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October 1, 2025 | Legal Update

The Nutter Securities Enforcement Update is a periodic update of noteworthy recent securities enforcement activity, settlements, decisions, and charges. We provide brief summaries that highlight recent enforcement action filings and developments to help identify enforcement trends, changes in the law, new theories, and new areas of enforcement focus. For more information on these cases or about how they may impact you, contact your Nutter attorney.

Government Shutdown

During the government shutdown, the SEC is operating in accordance with this Operations Plan adopted in August 2025. The Enforcement Division has not issued other guidance.

Administrative Law

Iowa v SEC, No. 24-1522 (8th Cir. Sept. 12, 2025) – In litigation over the validity of SEC climate disclosure rules adopted under the Biden Administration, the 8th Circuit issued a one-page order holding the matter in abeyance, and the climate rules stayed, until the SEC either reconsiders the rules or renews its defense of the rules. The rule requires public companies to make disclosures about greenhouse gas emissions from their operations and risks that climate change poses to their businesses. Several states and industry groups filed petitions for review of the rules, arguing that the SEC lacked authority and that the rules were arbitrary and capricious. In 2025, the SEC told the court that it no longer intended to defend the rules, and several other states and private parties intervened to provide a defense. In July, the SEC asked the court to rule on the petitions: that is, to rule on whether the rules are valid even though it did not intend to defend the rule. The court’s recent order denies the SEC’s request.

Remedies

Statement on Simultaneous Commission Consideration of Settlement Offers and Related Waiver Requests (Sept. 26, 2025) – SEC Chairman Atkins announced that the SEC will return to its former practice of allowing firms to request waivers from automatic disqualifications (for example, “bad actor” disqualifications from Reg D private offerings) and other follow-on consequences of enforcement actions in conjunction with settlements of enforcement actions. In 2019, the SEC announced it would consider settlements and waivers together, which streamlined the process and reduced uncertainty for settling parties. In 2021, the SEC changed course, announcing it would no longer recommend settlement offers that were conditioned on granting a waiver. Chairman Atkins stated that returning the SEC to the practice of simultaneous consideration “promotes fairness and economy of [SEC] resources.”

Investment Advisers/Investment Companies

SEC v. Vukota, et al., Lit. Rel. 26393 (Sept. 9, 2025) – In a settled matter, the SEC charged an investment adviser and his entities with causing private funds they advised to make short-term loans to the adviser’s entity at below-market rates to cover cash shortfalls at other funds, despite partnership agreements prohibiting such loans and with sending misleading buyout letters to investors that failed to disclose the conflicts of interest. The SEC also alleged that the individual and one of his investment adviser entities made material misstatements about the existence of an auditor, assets under management, investment strategy, and exempt reporting adviser status. Charges under Securities Act Sections 17(a)(2) and 17(a)(3), and Advisers Act Sections 206(2), 206(4) and Rule 206(4)-8. Without admitting or denying the allegations, the adviser and his entities consented to permanent injunctions and monetary relief totaling over $9.7m, comprised of over $6.9m in disgorgement, $1.7m in prejudgment interest, and $1m in civil penalties.

SEC v. Austin, et al., Lit. Rel. 26395 (Sept. 11, 2025) – In a litigated matter, the SEC charged an investment adviser and his advisory firm with fraud arising from his efforts to misappropriate client information from his former employer and conceal his disciplinary history. According to the SEC’s complaint, the adviser secretly forwarded nonpublic personal information of his then-employer’s clients—including names, contact details, account balances, and fees—to his personal email and, in some cases, to his future business partner, and also breached fiduciary duties by placing a client in investments contrary to instructions, leading to his termination. Shortly after, the adviser allegedly launched his advisory firm and engaged in a scheme to fraudulently solicit clients by misrepresenting his disciplinary record and termination in public materials filed with the SEC. Charges under Advisers Act Sections 206(1), 206(2), and 207, aiding and abetting the firm’s violation of same, and aiding and abetting Rule 10 of Regulation S-P. Remedies sought include permanent injunctions, an industry bar against the adviser, disgorgement, prejudgment interest, and civil penalties.

SEC v. Wu, Lit. Rel. 26398 (Sept. 11, 2025) – In a litigated matter, the SEC charged a quantitative model developer with orchestrating a scheme to defraud his former employer by secretly manipulating at least 14 algorithmic investment models to misrepresent that they generated unique forecasts, when in fact the developer had made unauthorized changes that caused them to replicate the forecasts of other models. According to the SEC’s complaint, the developer’s conduct misled his employer about the models’ performance, caused the firm to trade securities for clients in ways that deviated from intended strategies, resulted in at least $165 million in client harm that the employer repaid, and enabled the developer to reap millions of dollars in ill-gotten incentive compensation. Charges under Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. Remedies include injunctive relief, disgorgement and prejudgment interest, a civil penalty, and an industry bar. The U.S. Attorney’s Office for the Southern District of New York also announced parallel criminal charges.

