Corporate Enforcement

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On June 7, 2022, the Securities and Exchange Commission announced that it had charged software company Synchronoss Technologies, Inc. and seven of its current and former employees in connection with an alleged long-running accounting fraud involving improper revenue recognition of more than $46 million across six quarters.   All of those implicated settled with the SEC and agreed to pay a range of penalties, except for the former CFO and controller, who will litigate against the SEC in New York federal court.  Synchronoss was ordered to pay a $12.5 million penalty.
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Continue Reading SEC Accounting Enforcement Action Signals Heightened Focus on Individual Accountability and Puts Public Company Executives on Notice for Potential SOX 304 Reimbursement

U.S. federal and state authorities recently announced actions that are designed to give effect to economic measures taken against Russia and hold accountable those who violate U.S. laws.  These developments suggest that U.S. authorities’ focus on enforcing U.S. sanctions and export controls, anticorruption and anti-money laundering laws, and the growing scrutiny of cryptocurrency, will continue.  They also point to further coordination and cooperation between authorities in the U.S. and other jurisdictions in investigating and prosecuting violations of their respective laws.
Continue Reading Authorities in U.S. Take Steps to Strengthen Enforcement of U.S. Measures Against Russia

The SEC and a consortium of 32 states recently announced a $100 million settlement with BlockFi Lending LLC over its crypto lending product, BlockFi Interest Accounts. The SEC alleged BlockFi had violated the securities laws by failing to register its interest-bearing crypto lending product as a security, failing to register itself as an investment company,…

On January 24, 2022, Securities and Exchange Commission Chair Gary Gensler gave a speech at the Northwestern Pritzker School of Law’s Annual Securities Regulation Institute signaling the SEC’s intention to step up its cyber-related regulatory and enforcement efforts.  Gensler described the continued rise in cybersecurity incidents targeting the financial sector as a serious threat to the nation’s economy and critical infrastructure, with costs potentially in the trillions of dollars.
Continue Reading SEC Chair Previews Ramp Up in Regulation and Enforcement in the Cybersecurity Context

On January 14, 2022, the United States District Court for the Northern District of California issued a decision in SEC v. Matthew Panuwat[1] validating the legal theory advanced by the Commission that trading in the securities of a competitor company could form the basis of an insider trading violation where the defendant learned that an acquisition of his employer was imminent.  In denying the defendant’s motion to dismiss the complaint, the court ruled that the SEC had sufficiently pled a claim, marking the first judicial decision concerning alleged insider trading in securities of a company based on material, nonpublic information (“MNPI”) about another company, a practice that has sometimes been referred to as “shadow trading.”   The court’s refusal to dismiss the SEC’s novel legal theory that trading on the basis of MNPI of one company to profit on a securities transaction involving a competitor constitutes actionable insider trading should be considered by companies and individuals as they assess trading decisions and policies.
Continue Reading SEC’s “Shadow Trading” Insider Trading Case Allowed to Proceed

The path was paved in 2021 for unprecedented tax developments in the coming years for large businesses, especially for multinationals and investment businesses operating across borders.
Continue Reading Taxes: Stepping up Enforcement and Ending the Global “Race to the Bottom”

2021 was a year of transition for white-collar criminal and regulatory enforcement. As courthouses reopened and trials resumed, newly-installed heads of law enforcement authorities looked to reset priorities and ramp up enforcement in the first year of the Biden administration. …
Continue Reading Priorities, Trends and Developments in Enforcement and Compliance

On October 28, 2021, Deputy Attorney General Lisa O. Monaco announced the administration’s first significant changes to the DOJ’s policies on corporate criminal enforcement, highlighting departures from Trump-era policies. The announcement focused on three corporate enforcement policy developments:

  1. Individuals and Corporate Misconduct: to be eligible for cooperation credit, companies must provide the DOJ with all

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On September 2 and 3, 2021, the Securities and Exchange Commission (“SEC”) announced settlements with Pareteum Corporation (“Pareteum”) and Kraft Heinz Co.[1] (“KHC”) for accounting fraud following years of alleged accounting improprieties and financial restatements at both companies.  The underlying facts differed in significant ways, including with respect to the alleged involvement of senior executives, but both companies apparently received cooperation credit for their prompt and proactive remediation and cooperation with the SEC Division of Enforcement’s investigations.  The messaging in relation to the announcement of these cases and their timing, coming in the early days of new Enforcement Director Gurbir Grewal’s tenure, is instructive.  We expect the SEC to continue to focus on accounting fraud and to credit companies who provide cooperation in these challenging and resource-intensive investigations.  To see a meaningful increase in the frequency and nature of cooperation, the SEC would be well-served to provide even more explicit guidance on how cooperation results in improved settlement terms.  That said, these recent settlements are helpful in understanding the benefits of cooperation at this time.
Continue Reading Two Recent Settlements Highlight Heightened SEC Focus on Accounting Fraud and Potential Benefits of Cooperation

On July 29, 2021, the U.S. Attorney’s Office for the Southern District of New York unsealed a securities and wire fraud indictment against Trevor Milton, the founder and one-time chairman of Nikola Corporation (“Nikola”), a pre-revenue electric- and hydrogen-powered vehicle company which went public through a merger with a special-purpose acquisition company (“SPAC”).[1]  The Indictment alleges that Milton made deceptive, false, and misleading claims regarding Nikola’s products and technology, which were directed at retail investors through social media and television, print, and podcast interviews.  The SEC also filed a parallel civil action against Milton, alleging violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and which contends that Milton engaged in a “relentless public relations blitz” on social media and the popular press directed at “Robinhood investors” in order to inflate Nikola’s stock price.

These actions further confirm the heightened law enforcement and regulatory scrutiny of SPACs, as well as continuing interest by government authorities in protecting retail investors in so-called meme stocks.[2]…
Continue Reading DOJ Indicts Founder of Nikola for Allegedly Defrauding Retail SPAC Investors