SEC Charges Former Apple Lawyer Gene Levoff With Insider Trading

The U.S. Securities and Exchange Commission has charged Apple’s former vice president of corporate law Gene Levoff with insider trading, according to a lawsuit filed in the U.S. District Court for New Jersey on Tuesday.

The complaint alleges that Levoff traded on material nonpublic information about Apple’s earnings three times during 2015 and 2016, avoiding losses of approximately $382,000, according to CNBC. Levoff also reportedly committed insider trading at least three additional times in 2011 and 2012.

CNBC reports that Levoff had inside access to not-yet-public earnings results and briefings on iPhone sales. In its complaint, the SEC alleged he purchased Apple shares and then profited when the stock rose after positive earnings reports, and likewise sold shares prior to weaker earnings reports.

The complaint states that Levoff was fired from Apple in September. In his position, he was responsible for Apple’s compliance with securities laws, and he also signed off on at least one Apple acquisition back in 2017.

Read the full complaint here.

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Amazon’s 2018 acquisitions totaled $1.65B, led by PillPack and Ring

Amazon’s annual 10-K filing with the U.S. Securities and Exchange Commission confirmed the high prices the e-commerce giant paid for its two biggest M&A deals last year. According to the filing, the company paid approximately $839 million in cash for Ring and $753 million for PillPack, with all other acquisitions totaling $57 million.

GeekWire was first to spot and report on the filing.

Amazon bought Ring in the early part of the year to shore up its smart home business shortly after its 2017 acquisition of Blink. The deal was then reported to be worth more than a billion dollars. The PillPack deal, meanwhile, took place last summer, and came in around “just under a billion.”

The new filing, however, lists the acquisition prices as “net of cash acquired,” meaning it’s taking into account the cash and liabilities the acquired companies had on the books at the time of their deals. That’s why the final totals are lower than had been reported.

Amazon didn’t detail the prices paid or names of its other 2018 acquisitions, but said the focus was on acquiring “technologies and know-how to enable Amazon to serve customers more effectively.” Some of these had been discovered, though, including Amazon’s acquisition of Tapzo in India for $40 million and cybersecurity company Sqrrl, for example.

At $1.65 billion, this is Amazon’s second biggest year ever for acquisitions, following 2017, when it spent more than $13 billion to buy Whole Foods.

Nissan says it’s target of SEC inquiry after report of probe on exec pay

Nissan Motor Co Ltd said on Monday it was the target of a U.S. Securities and Exchange Commission (SEC) inquiry, widening a scandal involving the Japanese firm and its ousted Chairman Carlos Ghosn over his alleged financial misconduct.

Nissan says co-operating with SEC inquiry after report of probe on executive pay

Nissan Motor Co said on Monday that it was co-operating with an inquiry by the U.S. Securities and Exchange Commission (SEC) after a report said the regulator was investigating the Japanese automaker’s disclosures on executive pay.

Nine defendants charged in SEC hacking scheme that netted $4.1 million

Nine defendants charged in SEC hacking scheme that netted $4.1 million

Federal authorities have charged nine defendants with participating in a scheme to hack a Securities and Exchange Commission database to steal confidential information that netted $4.1 million in illegal stock trade profits.

Two of the defendants, federal prosecutors in New Jersey said, breached SEC networks starting in May 2016 by subjecting them to hacks that included directory traversal, phishing attacks, and infecting computers with malware. From there, the defendants allegedly accessed EDGAR (the SEC’s Electronic Data Gathering, Analysis, and Retrieval system) and stole nonpublic earnings reports that publicly traded companies had filed with the commission. The hackers then passed the confidential information to individuals who used it to trade in the narrow window between when the files were stolen and when the companies released the information to the public.

“Defendants’ scheme reaped over $4.1 million in gross ill-gotten gains from trading based on nonpublic EDGAR filings,” SEC officials charged in a civil complaint. It named Ukrainian nationalist Oleksandr Ieremenko as a hacker, along with six individual traders in California, Ukraine, and Russia, and it also named two entities. A criminal complaint filed by federal prosecutors in New Jersey charged Ieremenko and a separate Ukrainian named Artem Radchenko with carrying out the hack.

