Takeaways

The complaint demonstrates the SEC’s focus on individuals and foreign actors in insider trading enforcement. At the same time, it remains crucial for companies to adequately safeguard material nonpublic information by implementing robust policies and training on handling and protecting this type of information. This alleged insider trading scheme spanned various jurisdictions, with participants residing and operating in different countries. Companies and their compliance teams must monitor these cross-border risks and coordinate globally to detect patterns of trading in advance of significant events or announcements.

2. Accounting and disclosure fraud

SEC v. Leibowitz

On March 14, 2025, the SEC filed a complaint in the Southern District of New York against Glen Leibowitz, CFO of Acreage Holdings, Inc., a publicly traded company in the cannabis industry, alleging violations of the Securities Exchange Act of 1934, specifically Sections 13(b)(5) and 13(b)(2)(A), as well as Rules 13b2-1 and 13b2-2. The complaint alleges that Leibowitz falsified Acreage’s accounting records and made false statements to Acreage’s auditor concerning a round-trip transaction he directed to artificially inflate Acreage’s cash balance for FY 2019. The alleged scheme was that, at Acreage’s direction and with Leibowitz’s knowledge and active participation, Acreage caused an affiliated entity to transfer to it approximately $4.2 million on December 26, 2019, on the understanding that the funds would be returned to the affiliated entity at the beginning of the new year, on January 3, 2020. Leibowitz allegedly knew this transaction had no economic substance or legitimate business purpose – it was intended to bolster Acreage’s publicly reported year-end cash balance.

The complaint further alleges that when one of Acreage’s directors was alerted to this transaction by a concerned employee and began asking questions, Leibowitz directed Acreage’s accounting staff to record another false transaction to cover up the fraud, making it look as though the funds were returned in December 2019. As such, the FY 2019 year-end cash balance did not reflect the fraudulent transfer. Notwithstanding, Leibowitz also allegedly lied to Acreage’s auditor about his involvement in the scheme. His alleged lies to the auditor included an initial justification that the payments from the affiliated entity were to cover an outstanding debt to Acreage, which Acreage returned because the entity’s board had not approved it – he then modified his explanation to say that the payment was simply a mistake by the affiliated entity and made further misstatements to the auditor by incorporating this second explanation by reference into a management representation letter to the auditor, which he signed off on.

Takeaways

These allegations, if true, are an example of the “back to basics” approach the SEC is seeking to take under the current administration – this would represent a clear-cut attempt to defraud investors through false public disclosures and dishonesty to the auditor investigating the fraudulent scheme. It merits highlighting that this case is an example of a company maintaining effective internal controls – employees noticed signs of fraud and reported it upward within the company, and the alleged fraud was uncovered. This likely contributed to the complaint being made only against Leibowitz and not Acreage as a whole. Similarly situated public companies should ensure that their internal controls and reporting mechanisms are up to date and, to the extent they receive internal reports from whistleblowers about such matters, they should engage counsel immediately to minimize any potential liability.

3. Market manipulation

SEC v. Golusin

On April 29, 2025, the SEC filed a complaint in the Eastern District of New York against Albert Golusin (American Green, Inc.’s de facto CFO), Peter Jacobs (an undisclosed control person of American Green), and John Scuderi (its Vice President of Business Development), alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933. According to the complaint, Jacobs and Golusin obtained millions of shares of American Green at a steep discount by converting insider-friendly debentures, then fraudulently removed transfer restrictions by submitting opinion letters that misrepresented them as non-affiliates. While secretly controlling the issuer’s operations and finances, they orchestrated a multi-year pump-and-dump scheme: hiring stock promoters, disseminating deceptive press releases, and having Scuderi flood investor message boards with bullish posts that denied their insider roles. Concurrently, Jacobs and Scuderi engaged in manipulative trading – “painting the tape” with successive buy orders and “marking the close” with last-minute trades – to create the illusion of demand and inflate the share price, enabling Jacobs and Golusin (or entities they controlled) to unload unregistered shares for over $21 million in illicit proceeds.

The SEC alleges that the trio’s conduct repeatedly breached Rule 144’s volume limits, that the promotional materials concealed their financing, and that they attempted to erase their digital footprint by instructing each other to delete emails. Jacobs and Golusin continued to misrepresent their affiliate status on stock-deposit forms, while Jacobs and Scuderi ignored broker warnings about their end-of-day trades. The scheme left retail investors holding nearly worthless penny-stock positions, while the defendants avoided registration, disclosure, and insider-selling restrictions that are designed to protect the market from precisely this type of manipulative activity.

Takeaways

For businesses, the case highlights three key compliance takeaways: (1) control persons must candidly disclose their status and abide by registration or Rule 144 resale limitations – mischaracterizing insider sales invites both antifraud and unregistered-offering charges; (2) coordinated promotional activity, especially when coupled with contemporaneous insider selling, raises acute market-manipulation risk, so issuers and affiliates should implement robust policies requiring pre-clearance of any third-party publicity and transparent disclosure of paid promotions; and (3) trading practices such as marking the close, layering small bid orders, or timing trades around corporate press releases are red flags that compliance teams must monitor and escalate. Maintaining rigorous internal controls, accurate transfer-agent instructions, and clear audit trails – while fostering a culture where employees feel empowered to report suspicious conduct – remains the best defense against becoming the next target of an SEC market-manipulation action. To the extent any concerns come to light, businesses should engage counsel immediately to minimize any potential liability.

4. Breaches of fiduciary duties by investment advisers

Momentum Advisors, LLC

On March 7, 2025, the SEC filed settled charges against registered investment adviser Momentum Advisors, LLC, its former managing partner Allan J. Boomer, and its former chief operating officer and partner Tiffany L. Hawkins, for breaches by Boomer and Hawkins of their fiduciary duties stemming from the alleged misuse of fund and portfolio company assets. According to the SEC’s order against Hawkins, from August 2021 to February 2024, Hawkins allegedly misappropriated approximately $223,000 from a private fund advised by Momentum Advisors that she managed with Boomer by using portfolio company debit cards in more than 100 transactions to pay for vacations, clothing, and other personal expenses.

The SEC’s order against Momentum Advisors and Boomer further alleged that Boomer failed to reasonably supervise Hawkins and allegedly caused the fund in 2020 to improperly pay a business debt benefiting an entity that he and Hawkins controlled, resulting in unearned benefits of $346,904. Notably, the orders alleged that Momentum Advisors failed to adopt and implement adequate policies and procedures and to have the fund audited as required. The SEC’s orders found that Hawkins and Boomer violated the antifraud provisions of the Investment Advisers Act of 1940, and that Momentum Advisors violated the compliance and custody rule provisions of the Act. Without admitting or denying the SEC’s findings, the parties consented to the entry of cease-and-desist orders and agreed to pay monetary penalties totaling approximately $515,000.

Takeaways

The SEC’s order against Momentum Advisors and Boomer noted that the agency considered Momentum Advisors’ and Boomer’s remedial actions and cooperation, explaining that Momentum Advisors voluntarily reported Hawkins’ misappropriation and that Boomer disclosed the fund’s overpayment on loans. Momentum Advisors and Boomer also took steps to reimburse investors, and Momentum Advisors replaced Boomer as managing partner and hired a new chief financial officer and compliance consultant. Reporting, cooperation, and remediation will continue to be rewarded, and companies should take proactive steps to monitor, report, and remediate potential violations.