Securities Fraud Cases: State Street to Pay Over $35M Over Alleged Secret Markup Charges and Material Omissions, Braskem to pay Investors $10M To Settle Lawsuit in Petrobas Scandal, & Three Ex-Registered Reps Resolve Market Rigging Case over Attempted Nasdaq Listing

State Street Resolves SEC Fraud Charges for $35M
To settle charges brought by the US Securities and Exchange Commission, State Street (STT) will pay over $35M to resolve charges accusing the financial firm of overcharging transition management customers in secret, purportedly making $20M in improper revenue in the process, and leaving out material information related to GovEx, the trading platform it uses for US Treasury securities. The charges against State Street were brought in two separate orders.

In the first SEC order, the firm is accused of using false trading statements, post-trade reports, and pre-trade estimates so it could misrepresent the compensation it received on different transactions. After one customer noticed certain concealed markups, State Street’s employees claimed that these were “inadvertent commissions.”

In the second order, the SEC said that the firm did not notify GovEx subscribers that although the trading platform had been touted as “fair and transparent,” one subscriber was given a “Last Look” option that briefly allowed for the opportunity to turn down matches to quotes that were submitted. The Last Look trading functionality was used by that subscriber to turn down 57 matches, each face valued at $1M. Counterparties were not notified by State Street that Last Look had rejected their orders.

Braskem Settles Class Action Lawsuit Over Petrobas Corruption for $10M
Petrochemical company Braskem has consented to pay $10M to resolve a class action fraud case brought by investors claiming that the firm concealed its involvement in the bribery scandal involving Brazil’s state-owned Petrobas. The leading plaintiff in the case is Boilermaker-Blacksmith National Pension Trust, Kansas City, Kansas.

According to the shareholders, the petrochemical firm defrauded investors when it did not let them know that bribery was what allowed it to keep material costs down and its stock price artificially up.. The plaintiffs contend that Braskem executives did not disclose that they paid Petrobas officials and other at least $5m in yearly payments over several years so they would be charged lower prices for the ingredient naphtha.

After Braskem’s part in the bribery scandal became known, its American Depository Receipt price dropped 20% in 2015. This led to major shareholder losses. The ADRs make it possible for US investors to buy shares in foreign companies.

Last year, Braskem consented to pay The American, Swizz and Brazilian governments $957M in regulatory and criminal penalties over the Petrobas bribery scandal, also referred to as Operation Car Wash.

Ex-Registered Representative Settles SEC Charges Alleging Market Manipulation
Richard P. Cedrone, George R. Thoreson, and Steven R. Ferries have consented to settle charges brought by the SEC accusing them of manipulating the stock of Abakan on the Nasdaq stock exchange. However, due to their purported misunderstanding of the requirements, the alleged market rigging attempts were not successful. Ferris is also accused of taking part in illegal unregistered public offerings involving Abakan’s stock.

All three men are settling the SEC’s cases without denying or admitting to the civil charges.

Shepherd Smith Edwards and Kantas, LTD LLP is a securities fraud law firm.

State Street Paying Penalties to Settle Fraud Charges and Disclosure Failures, SEC, September 7, 2017

Braskem Signs $10 Million Settlement Over Bribery Scandal, WSJ, September 14, 2017

Read the SEC Complaint in the Alleged Market Rigging Case (PDF)