Cryptocurrency experts cautioned that it was especially difficult for victims of fraud schemes to get their money back and that cryptocurrency had become a preferred payment method for those orchestrating ransomware attacks.

“As a practical matter, there is no recourse,” Mr. Grundfest said. “Why crypto? It’s very simple. It’s very hard to trace.”

View Source

S.E.C. Chair Gensler Emphasizes Transparency in Markets

Gary Gensler is putting transparency in the markets and the need to understand the impact of new technology at the top of his priority list as the new chairman of the Securities and Exchange Commission.

“I think transparency is at the heart of efficient markets,” Mr. Gensler said during his first testimony on Capitol Hill as the nation’s top securities cop.

Mr. Gensler, speaking from his living room, appeared by video before the House Committee on Financial Services to discuss the S.E.C.’s response to the tumultuous trading in shares of GameStop in January. The massive run-up in the stock price of the video game retailer was fueled by small investors who bought its shares on Robinhood and other commission-free trading apps and banded together on social media to cause big losses for a hedge fund that had bet GameStop shares would fall. Some investors who bought shares of GameStop at the peak later lost money.

Mr. Gensler said the S.E.C.’s staff has been working on a report addressing the issues raised by the episode that will be released this summer. He also said new rules may be needed for brokerage apps that turn stock trading into a game or contest, a method called gamification.

the collapse of Archegos Capital Management, which caused more than $10 billion in losses for Wall Street banks, pushed regulators to consider whether traders should be required to disclose derivatives — the financial trading instruments that allowed Archegos to take massive positions in stocks without attracting attention. Archegos’s losses were mostly attributed to the firm investing heavily in total return swaps, a type of highly leveraged derivative that can give a trader exposure to a stock without actual ownership.

Mr. Gensler’s tenure got off to a rocky start after Alex Oh, his pick to serve as director of enforcement, had to resign just days after being named because Paul, Weiss, the big law firm she had worked for, was facing potential sanctions in a case in which she was heavily involved.

The hearing with Mr. Gensler was the third and final one focusing on GameStop and the frenetic trading in the markets held by the House Financial Services Committee. The first hearing on Feb. 18 was held when shares of GameStop were trading around $40 a share after falling from a high of $347 a share. Since then, the stock has soared again, rising nearly 300 percent to $160 a share.

View Source

Volkswagen Under S.E.C. Scrutiny After Gag Falls Flat

Volkswagen’s American unit was only kidding when it put out the word late in March that it was changing its name to “Voltswagen” to show its commitment to electric vehicles. To say the April Fool’s joke didn’t land is an understatement. Now the misfired marketing gag has prompted an inquiry by the Securities and Exchange Commission.

Volkswagen did not dispute reports in Der Spiegel and other German media that the S.E.C. was looking into whether the carmaker misled shareholders with the faux rebranding. Volkswagen in Germany declined to comment Friday.

Publicly listed companies are not supposed to fool their shareholders, even in jest. Some media reported the purported name change as fact until Volkswagen of America admitted it was all a joke.

German law also requires companies to be honest with their shareholders, but a spokeswoman for the stock market regulator, known as Bafin, said the agency saw no basis to investigate the Voltswagen issue.

emissions scandal has cost the company since 2015. The gag does not appear to have had any influence on the price of Volkswagen shares, which rose for several days even after the company admitted it was all a ruse.

Like a comedian bombing onstage, the most painful consequence may be the humiliation.

View Source

Hollywood Actor Charged With Running Film-Distribution Ponzi Scheme

The 2017 film “Bitter Harvest” would not, by many definitions, be considered a success.

“It’s a bad sign when even the prayers in this movie are crappy,” observed one reviewer, who contributed to the film’s 15 percent critic rating on Rotten Tomatoes.

It pulled in less than $600,000 in the United States. But that did not mean it did not still have moneymaking potential abroad. All investors needed to do was help buy the rights to distribute it and a number of other films in Latin America, Africa and New Zealand. Major distribution deals with HBO and Netflix were on the cusp of being formalized, they were told. Once those fell into place, the investors would get returns of at least 35 percent.

That is the essence of what the Securities and Exchange Commission and federal prosecutors are calling a Ponzi scheme run by Zachary J. Horwitz, a not particularly famous actor with a rather extravagant home. Mr. Horwitz, who went by the stage name Zach Avery, was arrested on Tuesday on wire fraud charges. He is accused of defrauding investors of at least $227 million and fabricating his company’s business relationship with HBO and Netflix.

“We allege that Horwitz promised extremely high returns and made them seem plausible by invoking the names of two well-known entertainment companies and fabricating documents,” Michele Wein Layne, director of the S.E.C.’s Los Angeles regional office, said in a news release on Tuesday.

most recent film, the horror movie “The Devil Below” (Rotten Tomatoes critic score: 0 percent). Mr. Horwitz did not star in any of the 50 or so films he promised could make investors millions, according to Thom Mrozek, a spokesman for the U.S. Attorney’s Office in Los Angeles.

Mr. Horwitz was in jail on Wednesday, Mr. Mrozek said. Attempts to reach other employees of One in a Million Productions, whose website features the tag line “When Odds Are One in a Million. Be That One,” were unsuccessful. (Later Wednesday afternoon, the site had been taken down.)

Mr. Horwitz’s lawyer, Anthony Pacheco, did not respond to a request for comment.

