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The top executives of defunct cybersecurity company GigaMedia Access Corp. have been charged with duping investors out of more than $50 million by faking financial statements and having one of them pose as a customer, Bloomberg News reported. Robert Bernardi, the founder and former chief executive officer of GigaMedia, which also did business as GigaTrust; Nihat Cardak, the company’s former chief financial officer; and Sunil Chandra, its former vice president for international business development, were arrested on fraud charges Wednesday morning and scheduled to appear in federal court in Virginia later in the day, prosecutors in New York said. They were also sued by the Securities and Exchange Commission. Bernardi and Cardak are accused of using fabricated bank statements to obtain multiple rounds of loans and investments for the company, which filed for chapter 7 bankruptcy protection in November 2019. Prosecutors said they made up fake statements that overstated the amount of cash deposits, concocted false audit materials that exaggerated the company’s performance, and forged a letter from its lawyers. Chandra was additionally charged with aggravated identity theft for allegedly posing as one of GigaTrust’s customers in order to secure a $25 million loan to the company.

The Securities and Exchange Commission issued a long-awaited report yesterday on the decision by many stock brokers to restrict customers’ ability to purchase shares of GameStop Corp. and other meme stocks in January, but the document offers few clues about how the agency might change market-structure rules to prevent such incidents in the future and came to no definitive conclusions as to why those restrictions were made, MarketWatch.com reported. “January’s events gave us an opportunity to consider how we can further our efforts to make the equity markets as fair, orderly and efficient as possible,” SEC Chairman Gary Gensler said in a statement. “Making markets work for everyday investors gets to the heart of the SEC’s mission.” The report offers an account of the rapid increase in the price of GameStop shares in January of this year, noting that the videogame retailer’s stock increased in value by 2,700% from January 8 to its intraday high on January 28 of $483. It notes that the price volatility came against the backdrop of growing interest in the company on social media, where investors argued that the company was undervalued for fundamental reasons and ripe for a so-called short-squeeze, because statistics showed that more than 100% of the shares in the company outstanding were on loan to investors seeking to bet that the price of the stock would fall.

The Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading in a watershed moment for the cryptocurrency industry, Bloomberg News reported. The regulator isn’t likely to block the products from starting to trade next week, said the people, who asked not to be named while discussing the decision. Unlike Bitcoin ETF applications that the regulator has previously rejected, the proposals by ProShares and Invesco Ltd. are based on futures contracts and were filed under mutual fund rules that SEC Chairman Gary Gensler has said provide “significant investor protections.” Bitcoin almost touched $60,000, the highest since April, while futures on crypto-linked stocks rallied in U.S. premarket trading. The largest cryptocurrency by market value has rallied almost 90% in three months and is closing in on the record high of $64,869 set earlier this year. Barring a last-minute reversal, the fund launch will be the culmination of a nearly decade-long campaign by the $6.7 trillion ETF industry. Advocates have sought approval as a confirmation of mainstream acceptance of cryptocurrencies since Cameron and Tyler Winklevoss, the twins best known for their part in the history of Facebook Inc., filed the first application for a Bitcoin ETF in 2013.

The U.S. Securities and Exchange Commission (SEC) yesterday voted to revive a rule, left unfinished since 2015, that would expand the regulator's powers to clawback executives' compensation when a company had to restate its financials due to a compliance lapse, Reuters reported. The SEC said that it would seek a further round of public feedback on the rule, which was mandated by Congress following the 2007-2009 financial crisis, with a view to finalizing the rule likely next year. The SEC proposed a draft in 2015, but failed to finalize it. The effort to revive the rule is part of a broader push by the SEC, now controlled by Democrats, to crack down on corporate malfeasance by boosting its tools for penalizing executives. Gary Genlser, the agency's chair, said in a statement that reopening the comment period provides the watchdog "an opportunity to strengthen the transparency and quality of corporate financial statements, as well as the accountability of corporate executives to their investors." If finalized, the measure would apply to public companies of all sizes and to any executive officer who performs policymaking decisions and who has received incentive compensation, including stock options, dramatically expanding the scope of the agency's existing clawback powers which were created in 2002.

