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The SEC fined two investment advisors, Delphia (USA) and Global Predictions, for allegedly making false statements about their use of AI technology which is known as “AI washing.” The SEC alleged that between 2019 and 2023, Delphi misled the public in SEC filings about their use of AI for investment opportunities. The SEC also alleged that Global Predictions claimed that its platform provided “[e]xpert AI-driven forecasts” on their website and social media which was false. Delphia and Global Predictions agreed to settle with the SEC on March 18th paying $225,000 and $175,000, respectively in civil penalties. 

https://www.wsj.com/articles/sec-settles-with-two-investment-advisers-over-alleged-ai-washing-cd067049

The Financial Action Task Force removed the United Arab Emirates from the Global Watch List for money laundering and terrorism on February 23^rd. According to the FATF, U.A.E. took significant steps to address an action plan in 2022 addressing its strengthening financial compliance efforts. According to FATF President, T. Raja Kumar, “Exiting the gray list doesn’t mean that the U.A.E. has a perfect system, but the U.A.E. has committed essentially to continuing its virtuous path to further enhancing its [anti-money-laundering/counter-terrorism financing] regime, and I encourage the U.A.E. to continue along this virtuous path.” 

https://www.wsj.com/articles/u-a-e-removed-from-global-watch-list-for-money-laundering-terrorism-financing-b288e217

According to a new Interpol assessment, the increased use of technology is helping organized crime groups better target victims around the world. Resources such as Artificial Intelligence (AI), language models, cryptocurrencies grouped with phishing and ransomware allow criminals to take a more business-like approach to fraud campaigns without the need to have technical skills. There is also a growing expansion of human trafficking, for the particular purpose to carry out ‘pig-butchering’ scams – a scheme combining romance and investment frauds, using cryptocurrencies. Interpol Secretary General Jürgen Stock says, “We are facing an epidemic in the growth of financial fraud, leading to individuals, often vulnerable people, and companies being defrauded on a massive and global scale.”

https://www.interpol.int/News-and-Events/News/2024/INTERPOL-Financial-Fraud-assessment-A-global-threat-boosted-by-technology

One of the biggest U.S. chemical companies, Chemours, fell more than 35% in the stock market on February 29th after the company said they were putting its top executives on leave and delaying its audited financial filings. This comes amidst an investigation into its bookkeeping, compensation and ethics-hotline reports. In securities filing, Chemours said they are looking into reports made to its ethics hotline, how the company managed working capital, and how that affected incentive compensation plans and custom metrics reported to investors and the SEC. According to RBC Capital Markets research analyst, Arun Viswanathan, when companies disclose internal reviews, the underlying issues stem from processes related to financial reporting. Viswanathan also stated, “This appears that it’s a bit broader and deeper than that.”

https://www.wsj.com/business/c-suite/chemours-shares-slide-premarket-as-execs-on-leave-amid-probe-b71da936?mod=hp_minor_pos8

Chinese gangs are utilizing the decentralized nature of cryptocurrency markets to launder billions of dollars, including profits from drug dealing and illegal gambling as well as investment scams. According to Chainalysis, a group of chemical traders in China were linked to crypto addresses where they received more than $37.8 million of assets since 2018 in exchange for fentanyl. This past October, the U.S.’s Office of Foreign Assets Control sanctioned a network of China based individuals and companies for manufacturing and distributing ingredients used in fentanyl and other drugs. 

https://www.wsj.com/finance/currencies/chinese-gangs-use-cryptocurrencies-to-launder-billions-5749f44e?mod=lead_feature_below_a_pos1

A New York Court shut down an alleged Ponzi scheme run by a Harvard MBA who solicited more than $2.9mn from alumni of the business school. Vladimir Artamonov, a Harvard alum, used personal connections and Harvard relationships to collect money from at least 29 people for his Project Information Arbitrage fund. This fund projected returns up to 1,000 times claiming to be able to identify investments that Berkshire Hathaway would make ahead of the market. Instead, he bought unrelated short-term options that lost money, raised new funds to reimburse previous investors, and spent some of the funds on shopping and dining.

https://www.ft.com/content/c6666047-2e1d-4e10-a810-974f1fe349aa

A New York jury found former Vitol commodities trader, Javier Aguilar, guilty of charges related to bribing officials at state oil companies in Ecuador and Mexico. Aguilar’s charges included violation of the Foreign Corrupt Practices Act (FCPA) and conspiring to launder money. While working for Vitol, prosecutors alleged that Aguilar paid bribes to officials in Ecuador to secure a contract to buy roughly $300 million in fuel oil from a state-owned company. Aguilar was also involved in a money laundering and bribery scheme with officials at Mexico’s state-owned oil company, which helped Vitol win contracts worth hundreds of millions of dollars. He could potentially face up to 30 years in prison.

https://www.wsj.com/articles/ex-vitol-trader-found-guilty-in-connection-with-ecuador-mexico-bribe-schemes-d10a37e2

Tyler Loudon of Houston, Texas pleaded guilty to insider trading after being accused of making $1.7 million in illegal profits. Loudon was accused of buying and selling 46,450 shares of stock in TravelCenters of America. Loudon overheard his wife who worked for BP, as a mergers and acquisitions manager, discussing BP’s proposed acquisition of TravelCenters while working at home. After BP’s acquisition of TravelCenters of America, Loudon immediately sold all of his stock – making $1.76 million in profits. He now faces a maximum sentence of five years in prison and $250,000 fine.

Britain’s National Crime Agency, along with the U.S. Federal Bureau of Investigation, Europol and a coalition of international police agencies disrupted a notorious cybercrime gang known as Lockbit. Lockbit makes money by stealing sensitive data and threatening to leak it if victims fail to pay an extortionate ransom. Lockbit has hacked some of the largest organizations in the world – ION Trading UK and Boeing. According to Jon DiMaggio, chief security strategist at Analyst1 a U.S. based cybersecurity firm, “They are the Walmart of ransomware groups, they run it like a business – that’s what makes them different.”

https://www.reuters.com/technology/cybersecurity/lockbit-cybercrime-gang-disrupted-by-international-police-operation-2024-02-19/

Lyft shares jumped up more than 60% on February 13, 2024 after an error in the company’s earnings release exaggerated its would improve adjusted earnings margins outlook by 500 basis points in 2024 compared to the prior year. Shares then dropped after CFO Erin Brewer said on the earnings call that the increase would be 50 basis points – a correction from the earlier issued earnings release. A ten fold margin improvement is improbable for any business, particularly over the short term. With an obvious mistake in the earnings release, investors were still trading with decent volume before, during and after the error. The question here is who was trading on an obvious typo. 

Per the FT’s Alphaville: Below (per Bloomberg) is the post-close price and volume. It shows a slightly fishy 1mn shares traded in the moments before the Lyft release dropped, followed by another 2mn exchanged in the minutes before the conference call, after which there’s a near-3mn dump once the correction was issued.

https://www.ft.com/content/6f1d2323-4b18-44b6-b13c-7eab43f4ff83