Broker-Dealers

SEC v. Mastroianni, Jr., et al., Lit. Rel. 26396 (Sept. 11, 2025) – In a litigated matter, the SEC obtained a final judgment against a barred broker, previously charged in connection with a $1.2 million fraudulent promissory note scheme that targeted elderly investors. According to the SEC’s complaint, the broker induced investors aged 64 to 82 to purchase notes from his company by promising interest rates of 50% to 175%, misleading them about the company’s business, and persuading them to roll over existing notes, while misappropriating investor funds for personal expenses. In a parallel criminal case, the broker was sentenced in February 2024 to 45 months in prison, ordered to serve three years of supervised release, and required to pay $1.3 million in restitution and forfeiture for the fraudulent note scheme and a separate COVID-19 relief loan fraud. The SEC advised the court it would not pursue additional monetary relief given the criminal restitution and forfeiture, and the broker consented to a judgment permanently enjoining him from violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5.

In the Matter of Bloomberg Tradebook LLC, Rel. 33-11390 (Sept. 18, 2025) – In a settled matter, a registered broker-dealer was charged with making misleading statements about the speed of its market data displayed to customers. The SEC alleged that Bloomberg’s Tradebook subsidiary stated that the data was displayed “in fractions of seconds” when the firm allegedly knew that the U.S. Options Market Data was subject to regular delays lasting as long as several minutes during periods of high data volumes. Charge under Securities Act Section 17(a)(2). Remedies included cease-and-desist and a $5m penalty.

Issuer Reporting/Audit and Accounting

SEC v. Kin-Hung Peony Yu, Lit. Rel. 26394 (Sept. 10, 2025) – In a litigated matter, the SEC charged the former Chief Medical Officer (CMO) of FibroGen, Inc., with making false and misleading statements about the cardiovascular safety of FibroGen’s then-primary drug candidate, roxadustat. According to the SEC’s complaint, the former CMO claimed that key studies showed roxadustat was superior in cardiovascular safety to the leading treatment for anemia in chronic kidney disease patients, while allegedly concealing that initial analyses showed the drug was only comparable and that she directed post-hoc changes to make results appear more favorable. The complaint alleges that the CMO allegedly repeated these misrepresentations at an industry conference presentation and in a press release, SEC filings, an earnings call, and a published article, until FibroGen’s new management issued a corrective disclosure revealing that prior claims were based on altered analyses. Charges under Securities Act Section 17(a)(2) and Exchange Act Section 10(b) and Rule 10b-5(b). Penalties sought include permanent injunctive relief, an officer-and-director bar, disgorgement with prejudgment interest, and a civil penalty.

Securities Offerings

SEC v. Heller, et al., Lit. Rel. 26387 (Sept. 3, 2025) – In a litigated matter, the SEC charged an individual and his entities with operating a multi-year Ponzi scheme that resulted in investor losses of approximately $400 million. The SEC alleged that approximately 2700 victims invested about $770 million in what they believed was a successful, nationwide ATM network that paid investors fixed monthly distributions from income generated by ATM transaction fees and related charges. The defendants allegedly misrepresented the size and financial profitability of the ATM networks, paying distributions to investors from money generated by new investments and high-interest, short-term loans. The founder also allegedly misappropriated more than $185 million of investor funds for his own benefit. Charges under Securities Act Section 17(a), and Exchange Act Section 10(b) and Rule 10b-5. Remedies sought include permanent injunctions, disgorgement of gains with prejudgment interest, civil penalties against the defendants, and a conduct-based injunction and officer-and-director bar against the founder. The U.S. Attorney’s Office for the Eastern District of Pennsylvania also announced parallel criminal charges.

SEC v. Regan, Jr., Lit. Rel. 26392 (Sept. 9, 2025) – In a litigated matter, the SEC charged a former stockbroker with defrauding hundreds of U.S. investors out of more than $63 million through the sale of promissory notes and partnership interests in entities he controlled. According to the SEC’s complaint, while living in Colombia, the stockbroker promised investors annual returns of up to 15.5% based on purported profits from trading Colombian-sourced precious metals and investments in Affordable Care Act health insurance policies allegedly guaranteed by the federal government, but instead used most investor funds to make Ponzi-like payments, pay commissions to salespeople, and transfer money to dozens of international companies. Charges under Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. Remedies sought include injunctions, disgorgement, prejudgment interest, and civil penalties. The U.S. Attorney’s Office for the Southern District of New York also announced parallel criminal charges.

SEC v. Lopez, et al., Lit. Rel. 26413 (Sept. 25, 2025) – In a litigated matter, the SEC charged the co-founders of Retail Ecommerce Ventures LLC (REV) and its chief operating officer with conducting fraudulent securities offerings, misusing investor funds, and making Ponzi-like payments to investors. The complaint alleges that REV’s primary business was purchasing distressed retail companies with name brand recognition and converting them into online-only businesses. The REV executives allegedly raised approximately $112 million through fraudulent offerings in eight portfolio companies, including Pier 1 Imports Online, Inc., Dress Barn Online, LLC, Linens ‘N Things Online, Inc., and RadioShack Online, LLC. The complaint alleges that they sold unsecured notes promising up to 25% annualized returns and membership units with a monthly preferential dividend of more than 2%. According to the complaint, the executives made material misstatements in these offerings about the success and profitability of REV’s business and the safety of investors’ investments. The complaint also alleges that the executives transferred at least $5.9 million in investor proceeds between portfolio companies, contrary to the written and oral representations made to investors about the use of proceeds, that at least $5.9 million of the returns distributed to investors were Ponzi-like payments funded by other investors, and that the executives misappropriated approximately $16.1 million for personal use. Charges under Securities Act Section 17(a), and Exchange Act Section 10(b) and Rule 10b-5. The complaint seeks disgorgement with prejudgment interest, permanent injunctions, civil penalties, and officer-and-director bars as to each executive.

