Week 4 Discussion 1 Legal Environment
Week 4 Discussion 1 Legal Environment?
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In April of 2022, Lyle Sinclair told Jessie Jannsen and Pablo Rincor about an investment program that would buy and sell securities that were fully secured. In addition, these would be monitored by the central bank of the United States: The Federal Reserve.
Without verifying if the program even existed, Jannsen and Rincor began to assist Sinclair in selling interests in it to investors. The opportunity was represented as a private investment and was not registered with the Securities and Exchange Commission (SEC). The minimum amount required to invest was $2 million and for this there was promised a weekly rate of return from 10% to 100%. In addition to funds, nothing else was required from investors except for their silence – the program was to be kept a secret.
Over a 5-month period in 2022, the trio raised nearly $110,000,000 from 32 investors. However, the promised financial gains never occurred as Sinclair, Jannsen and Rincor had the funds sent to an offshore account in the Cayman Islands. There they withdrew most of the money for their personal use.
- Analyze if the investments in this program are considered securities by using the Howey test.
- Explain if the investment interest in this situation needed to be registered under the Securities Act of 1933.
- Discuss if there was a violation of Section 10(b), of the Securities and Exchange Act of 1934? How would the facts of this case apply to Rule 10b-5?
- Analyze the role investors played in this scheme. Should they be partially responsible for their own losses?
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