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New Aphria chairman’s former company settled SEC charges in December

An organic and natural products company founded by Irwin D. Simon, the new independent chair of the board of directors of cannabis producer Aphria Inc., settled SEC charges related to its internal controls just weeks before Simon started his job with the Canadian company.

On Dec. 11, the U.S. Securities and Exchange Commission issued a statement saying it had charged The Hain Celestial Group Inc. with “internal controls failures,” and reached a settlement. The SEC’s allegations against the firm, whose brands include Terra chips, Yves Veggie Cuisine, Live Clean, and Earth’s Best baby food, covered a period between 2014 and 2016, according to the U.S. regulator.

The SEC ordered Hain to cease and desist from further violations, and Hain consented to the SEC’s order without admitting or denying the regulator’s findings.

The commission’s statement in December did not name anyone besides the firm, and noted that there was no monetary penalty imposed on the firm due to “extensive cooperation with the SEC’s investigation, which included self-reporting (the issues) and remediation efforts.”

Simon, Aphria’s newly appointed board chair, was chief executive of Hain Celestial, the company he founded, until he stepped down in November, a planned departure that had been announced in June. He remains a shareholder.

In an interview with the Financial Post on Thursday, Simon said the SEC settlement was not raised in his talks with Aphria before he was appointed chairman on Dec. 27 because it was already a matter of public record and he felt it had been resolved in the best way possible with no financial restatements or penalties.

Not only was the SEC statement available online, Simon said, but he had discussed reaching an understanding with SEC staff to resolve the issue with no financial penalty during a company conference call with Hain Celestial analysts in August.

“It was publicly disclosed. The SEC closed the case,” he told the Financial Post. “It was not raised as an issue (with Aphria).”

According to the SEC’s order against Hain Celestial Group, sales personnel for Hain had offered the company’s two largest distributors sales incentives at the end of fiscal quarters, between 2014 and 2016, to encourage the purchase of sufficient inventory to meet quarterly internal sales targets.

“The incentives offered by Hain included rights of return for products that spoiled or expired before they were sold to retailers, as well as cash incentives of up to $500,000, substantial discounts, and extended payment terms,” the SEC said, noting that some of these incentives were agreed to orally and not documented, or documented only in email exchanges with the distributors.

The SEC’s order found that the firm’s finance department was not aware of the incentive practices until May of 2016, after which the company conducted an internal investigation and self-reported the issue to the SEC. The regulator also noted that no financial restatements were required, and that the company had acknowledged “material weaknesses in its internal controls of financial reporting,” retained compliance staff, and voluntarily made “significant changes” to its organization and to its revenue recognition practices.

Simon said his company’s brush with regulators actually strengthens his skill set to help the Canadian cannabis company, Aphria, move from fast-growing startup to a growth company with strong independent oversight.

“If anything, it’s a positive, because I managed it, I knew how to manage the employees, the people, the process, the governance, where changes had to come into place, where there were any weaknesses…. I knew how to get it to a good conclusion,” Simon told the Financial Post, speaking as Aphria’s chair.

He said building Hain over 25 years, and sitting on a number of other corporate boards, including MDC Partners Inc. and Barnes & Noble, has ensured that corporate governance and corporate finance processes are “very important” to him.

“I plan to bring in my expertise, other people that I’ve worked with, and ensure that there is the strongest, strongest level of governance throughout Aphria,” Simon said.

Aphria shares cratered in early December after short-sellers Quintessential Capital Management and Hindenburg Research called the company a “black hole” and alleged that recent international acquisitions valued at around $280 million had been orchestrated to benefit insiders and were essentially “worthless.”

Aphria defended the acquisitions and called the short-seller report a “malicious and self-serving attempt to profit by manipulating Aphria’s stock price at the expense of Aphria’s shareholders.”

The cannabis company also formed a special committee of directors and has promised a comprehensive response refuting all the short sellers’ claims, and has taken steps to increase independent oversight. Six of its 10 board members are now independent.

Aphria shares closed at $8.03 Thursday on the Toronto Stock Exchange, 65 per cent below their 52-week high.

