke and deputy chief Sanjay Wadhwa, conducted the investigation in this matter jointly with the agency’s San Francisco Regional Office under the leadership of Director Marc J. Fagel and Associate Director Michael S. Dicke. Jina L. Choi and Steven D. Buchholz – members of the Market Abuse Unit in San Francisco – together with Alice Jensen of the San Francisco Regional Office conducted the agency’s investigation, which is ongoing. The SEC’s litigation effort will be led by Lloyd A. Farnham and John S. Yun of the San Francisco Regional Office.

The SEC thanks the Financial Industry Regulatory Authority (FINRA), Cyprus Securities Commission, and Latvia Financial and Capital Market Commission for their assistance.

# # #

For more information about this enforcement action, contact:

Daniel M. Hawke
Chief, Market Abuse Unit, SEC’s Division of Enforcement
(215) 597-3191

Sanjay Wadhwa
Deputy Chief, Market Abuse Unit, SEC’s Division of Enforcement
(212) 336-0181

Jina L. Choi
Assistant Director, Market Abuse Unit and SEC’s San Francisco Regional Office
(415) 705-2500

FOR IMMEDIATE RELEASE
2012-11

Washington, D.C., Jan. 18, 2012 – The Securities and Exchange Commission today charged two multi-billion dollar hedge fund advisory firms as well as seven fund managers and analysts involved in a $78 million insider trading scheme based on nonpublic information about Dell’s quarterly earnings and other similar inside information about Nvidia Corporation.

The charges stem from the SEC’s ongoing investigation into the trading activities of hedge funds. The U.S. Attorney for the Southern District of New York today announced criminal charges against the same seven individuals.

The SEC alleges that a network of closely associated hedge fund traders at Stamford, Conn.-based Diamondback Capital Management LLC and Greenwich, Conn.-based Level Global Investors LP illegally obtained the material nonpublic information about Dell and Nvidia. Investment analyst Sandeep “Sandy” Goyal of Princeton, N.J., obtained Dell quarterly earnings information and other performance data from an insider at Dell in advance of earnings announcements in 2008. Goyal tipped Diamondback analyst Jesse Tortora of Pembroke Pines, Fla., with the inside information, and Tortora in turn tipped several others, leading to insider trades on behalf of Diamondback and Level Global hedge funds.

“These are not low-level employees succumbing to temptation by seizing a chance opportunity. These are sophisticated players who built a corrupt network to systematically and methodically obtain and exploit illegal inside information again and again at the expense of law-abiding investors and the integrity of the markets,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

According to the SEC’s complaint filed in federal court in Manhattan, the illicit gains in the Dell insider trades exceeded $62.3 million, and the illicit gains in the Nvidia insider trades exceeded $15.7 million. For his role in the scheme, Goyal was paid $175,000 in soft dollar payments that were deposited in a brokerage account of an individual affiliated with him.

The SEC alleges that after obtaining the inside information from Goyal in advance of Dell’s first and second quarter earnings announcements in 2008, Tortora tipped his portfolio manager at Diamondback, Todd Newman of Needham, Mass. Newman traded on the information on behalf of the Diamondback hedge funds he controlled. Tortora also tipped Spyridon “Sam” Adondakis, an analyst at Level Global. Adondakis tipped his manager Anthony Chiasson, who then traded on the inside information on behalf of Level Global hedge funds. During this time period, both Adondakis and Chiasson lived in New York City.

According to the SEC’s complaint, Tortora also tipped two others at firms other than Diamondback or Level Global with the Dell inside information: Jon Horvath of New York City and Danny Kuo of San Marino, Calif. Horvath caused insider trades at his firm that resulted in approximately $1.4 million of illicit gains. Kuo similarly caused the firm where he worked to execute profitable insider trades in Dell securities.

The SEC further alleges that Kuo also obtained inside information about Nvidia Corporation’s calculation of its revenues, gross profit margins, and other financial metrics in advance of the company’s first quarter 2010 earnings announcements, which was made in May 2009. Kuo again caused his firm to trade on inside information. Kuo’s insider trades in Dell and Nvidia resulted in approximately $270,000 in ill-gotten gains. Kuo also tipped Tortora at Diamondback and Adondakis at Level Global with the nonpublic information about Nvidia. Tortora again tipped Newman, who made more insider trades on behalf of the Diamondback hedge funds. The illegal trades in Dell and Nvidia securities resulted in $3.9 million in illicit gains for Diamondback. At Level Global, Adondakis tipped Chiasson who made the insider trades on behalf of those hedge funds. Chiasson’s insider trades in Dell and Nvidia resulted in approximately $72.6 million of illicit gains for the Level Global hedge funds.

