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Financial Services Law Insights and Observations

SEC charges online auction portal with violating whistleblower protection laws

Securities SEC Whistleblower


On November 4, the SEC announced the filing of an amended complaint in an action against an online auction portal and its CEO (collectively, “defendants”), along with the CEO’s wife as a relief defendant. The original complaint, filed in May, alleged that defendants operated a $23 million fraudulent securities offering and misappropriated investor proceeds. The amended complaint adds, among other things, a new count for “Impeding: Rule 21F-17 of the Exchange Act,” alleging that the defendants took actions to impede individuals from communicating with the SEC and other agencies regarding misconduct at the company by conditioning the return of investor money on signing agreements with confidentiality clauses purportedly prohibiting the reporting of potential securities law violations to law enforcement agencies. The SEC seeks preliminary and permanent injunctions, disgorgement plus prejudgment interest, and penalties.

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