Legal
Larry Goldfarb

Baystar’s Goldfarb Still Fighting Criminal Prosecution

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BayStar Capital founder Larry Goldfarb is continuing efforts to avoid criminal prosecution, while the Securities and Exchange Commission and criminal prosecutors insist that he violated a deferred prosecution agreement (DPA) by illegally transferring nearly $300,000 for “personal luxury items” in 2011 and 2012. The civil and criminal cases were both filed in the U.S. District Court in San Francisco. In settling with the SEC last year, Goldfarb did not dispute charges that he and BayStar diverted $12 million of investor capital into assets the investors had not intended to purchase, and that he had also improperly used investor funds for personal expenditures. Goldfarb formed BayStar Capital I in 1999 and BayStar Capital II in 2003, according to the company’s website, which says the two entities invested some $1.5 billion in private and public companies. LRG Capital Group was formed as general partner to BayStar Capital III in 2005.

Legal

Hedge Funds Say China Medical CEO Tanked Company with Transfers to Family

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China Medical Technologies (CMEDY) was already on financially shaky ground before three hedge funds accused the company’s CEO Xiaodong Wu of further destabilizing the company by illegally transferring much of its assets to relatives. China Medical had already defaulted on two series of convertible notes, and Nasdaq had delisted its shares. Investors Whitebox Advisors, GLG Partners and Visium Asset Management made the claims in a suit they filed against Wu’s son-in-law Henry Mann and daughter-in-law Bi Junyun in the New York Supreme Court on Aug. 22. Wu himself was not named in the suit.

Legal

Funds Sue DJSP over Post-SPAC Disclosure

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Two hedge funds are suing a foreclosure processing business that went public in 2010 when it combined with SPAC Chardan 2008 China Acquisition Corp. (CACA). Blue Lion Master Fund and Philadelphia Financial Management of San Francisco allege that foreclosure farm DJSP Enterprises (DJSP) and management including founder David Stern issued misleading financial data to drive the company’s stock higher so investors could exercise warrants issued when the SPAC went public. Millions of dollars from the warrants would have been channeled to Stern or entities he was associated with, according to the suit. SPACs, or Special Purpose Acquisition Companies, are designed to raise capital in an IPO and then select an acquisition target.

Legal
Corey Ribotsky

SEC Files New Complaint Against NIR’s Ribotsky, Dworkin

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The Securities and Exchange Commission filed an amended complaint against NIR Group, its founder Corey Ribotsky, and former analyst Daryl Dworkin. The document reiterates most of the commission’s allegations that Ribotsky engaged in fraudulent accounting, lied to investors and stole over $1 million from one of his funds, but it also provides new specifics to the regulator’s claims that Ribotsky profited from management fees from phantom gains and engaged in questionable accounting. The suit was originally filed last September in Manhattan's U.S. District Court. Funds managed by NIR, which include four AJW entities and New Millennium Capital Partners II, committed $225 million to 144 PIPEs from 1999 through 2010, according to PlacementTracker data. Dworkin plead guilty to charges of securities fraud in a separate criminal case in 2010.