Nikola Corp. founder Trevor Milton has hired New York attorneys Marc Mukasey, Bradley Bondi and Nola Heller as defense counsel in a criminal case accusing the electric vehicle start-up’s former chair of lying about the company’s technology in order to boost stock sales. Milton, who surrendered to authorities Thursday morning,…
WASHINGTON, June 30 (Reuters) – Wall Street’s industry regulator fined Robinhood Financial LLC $70 million on Wednesday for “systemic” failures, including systems outages, providing “false or misleading” information, and weak options trading controls, saying those factors combined harmed millions of the app’s customers.
The Financial Industry Regulatory Authority (FINRA) fine is the latest hit to Robinhood’s reputation. The broker, which has been credited with democratizing trading, is under scrutiny by federal and state policymakers following this year’s meme-stock fiasco which raised questions over the California firm’s business model, risk management and customer treatment.
However, the sweeping agreement, which resolves alleged FINRA violations dating back to September 2016, likely paves the way for the firm to move forward quickly with a planned initial public offering that has been delayed due to meme-stock backlash and other regulatory queries.
Robinhood’s resolution with FINRA includes $12.6 million in restitution to thousands of customers and a $57 million penalty, the largest in the regulator’s history, and covers a range of issues dating back to September 2016, FINRA said in a statement.
“The fine… reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers,” said Jessica Hopper, Head of Enforcement at FINRA.
According to FINRA, those communications related to whether customers could place trades on margin, how much cash was in their accounts, how much buying power they had, the risk of loss customers faced in certain transactions, and whether customers faced margin calls.
FINRA noted that a Robinhood customer took his life in 2020 after becoming confused by messages in his account which appeared to show he had turned off margin trades and inaccurately showed a negative cash balance. Thousands of other customers suffered more than $7 million in losses due to similar mis-statements, FINRA alleged.
Between 2018 and late 2020 Robinhood also failed to properly supervise its technology, causing it to experience a “series of outages and critical systems failures,” including a major outage during the pandemic turmoil of March 2020, which led customers to lose money, FINRA said.
During the same period, Robinhood also failed to properly vet customers before allowing them to make risky options bets, FINRA alleged.
Robinhood neither admitted nor denied the charges, but consented to FINRA’s findings. The company said in a statement that it was overhauling its business, installing new supervisory and communications procedures, and has hired a slew of attorneys, including previous regulators.
“There’s a clear message: You can try to democratize investing and demystify finance, but you can’t cut corners,” said Robert Frenchman, an attorney with Mukasey Frenchman & Sklaroff, who added the settlement should be good news for the IPO.
“It’s good because it clears up such a wide range of issues that now they can say they have settled with regulators. I can see the value – it’s a lot of money – in settling on such a salad of FINRA violations.”
BY ANDY Z. WANG
Attorneys defending former Chemistry department chair Charles M. Lieber, who was charged with lying to federal authorities examining his ties to China, said during a status conference last month that Lieber’s cancer diagnosis and deteriorating health call for an expedient trial.
As the trial looms, legal experts spoke with The Crimson about Lieber’s possible defense strategies, which might implicate Harvard and draw attention to University policies around foreign funding disclosure.
Federal authorities arrested Lieber in January 2020, alleging that he made fraudulent statements to officials investigating his funding sources. Lieber reportedly lied to the Defense Department and the National Institutes of Health about ties he allegedly had to China’s Thousand Talents Plan, a talent recruitment program.
Last June, a federal grand jury indicted Lieber on charges of making false statements, to which he pled not guilty. The next month, Lieber was additionally charged with four tax offenses for failing to report income he allegedly received from Chinese sources.
Marc L. Mukasey, one of Lieber’s attorneys, said in a Feb. 26 hearing that Lieber had eliminated the potential of a plea deal and would be pursuing a trial.
“At this time, Your Honor, there is no possibility of a plea and there will be a trial,” Mukasey told Magistrate Judge Marianne B. Bowler of the U.S. District Court of Massachusetts at the February status conference.
“He is fighting for his life while also fighting the government,” Mukasey added in a Tuesday statement. “He is eager to show the world at trial how the government has it wrong.”
In a public letter released last month, 41 professors — including seven Nobel laureates — from several American universities questioned Harvard’s decision to not recoup Lieber for his legal costs, especially after he had been diagnosed with “an incurable lymphoma.”
