SEC CHARGES CHINESE ISSUER, 2 OFFICERS WITH FRAUD

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23214 / March 4, 2015
Securities and Exchange Commission v. China Infrastructure Investment Corp., et al., Civil Action No. 1:15-cv-00307 (D.C.D.C., filed March 3, 2015)
SEC Charges Chinese Issuer and Two Officers with Fraud

The Securities and Exchange Commission filed a civil injunctive action on March 3, 2015, in the United States District Court for the District of Columbia in connection with a fraudulent scheme to file false and forged SEC reports. China Infrastructure Investment Corp.'s 2011 SEC Forms 10-K and 10-K/A and its first quarter 2012 SEC Form 10-Q contained material omissions and misrepresentations, including multiple forged signatures and certifications of CIIC's former chief financial officer. CIIC is a company incorporated in Nevada and engaged in the construction and operation of a toll road in China. The company and its chief executive officer and corporate secretary filed the false reports with the SEC to conceal the fact that the company's CFO had resigned and that CIIC had no CFO at the time of the filings.

The SEC's complaint alleges that CIIC hired Li Lei as CFO on June 27, 2011. On September 21, 2011, less than three month later, Lei resigned effective immediately. Within the week following Lei's resignation, the company's corporate secretary, Wang Feng, falsely reported that the Lei had decided to continue as CFO for a transition period. CEO Li Xipeng and Feng knew at the time of Lei's resignation that NASDAQ had decided to delist CIIC for failure to maintain a minimum share price of at least $1.00, and CIIC was appealing the delisting decision. As the complaint further alleges, Feng believed that public disclosure of the resignation of the CFO could have a negative impact on CIIC's share price, and thus forged Lei's signatures on the filings as part of a scheme to create the false impression that CIIC continued to have a CFO. In furtherance of the scheme, CIIC sent correspondence to NASDAQ and its auditors bearing Lei's forged signature.

The SEC's complaint alleges that all three defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; that CIIC violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder by filing materially false annual and quarterly reports, and that Xipeng is also liable for these violations as a control person of CIIC, and that Xipeng and Feng aided and abetted these violations; that Xipeng and Feng violated Rule 13b2-2 by making materially false statements to CIIC's auditors in connection with required reports; and, that Xipeng violated Rule 13a-14 by falsely certifying that CIIC's reports contained no untrue statements of material fact, and that Feng aided and abetted this violation. The SEC's complaint seeks permanent injunctions and civil money penalties against all three defendants and officer-and-director bars against Xipeng and Feng. In related actions, the SEC issued an Order suspending trading in the securities of CIIC and issued an Order instituting proceedings to determine if the registration of CIIC's securities should be suspended or revoked.

The SEC's investigation was conducted by Nancy Singer and Andrew Shirley under the supervision of Conway Dodge. The SEC's litigation will be led by Stephan Schlegelmilch and Melissa Armstrong.

FORMER MANAGING DIRECTOR NASDAQ, INSIDE TRADER ORDERED TO DISGORGE NEARLY $900,000 OF PROFITS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Litigation Release No. 23156 / December 12, 2014
Securities and Exchange Commission v. Donald L. Johnson, et al., Civil Action No. 11-CV-3618 (VM) (S.D.N.Y.)
Court Orders Former Managing Director of the NASDAQ Stock Market to Disgorge More Than $898,000 in Insider Trading Profits

The Securities and Exchange Commission announced today that on November 12, 2014, the Honorable Victor Marrero of the United States District Court for the Southern District of New York entered a final judgment against defendant Donald L. Johnson, formerly a Managing Director of The NASDAQ Stock Market ("NASDAQ"), ordering Johnson to disgorge insider trading profits of $755,066.20, together with prejudgment interest thereon in the amount of $143,041.72, for a total payment of $898,107.92. Johnson consented to the entry of the final judgment. The Court previously had entered a judgment permanently enjoining Johnson for violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, representing the full injunctive relief sought by the SEC in the same civil action.

