Securities Enforcement Roundup – December 2025

In this issue of our monthly Securities Enforcement Roundup, we highlight top securities enforcement developments from December 2025.

In December 2025:

• The US Securities and Exchange Commission (SEC or Commission) filed a settled action against a trader related to an alleged spoofing scheme.
• The SEC charged three purported crypto asset trading platforms and four investment clubs with a scheme that targeted retail investors on social media.
• The SEC charged a Canadian citizen with fraud schemes that targeted retail investors on a social media platform.
• The SEC sued three former executives of a public company for accounting and disclosure fraud and settled with the company without a civil penalty.
• The Financial Industry Regulatory Authority (FINRA) ordered a firm to pay $2 million in restitution and a $1 million fine for mutual fund supervision failures.
• On January 9, 2026, the US Supreme Court agreed to hear a case that may redefine the SEC’s disgorgement authority by resolving a widening circuit split over the need to show investor pecuniary harm.

SEC FILES SETTLED SPOOFING CHARGES AGAINST TRADER

On December 16, 2025, the SEC filed settled charges against an individual trader for allegedly engaging in a two-year spoofing scheme that generated approximately $373,885 in ill-gotten gains.[1] According to the SEC, the trader placed a rapid series of non-bona fide orders in thinly traded stocks (often outside regular market hours) that he did not intend to execute. After the stock prices moved in his favor, he executed genuine trades on the opposite side of the market at the manipulated prices and quickly canceled the spoof orders, after which he repeated the same scheme on the other side of the market to move the stock price in the opposite direction and lock in his profits.[2]

The SEC further alleged that after broker-dealers restricted or closed his accounts, the trader opened new accounts in others’ names (with their permission) to continue his trading and provided materially false information on account opening forms regarding control over the account.

Without admitting or denying the SEC’s allegations, the trader consented to the entry of a final judgment permanently enjoining him from violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, as well as Section 9(a)(2) of the Exchange Act. He also agreed to pay approximately $400,000 in disgorgement and prejudgment interest, a civil penalty of $112,165, and a four-year prohibition on opening brokerage accounts without disclosing the judgment to the relevant broker-dealer(s). This is the second recent spoofing case brought under the new administration[3] and underscores the SEC’s focus on trading abuses such as market manipulation and insider trading.

SEC CHARGES CRYPTO TRADING PLATFORMS AND INVESTMENT CLUBS IN SOCIAL MEDIA–DRIVEN FRAUD SCHEME

Highlighting its continued focus on retail investor fraud, the SEC charged three purported crypto asset trading platforms and four investment clubs for misappropriating more than $14 million from US retail investors through an investment confidence scheme promoted on social media.[4]

According to the SEC’s complaint, from at least January 2024 through January 2025, the WhatsApp-based investment clubs used social media advertisements to attract investors and built trust by offering purportedly AI-generated investment tips and promises of significant returns.[5] Investors were apparently then directed to open and fund accounts on the purported crypto asset trading platforms, which (along with the investment clubs) promoted fictitious “security token offerings” that were supposedly issued by legitimate businesses. As alleged in the complaint, no trading actually occurred, the platforms and offerings did not exist, and when investors attempted to withdraw funds, the defendants allegedly demanded additional advance fees.

The SEC’s complaint, filed in the US District Court for the District of Colorado, charges defendants with violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 and seeks permanent injunctions, civil penalties, and disgorgement with prejudgment interest. While we have certainly seen the SEC shift its approach to crypto (and drop a number of crypto-related cases brought under the prior Commission), this action highlights that “fraud is fraud” and the SEC “will vigorously pursue securities fraud that harms retail investors,”[6] particularly here where social media and misleading AI-generated information are at play.

SEC CHARGES CANADIAN PROMOTER WITH MULTIMILLION-DOLLAR SOCIAL MEDIA-BASED OFFERING FRAUD

In another fraud case involving social media, the SEC charged a Canadian citizen and three entities he controls with orchestrating two fraudulent securities offerings that raised more than $18 million from US and non-US investors.[7]

According to the SEC’s complaint, the defendant cultivated a following on a social media platform by falsely portraying himself as a successful investment professional managing more than $1 billion in assets through one of his entities, which was in fact a shell entity, and then engaged in a number of schemes to misappropriate over $6 million of investor funds.[8] For example, the defendants raised approximately $18.1 million from investors in a fund that they claimed could generate double-digit monthly returns, when the fund’s monthly compounded return was only 1.4%.