“Our efforts are all the more urgent as Professor Lieber is fighting for his life on another front,” the letter reads. “Instead of devoting what may be the final months of his life to fulfilling his scientific and educational calling, he is tackling the monumental task of restoring his reputation.”
Lieber filed suit against Harvard in Middlesex County Superior Court in October 2020, alleging that the University broke its contract with him by refusing to reimburse him for his criminal defense.
Previously, Harvard officials have pointed to provisions in the University’s indemnification policy excluding individuals who have been “determined not to have acted in good faith” as justification for refusing reimbursement.
In the status conference, Mukasey said indemnification was necessary for Lieber’s health.
“We’re fighting Harvard in state court so that Lieber can afford experimental treatment to keep him alive,” he said.
Kristen M. Schwendinger — a senior counsel at Feldesman Tucker Leifer Fidell LLP specializing in practices including federal grants and compliance matters — said Lieber’s health condition would not stop the government from pursuing its case.
“I don’t think that usually stops a trial from occurring entirely,” she said. “I do think it absolutely factors into sentencing.”
Derek Adams — a partner at Potomac Law Group in Washington who regularly defends clients facing Department of Justice investigations — said based on case filings, Lieber’s defense team will likely contend that Lieber was “sucked into” the federal government’s pre-existing efforts to combat intellectual property theft by Chinese state actors.
“The defense is going to be very focused on the bigger picture — the anti-China movement that’s happened over the last three or four years — and try to take the focus away from the specific statements and more generally paint this as part of a broader brush that the government has been taking,” Adams said.
“This case has been painted as an espionage case and a case about theft of intellectual property or other materials from the U.S., when in fact it’s just about allegedly a false statement to the government,” he added.
A federal charge for making false statements allows for a sentence of up to five years in prison, three years of supervised release, and a $250,000 fine.
Schwendinger said that there are “pretty standard defense arguments” for false claims charges.
“Usually it tackles whether or not the statement was done knowingly and willfully,” she said. “There’s another standard defense, and that’s when you respond ‘no’ to something in a very quick response, but you unpack what the question was and what the answer really meant at the time.”
Adams added that the false claims charges against Lieber allege that Lieber willfully lied when he informed the Department of Defense and National Institutes of Health that he was “not involved in a foreign talent plan in any way.”
“One of the defenses is going to be that there’s so much ambiguity in terms of whether somebody is truly a member in a foreign talent program or not, that it could have just not been clear to Charles Lieber what the question was being asked and whether his answer was accurate or not,” Adams said. “They’re probably going to take the position that he thought his answer was accurate.”
In the March status conference, Mukasey alluded to how a trial might implicate Harvard in the Lieber case, saying there are those “who do not want their own misconduct to be laid bare at trial.”
“The indictment references Harvard 33 times,” he added in an emailed statement. “It’s hard to imagine a trial where Harvard will not be at the forefront.”
Peter R. Zeidenberg — a partner at Arent Fox specializing in espionage-related offenses and trade secret theft — said many universities do not clearly delineate guidelines for reporting foreign collaboration.
“Relationships like the Thousand Talents Program were something that universities thought were a good thing, and they were encouraged,” he said. “Then you have a complete lack of training by either the granting agencies or the universities to their staff on what the rules and requirements are of disclosure, and very vague definitions and explanations of what needs to be disclosed.”
Though he declined to comment specifically on the Lieber case, Zeidenberg said it was “completely unfair and unjust” for the Department of Justice to “change the rules in the middle of the game” in enforcing disclosure.
“[The Department of Justice is] going back in time, and they’re looking at disclosures made in 2016, ’17, ’18, and even further back and saying, ‘You didn’t do this,’” Zeidenberg said. “It’s a retroactive application of new standards.”
Schwendinger said Lieber could argue he was not fully aware of the required disclosures in his situation.
“One of the things that could be part of his overall defense is to say: what you’re talking about happened in an era where it was not clear what I needed to share,” she said.
Adams said Harvard would “come into the trial one way or another” due to its role in facilitating Lieber’s grant applications to the National Institutes of Health.
“[Harvard] definitely could come in, in terms of the way that they go about their due diligence on statements like this and on their internal policies and practices as it relates to foreign disclosures,” Adams said.
However, both Schwendinger and Adams said they were wary about the efficacy of such a defense.
