
Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Author: Dan Brecher
Date: April 5, 2021
Counsel
212-286-0747 dbrecher@sh-law.comA hedge fund operator accused of securities fraud was recently sentenced to three months in prison for obstruction of justice. The charges stemmed from lying to investigators during a deposition conducted by the Securities and Exchange Commission (SEC).
Niket Jain, a managing member of an investment company, Aberon Capital Management, was charged with conspiracy to commit securities and wire fraud, securities fraud, wire fraud, and obstruction of justice. Prosecutors alleged that Jain provided false representations to two investors in a fund controlled by Aberon regarding the fund’s performance.
Late last year, Jain pled guilty to one count of obstruction of justice pursuant to a plea agreement with federal prosecutors. However, New York District Judge P. Kevin Castel declined to follow the recommendation of the U.S. probation office and sentence Jain to time served. Instead, he sentenced Jain to three months in prison, along with a fine of $15,000 and one year of supervised release. Judge Castel seemingly agreed with prosecutors who argued it was important to “send a message to people in the financial industry” that the only way financial professionals can fulfill their obligations to regulators “is for witnesses to tell the truth.” According to Judge Castel, “It becomes in this case important to deliver the message that the crime is deserving of meaningful punishment.”
The Jain case provides valuable lessons for firms and individuals under the SEC’s purview. Of the utmost importance, lying to investigators is the quickest way for the situation to go from bad to worse.
When the SEC launches an investigation, it first develops the facts to the fullest extent possible through informal inquiry, interviewing witnesses, examining brokerage records, reviewing trading data, and other methods. Once armed with a formal order of investigation, the staff of the SEC’s Enforcement Division can compel witnesses by subpoena to testify and produce books, records, and other relevant documents.
Being the target of a SEC investigation can be extremely stressful, even if you’re fairly confident that you haven’t done anything wrong. To avoid unintended criminal liability, it is imperative to be truthful and cooperate with investigators. Of course, that doesn’t mean that you should not aggressively seek to protect your legal rights.
In the case above, the defendant ultimately faced criminal liability not for securities fraud, but lying to investigators. When confronted with a SEC investigation (or even an examination), there are steps you can take to help ensure a more favorable outcome:
Following an investigation, SEC staff present their findings to the Commission for its review. The Commission can authorize the staff to file a case in federal court or bring an administrative action. Enforcement can also refer potential criminal cases to criminal law enforcement authorities for investigation or coordinate SEC investigations with criminal investigations involving the same conduct. While the SEC can‘t by itself impose criminal sanctions, if a person is convicted of a criminal violation of the securities laws, a court may sentence that person to serve time in jail.
In some cases, the targets of an SEC investigation can reach a settlement with SEC enforcement officials or a plea agreement with federal prosecutors. While this will be greatly influenced by the facts of the case, how targets of an investigation (or a witness) conduct themselves during the investigation can often play a role in the result of the matter.
If you have any questions or if you would like to discuss these issues further,
please contact Dan Brecher or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
Author: Dan Brecher
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Author: Bryce S. Robins
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
Author: Matthew F. Mimnaugh
Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]
Author: Dan Brecher
Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]
Author: Dan Brecher
The Trump Administration’s new tariffs are having an oversized impact on small businesses, which already tend to operate on razor thin margins. Many businesses have been forced to raise prices, find new suppliers, lay off staff, and delay growth plans. For businesses facing even more dire financial circumstances, there are additional tariff response options, including […]
Author: Brian D. Spector
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!