Legal

Criminal Charges Loom over BayStar’s Goldfarb

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Lawrence Goldfarb and BayStar Capital face a renewed criminal investigation after Goldfarb allegedly violated a $14 million settlement with the Securities and Exchange Commission. The March 2011 civil settlement entailed a deferred prosecution agreement (DPA) for a criminal charge of wire fraud. After Goldfarb failed to make over $10 million of the scheduled payments, prosecutors took the view that the missing payments are a violation of the DPA. Goldfarb, who maintains he has done everything possible to come up with the cash, filed a motion to stave off criminal prosecution on July 17, weeks after the SEC had a receiver appointed in the civil matter. The civil and criminal cases were both filed in the U.S. District Court in San Francisco.

Legal
SithLord

Brothers Bound in $15M Naked Shorting Settlement Involving Fairfax Financial

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The SEC has settled a case against two brothers who used complex options trades and naked short sales to reap more than $9 million in illicit profits that may have ties to one of the most controversial activities of small-cap trading hedge funds over the past decade. Brothers Jeffrey and Robert Wolfson did not dispute naked short selling allegations when they separately settled Securities and Exchange proceedings for a total of $15 million in disgorgement, interest and civil penalties. Sanctions against Robert Wolfson also encompassed Golden Anchor Trading II, which provided Robert Wolfson with capital in exchange for 50% of his trading profits. The companies traded illegally included Fairfax Financial (FFH), whose huge short sale trading fail-to-deliver numbers in the mid-2000s seemed to have no rational cause.Toronto-based Fairfax sued eight hedge funds including SAC Capital in 2006 for $8 billion in damages, claiming the funds were engaged in a conspiracy of distortion and false rumor-mongering aimed at destroying the company's market value and reaping profits from the funds' heavy short selling of Fairfax's stock. SAC and six other funds won an early dismissal of the suit.

Legal

Regulators Accuse Attorney, Gold Standard Mining of Fraud

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Gold Standard Mining Corp. (GSTP) and its corporate counsel Kenneth Eade filed false financial statements and lied about the extent of the company’s assets, according to a suit filed by the Securities and Exchange Commission. The suit also alleges that CPA Randall Gruber of Gruber & Co. turned a blind eye to the fraud. The complaint was filed on June 29 in the U.S. District Court in Los Angeles.

Legal

Further Facebook Follies Follow IPO

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The craze for Facebook shares has lead to more lawsuits, as one pre-IPO share finder alleges it was duped out of $15 million in fees and a yet another disgruntled trader is suing Nasdaq over liquidity problems that plagued the first day of public trading in Facebook stock. Antares Management claims it entered into an agreement with Global Innovation Fund to split fees from investors who purchased interests in the fund, which was structured to invest in Facebook and other social media companies. Plaintiff Saransh Sharma said in court papers that after a decade in finance he formed Antares in March of 2011 in order to offer consulting and finder services. The Antares suit says it spent “thousands of hours” finding Juthoor Corp., an entity that executed a letter of intent to invest $310 million and pay front end fees of 10%, as well as 20% of any profits generated. San Jose, Calif.-based Antares was to split fees evenly with Global Innovation, the suit alleges, but the fund intentionally backed away from Juthoor in order to avoid paying its share of the fees to Antares.