Legal
STI

Update: SunTrust Pays $1.2B to Settle Shoddy Mortgage Charges

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SunTrust Bank (STI) will pay penalties totaling more than $1.2 billion to settle charges it used abusive foreclosure practices, and originated and sold shoddy mortgages to Fannie Mae and Freddy Mac under settlements reached with the two government-sponsored loan agencies, 49 state attorneys general, and the U.S. Justice Department, the bank announced last week. The bank will pay $468 million in cash and provide relief to borrowers valued at $500 million in a settlement with the DOJ, HUD, and the Federal Reserve, plus more than $200 million to Fannie Mae and Freddie Mac. The payments include $160 million to settle claims with the states and federal regulators that it “robo-signed” foreclosure documents. The bank also settled charges it originated and sold shoddy loans to Fannie Mae and Freddy Mac. The bank agreed to pay $373 million to Fannie Mae and $65 million to Freddy Mac.

Legal

ChinaCast Education Execs Charged with Fraud, Insider Trading

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The senior executives of one of the darlings of the Chinese reverse merger boom were charged with misappropriating tens of millions of dollars of shareholder funds in self-dealing transactions, and with insider trading to avoid losses when the frauds began to be revealed, according to the SEC. ChinaCast Education’s ex-CEO Chan Tze Ngon was accused of transferring $41M of shareholder funds to a subsidiary and then outside the country by the SEC. The agency also charged the company’s former president, Jiang Xiangyuan, with allegedly selling 50,000 shares of the company to avoid $200,000 in losses after transferring other assets out of the company. "Chan orchestrated the systematic looting of ChinaCast and hid his misconduct by repeatedly lying to investors about the company's assets," said Sanjay Wadhwa, senior associate director for enforcement in the SEC's New York office. ChinaCast Education (CAST) went public on the Singapore Stock Exchange in May 2004, after having been backed by the venture capital arms of Intel and DirecTV, and Sun Hung Kai, a large Hong Kong company.

Legal
SEC

Vicis Capital Partner Charged with Self-dealing in Client Trades

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The SEC has charged  Shadron Stastney, a partner at hedge fund manager Vicis Capital, with breach of fiduciary duty by engineering the purchase of a basket of securities by a fund he managed and in which he maintained a financial interest. The SEC accused Stastney of trading as a principal when he agreed to pay a friend $7.5 million for a portfolio of illiquid securities that the friend was required to divest in order to join Vicis as a managing director. Stastney failed to disclose to the hedge fund’s limited partners that the portfolio included securities in which he held a personal interest and that he received more than $2 million of the proceeds from the sale. “Fund advisers cannot sit on both sides of a transaction as buyer and seller without the consent of the clients who rely on them for unbiased investment advice,” said Julie M. Riewe, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.  “Stastney failed to live up to his fiduciary duty when he unilaterally set the terms of the transaction and authorized it without disclosing that he would personally profit from it.”

Under a settlement reached with the agency, Stastney will be barred from association with regulated investment professionals for 18 months, and will wind down the Vicis Capital Master Fund he manages. He will also pay $2.9 million in disgorgement and penalties.

Legal

FINRA Alleges Fraud, Stock Manipulation by PIPE Broker Carris

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A New York City based broker-dealer active in equity private placements with emerging growth companies has been accused of fraud on grand scale by its regulator FINRA. John Carris Investments, founded by George Carris in 2009, is facing multiple allegations centering on stock manipulation, fraudulent self-offerings of securities, use of firm funds to pay personal expenses, falsifying tax documents and not paying staff payroll taxes withdrawn from employee’s paychecks.  The regulator wants George Carris, along with other principals of the firm, Andrey Tkatchenko and Jason Barter sanctioned for securities fraud. In the FINRA complaint the regulator alleges Carris manipulated the price of shares of then-OTC Pink-quoted FibroCell Sciences (FCSC):

“This scheme was motivated by the Manipulation Respondents' interest in increasing the volume and price of sales of Fibrocell shares, including in ongoing Private Placements of Public Equity ("PIPEs") for which John Carris Investments acted as a placement agent. From these placements, the Manipulation Respondents earned commissions ranging from 7-10% and Fibrocell warrants- from which respondents could profit by cashless exercise. By engaging in prearranged trading during the Manipulation Period, between May 1, 2010 and September 30, 2010, the Respondents created volume and also gave the appearance of greater liquidity, manipulated the price by which the shares were bought and sold, and prevented large sales of blocks of shares from being sold into the market (which would depress the stock price).