Performer Ne-Yo Files Countersuit Against Citibank Over Alleged $5.4M Securities Fraud
Singer Ne-Yo is suing Citibank (C), claiming that the financial institution should have had the proper safeguards and procedures in place that could have prevented his ex-money manager Kevin Foster from allegedly bilking him of $4.5M. The performer had filed a securities case against Foster and the latter’s employer, V. Brown & Co., in 2014.
Ne-Yo sought $8M. $4.5M of which Foster had purportedly swindled by moving funds out of the singer’s accounts to the money manager’s own accounts and the accounts of others. Ne-Yo sought $3.5M for service payments he says that he paid Foster and V. Brown between ’05 and ’13.
The performer claims that Foster forged his name on loan documents and took the money, including $1.4M from Citibank that the singer claims he never signed off on. Right before Ne-Yo sued his ex-manager, however, Citi filed its own lawsuit against him for the loan.
Now, Ne-Yo is saying that Citibank never told him of the numerous transactions made by Kevin, some of which involved his overdrawn account at the bank.
Sec Issues Over $700K Award to Whistleblower
The Securities and Exchange Commission is issuing an over $700K award to an individual who blew the whistle on a company. The information that the person provided led to a successful enforcement action. The whistleblower, an industry expert, was not employed at the company. This is the first time a company outsider has been issued this type of award since the SEC opened its whistleblower office in 2011.
Because the regulator protects the confidentiality of whistleblowers, the individual’s identity has not been revealed. SEC Enforcement Division Director Andrew Ceresney said that the agency values voluntary submissions by industry experts with ‘first-hand” information of wrongdoing committed by company insiders.”
US Supreme Court To Review Insider Trading Case
The US Supreme Court has consented to hear an appeal from an Illinois man who was convicted of insider trading. Bassam Salman is accused of using information provided by a former Citigroup investment banker. Salman claims that the judge who presided over his case established too low a bar for prosecutors. At issue is whether prosecutors in this case must demonstrate that the insider obtained a tangible benefit in return for sharing the information.
A federal appeals court said that in Salman’s insider trading case this threshold requirement wasn’t warranted. That ruling overturned the decision of a New York-based panel, which found that it was required.
Morgan Stanley Must Face $500M CDO Fraud Claim
In New York State, A First Judicial Department panel has upheld a decision by a trial judge not to dismiss fraud claims brought by Basis Yield Alpha Fund Master against Morgan Stanley (MS). The Cayman Islands vehicle purchased $18M in risky notes linked to residential mortgage-backed securities in a $500M collateralized debt obligation.
The subordinated notes were from Morgan Stanley’s STACK 2006-1 offering. Basis Yield contends that the ratings of the senior debt tranches underplayed the risk of the investment structure. In 2013, Manhattan Judge Melvin L. Schweitzer sided with the plaintiff, noting that Morgan Stanley did not possess a “license to misrepresent” to the buyer the material aspects of the obligation. The appeals panel agreed.
Morgan Stanley Must Face Fraud Claim Over $500M CDO, Law360, January 4, 2016
Supreme Court Takes Up Case That Tests Limits on Insider Trading Prosecution, WSJ, January 19, 2016
Ne-Yo countersues Citibank amid ongoing legal battle with ex-manager he claims stole millions from him, NY Daily News, January 14, 2016