The SEC’s complaint charges each of the defendants with violations of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and, additionally, charges Goyal, Tortora, Newman, Adondakis, Chiasson, Horvath and Kuo with aiding and abetting others’ violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC’s complaint seeks a final judgment ordering the defendants to disgorge their ill-gotten gains plus prejudgment interest, ordering them to pay financial penalties, and permanently enjoining them from future violations of these provisions of the federal securities laws.

The SEC’s investigation, which is continuing, has been conducted by Joseph Sansone, Daniel Marcus and Stephen Larson – members of the SEC’s Market Abuse Unit in New York – and Matthew Watkins, Neil Hendelman, Diego Brucculeri and James D’Avino of the New York Regional Office. The SEC thanks the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation for their assistance in the matter.

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For more information about this enforcement action, contact:

George Canellos
Director, SEC’s New York Regional Office
212-336-1020

Sanjay Wadhwa
Associate Director, SEC’s New York Regional Office and Deputy Chief, Market Abuse Unit
212-336-0181

David Rosenfeld
Associate Director, SEC’s New York Regional Office
212-336-0153

Joseph G. Sansone
Assistant Director, SEC’s New York Regional Office and Market Abuse Unit
212-336-0517

FOR IMMEDIATE RELEASE
2012-10

Washington, D.C., Jan. 17, 2012 – The Securities and Exchange Commission today announced that Jane A. Norberg has been appointed as Deputy Chief of the Office of the Whistleblower, which oversees the agency’s whistleblower program.

Under that program established by the Dodd-Frank Wall Street Reform and Consumer Protection Act, individuals can receive awards if, among other things, they voluntarily provide the SEC with original information that leads to successful SEC enforcement actions. Staff in the Office of the Whistleblower helps ensure that whistleblower complaints are handled appropriately, and recommends to the Commission whether an individual is eligible for an award.

“Jane has extensive experience in both the private and public sectors, particularly with regard to corporate governance, compliance and disclosure matters,” said Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower. “With the experience she brings, Jane will help us to fulfill our mission of administering a vigorous whistleblower program will help the SEC identify and halt frauds early and quickly to minimize investor losses.”

Ms. Norberg comes to the SEC after 14 years of experience at her own law firm and at Shearman & Sterling. In these capacities, Ms. Norberg advised major public corporations regarding executive compensation disclosure, corporate governance issues and other securities laws matters. She also negotiated and drafted severance arrangements for senior executive officers and provided guidance regarding non-competition and non-solicitation covenants.

Prior to her private law experience, Ms. Norberg served as a special agent for the U.S. Secret Service where she worked with confidential informants in planning, organizing, and conducting investigations of federal crimes including telecommunications and bank fraud, counterfeiting of U.S. currency, and forgery of federal checks and bonds.

“The whistleblower program is an important component of the SEC’s efforts to stop those who prey on investors and destroy the public’s trust in our capital markets,” said Ms. Norberg. “I am honored and excited to join the Commission staff and look forward to helping the agency build on the success achieved in the short time since the program was established.”

Ms. Norberg is a cum laude graduate of St. John’s University School of Law, where she served as an editor of the law review and was a merit scholarship recipient. She received her bachelor’s degree from Bloomsburg University of Pennsylvania.

Under the SEC’s whistleblower program, the SEC is authorized to pay 10 to 30 percent of money collected from enforcement actions involving a whistleblower whose information led to the successful enforcement of an action in which sanctions exceeding $1 million were imposed. The statute and rules implementing the program also include anti-retaliation protections for individuals who provide information to the Commission with a reasonable belief that the information relates to a possible securities law violation that has occurred, is ongoing, or is about to occur. For more information or to access forms to submit information or apply for an award, visit www.sec.gov/whistleblower.

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FOR IMMEDIATE RELEASE
2012-9

Washington, D.C., Jan. 17, 2012 — The Securities and Exchange Commission today announced that Inspector General H. David Kotz will leave the agency at the end of January to join a private investigative services firm. Since he was appointed in December 2007, Mr. Kotz directed many important investigations and audits that led to significant improvements of the agency’s operations.

