SEC takes interest in trading of shares of Twitter, Facebook and other private companies

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

Chinese reverse mergers on the SEC’s radar

The Securities and Exchange Commission won’t confirm or deny the probe, according to The 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 execs take leave of absence

Alternate Energy Holdings Inc. (Pink Sheets: AEHI.PK) was sued by the Securities and Exchange Commission last week, Now,  according to ABCDonald 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 

Corporations seek to limit new whistleblower law

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

Prosecutors announce $7.2 billion settlement in Madoff case

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.




SEC shuts down couple’s alleged pump-and-dump scheme

 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.” 

British Columbia levies record fine against fraudster

Sung Wan (Sean) Kim promised members of his church high returns — as much as 5 percent a month — if they let him invest their money in futures and options and U.S. Treasury bills. But, as is too often the case, the money apparently never went where he said it was going. “Kim diverted the money he collected from 35 British Columbia investors and one Korean investor into his own bank account and fled late last year to South Korea, where he is behind bars,” according to the Vancouver Sun. The BRitish Columbia Securities Commission fined him $15.7 million and then added an administrative penalty of $31.4 million, bringing the total to just over $47 million. They’ve not collected any of it yet and, according to the Sun, aren’t holding out hopes that they ever will. Kim is banned from the securities industry in Canada for life, however.

SEC charges Nevada lawyer and his associates with securities fraud

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. 

The case that the SEC brought Wednesday involves Marcus Luna, a Henderson, Nev., lawyer, and Axis Technologies Inc. Inc. (Pink Sheets: AXTG.PK), a lighting company that went public through a reverse merger. The SEC says that Luna, Montgomery and two other associates shared in almost $7 million from the sale of Axis stock after Luna wrote an opinion letter falsely claiming the shares were unrestricted. 
The complaint alleges that Luna arranged a sham placement of 15 million shares for Axis in connection with its 2006 reverse merger. It says he financed the $300,000 placement himself, keeping some of the shares and assigning the rest to entities controlled by Montgomery and two other men.
The SEC says Luna sold his shares for a profit of roughly $1.6 million, and got $1.7 million in kickbacks from the stock sold by his associates. The government is asking for the usual: an injunction, a penny stock bar, disgorgement of profits and civil fines. Plus, they want the court to bar Luna from serving as anyone’s lawyer in a securities transaction.

Corporations unhappy with whistleblower bounty in new financial-fraud laws

“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.”

How long will it take to pay SEC whistleblowers?

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.”