Filed in the US District Court for the Eastern District of New York, the complaint charges antifraud and registration violations and seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties, conduct-based injunctions, and a bar prohibiting the individual defendant from acting as an investment adviser.

SEC CHARGES PUBLIC CO. EXECUTIVES WITH FRAUD AND MISCONDUCT

On December 15, 2025, the SEC filed charges against three former public company executives for accounting and disclosure fraud, including through materially false and misleading statements in the company’s SEC filings and financial statements.[9] Among others, the SEC alleges the company’s public statements failed to disclose the fact that the company’s co-founder played an important executive and managerial role at the company, despite a 2020 federal court order prohibiting him from holding an executive role at a public company

The SEC has charged all three former executives with violating antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Additionally, the former CEO and CFO face charges for falsifying records, lying to auditors, and providing false certifications. The SEC seeks permanent injunctions, civil penalties, officer and director bars, and disgorgement and reimbursement of certain compensation and profits.

Notably, the company itself entered a no-admit, no-deny settlement with the SEC related to the alleged fraud perpetrated by the former executives. Citing extensive remedial measures (including conducting an internal investigation and hiring a compliance consultant), the SEC did not impose a civil penalty against the company but required it to implement certain compliance enhancements.

FINRA SETTLES WITH BROKER-DEALER FOR MUTUAL FUND SUPERVISION FAILURES

In December 2025, FINRA issued a letter of acceptance, waiver, and consent (AWC) related to alleged failures by a broker-dealer to supervise Class A mutual fund recommendations, which, according to FINRA, resulted in recommendations that were potentially unsuitable or not in customers’ best interest and caused customers to pay unnecessary fees.[10] FINRA alleged that while the firm’s WSPs generally required supervisors to assess the suitability of mutual fund transactions, they did not provide sufficient guidance on how to conduct that analysis and were therefore not reasonably designed to achieve compliance with suitability and best interest obligations regarding mutual fund recommendations.[11]

FINRA also faulted the firm’s systems for identifying and supervising switches and short-term sales, finding that the firm failed to reasonably supervise recommendations of more than 1,000 Class A mutual fund switches and more than 2,000 short-term sales, which were potentially unsuitable or not in the customer’s best interest. These trades resulted in over $2 million in commissions and fees. In settling the matter, the firm agreed to pay restitution in that amount, as well as a $1 million fine.

SCOTUS TO RESOLVE CIRCUIT SPLIT OVER SEC’S DISGORGEMENT AUTHORITY

On October 14, 2025, Ongkaruck Sripetch filed a petition for certiorari, asking the Supreme Court to address the question of whether the SEC can seek equitable disgorgement in civil enforcement actions without demonstrating that investors suffered pecuniary harm. [12]

The appeal originates from a US Court of Appeals for the Ninth Circuit decision in September, which upheld a $2.25 million disgorgement award plus interest against Sripetch based on SEC allegations that he engaged in fraudulent schemes involving at least 20 penny-stock companies. Sripetch consented to the entry of judgment and agreed to pay disgorgement, with the district court ordering him to disgorge $2.25 million, plus prejudgment interest, totaling over $3.3 million.

In doing so, the Ninth Circuit (agreeing with the First Circuit and disagreeing with the Second Circuit) held that pecuniary harm is not a prerequisite for disgorgement.[13] Citing 15 USC § 78u(d)(5) and 78u(d)(7), the Ninth Circuit emphasized that disgorgement is a remedy focused on depriving wrongdoers of ill-gotten gains rather than compensating victims for losses, and there is no statutory requirement of investor harm.

In his petition, Sripetch contends that the question of whether pecuniary harm is necessary for disgorgement is crucial, as disgorgement has been a central remedy in SEC enforcement actions for decades and could have significant implications on the Commission’s enforcement strategy, as evidenced by the substantial financial remedies obtained in recent years. Moreover, the Supreme Court’s review of this case could resolve the conflicting interpretations among the circuits and clarify the legal standards for disgorgement in SEC actions.

The SEC’s view (in line with the Ninth Circuit) is that it can seek disgorgement without proving pecuniary harm to investors; however, given the significance of disgorgement, the Commission took the unusual step of urging the Supreme Court to grant certiorari to resolve the circuit split even though it prevailed in the Ninth Circuit.[14] On January 9, 2026, the Supreme Court agreed to hear the case. The case is likely to be fully briefed this spring, and a ruling is anticipated before the end of the Court’s current term in late June or early July 2026.