TOPLINE
As the Securities and Exchange Commission (SEC) cracks down on financial misconduct related to the coronavirus pandemic—from insider trading and misuse of federal funds to advertising fake cures and price gouging on medical supplies, the agency is seeing a surge in tips and whistleblower complaints, according to Reuters.
An increasing number of whistleblowers and tipsters are working with the SEC to help identify … [+]
Andrew Harnik/ASSOCIATED PRESS
KEY FACTS
On Tuesday, New Jersey resident Ronald Romano was arrested for a $45 million scheme to defraud and price gauge New York City, in which he tried to offload personal protective equipment that he did not possess and was not authorized to sell.
Romano is just one example of an apparent increase in coronavirus related fraud that’s resulted in a 35% annual increase in complaints the SEC has recorded, according to the agency’s co-head of enforcement Steven Peikin.
Two factors are driving the current surge in SEC tips, lawyers told Reuters: The sheer scale of the coronavirus crisis has led to all kinds of financial misconduct, and mass unemployment has resulted in whistleblowers who would have otherwise feared retribution from their employers.
The SEC has created a new group to spot market abuses which has so far led to the agency suspending 31 penny stocks for advertising dubious coronavirus cures, tests, treatments and medical supplies. It charged two of those companies this month: Applied BioSciences Corp and Turbo Global Partners.
The increase in potential fraud has also proven to be a bonanza for lawyers who help whistleblowers navigate the SEC’s bounty program (it rewards tipsters whose information leads to penalties of more than $1 million).
The SEC is paying close attention to potential red flags in the disclosures issued by companies that accepted coronavirus relief funds; meanwhile, lawyers are expecting an uptick in cases related to insider trading and ponzi schemes.
Crucial quote
“Unfortunately, fraudsters often seek to exploit difficult situations like the ongoing pandemic for their own gain,” an SEC spokeswoman told Reuters. “The SEC frequently relies on the tips that we receive from the public.”
What to watch for
“We expect to see the SEC bring more actions as we continue to investigate suspected COVID-19 related scams,” Peikin and his co-head of enforcement at the SEC, Stephanie Avakian, said in a recent statement.
Further reading
Feds Announce First Arrests In Country Linked To PPP Loan Fraud (Forbes)
Beware Of Stimulus Check Scams And Related Hoaxes (Forbes)
Federal Charges Of PPP Loan Fraud Are Here To Remind You These Loans Are Not “Free Money” (Forbes)
New Jersey Man Arrested For $45 Million Scheme To Defraud And Price Gouge New York City During COVID-19 Pandemic (United States Department of Justice)
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