The Ponzi scheme began to unravel when an investor wanted money refunded in 2019 and could not get it, Mr. Mrozek said.

For several years, 1inMM — as the company styles its name — found ways to pay investors, according to the S.E.C. Court documents do not list all of the films investors thought they had helped buy rights to, but the complaint features an image from 1inMM’s “library”; the 1989 Jean-Claude Van Damme movie “The Kickboxer” and the 2013 romantic comedy “The Spectacular Now” are included.

The way that money can be made in the movie distribution world is to say, “I’ll give you $100,000 for Latin America rights,” for example, Mr. Mrozek said, adding, “I go to HBO or whomever and say, ‘Give me $200,000 to show the movie.’”

according to the S.E.C.

Since December 2019, 1inMM has defaulted on more than 160 payments, according to court documents. One investor in Chicago, who was owed more than $160 million in principal and $59 million in profits, wanted his returns and could not get them, Mr. Mrozek said. That investor contacted the authorities.

View Source

Credit Suisse and Nomura Feel the Sting from Archegos’ Fall

The case is a test of shareholders’ ability to sue over claims of investment fraud. The pension funds have sought to sue as a class over Goldman’s statements, saying that they believed the claims of honesty. Goldman has argued in its latest brief that the investors are resorting to “guerrilla warfare” and aren’t providing “serious legal arguments.” The bank says that an investor victory would lead to a barrage of future lawsuits over “general and aspirational statements” of the kind made by “virtually every public company in America.”

How a former S.E.C. commissioner thinks the court will respond to Goldman’s arguments: “I expect the court to be troubled by the claim that companies cannot be held accountable for saying that clients come first and then acting otherwise,” Robert Jackson Jr., who served on the commission from 2018 to 2020 and is now an N.Y.U. law professor, told DealBook. (The justices probably won’t agree with the claim that making a company “mean what it says” will lead to a tsunami of meritless lawsuits, he added.) Regardless, Goldman is right that the stakes are high, he said, since the case will probably decide whether shareholders can “hold corporate insiders accountable when they tell investors one thing and do another.”


What made last night different from all others? A diverse group of comedians, celebrities and venture capitalists doesn’t normally gather for a virtual Passover Seder on a chat app. But that is what happened last night on Clubhouse, which hosted what was possibly the world’s first hunt for a nonfungible token version of afikomen, the broken matzo ritualistically hidden for children to find and claim a prize.

Like an NFT, an afikomen is a unique object. “It feels like a reasonable updating of tradition,” said fnnch, the San Francisco street artist who created images of broken matzo for the event. NFTs are digital assets that represent sole ownership of things that are otherwise easily replicated — in this case fnnch’s pictures. He predicted that NFTs would eventually include a technological lock preventing copies from displaying, which would make owning them much more like possessing a physical artwork.

One afikomen NFT is being auctioned off to support Value Culture, a nonprofit that sponsors art, education and spiritual projects to foster community engagement. The other was nestled within the profile of someone in the Clubhouse room and given away for free. (Hints about to how to find them lay in the Passover tale that is traditionally told at a Seder.)


The annual college basketball championship — and betting bonanza — known as March Madness has been full of upsets, on both the men’s and women’s sides, blowing up many brackets.

If you no longer have hope of winning the office pool, here’s another contest to think about: March’s maddest markets. We’ve come up with a mini-tournament of seeded matchups to determine which mania is the most manic.

How would you bet? Let us know: dealbook@nytimes.com.

Stonks division

No. 1 SPACs vs. No. 4 penny stocks

View Source

Penny Stocks Are Booming, Which Is Good News for Swindlers

“It’s all just a pool filled with sharks,” said Urska Velikonja, a law professor who studies securities regulation at Georgetown University Law Center. “It’s where the unwary go to get eaten.”

Penny stock booms tend to occur during raging bull markets, when greed abounds. They were hot in the 1980s, when the arrival of cheap, long-distance telephone service gave rise to brokerage firms that specialized in high-pressure, cold-call pitches of worthless stocks.

That was the specialty of Blinder, Robinson & Company, which was led by Meyer Blinder, a New York broker with a flamboyant reputation. In the mid-80s, it became the largest penny stock brokerage in the country. But by 1990 it had been liquidated, and by 1992 Mr. Blinder had been convicted of racketeering and securities fraud. After his conviction was announced, he lunged at a prosecutor, threatening to kill him.

But stock-touting technology changes with the times. Cold-calling went out, followed by faxes and email spam. Today, social media sites like Twitter and Reddit, which powered the rise of GameStop and other meme stocks, are the preferred method for building unwarranted hype.

According to a civil complaint filed this month by the S.E.C., Andrew Fassari of Irvine, Calif., used his Twitter account — OCMillionaire — to pump up the price of Arcis Resources, a company that has not conducted business since at least 2016, but whose stock still trades. Mr. Fassari, regulators said, bought 41 million shares of the company and then posted misleading information, including fictitious emails from the company’s purported chief executive about expansion plans. Over nine days in December, the share price skyrocketed more than 4,000 percent — to a little over a nickel. Mr. Fassari’s gains were $929,000, according to the agency.

Mr. Fassari’s lawyer, Jessica C. Munk, said he denied wrongdoing. “It appears Mr. Fassari has been hit with fallout from the GameStop, Robinhood, Reddit controversy,” Ms. Munk said in a statement, including a reference to the Robinhood trading app. She also noted the S.E.C. action’s “lightning pace.”

View Source