Tag: Financial News

The SEC now charges three executives with defrauding investors after raising a whopping $170 million based on misleading data.

The Securities and Exchange Commission (SEC) has charged three former executives of the now-defunct digital pharmacy startup Medly Health Inc. with fraudulently misleading investors during capital-raising efforts that secured over $170 million for the company.

The SEC’s complaint names co-founder and former CEO Marg Patel, former CFO Robert Horowitz, and former Head of Rx Operations Chintankumar Bhatt, alleging that from February 2021 to August 2022, they provided inflated financial information to both existing and prospective investors.

This misinformation included millions of dollars attributed to fake prescriptions entered into Medly’s systems by Bhatt.

According to the complaint, Patel and Horowitz were aware of significant accounting irregularities and ignored multiple employee reports indicating that the reported revenue figures were inaccurate.

“The alleged facts of this case demonstrate significant corporate malfeasance,” stated Sheldon L. Pollock, Associate Director of Enforcement for the SEC’s New York Regional Office.

He emphasized that the misleading practices harmed investors and underscored the Commission’s commitment to addressing deceitful fundraising activities by startups.

Filed in the U.S. District Court for the Eastern District of New York, the SEC’s charges against the three executives include violations of antifraud provisions of securities laws.

Additionally, the complaint seeks permanent injunctions, civil penalties, disgorgement, and bans from serving as officers or directors for all defendants involved.

The SEC’s investigation is ongoing, led by a team from the New York Regional Office, and supervised by senior officials including Judith Weinstock and Antonia Apps.

As the litigation progresses, the focus remains on holding those responsible accountable for their actions and protecting investors from fraudulent schemes.

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Also Read: NYSE Is Now Reporting A GameStop Price Glitch

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Citadel is now fighting the SEC on the market surveillance system known as CAT, which enables regulators to track trading activity.

Citadel Securities is spearheading an industry pushback against a proposal from exchanges like the New York Stock Exchange and Nasdaq that would require traders to help fund a new market surveillance system, known as the Consolidated Audit Trail (CAT), which has already incurred nearly $1 billion in costs.

Brokers are urging regulators to halt new billing schedules that would mandate their financial contributions to the CAT system, which serves as a comprehensive record of all activity in U.S. equities and options markets—often compared to a “Hubble Telescope” for financial markets.

Until now, exchanges have covered the costs of the CAT.

However, if the U.S. Securities and Exchange Commission (SEC) does not intervene soon, brokers will start receiving bills from the exchanges beginning Tuesday, as the exchanges seek to recover a portion of the promised costs.

The CAT was established after the 2010 flash crash, which made it difficult for investigators to determine the cause of a market drop that erased nearly $1 trillion in value.

The system has been fully operational since 2022, according to Financial Times.

The SEC directed national exchanges and Finra, which oversees brokers, to create the CAT, with the expectation that the trading industry would eventually bear a significant share of the expenses.

Last year, the SEC approved a plan requiring broker-dealers to cover two-thirds of the costs, while exchanges would cover the rest.

Initial payment plans were submitted in January but were suspended pending review, which has yet to be completed.

Last month, exchanges and Finra withdrew their initial payment plans and submitted revised ones with minor changes.

Unless the SEC issues another suspension, brokers will receive bills in October based on September’s trading volumes.

Several regulatory filings and letters from industry groups, including Citadel Securities, Virtu Financial, the American Securities Association, and Sifma, have urged the SEC to suspend the billing process.

Citadel Securities, led by Ken Griffin, warned the SEC that it might seek legal action if the billing is not halted by next week.

Also Read: “The Game is Rigged”, Says Ex-Citadel Data Scientist

The company criticized the new filings as an attempt to extract significant amounts from broker-dealers.

Citadel previously challenged the legality of the CAT funding model in a Florida court, in partnership with the ASA.

That case is still ongoing.

Exchange representatives, including those from the NYSE, Nasdaq, and Cboe Global Markets, declined to comment, as did Finra and the SEC.

However, exchange officials noted that they were instructed by the SEC to implement the CAT and that cost-sharing with the industry was always part of the plan.

They argue that increasing trading volumes have contributed to rising costs.

One executive involved in the CAT project stated, “We’re just recovering our costs. There’s no profit here,” emphasizing that the industry had been resistant to funding the system.

Brokers have raised concerns not only about the costs but also about accountability for any costly missteps during the CAT’s development, as well as the system’s annual operating budget, which now nears $200 million—about five times the original estimates from 2016.

In a market where big player such as Citadel have manipulated prices in their favor, reported inaccuracies, and have taken advantage of the industry — opposing any regulatory means that track its trading activity has been part of their mission for years.

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Also Read: BlackRock Is Now Hit With 54 Counts of Securities

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