FRAUD FRIDAY: SCOTUS Gives the SEC its Groove Back, Crypto-fraud Arrest, Sleeping on the (State) Job

Apologies for my extended absence from the proverbial blogosphere. It was a combination of circumstances, none of which would be particularly interesting to anybody, so we’ll just say I’m glad to be back amongst the digital proles, where I belong. Lots going on in the World of Fraud, so let’s get after it…

Supreme Court Widens Scope for Fraud Claims

Last week, the Supreme Court ruled in favor of the Security and Exchange Commission’s (SEC) growing sentiment to expand the horizons of rules that dictate who may be held liable for fraudulent activity.

The opinion was a conclusion of the court’s investigation of the Lorenzo v. SEC case, where the agency argued that the defendant, Francis Lorenzo, is liable for disseminating a note falsely claiming to investors that a prospective company’s assets are worth more than $10 million, while being aware that they were in fact worth under $400,0000.

The SEC has been on a years-long losing streak, essentially getting its butt handed to it every time it enters an appelate or higher courtoom. Things have gotten so bad that some journalists are concluding, rather convincingly, that we essentially no longer prosecute white collar crimeChief Investment Officer Online

The Lorenzo case is a much-needed win and morale booster for the SEC folk. It’s no fun losing all the time – just ask the Cleveland Browns or the Baltimore Orioles!

Shady Characters Arrested for Running Cryptocurrency Pyramid Scheme. Also, Water is Wet

Cryptocurrency scams are nothing new, but they’re rarely as large as this. US law enforcement has arrested Konstantin Ignatov over a fraud charge relating to OneCoin, the cryptocurrency he helped found. Ignatov, his sister Ruja Ignatova (also charged, but hiding) and others allegedly orchestrated a “multibillion-dollar pyramid scheme” where people received commissions for persuading people to buy OneCoin packages that themselves were junk. OneCoin reportedly rigged prices, sold people non-existent coins and didn’t even have a true blockchain to manage the currency.”  Engadget

Gee, who could’ve thought that this wasn’t legit? It’s got all the signs of a transparent, cleanly-owned-and-operated Eastern European mega-grift pyramid scheme. These guys DIDN’T EVEN HAVE A BLOCKCHAIN. They were basically just updating the age-old game of trying to not be the last person holding the (empty) bag. The more I learn about cryptocurrentices, the less like legit alternatives to “fiat” currencies they seem. It’s the 2019 version of the Nigerian 419 scam, and I have to ask myself essentially the same question: WHO in their right mind gets a call from a sketchy international phone number or a pitch email from some weird domain like @Theft.Biz and says “Sure. This sounds fantastic, give me a few days to make an early withdrawl from my Roth account & I’ll wire the money to you there at the Bank of Eastern Vampiristan. What could POSSIBLY go wrong?”

Ahhh, Memories: Investigations of Improper Activities by State Agencies and Employees

My first audit shop was the California State Auditor, under the superlative leadership of the legendary Elaine Howle. After a couple of years of stumbling around as a baby auditor and managing not to get fired, I was lucky enough to be selected for the Investigations Unit, which turned out to be one of the best professional moves that could have happened to me. I learned so much from the seasoned pros in the I-Unit, had a ton of fun, and helped the state identify, save, and recover a not insignificant amount of dough. While the I-Unit answers well over 5,000 calls and emails per year, much of the unit’s activity is summarized in a twice-yearly summary report, always titled as some close variation of the title above. There’s so much more that goes on that the public knows nothing about, and even when the results of investigations and audits are made public, there’s always a ton of allegations that are probably true, but are left on the editing room floor because, you know, ALIENS made me fall asleep at work for several years. Really. They even killed my hamster and “arranged it in in a sacrificial manner on my living room carpet.” (absolutely true story, I swear)

Anyhow, the CSA just released the latest I-summary, and as always, it’s entertaining reading:

“California state employers cost the state tens of thousands of dollars in wasted funds by leaving work early, misusing leave time and in one case literally sleeping on the job.
That’s the finding of a new report from California State Auditor Elaine Howle, which examined more than 800 whistleblower complaints between July and December of 2018.The auditor found that 30 employees, in eight departments, cost the state an estimated $150,000 in taxpayer money.” Sacramento Bee

That’s all for now, kids. Keep on fighting the good fight!


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