“David has been a committed public servant who has served the agency with great distinction for the past four years,” said SEC Chairman Mary L. Schapiro. “His work helped us to identify areas where we needed to improve the way we operate, bolster our resources, and upgrade our technology.”

Mr. Kotz said, “I am tremendously proud of the accomplishments of my office and the agency over the past four years. The reports we have issued have not only been significant to the agency, Congress and the investing public, but they have also directly resulted in a transformation of many of the divisions and offices of the Commission. While I will miss doing this important work, I am gratified knowing that nearly every aspect of the SEC has been significantly improved in the four years since I was named Inspector General. I owe particular thanks to Chairman Schapiro for her leadership and support of the Office of Inspector General.”

Mr. Kotz intends to join the investigative services firm of Gryphon Strategies as a Managing Director in its Washington D.C. office. He plans to focus on conducting corporate fraud investigations as well as assisting whistleblowers in exposing fraud and improving government accountability.

Mr. Kotz previously served as the Inspector General of the Peace Corps and worked in several other senior level capacities for the U.S. Agency for International Development (USAID). Prior to his government service, Mr. Kotz practiced at private law firms, including Pepper Hamilton LLP in Washington D.C. Mr. Kotz graduated cum laude from the University of Maryland in 1987 with a BA in Government and Politics, and earned his JD at Cornell Law School in 1990.

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FOR IMMEDIATE RELEASE
2012-4

Washington, D.C., January 4, 2012 – The Securities and Exchange Commission Advisory Committee on Small and Emerging Companies will hold a public meeting by conference telephone call on Friday, January 6.

The meeting will begin at 1:00 p.m. EST, and an audio webcast will be available on the SEC’s website at www.sec.gov. The agenda includes discussion of a recommendation to the Commission on relaxing restrictions on general solicitation and advertising of securities offerings that are exempt from registration.

The advisory committee was formed last year to provide a formal mechanism for the Commission to receive advice and recommendations on privately held small businesses and publicly traded companies with a market capitalization less than $250 million. The advisory committee is expected to provide input to the Commission on this issue as well as many others over time.

More information about the SEC's Advisory Committee on Small and Emerging Companies is available at http://www.sec.gov./info/smallbus/acsec.shtml.

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LOS ANGELES (MarketWatch) -- Hong Kong stocks opened solidly lower Thursday, with the Hang Seng Index down 0.8% at 21,378.88, and Hang Seng China Enterprises Index losing 0.7%. The Shanghai Composite traded flat. Real-estate stocks were among the worst performers, after Shanghai's housing bureau denied reports that it was easing restrictions on second-home purchases. Mainland Chinese developer Agile Property Holdings Ltd. fell 1.7%, while among Hong Kong real-estate names, Cheung Kong Holdings Ltd. dropped 2.6%, and Henderson Land Development Co. fell 2%. Banks also suffered after U.S. financials lost ground in reaction to weak euro-zone business-activity data. HSBC Holdings PLC dropped 1.7%, China Merchants Bank Co. gave up 1.6%, and Agricultural Bank of China Ltd. fell 1.1%.

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SYDNEY (MarketWatch) -- Australia's prime minister Julia Gillard Thursday called a leadership contest for the Labor Party after Kevin Rudd resigned as foreign minister in Washington late Wednesday.

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WASHINGTON (MarketWatch) - The G-20 will not decide on boosting resources for the International Monetary Fund until after euro-zone officials agree on their own rescue fund at a summit in early March, Lael Brainard, Treasury undersecretary for international affairs, said Wednesday. The IMF is currently seeking to raise up to $500 billion in additional lending resources so it's better equipped to respond to the euro crisis and other emergencies. But the United States and other countries are pushing Europe to first bolster the firewall designed to prevent the debt crisis from engulfing Spain or Italy. Brainard refused to give details on the size of the rescue fund, saying only that it must be big enough to convince financial markets "of the commitment by the members of the euro area to protect the euro area." She added that the firewall also must be "fully operational" and able to provide emergency funding for bank recapitalizations and sovereign needs. Europe's debt crisis will be a topic of discussion at the G-20 finance and central-bank officials' meeting in Mexico City this weekend, according to Brainard.

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