Litigation

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On February 13, US Senators Chuck Grassley, Thom Tillis, John Cornyn and Ben Sasse, all members of the Senate Judiciary Committee, introduced legislation requiring disclosure of third-party litigation financing agreements to the court and named parties to (1) any class action lawsuit filed in federal court, and (2) any claim that is aggregated into a federal multi-district litigation proceeding. Currently, the existence and terms of third-party litigation financing agreements, whereby hedge funds and other lenders finance the cost of civil litigation with the expectation of sharing in a portion of any recovery, are rarely disclosed to the court or opposing parties, creating the potential for conflicts of interest.
Continue Reading Sen. Chuck Grassley Leads Effort to Improve Transparency of Third-Party Financing in Civil Litigation

On February 21, the US Supreme Court decided Digital Realty Trust, Inc. v. Somers (583 U.S. ____ (2018)), which resolved a circuit split related to whether the anti-retaliation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1376 (Dodd-Frank) extend to individuals who have not reported a securities law violation to the Securities and Exchange Commission and, therefore, falls outside of Dodd-Frank’s definition of a “whistleblower.”
Continue Reading Supreme Court Limits Scope of Dodd-Frank Whistleblower Protections

Demonstrating the effect recent enforcement efforts have had on the industry, in remarks given in Washington, DC at a Compliance Outreach Program for broker-dealers, Securities and Exchange Commission Chairman Mary Jo White tried to assure compliance officers that the SEC does not intend to use its enforcement program to target compliance professionals.
Continue Reading SEC Chair Attempts to Reassure Compliance Officers That They Will Not Be Targeted

On July 6, the Securities and Exchange Commission filed a complaint in connection with a $68 million affinity fraud scheme allegedly orchestrated by Bingqing Yang, through her wholly owned management companies, Luca International Group, LLC, Luca Resources Group, LLC and Luca Energy Fund, LLC (collectively, Luca Managers), with the help of Ms. Yang’s chief fundraiser, Lei Lei.
Continue Reading SEC Brings Complaint in $68 Million Affinity Fraud Scheme

A federal jury in the District of Massachusetts recently convicted Eric McPhail of securities fraud — one of the first criminal insider trading convictions since the US Court of Appeals for the Second Circuit’s decision in United States v. Newman.

The allegations arose out of information Mr. McPhail received from a close friend— an executive at American Superconductor Corporation (AMSC) — who was a member of the same country club and went on golf and other trips together. This information allegedly included nonpublic information about AMSC’s business activities. According to the government, Mr. McPhail then gave this information to other friends of his, who made trades based on the information and earned more than $500,000. Mr. McPhail is alleged to have tipped those friends in return for golf tournament fees and meals, and to have told one of them after a tip that he “like[s] Pinot Noir and love[s] steak…looking forward to getting paid back.”
Continue Reading Massachusetts Federal Jury Convicts Amateur Golfer for Insider Trading

On June 9, the US Court of Appeals for the Eleventh Circuit affirmed a Florida district court’s refusal to acquit Linda Deavers, an Indianapolis real estate broker, of four counts of wire fraud. In doing so, the Eleventh Circuit found that Ms. Deavers need not have sent fraudulent statements via email nor even know about the specific wording of the fraudulent statements as long as she supplied the misrepresentations, and it was reasonably foreseeable the substance of them would be transmitted by another person.
Continue Reading Eleventh Circuit Upholds Wire Fraud Conviction of Defendant Who Did Not Participate in Sending the Fraudulent Representations

On June 9, Chad Wiegand and Akis Eracleous, two San-Diego based brokers, pled guilty in California district court to trading in Ardea Biosciences, Inc. stock with inside information.

Mr. Wiegand and Mr. Eracleous, brokers for National Planning Corporation, admitted to trading on inside information in advance of four separate announcements between April 2009 and April 2012. Mr. Wiegand received inside information from his brother-in-law and former Ardea Biosciences employee, Michael Fefferman. Mr. Fefferman tipped Mr. Wiegand material, non-public information, related to pharmaceutical trials of RDEA594, a drug for the treatment of gout; a global agreement with Bayer HealthCare, LLC to license a developmental cancer treatment; and the acquisition of Ardea by AstraZenca PLC. Mr. Wiegand passed along the non-public information to Mr. Eracleous, a friend and business associate.
Continue Reading California Brokers Plead Guilty to Insider Trading of Ardea Biosciences, Inc. Stock