SEC v. Azarmehr, et al., Lit. Rel. 26412 (Sept. 25, 2025) – In a settled matter, the SEC charged an individual and related entities with an offering fraud and diverting approximately $10 million of investor funds for use in an unrelated real estate venture. The complaint alleges that the individual and the related entities promised investors their money would be used solely for the financing and construction of three skilled nursing facilities in the Las Vegas metropolitan area. Instead, the complaint alleged, the individual and related entities used investor funds as collateral for an unrelated real estate venture in Los Angeles. Charges under Securities Act Section 17(a), and Exchange Act Section 10(b) of the and Rule 10b-5. Remedies include over $500,000 in disgorgement with prejudgment interest, a $500,000 civil penalty, and a 10-year bar from participating in the offer or sale of any security which constitutes, or is promoted as constituting, a qualifying investment in a “commercial enterprise” under the federal EB-5 Immigrant Investor Program.

Insider Trading

SEC v. Squillante, Lit. Rel. 26388 (Sept. 5, 2025) – In a bifurcated settled matter, the SEC charged a Connecticut resident with using confidential information about upcoming secondary offerings obtained during his employment at an investment firm to trade in the securities of at least 10 different publicly-traded companies, and earning approximately $216,965 in illegal trading profits. Charges under Exchange Act Section 10(b) and Rule 10b-5. Remedies included a permanent injunction and monetary relief in an amount to be determined by the court.

In re: Archegos 20A Litigation, No. 24-1162-cv(L) et al. (2d Cir. Sept. 16, 2025) – In a civil litigation matter addressing important insider trading issues, the 2nd Circuit affirmed the dismissal of investor claims against Goldman Sachs and Morgan Stanley for trading in securities allegedly controlled by their now-defunct client, Archegos Capital Management. Archegos, a family office that operated as a sophisticated investment firm, entered into total return swaps with the defendants (among others) which enabled it to acquire non-public, highly leveraged positions in the securities of seven publicly traded companies. When these companies’ stocks dropped in value, Archegos told the defendants it could not meet margin calls, and the defendants then sold their positions in the companies’ stocks, further depressing the market prices. Shareholders of the seven companies alleged that the defendants’ sales constituted trading on material nonpublic information in violation of Exchange Act Section 10(b) and Rule 10b-5. The 2nd Circuit held that the “classical” theory of insider trading did not apply because Archegos had no fiduciary duty to the companies’ shareholders. Its beneficial ownership of stock through the TRS transactions did not entitle it to vote shares, influence corporate decisions, or access confidential information of the companies. The 2nd Circuit also held that the defendants were not liable under the misappropriation theory of insider trading, because they were counterparties to Archegos and had no fiduciary duty to Archegos, and therefore no duty to abstain from trading based on their knowledge about Archegos’ financial crisis.

Market Manipulation

SEC v. Gallagher, Press Release (Sept. 19, 2025) – In a litigated matter, a jury found an individual trader liable on charges of manipulative trading in over 30 microcap stocks. The SEC had alleged that the trader used his Twitter account to encourage his followers, including many retail investors, to buy stocks in which he had already amassed holdings, and that he sold those stocks while he continued to recommend others buy them, never disclosing that he was selling the stocks. Charges under Exchange Act Section 10(b) and Rule 10b-5. Remedies to be determined by the court later.

SEC v. Kushnarev, Lit. Rel. 26410 (E.D. Ga. Sept. 22, 2025) – In a litigated matter, the SEC charged a Russian national with multiple aliases for his role in a multi-year fraudulent scheme in which hundreds of U.S. retail brokerage accounts were hacked and misused to manipulate the price and trading volume of hundreds of securities listed on the NYSE, NASDAQ, or OTC Markets. The complaint alleges that the Russian national used over 20 fake identities to open more than 100 foreign and domestic bank and brokerage accounts of a seven-year period and repeatedly used these brokerage accounts to trade profitably in securities that were simultaneously being manipulated by hackers through forced trades in the compromised U.S. brokerage accounts. The individual is alleged to have generated approximately $31 million in gross proceeds from his trades, and approximately $1.5 million in net profits from the scheme. Charges under Securities Act Sections 17(a)(1), 17(a)(2), and 17(a)(3), and Exchange Act Sections 9(a)(2) and 10(b) and Rule 10b-5. The SEC acknowledged the collaboration of an international group of regulators and law enforcement agencies in the United States, Austria, The Bahamas, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, Germany, Hong Kong, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Quebec, Slovakia, Spain, Turkey, Sweden, and Switzerland.

(NSEU 25-06)

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.