In its Complaint, filed in May 2011, the SEC had alleged that Johnson had unlawfully traded in advance of nine announcements of material nonpublic information involving NASDAQ-listed companies from August 2006 to July 2009. According to the SEC's Complaint, Johnson took advantage of both favorable and unfavorable information that was entrusted to him in confidence by NASDAQ and its listed companies, shorting stocks on several occasions and establishing long positions in other instances. The SEC alleged that Johnson reaped illicit profits in excess of $755,000 from his illegal trading.

On May 26, 2011, Johnson pleaded guilty to a federal criminal charge of securities fraud in a parallel criminal action arising out of certain of the conduct underlying the SEC's action. On August 12, 2011, Johnson was sentenced to forty-two months in prison and ordered to forfeit $755,066.

Following the entry of the final judgment against Johnson, which provided for payment of full disgorgement with prejudgment interest, the SEC voluntarily dismissed its relief defendant claim against Johnson's wife, Dalila Lopez. This concludes the SEC's civil action against Johnson.

The SEC acknowledges the assistance of the Fraud Section of the U.S. Justice Department's Criminal Division and the U.S. Postal Inspection Service. The SEC also acknowledges FINRA and NASDAQ for their assistance in this matter.

MAN ACCUSED OF OPERATING A $60 MILLION INVESTMENT FUND FRAUD

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., May 24, 2012 – The Securities and Exchange Commission today charged an investment adviser in Scotts Valley, Calif., with running a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he incurred.

The SEC alleges that John A. Geringer, who managed the GLR Growth Fund, used false and misleading marketing materials to lure investors into believing that the fund was earning double-digit annual returns by investing 75 percent of its assets in investments tied to major stock indices. In reality, Geringer’s trading generated consistent losses and he eventually stopped trading entirely. To mask his fraud, Geringer paid millions of dollars in “returns” to investors largely by using money received from newer investors. He also sent investors periodic account statements showing fictitious growth in their investments.

“Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements.”

According to the SEC’s complaint filed in federal court in San Jose, Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. Geringer used fraudulent marketing materials claiming that the fund had between 17 and 25 percent annual returns in every year of the fund’s operation through investments tied to well-known stock indices like the S&P 500, NASDAQ, and Dow Jones. Although the fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 – before the fund even existed. The marketing materials also falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly-traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.

The SEC alleges that Geringer’s actual securities trading was unsuccessful, and by mid-2009 the fund did not invest in publicly-traded securities at all. Instead, the fund invested heavily in illiquid investments in two private startup technology companies. The rest of the money was paid to investors in Ponzi-like fashion and to three entities Geringer controlled that also are charged in the SEC’s complaint.

According to the SEC’s complaint, Geringer further lied to investors on account statements that falsely claimed “MEMBER NASD AND SEC APPROVED.” The SEC does not “approve” funds or investments in funds, nor was the fund (or any related entity) a member of the NASD (now called the Financial Industry Regulatory Authority – FINRA). Geringer also falsely claimed that the fund’s financial statements were audited annually by an independent accountant. No such audits were performed.

The SEC’s complaint alleges Geringer and three related entities violated or aided and abetted violations of the antifraud provisions of the securities laws as well as a statute barring people from claiming that the SEC has passed on the merits of a particular investment. The SEC seeks financial penalties, disgorgement of ill-gotten gains, preliminary and permanent injunctions, and other relief. Geringer, the fund, and two of the related entities consented to the entry of a preliminary injunction and a freeze on the fund’s bank account.

The SEC’s investigation, which is continuing, has been conducted by Robert J. Durham and Robert S. Leach of the San Francisco Regional Office. The SEC’s litigation will be led by Sheila O’Callaghan of the San Francisco Regional Office.

The SEC thanks the U.S. Attorney’s Office for the Northern District of California, Federal Bureau of Investigation, and FINRA for their assistance in this matter.