“He actually may have violated some of Harvard’s policies that are more clear,” Schwendinger said. “It’s easier to make an argument that you might’ve been confused if it’s very clear that you were making an effort to follow all those policies.”
University spokesperson Jonathan L. Swain and FAS spokesperson Anna G. Cowenhoven declined to comment for this story.
Adams and Zeidenberg said they would like to see a shift in how the Department of Justice handles cases of individuals failing to disclose foreign funding. Zeidenberg specifically said the China Initiative — a Department of Justice task force targeting intellectual property theft by China — had “gotten badly off track.”
“It’s going after people who have not even a hint of allegation that they transferred any technology or intellectual property to anybody,” he said.
Mukasey maintains Lieber had no involvement in transferring proprietary knowledge.
“Through the DOJ’s China Initiative, the government wanted to root out spies and those who might be compromising American knowledge, intellectual property and intelligence,” he wrote. “There is nobody on earth who thinks Charlie Lieber was involved in that kind of activity and there is not a speck of evidence in that regard.”
Adams said, however, that a shift in policy around enforcing foreign funding disclosures would be unlikely to affect Lieber’s case.
“I hope we see some shifts to there being less criminal cases and more issues dealt with at the administrative or civil level under the new administration,” he said. “But this case has already been charged; it’s already moving forward.”
Schwendinger said the trial would prove instructive for future cases alleging academic espionage.
“It’s incredibly unfortunate that things have to go to a full trial, but I think all of us involved in this challenging era area of law will learn a lot from his outcome,” she said. “There is no precedent for a trial like this, and so we’ll all learn a lot from its outcome.”
Mukasey wrote that the U.S. government had overzealously executed its China Initiative, and in doing so, unfairly targeted Lieber.
“The entire prosecution of an innocent man dying of cancer is ghastly, barbaric and unnecessary,” he wrote.
Elizabeth O. McCarthy, a spokesperson for the U.S. Attorney’s Office in the District of Massachusetts, declined to comment, citing the pending trial.
Lieber’s next pretrial status conference has been tentatively scheduled for April 28.
—Staff writer Andy Z. Wang can be reached at email@example.com.
Investors who sued online brokerages over claims they were unfairly blocked from trading shares of high-flying stocks like GameStop Corp. may have a long wait before their cases are resolved.
So far, at least 18 lawsuits have been filed against Robinhood Markets in California, Connecticut, Florida, Illinois, New Jersey, Oregon, Pennsylvania and Texas, mostly alleging restrictions by the trading platform that amounted to a breach of contract, court records show. Some also seek damages on behalf of other aggrieved investors.
While such claims already must overcome the broad powers brokerages have to block or restrict transactions on their platforms, the path through the courts could take months or even years to resolve, with mandatory arbitration in some cases and delays for consolidation of similar lawsuits, legal experts said.
WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission (SEC) is looking at every aspect of and parties involved in the “Reddit rally” of GameStop Corp and other stocks, said two people familiar with the matter, suggesting a swath of industry participants may be swept up in the regulator’s review of the trading frenzy.
The people added that the furious surge in shares of GameStop, AMC Entertainment Holdings and other stocks contained familiar patterns, in that it involves users of online platforms hyping up stocks – something seen in the past on bulletin boards and social media platforms.
However, manipulation cases can be complex and may rely on more than simply language posted on a message board, they said.
Thousands of Reddit users trading on low-cost retail platforms including Robinhood banded together to drive up the prices of GameStop and other “meme” stocks, squeezing hedge funds that had taken short positions, or bets against those shares.
By Xiumei Dong
Law360 (August 19, 2020, 3:14 PM EDT) — Marc Mukasey, a former co-chair of Greenberg Traurig LLP’s white-collar defense and investigations practice, and two other former firm shareholders launched their boutique law firm, Mukasey Frenchman & Sklaroff LLP, in spring 2019.
Here, Mukasey chats with Law360 about the reasoning behind founding the law firm, his goals for the firm over the next five years and how it is different from other litigation boutiques in New York.
This interview took place July 17 and has been edited for length and clarity.
What is your reason for founding a boutique litigation firm?
I spent nine years in the U.S. Attorney’s Office for the Southern District of New York. I loved trial work. I loved being in the courtroom. I love preparing for the trials and working with a team and everybody being in it together for the high-stakes moments. And I was very lucky at my two prior law firms, after I left the U.S. attorney’s office, to get a lot of trial work representing all sorts of folks from all sorts of industries.
