The New York Times’ Dealbook says though it’s not clear exactly what they’re worried about, the Securities and Exchange Commission is looking into the growing tide of exchanges set-up to trade shares in private companies that include Facebook, Twitter and LinkedIn. The volume on the exchanges are low, but growing — and several people told Dealbook that the SEC might be curious about how many shareholders the companies hav,e because if the number is more than 500, SEC rules require that they disclose their finances to the public. | MORE: The SEC Investigation Into Private Stock Sales Is All About the Glaring Lack of Disclosure
The Securities and Exchange Commission won’t confirm or deny the probe, according to The Street.com. But it’s widely believed that the agency is looking into the ways that Chinese and Americans work together to exploit weaknesses in both countries’ regulatory schemes. with a particular focus on companies that go public through reverse mergers (a frequent topic of investigation at Sharesleuth). A highlight from today’s story: “In some quarters, China-based stocks are now discussed with near scorn. Famed hedge-fund manager Jim Chanos, who uncovered the accounting fraud at Enron nearly a decade ago, says that accounting irregularities are more the norm than the exception at the Chinese companies researched by his firm.”
Alternate Energy Holdings Inc. (Pink Sheets: AEHI.PK) was sued by the Securities and Exchange Commission last week, Now, according to ABC, Donald Gillespie and Jennifer Ransom – the company execs who the SEC alleges were the architects behind a pump-and-dump scheme — have taken a voluntary leave of absence while the case makes its way through the courts. | Previously on Sharesleuth
Here’s the letter that dozens of publicly traded companies like Gap, McDonalds, the Mayo Clinic, Intel, General Mills, Saks, Sprint-Nextel, Time Warner and others signed on to, by way of the Association of Corporate Counsels. They say they’re worried that the new whistleblower law, which provides for a bounty to anyone who reports fraud to the Securities and Exchange Commission that results in monetary penalties, will undermine their internal compliance procedures. They are urging the SEC to force whistleblowers to report fraud internally, first, before they can qualify for any cash rewards. || earlier on Sharesleuth
It looks like investors burned by Bernard Madoff’s Ponzi scheme might see even more of their money again. The New York Times is reporting that prosecutors and the trustee trying to recover assets in the Bernard Madoff bankruptcy case announced a settlement that will add $7.2 billion to an already $2.3 billion cash fund that could go to compensate Madoff’s victims.
Irving H. Picard, the bankruptcy trustee, said at a press conference that “every penny” of the settlement will go to victims with valid claims and that he expects to start distributing funds by the end of the first quarter of 2011. The $7.2 billion is coming from the estate of Jeffrey Picower, one of Madoff’s biggest investors, who collected billions in returns that the trustee said were not genuine. Picower drowned at his home in Florida last year after suffering a heart attack while swimming.
Donald Gillespie and Jennifer Ransom peddled shares in Alternate Energy Holdings Inc. (OTCBB: AEHI.OB), a company that was supposed to be building a multibillion-dollar nuclear reactor. In reality, the company never had any revenue or product, says the SEC. Instead, Gillespie and Ransom were pumping the stock through press releases (more than 87 this year alone) while secretly selling their own stock and using the proceeds on personal items like a Maserati for Gillespie. Courthouse News says the SEC has asked for fines, disgorgment of profits and an order “telling both of them never to do such a thing again.”
One of the defendants, Nathan B. Montgomery, was a key figure in an earlier Sharesleuth story on Mesa Energy Holdings Inc.(OTCBB: MSEH.OB). Montgomery headed a company that got 3.5 million free trading shares of Mesa Energy when, in an unusual move, executed a reverse merger with another publicly traded company. Mesa Energy announced in August that it was the subject of an SEC investigation.
“You know who’s also been paying close attention to the new law? Corporate chieftains, and they’re none too happy about it,” says the Wall Street Journal. One industry spokeswoman says every “responsible” company has spent decades trying to build compliance systems and that the new law “pulls the legs off the stool.”
Ashby Jones at the Wall Street Journal says whistleblowers hoping to collect payouts from the Securities and Exchange Commission under new financial reform laws might be waiting quite a while before they see any cash. “The expected tidal wave of tips might overwhelm the agencies, some outsiders warn, citing a bounty-payment system at the Internal Revenue Service that was launched four years ago but has yet to pay out its first cent to whistleblowers.”