The U.S. Securities and Exchange Commission (SEC) has opened a broad inquiry into how Wall Street banks are keeping track of employees' digital communications, Reuters reported. SEC enforcement staff contacted multiple banks in recent weeks to check whether they have been adequately documenting employees' work-related communications, such as text messages and emails, with a focus on their personal devices. The industry "sweep" is a further sign that the SEC is ramping up enforcement under its Democratic leadership, and highlights the challenges Wall Street banks face keeping track of staff communications in the work-from-home pandemic era. The SEC periodically conducts sweeps to quickly gather information on issues it suspects may be widespread. Sweeps can sometimes, although not necessarily, lead to formal probes. The sweep appears to stem from a probe the agency has been conducting for some time into an individual financial institution. In August, JPMorgan Chase & Co. disclosed that it had been fielding regulatory inquiries concerning its "compliance with records preservation requirements in connection with business communications sent over electronic messaging channels" that the bank had not approved. It said that it was discussing a "resolution" with regulators, without specifying which ones.

Lawyers with the Securities and Exchange Commission have served a subpoena on Archegos Capital Management, the $10 billion family investment office that suddenly collapsed in March, roiling the stock market as its losses reverberated through the banking industry, the New York Times reported. The issuance of a subpoena is not particularly surprising as lawyers from the SEC, the Manhattan U.S. attorney’s office and the Commodity Futures Trading Commission have been looking into the collapse of Archegos since its heavy bets on a small number of stocks rapidly unraveled seven months ago. Even so, the subpoena marks the transition to a formal investigation. Investigators are focusing mainly on whether Archegos’s founder, Bill Hwang, misled the banks through which he invested in sophisticated derivatives about the risk he was taking on at his firm. The SEC is also believed to be looking into whether Archegos violated any regulating rules that would have required the firm to disclose some of its hefty stock position. In appearances before Congress, Gary Gensler, the SEC’s chair, has said that the Archegos trading debacle revealed gaps in the regulatory requirements for investment firms and lightly-regulated family offices when it comes to disclosing big positions in derivatives.

The Securities and Exchange Commission (SEC) voted on Wednesday to propose several amendments to financial firms’ voting transparency rules, including requiring them to disclose voting procedures and outcomes on executive salaries, The Hill reported. If approved, the rule would require managers of hedge funds and pensions to report the process through which shareholders of the firm vote on top executives’ compensation. Commissioners voted 4-1 in favor of the new rules. Commissioner Allison Herren Lee, the former acting chair of the SEC, called the amendments “meaningful improvements” that will enhance voting disclosure to bring better transparency for stakeholders. “It is critical for investors and the public—academics, policymakers, issuers, and a wide variety of market participants—to understand and evaluate the role of funds and managers in the capital markets,” Lee said in a statement. “Thus, how voting authority is exercised—or, in some cases, not exercised—is unquestionably significant to the investors who rely on intermediaries to vote their investment dollars.”

Expanding its crackdown on the SPAC sector, the U.S. Securities and Exchange Commission has told top auditors of blank-check acquisition companies to account more strictly for public shares in these shells, according to multiple industry accountants and lawyers familiar with the change, Reuters reported. SEC staff have privately told top auditors of special purpose acquisition companies (SPACs) that "redeemable" shares issued by these shells must be treated as temporary — known as "mezzanine" — equity, in a break from the long-standing industry practice of treating them as permanent equity, the people said. The change will cause most SPACs to fall below the minimum equity capital requirement of Nasdaq's Capital Market tier, pushing SPACs looking to list on Nasdaq to its Global Market tier, which has no equity requirement, the people said. The development marks the second time this year that the SEC has tightened SPAC accounting guidance and the latest salvo in the agency's broader crackdown on the SPAC deals market, a booming business for Wall Street over the past 18 months. SPACs are listed shell companies used to take private companies public, sidestepping the more traditional and lengthy initial public offering process. In an era of free-flowing money, more than $100 billion in SPAC deals have been inked so far this year. With less initial regulatory vetting than IPOs, the SEC has said the boom in SPAC deals puts investors at risk. It has increased scrutiny of the sector, from SPAC marketing and fees to disclosures, conflicts of interest and accounting treatment.