Top 5 SEC Enforcement Updates October 2024

October brought several significant SEC enforcement actions, shedding light on a range of financial misconduct issues. Let’s take a closer look at the top enforcement developments from last month:

1. SEC Takes Action Against Lovesac for Accounting Fraud
The SEC filed a complaint against Lovesac Company and two former executives for allegedly concealing $2.2 million in shipping costs to artificially boost gross margins. Lovesac settled the charges by paying a civil penalty of $1.5 million and committing to enhance financial reporting controls. The former executives are contesting the charges, as the SEC seeks further penalties.

2. Rimar Capital Faces Charges for Misleading AI Claims
Rimar Capital and its executives were charged with making false claims about using artificial intelligence in trading. The SEC alleged that Rimar overstated its assets under management, with the CEO using investor funds for personal expenses. The defendants agreed to pay civil penalties and face industry bars.

3. WisdomTree Pays $4 Million for Misleading ESG Claims
WisdomTree settled with the SEC for $4 million over allegations of misrepresenting its ESG-focused ETFs. The SEC found that the ETFs held investments in industries supposedly excluded by WisdomTree’s marketing claims. The company lacked consistent ESG screening policies, leading to compliance gaps.

4. Cumberland DRW Accused of Unlawful Crypto Trading
Cumberland DRW was charged by the SEC for trading over $2 billion in crypto assets without proper registration. The firm allegedly operated as a major crypto liquidity provider without adhering to securities dealer registration requirements. Cumberland plans to challenge the charges, citing unclear regulatory guidance on crypto assets.

5. Aerospace Firms RTX and Moog Settle Bribery Allegations
RTX Corporation and Moog Inc. settled SEC actions related to bribery schemes involving international defense contracts. RTX agreed to pay over $124 million for allegedly paying bribes to Qatari military officials, while Moog resolved similar FCPA violations. Both companies faced allegations of inadequate internal controls and oversight.

As we move into November, it’s crucial for companies to stay vigilant and compliant with regulatory requirements to avoid costly enforcement actions. Stay tuned for more updates on SEC enforcement developments in the coming months.