Hertz Global to pay $16 million fine to settle accounting case: SEC

Hertz Global Holdings has agreed to pay a $16 million fine to settle a case over accounting misstatement, the U.S. Securities and Exchange Commission (SEC) said in an order filed on Monday.

Robinhood’s 3% interest checking & savings may not be properly insured

Robinhood’s new high-interest, zero-fee checking and savings feature seems to be too good to be true. Users’ money may not be fully protected. The CEO of the Securities Investor Protection Corporation, a non-profit membership corporation that insures stock brokerages, tells TechCrunch its insurance would not apply to checking and savings accounts the way Robinhood claims. “Robinhood would be buying securities for its account and sharing a portion of the proceeds with their customers, and that’s not what we cover” says SIPC CEO Stephen Harbeck. “I’ve never seen a single document on this. I haven’t been consulted on this.”

That info directly conflicts with comments from Robinhood’s comms team, which told me yesterday users would be protected because the SIPC insures brokerages and the checking/savings feature is offered via Robinhood’s brokerage that is a member of the SIPC.

If Robinhood checking and savings is indeed ineligible for insurance coverage from the SIPC, and since it doesn’t qualify for FDIC protection like a standard bank, users’ funds could be at risk. Robinhood co-CEO Baiju Bhatt told me that “Robinhood invests users’ checking and savings money into government-grade assets like US treasuries and we collect yield from those assets and pay that back to customers in the form of 3 percent interest.” But Harbeck tells me that means users would effectively be loaning Robinhood their money, and the SIPC doesn’t cover loans. If a market downturn caused the values of those securities to decline and Robinhood couldn’t cover the losses, the SIPC wouldn’t necessarily help users get their money back. 

Robinhood’s team insisted yesterday that customers would not lose their money in the event that the treasuries it invests in decline, and that only what users gamble on the stock market would be unprotected as is standard. But now it appears that because Robinhood is misusing its brokerage classification to operate checking and savings accounts where it says users don’t have to invest in stocks and other securities, SIPC insurance wouldn’t apply. “I have an issue with some of the things on their website about whether these checking and savings accounts would be protected. I refered the issue to the SEC” Harbeck tells me. TechCrunch has reached out to the SEC and will update if we hear back about its perspective on the issue.

Robinhood planned to start shipping its Mastercard debit cards to customers on December 18th with users being added off the waitlist in January. That might need to be delayed due to the insurance problem. We’ve repeatedly asked Bhatt and Robinhood’s team for a formal statement and clarification this morning, but have not heard back.

Robinhood touted how its checking and savings features have no minimum account balance, overdraft fees, foreign transaction fees, or card replacement fees. It also has 75,000 free-to-use ATMs in its network, which Bhatt claims is more than the top five US banks combined. And its 3 percent interest rate users earn is much higher than the 0.09% average interest rate for traditional savings, and beats  most name brand banks outside of some credit unions.

But for those perks, users must sacrifice brick-and-mortar bank branches that can help them with troubles, and instead rely on a 24/7 live chat customer support feature from Robinhood. The debit card has Mastercard’s zero-liability protection against fraud, and Robinhood partners with Sutton Bank to issue the card. But it’s unclear how the checking and savings accounts would be protected against other types of attacks or scams.

Robinhood was likely hoping to build a larger user base on top of its existing 6 million accounts by leveraging software scalability to provide such competitive rates. It planned to be profitable from its margin on the interest from investing users’ money and a revenue sharing agreement with Mastercard on interchange fee charged to merchants when you swipe your card. But long-term, Robinhood may use checking and savings as a wedge into the larger financial services market from which it can launch more lucrative products like loans.

But that could fall apart if users are scared to move their checking and savings money to Robinhood. Startups can suddenly fold or make too risky of decisions while chasing growth. Robinhood’s valuation went from $1.3 billion last year to $5.6 billion when it raised $363 million this year. That puts intense pressure on the company to grow to justify that massive valuation. In its rush to break into banking, it may have cut corners on becoming properly insured.

[DIsclosure: The author of this article knows Robinhood co-founders Baiju Bhatt and Vlad Tenev from college 10 years ago]