Nikola, the electric vehicle company that became a publicly traded company through a June 3, 2020 merger with a SPAC, has reached an agreement to pay $125 million to settle proceedings the SEC brought against the company relating to misrepresentations its former CEO Trevor Milton and the company made about the company’s EV production capabilities. In the settlement, the company neither admitted nor denied the SEC’s allegations. The SEC’s December 21, 2021 press release about the settlement can be found here. The SEC’s December 21, 2021 order instituting cease and desist proceedings against Nikola can be found here. The company’s December 21, 2021 press release about the settlement can be found here.
Continue Reading Nikola Settles SEC Proceedings for $125 Million

By almost any measure, Fiscal Year 2021 (ended September 30, 2021) was a watershed year in the history of the SEC’s Whistleblower program. According to the recently published annual report of the SEC’s Whistleblower Office, during FY 2021 the agency made the highest annual number of awards in the history of the program, both in terms of dollars and individuals awarded. Indeed, during FY 2021 the agency made more whistleblower awards than in all of the program’s prior years combined. The SEC’s Office of the Whistleblower’s November 15, 2021 Report to Congress can be found here.
Continue Reading Record-Setting Year for SEC Whistleblower Program

From the outset of his time in office, SEC Chair Gary Gensler has made it clear that establishing oversight of crypto assets represent one his priorities. In a speech last week, Gensler said that agency will be “very active” in bringing digital currency under its investor protection framework, saying further that the digital assets will not mature if they are not brought under broad regulatory oversight. The regulator’s position is not restricted to mere words; a recent report shows that the agency has indeed been active in asserting its cryptocurrency oversight through enforcement actions. According to a recent report from Cornerstone Research, the agency has bought 19 enforcement actions related to cryptocurrency in the first nine months of 2021. The report, entitled “SEC Cryptocurrency Enforcement: Q3 2021 Update,” can be found here.
Continue Reading SEC Enforcement Activity Targets Crypto Assets

As I discussed in a post at the time (here), in August 2021 the SEC brought an cybersecurity-related disclosure enforcement action against UK educational publishing firm Pearson plc. In the following guest post, Paul Ferrillo, Daphne Morduchowitz and James Billings-Kang take a detailed look at the Pearson enforcement action and discuss the action’s implications. Paul and Daphne are partners and James is an associate at the Seyfarth Shaw law firm. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading SEC Ramps Up Its Cyber-Security Enforcement in Pearson Matter

As the pandemic has progressed and as time has passed, one question I am regularly asked is whether we will continue to see COVID-19 related legal actions being filed. If the latest SEC action is any indication, we have not yet seen the last of new COVID-19-related suit filings. On August 17, 2021, the agency filed a civil enforcement action against an Ohio biotech firm claiming that the firm made false claims about one of its products, as a way to suggest that the firm was positioned to profit from the coronavirus outbreak. A copy of the agency’s complaint can be found here.
Continue Reading SEC Files COVID-19-Related Enforcement Suit Against Biotech Firm

In the agency’s latest move underscoring its emphasis on cybersecurity disclosure, the SEC has filed settled charges against the U.K. educational publishing and services company Pearson plc, alleging that the company misled investors about a 2018 data breach. The company, which neither admitted nor denied the charges, agreed to pay a $1 million civil money penalty. The administrative enforcement action, while not the first of its type, does highlight the agency’s heightened focus on cybersecurity disclosure issues. The agency’s August 16, 2021 cease and desist order can be found here. The agency’s August 16, 2021 press release about the order can be found here. Pearson’s statement about the proceeding can be found here.
Continue Reading SEC Charges Company Over Misleading Cybersecurity-Related Disclosures

Even though the worst of the pandemic crisis in the U.S. appears, at least for now, to be past, the threat of COVID-19-related claims continues. In the latest example of the continuing COVID-19-related claim threat, the SEC has initiated a COVID-19-related enforcement action against a California-based digital health care company that had made claims early in the coronavirus outbreak about the company’s ability to profit from the outbreak. The SEC’s new action is a reminder that the threat of new COVID-19-related claims is ongoing. A copy of the SEC’s July 7, 2021 complaint against Parallax Health Sciences, Inc. can be found here. The SEC’s July 7, 2021 press release about the enforcement action can be found here.
Continue Reading SEC Files COVID-19-Related Enforcement Action Against Digital Health Firm

The number of SEC and PCAOB accounting and auditing enforcement actions decreased in 2020 relative to 2019, but monetary settlements increased year-over year, according to a recent report from Cornerstone Research. The report, entitled “Accounting and Auditing Enforcement Activity – 2020 Review and Analysis” (here), analyzes the agencies’ publicly disclosed accounting and auditing enforcement actions between 2015 and 2020. Cornerstone Research’s April 27, 2021 press release about the report can be found here.
Continue Reading Accounting and Auditing Enforcement Actions Down in 2020 While Total Settlements Increased

In what is, according to the SEC itself, the second-largest whistleblower award in the history of the agency’s whistleblower program, the SEC has awarded two joint whistleblowers a bounty of over $50 million. The agency’s order making the award is heavily redacted, in order to protect the whistleblowers’ identities, so it is hard to tell very much about the circumstances surrounding the award. But the award is the latest in what has been a recent flurry of very large whistleblower awards by the agency. The SEC’s April 15, 2021 press release announcing the award can be found here. The April 15, 2021 award order can be found here.
Continue Reading SEC Awards Second-Largest Ever Whistleblower Bounty

Anyone reading the business pages know that SPAC IPO activity continues to surge; indeed, we have not yet even officially completed 2021’s first quarter, yet the number of SPAC IPOs completed and the amount of funding raised have both already exceeded the totals for the full year 2020. As I have already noted in prior posts on this site, all of this SPAC activity has already attracted some legal action. At the end of the last week, there were further signs that the legal activity could be about to pick up. As discussed below, news reports circulated late last week that the SEC has sent informal inquiries to Wall Street banks concerning SPACs, and, as also discussed below, a plaintiff shareholder has initiated a class action lawsuit against the directors and officers of a SPAC, among others, in Delaware Chancery Court presenting some alternative liability theories.
Continue Reading Is SPAC-Related Legal Action About to Heat Up?