SEC Cases: IT Specialist Settles Insider Trading Charges For Over $375K, San Francisco Firm Pays $80K for Unregistered Swaps Sales Involving Pre-IPO Companies, and EB-5 Fraud Cases Lead to Settlement for Florida Businessman and Civil Charges For California Lawyer

IT Specialist Accused of Hacking Expedia Executives and Insider Trading

The U.S. Securities and Exchange Commission has filed civil insider trading charges against Jonathan Ly, who worked as a technology specialist for online travel company Expedia. According to the regulator, Ly hacked senior company executives and traded on company secrets ahead of nine announcements between 2013 and 2016.

As a result of his alleged insider trading, Lyn made almost $350K in profits. To settle the SEC case against him, Ly will pay over $348K of disgorgement and more than $27K in interest. This is a deal that still has to be subject to court approval.

Meantime, the U.S. Attorney’s Office for the Western District of Washington has filed parallel criminal charges against Ly.

In another, unrelated SEC case, also involving hacking and illegal trading, the regulator is charging three Chinese traders with fraudulent trading while using non-public market moving information that was hacked and stolen from two New York-based law firms. Lat Hong, Hung Chin, and Bo Zheng are accused of making nearly $3M in illegal profits. This is the first time that the Commission has brought an enforcement action involving the hacking into the computer network of a law firm. The U.S. Attorney’s Office for the Southern District of New York has brought parallel criminal charges over the allegations.

 

Equidate Inc. Accused of Selling Unregistered Swaps
A San Francisco, Ca-based firm has agreed to settle civil charges accusing it of violating federal securities laws by not registering security-based swaps that were sold and offered through the Internet to shareholders in pre-IPO companies. Without denying or admitting to the SEC’s findings, Equidate Inc. will pay an $80K penalty. Also, it stopped offering and selling the swaps at issue in December 2015.
According to the regulator’s order, Equidate aimed to give employees at certain private Silicon Valley companies, along with others holding restricted shares of the company’s stock, liquidity. Meantime, the platform that Equidate provided would match investors looking to invest in the shares’ possible economic returns with shareholders. The company performed these transactions via contracts that a subsidiary had agreed to with investors and shareholders. Payment provisions were activated by acquisition, merger, or the IPO at the underlying company. However, contends the SEC, Equidate failed to submit a registration statement for swaps and did not sell them via a national securities exchange, which the financial firm is required to by law.

 

SEC Cracks Down On Fraudulent EB-5 Offerings
The Commission has filed charges against Emilio Francisco. The regulator is accusing him of bilking investors wanting to obtain green card status through the EB-5 immigrant investor program. The regulator claims that the California-based lawyer raised $72M from Chinese investors through his PDC Capital but then diverted the money and stole at least $9.6M to fund his own ventures and support his expensive lifestyle.

In another EB-5 fraud case, Jason Adam Ogden of Florida has agreed to settle SEC charges accusing him of misusing investor money. The regulator is accusing Ogden, who is the CEO of Yoblendz and Juiceblendz, of improperly siphoning over $1M for his own use, including paying back a personal loan.

The foreign investors were told that their funds would help construct and run more of the franchise’s stores and create enough US jobs so that they could qualify for an EB-5 visa and eventually a green card that would allow them permanent residency in the US.

Ogden and his AJN Investments LLC, which was established to conduct the EB-5 related investment offering, have settled the SEC charges without denying or admitting to the allegations. Ogden will pay back the $1M that he took in addition to interest and a $160K penalty.

The SEC Complaint in the Ly Case (PDF)

The SEC Order in the Equidate Case (PDF)

The SEC Complaint in the EB-5 Case Against Francisco  (PDF)

The SEC Complaint in the EB-5 Case Against Ogden and AJN Investments (PDF)