Securities Enforcement Roundup – August 2026

In this issue of our monthly Securities Enforcement Roundup, we highlight top securities enforcement developments from August 2026.

In August 2026:

• The US Securities and Exchange Commission (SEC or the Commission) established a specialized Financial Reporting and Accounting Unit, underscoring the Commission's continued focus on accounting, auditing, internal controls, and financial reporting misconduct.
• The SEC and the US Food and Drug Administration (FDA) entered a three-year information-sharing arrangement, providing the SEC with more streamlined access to nonpublic FDA-related information.
• The SEC brought two large-scale fraud actions alleging significant schemes to defraud investors and naming a number of individual executives as defendants.
• The SEC filed two notable enforcement actions involving alleged investor fraud in connection with private funds investing in pre-IPO shares.

SEC ESTABLISHES FINANCIAL REPORTING AND ACCOUNTING UNIT IN ENFORCEMENT DIVISION

The SEC announced the creation of a new Financial Reporting and Accounting Unit within the Division of Enforcement that will focus on accounting and financial reporting fraud cases and other accounting and auditor misconduct.[1] In announcing the new unit, SEC Enforcement Director David Woodcock explained that he has been assessing the division's staffing to ensure that its resources are aligned with its "core mission areas" and described the unit as an expansion of the division's longstanding efforts to pursue financial reporting fraud, as well as misconduct in the accounting and auditing profession. This is consistent with Director Woodcock's comments earlier this year that Enforcement is "prioritizing financial reporting matters that are important to ensure good corporate accounting and disclosures." [2]

The new unit will be led by Timothy Zimmerman, who joined the Division of Enforcement in May 2026 as a senior advisor to Director Woodcock. Prior to joining the SEC, Zimmerman spent 12 years in private practice and most recently served as deputy general counsel at an international accounting and professional services firm.

The Financial Reporting and Accounting Unit will be staffed by both attorneys and accountants who specialize in financial reporting, accounting, and auditing matters and will collaborate closely with other SEC divisions and offices.

The creation of this dedicated unit suggests that accounting and financial reporting fraud and auditor misconduct will remain significant enforcement priorities under the current Commission, enabling the SEC to identify and investigate complex accounting and financial reporting issues more efficiently. The new unit bears watching, particularly by public companies and accounting firms, as the division continues to define its enforcement priorities under Director Woodcock.

SEC AND FDA FORMALIZE INFORMATION-SHARING ARRANGEMENT

On August 31, 2026, the SEC and the FDA announced a new Memorandum of Understanding (MOU) intended to facilitate information sharing between the agencies and enhance cooperation in their respective regulatory and enforcement responsibilities.[3] The MOU is intended to improve the agencies' oversight and compliance efforts by facilitating the exchange of information concerning FDA-regulated products and activities.

The MOU is of particular significance for public companies in the life sciences sector—which are already a focus of the SEC—because it allows the SEC to use nonpublic information obtained from the FDA in connection with public company filing reviews and SEC enforcement investigations, proceedings, and civil actions.

The MOU opens a new line of communication between the agencies, allowing the agencies to more efficiently request and exchange nonpublic information (and establish standard operating procedures and templates to facilitate those requests) and establish points of contact within the SEC's Division of Corporation Finance and Division of Enforcement and the FDA's Office of the Chief Counsel and Office of Inspections and Investigations. The MOU will remain in effect for three years unless extended, modified, or terminated.[4]

As SEC Chair Paul Atkins noted, "FDA-related disclosures by public companies have a significant impact on our markets."[5] The MOU will provide the SEC with a more streamlined mechanism to obtain FDA-related information when evaluating the accuracy of public statements concerning, for example, clinical trials, regulatory submissions, product approvals, and other FDA-related developments. This may result in increased enforcement activity involving life sciences companies and FDA-related disclosures as well as related trading activity.

SEC CONTINUES TO PURSUE INVESTOR FRAUD AND INDIVIDUAL LIABILITY

The SEC filed two notable civil enforcement actions in August targeting senior executives for their alleged roles in schemes that misrepresented the existence, status, or use of assets purportedly supporting investor returns. One focuses on collateral backing subprime auto loan securitizations, and the other concerns crypto asset liquidity pools.

In the first action, the SEC charged the former CEO, CFO, and senior director of finance of a large subprime auto lender in connection with an alleged multiyear scheme to defraud investors in the company's asset-backed securities (ABS) offerings.[6] The SEC alleges that the company raised more than $1.9 billion through ABS offerings, while the CEO and CFO portrayed the company as financially sound despite its significant liquidity constraints and increasing inability to fund operations.

