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Alleged Ponzi scheme mastermind Robert Shapiro and related companies have agreed to pay more than $125 million to settle civil fraud charges, but the settlement won’t necessarily mean much cash for bilked investors, WSJ Pro Bankruptcy reported. Shapiro, his Woodbridge Group of Cos. and related businesses were accused of defrauding thousands of investors in a suit brought last year in federal court in Florida by the Securities and Exchange Commission. A proposed settlement of that suit calls for Shapiro to pay a $100 million penalty, and to return millions of dollars obtained on false premises. Read closely, the SEC federal court filings describe a judgment consented to by Shapiro, who neither admits nor denies the fraud allegations. Once the judgment is approved, the SEC will still have to take action to collect the cash. The problem is, Shapiro doesn’t have the money, according to lawyers working to recover money for Woodbridge investors.

The Securities and Exchange Commission is probing investment advisers for potential misconduct involving cryptocurrencies, signaling a new direction in its oversight of the emerging market, Politico reported. The regulator is focusing on how investment advisers registered with the agency are storing the cryptocurrency assets they hold, as well as on possible price manipulation, and the digital currencies' vulnerability to cyberattacks. The investigation marks an escalation of the SEC’s scrutiny of the digital currencies. In the last year, the agency has halted a number of initial coin offerings, and Chairman Jay Clayton has warned that it will vigorously police the industry. Notably, the SEC is looking beyond the type of fraud cases that it has brought so far and is now hunting for violations involving the agency's custody rule for assets, valuation and cybersecurity. Read more. 

Don't miss the "Cryptocurrency, Blockchain and Other Breaking News" session at ABI's Winter Leadership Conference in December. This panel will discuss the impact of cryptocurrencies on the financial industry and how to litigate the complex issues they bring. Click here to register. 

The Securities and Exchange Commission charged a former insurance industry wunderkind with fraud, claiming he and an associate diverted more than $300 million from insurers they controlled and caused the companies to become insolvent, the Wall Street Journal reported. The civil charges against Alexander Chatfield Burns include allegations that he and the associate “raided those insurance companies of their funds” and replaced them with assets that were either worthless or grossly overvalued, including a supposed Caravaggio painting “of questionable authenticity.” The alleged scheme was carried out by a New York-based company, Southport Lane Management LLC, that Burns created while in his early 20s. Through Southport, Burns and associates gained control of several insurance companies starting in 2013, then allegedly began diverting the insurers’ assets. The alleged scheme collapsed in early 2014, when Burns checked into a mental-health ward at New York’s Bellevue Hospital, leaving behind an affidavit describing an unusual series of asset transfers.

The Securities and Exchange Commission said yesterday that public companies that are easy targets of cyber scams could be in violation of accounting rules that call for firms to safeguard assets, the Wall Street Journal reported. The SEC said in an investigative report that nine public companies wired nearly $100 million to hackers who impersonated corporate executives or vendors using emails. One company made 14 wire payments to a hacker, resulting in more than $45 million in losses, the SEC said. The agency declined to punish the companies, which weren’t identified. “Cyber frauds are a pervasive, significant, and growing threat to all companies, including our public companies,” SEC Chairman Jay Clayton said in a statement. “Investors rely on our public issuers to put in place, monitor, and update internal accounting controls that appropriately address these threats.” The type of scam the companies faced, known as business email compromises, have been responsible for more than $5 billion in losses since 2013 and ranked last year as the top cause of estimated losses linked to any cybercrime, the SEC said, citing data from the Federal Bureau of Investigation.