I realized that the team that I was working with was a great one, and we were really effective in the courtroom, and we were winning a lot of defense verdicts and getting investigations resolved in a positive way for the clients. And I thought that if we could … build a firm that would handle the most difficult trial work, the highest-stakes trial work — I mean, in-court jury trial work — that we could be of great service to individuals and institutions. We started about a year and a half ago and it’s been a tremendous success.
Does the firm represent President Donald Trump and the Trump Organization in legal matters?
I represent the Trump Organization in connection with a subpoena and an investigation by the Manhattan [district attorney’s] office. I know of no other cases [going forward]. I am focusing on this criminal investigation at the moment.
What are your goals for the law firm over the next five years?
We want to stay small. We want to stay lean. We have been thriving and succeeding during the pandemic because we are very technologically advanced.
In the next few months, we expect to have two criminal trials. One is called United States v. Goyal — that’s the health care fraud case in the Southern District of New York — and a very controversial case in the [District of Massachusetts] called United States v. Charles M. Lieber. And in that case, we represent a world-renowned scientist named Charles Lieber who has been accused of making false statements. He’s the chairman of the chemistry department at Harvard University.
This is a time of incredible change and necessary change in our country and in our judicial system. As a firm, we are committed to representing those people who are not treated fairly and have not been treated fairly by the justice system. We will always fight for the rights of those people.
What distinguishes your firm from other litigation boutiques in New York?
One of the very interesting features of our firm, as we continue to grow and move forward, is that we have one of the best health care defense lawyers in the country, our new partner Torrey Young. She left BigLaw to come to us. She’s moving from Boston to New York in the middle of a pandemic to come to us with her family. Health care has not always been the focus of white-collar firms in New York. It’s much more of a Southeast, Southwest focus, and we plan to be very active in that space, and I think that’s one of the things that makes us very interesting and unique.
What kind of legal talent do you want to bring on board? What is your approach to attracting and retaining them?
We are operating on all cylinders, able to handle any kind of case no matter how large or how complex right now. Our eyes are always open for good candidates, and good candidates are people who are skilled in the courtroom and people who are skilled in brief writing and legal argument.
How has your firm been responding to the COVID-19 pandemic?
We’ve been very lucky to go through this pandemic with everybody busy and incredible clients who stand by us as much as we stand by them. We have been working remotely. We have been doing everything we would do in the office. We do cocktail hours once a week, and we actually have a guest speaker series where we were arranging to have speakers come in over Zoom and get some thoughts on their careers to our firm.
Our firm is more of a trial team than it is a law firm. It is a movable, flexible, fast-style, tactical trial team. That’s how we think of it, as opposed to a big, bureaucratic law firm.
If you could have lunch with any well-known lawyer, alive or dead, who would it be?
I would say Abraham Lincoln because he was a fantastic oral advocate. He created the kind of change that set people free and set a path towards people being treated equally, and that’s something that still resonates today, and we still have to strive for today. I would definitely do lunch with Lincoln. –Editing by Kelly Duncan.
In a war-crimes trial that roiled the elite Navy SEALs and drew the attention of President Trump, a decorated eight-tour SEAL platoon leader was found not guilty on Tuesday of first-degree murder of a captive ISIS fighter and attempted murder of civilians in Iraq.
But the platoon leader, Special Operations Chief Edward Gallagher, was convicted of one charge: posing for photos with the teenage captive’s dead body.
Chief Gallagher, 40, who was serving with SEAL Team 7, became a rallying cause of some Republicans in Congress and members of the conservative media. Mr. Trump said on Twitter in March that he would have the chief released from pretrial confinement “in honor of his past service to our country.”
A federal jury on Wednesday acquitted a former trader for the Swiss bank UBS of charges related to market manipulation, dealing a blow to a Justice Department effort to crack down on a Wall Street practice known as “spoofing.”
Prosecutors accused the former trader, Andre Flotron, of trying to move market prices for precious metals by making offers on electronic trading systems to buy or sell gold, silver and other financial products and then quickly deleting those offers before anyone could accept them.
But after only a few hours of deliberation, a jury in United States District Court in the District of Connecticut rejected their theory, according to Mr. Flotron’s lawyer Marc L. Mukasey.