The SEC further alleges that the defendants double pledged hundreds of millions of dollars of subprime auto loan receivables to multiple ABS offerings and warehouse lenders. The company allegedly represented that the loans included in the ABS collateral pools were free and clear of other liens, though many loans had been pledged elsewhere. Further, the SEC alleges that with the CEO's endorsement, the CFO and senior director of finance manipulated loan information and prepared false servicing reports to conceal the double pledging, making delinquent or nonpaying loans appear current and eligible for inclusion in the collateral pools. When the company filed for bankruptcy in 2025, more than $945 million of principal associated with the ABS offerings remained outstanding and payable to investors.[7]

The complaint charges the defendants with violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. It also charges the former CEO with control-person liability and each defendant with aiding and abetting liability. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against all three defendants, as well as officer and director bars against the former CEO and CFO. In a parallel action, the US Attorney's Office for the Southern District of New York previously announced criminal charges against the defendants arising from the same alleged conduct.[8]

In a separate action, the SEC charged a cryptocurrency investment firm and its founder and CEO with raising at least $425 million from more than 1,300 investors through an alleged multiyear Ponzi scheme.[9] According to the complaint, from at least January 2023 to January 2026, the defendants sold unregistered securities in the form of "Joint Venture Agreements" through which investors partnered with the firm to invest in crypto asset liquidity pools that were also managed by the firm. Investors were promised monthly profit distributions of 3%–10% generated from fees paid to trade crypto assets within the liquidity pools and the return of their principal investment.[10]

The SEC, however, alleges that the firm did not invest any investor funds or crypto assets in liquidity pools. Instead, the SEC alleges that the CEO misappropriated at least $51 million for personal use, including to purchase homes, luxury vehicles, a yacht, and travel. The defendants allegedly used funds from new and existing investors to pay promised returns to earlier investors in a classic Ponzi scheme and fabricated account balances and investment-performance information to create the appearance that investors were earning profits. According to the SEC, by November 2025, the firm could no longer raise sufficient funding for existing obligations, halted monthly distributions, and collapsed.[11]

The CEO agreed to a bifurcated settlement, subject to court approval, under which he would be permanently enjoined from violating the charged provisions and barred from participating in securities transactions—other than certain transactions for his personal account—or acting or associating with a broker or dealer. The court will determine the CEO's disgorgement with prejudgment interest and civil penalty amounts at a later date upon motion by the SEC. As for the firm, the SEC seeks injunctions and disgorgement with prejudgment interest.[12]

Taken together, these matters highlight the Commission's continued focus on private investment markets and private credit and on holding senior executives accountable for alleged fraud and misconduct. The action against the auto lender is particularly noteworthy for participants in securitization and private credit markets because it shows the SEC's focus on executive transparency and accuracy in lien status and loan-level servicing data. The action against the cryptocurrency investment firm further suggests that the SEC will continue to pursue executive liability for crypto-related conduct through conventional fraud and Ponzi schemes.

SEC TARGETS ALLEGED FRAUD IN PRE-IPO PRIVATE FUND OFFERINGS

The SEC filed two notable enforcement actions in August involving alleged fraud in private funds that offered exposure to shares of stock of certain pre-IPO companies. Both cases involve hidden fees, pre-IPO share markups, and principal transactions.

In the first action, the SEC charged a private fund adviser, its CEO, and three affiliated general partners with allegedly defrauding investors and client funds in connection with pre-IPO investments.[13] According to the SEC, from at least April 2019 through December 2024, the defendants made false claims and promises to solicit investors. In one instance, for example, the CEO allegedly told an investor that a fund owned shares of a private pre-IPO company when it did not.[14] The defendants also allegedly borrowed client capital through unsecured loans on favorable terms; fund documents generally did not authorize the loans, and the defendants rarely disclosed them to investors.

The SEC further alleged that the defendants misrepresented the acquisition cost for pre-IPO shares and then caused client funds to purchase those shares at higher prices, failed to obtain required consent for principal transactions, and charged millions of dollars in unauthorized acquisition fees. In addition, the CEO pledged client fund assets as collateral for a $10 million line of credit obtained by two general partners.[15]

Without admitting the allegations, the defendants consented to judgments, subject to court approval, that would permanently enjoin them from violating the charged provisions. The court will determine disgorgement, prejudgment interest, and civil penalties. The CEO also agreed to an associational bar with a right to apply for reentry after three years.[16]

In another action, the SEC charged the founder and CEO of a fund manager and three entities he owned and controlled with fraud and other violations in connection with unregistered securities offerings by private funds.[17] The SEC alleged that the defendants raised more than $74 million from more than 800 investors for 11 private funds between December 2020 and June 2025. According to the SEC, the founder and CEO used two entities that he owned to acquire pre-IPO shares directly or through other investment funds, then caused those entities to sell the shares to the private funds at marked-up prices. The defendants subsequently passed the markups on to investors as hidden upfront fees.[18]

The SEC also alleged that the defendants employed more than 100 sales agents who cold-called prospective investors and used high-pressure sales tactics. The sales agents allegedly told investors that they would pay no, or low, upfront fees, when in reality, investors paid prices that averaged approximately 46% above the acquisition prices for the underlying pre-IPO securities. The defendants collected approximately $23 million in upfront fees, including more than $12 million in sales-agent commissions, and the founder and CEO personally received at least $4 million.[19] The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against all defendants, as well as conduct-based injunctions against the founder and CEO.

These matters reinforce the SEC's continued focus on private funds, offering frauds involving pre-IPO investments, and retail investors. They also highlight the Commission's scrutiny of hidden fees, principal transactions, and other conflicts that can obscure the cost of private-market investments.