Elon Musk was chastened by federal regulators on Saturday night, and he agreed to step down as chairman of Tesla and to have his communications monitored, the New York Times reported. But Musk, the exuberant, relentless billionaire chief executive of Tesla, showed no immediate signs of changing his style. On Sunday at 1:08 a.m., just hours after settling the Securities and Exchange Commission’s fraud case stemming from his impulsive tweet on Aug. 7, Musk sent an email to all Tesla employees. He implored them to work hard, even though it was the weekend. For all of Mr. Musk’s late-night enthusiasm, however, Tesla faces many challenges in the months ahead. The company is still struggling to produce and deliver its Model 3 cars, which are the key to its financial future. It is short on cash and has looming bond payments. Short-sellers are still targeting the company, betting on the stock to fall. The SEC is continuing to look into the company’s past claims about its production goals, and the Justice Department was also looking into Musk’s tweet.

Wall Street shouldn’t relax its standards just because its regulator looks less muscular these days, according to a top federal official, the Wall Street Journal reported. The Securities and Exchange Commission is still policing wrongdoers, even if the volume of its enforcement actions and dollar amount of its fines drop this year, Stephanie Avakian said yesterday. The SEC rejects the premise “that numbers—standing alone —can adequately measure the success or impact of an enforcement program,” said Avakian, the SEC’s co-director of enforcement. “Any assessment that suggests our effectiveness should be measured solely based on the number of cases we bring over any particular period of time is misguided,” Avakian said. The SEC hasn’t revealed its enforcement statistics for fiscal year 2018, which ends on Sept. 30. Total fines ordered through SEC enforcement activity fell 7.2 percent in 2017 to about $3.8 billion, the lowest total since 2013, according to SEC figures.

A top securities regulator is calling for his agency to beef up its oversight of the nation’s stock exchanges to root out conflicts and curb rising fees that he says are harming investors, the Wall Street Journal reported. In a policy speech to be delivered Wednesday, Robert J. Jackson Jr., a Democratic commissioner at the Securities and Exchange Commission, will allege that the SEC has “stood on the sidelines” as the New York Stock Exchange, Nasdaq Inc. and other market operators have significantly boosted their profits while raising investors’ costs, according to a copy of his remarks. Jackson will call on the SEC to ensure “that the exchanges’ actions do not unduly burden competition and are fair and reasonable.” All of the currently active U.S. stock exchanges are for-profit enterprises, a reversal of the way the stock market operated for nearly two centuries. The NYSE, for instance, was a member-owned nonprofit until 2006 and was later acquired by Intercontinental Exchange Inc., an Atlanta-based global exchange operator. Critics charge that for-profit exchanges exploit their central position in the markets to extract greater fees from traders.

The U.S. Senate voted 85 to 14 yesterday to confirm Elad Roisman, President Donald Trump’s pick as commissioner to fill the vacant Republican seat atop Wall Street’s securities regulator, Reuters reported. The decision allows Roisman, 37, to be sworn in at the Securities and Exchange Commission (SEC), replacing Michael Piwowar, a Republican who vacated the role when his term ended in June. Yesterday’s vote brings the current four-member panel to its full five-member complement, at least until year-end, when one of the Democratic commissioners ends her term. While the White House has yet to formally propose a Democratic candidate for the role, a Bloomberg report in August named former SEC enforcement attorney Allison Lee as the potential nominee to fill the vacant role, citing sources.

The Securities and Exchange Commission charged Texas-based Greenview Investment Partners L.P. and its founder Michael E. Cone yesterday with allegedly defrauding investors by promising 24 percent annual returns from cannabis-related investments, MarketWatch.com reported. The U.S. Attorney in California has also criminally charged Cone and seized approximately $1.4 million in cash and assets. The fund and Cone raised more than $3.3 million by allegedly employing boiler room sales staff to cold call investors to promise unattainable returns based on misleading marketing materials. According to the SEC complaint, Cone also concealed his prior criminal convictions by using an alias, lied about having a former agent from the U.S. Drug Enforcement Administration on staff, and falsely claimed to have a long record of profitably investing millions in cannabis-related businesses. Cone allegedly spent investors' money on designer clothes and luxury cars, and Ponzi-like payoffs of earlier investors. Cone settled the SEC's charges by agreeing to an officer-and-director bar and a permanent injunction.