On February 28, the U.S. Securities and Exchange Commission (SEC) Office of the Whistleblower posted five new Notices of Covered Actions (NoCAs). Each NoCA relates to a successful enforcement action and signals that individuals may now file whistleblower award claims for those cases.
Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide the SEC original information that leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recovered by the government. By posting an NoCA, the SEC is not making any determination that the relevant case was aided by a whistleblower tip. Rather, the SEC posts an NoCA for any enforcement action that results in monetary sanctions exceeding $1 million.
The newly posted NoCAs cover a wide variety of types of securities fraud including multiple types of offerings fraud. One NoCA relates to an enforcement action in which the SEC charged three individuals and several related entities with conducting a multi-million dollar offering fraud. According to the SEC, Texas resident and real estate developer Phillip Michael Carter, along with Bobby Eugene Guess and Richard Tilford, “raised almost $45 million from over 270 investors across the United States by selling short-term, high-yield promissory notes issued by a number of shell companies intentionally named to confuse investors.”
The second NocA relates to an enforcement action taken by the SEC against four individuals in connection with a fraudulent oil and gas offering. According to the SEC, the agency “charged Timothy Burroughs, Jay Holstine, John Griffin, and Michael Oswald Williams for their respective roles in raising approximately $3.2 million from approximately 50 investors through the fraudulent and unregistered offer and sale of interests in two oil and gas joint ventures offered by Petrobridge Energy, LLC.” To settle the charges, Holstine will pay $335,219.67 in disgorgement plus prejudgment interest and an $85,000 civil penalty; Williams will pay $284,860.76 in disgorgement plus prejudgment interest and a $50,000 civil penalty; and Griffin will pay $150,469.84 in disgorgement plus prejudgment interest and a $50,000 civil penalty.
Another NoCA covers an enforcement action concerning a fraudulent and unregistered marijuana financing offering. The SEC charged VerdeGroup Investment Partners, Inc. (VerdeGroup), its principal Thomas Gaffney, and its investor relations contact Lisa Gordon in connection with the alleged fraud. According to the SEC, “VerdeGroup and Gaffney raised funds from investors to ostensibly finance legal marijuana businesses” and “misled investors about how their monies would be used, about VerdeGroup’s business partners, and about VerdeGroup’s initial public offering.”
The fourth NoCa relates to an enforcement action where the SEC charged a San Juan Capistrano, California-based company and its founder with carrying out an ongoing investment fraud. The SEC alleges that Justin Robert King and his company, Elevate Investments LLC, “were offering interests in the Elevate Investment Fund despite the fact that no such fund entity exists” and that “all investor money was held in brokerage and bank accounts in the name of King, his wife, and/or Elevate.”
The final NoCA covers an enforcement action in which the SEC charged registered investment adviser O.N. Investment Management Company (ONIMCO) with failing to disclose conflicts. The SEC alleges that ONIMCO breached its fiduciary duty “in connection with its selection of investments that provided ONIMCO’s parent company with compensation.” To settle the charges, ONIMCO agreed to pay disgorgement of $866,257, prejudgment interest of $162,396, and a civil penalty of $210,000.
Whistleblowers have until May 29, 2022 to apply for an award for these newly posted NoCAs by submitting a completed Form WB-APP to the Office of the Whistleblower.
Since issuing its first award in 2012, the SEC has awarded approximately $1.2 billion to 245 individuals. In fiscal year 2021, the agency shattered records by awarding approximately $564 million to 108 individuals.
The Notices of Covered Actions