SEC fails to get $1.4B in case involving Wyly brothers

The Securities and Exchange Commission (SEC) lost out on getting the complete profits from Maverick Capital and Ranger Capital founder Sam Wyly and his late brother

The Securities and Exchange Commission (SEC) lost out on getting the complete profits from Maverick Capital and Ranger Capital founder Sam Wyly and his late brother.

U.S. District Judge Shira Scheindlin refused to let the government take the total profits earned by Wyly and brother, Charles, on allegedly hidden trades, which totaled $1.4 billion, according to a report from FinAlternatives.com.

The SEC this week had no comment on the judge’s ruling.

____________________________________________________________________________________________________

FURTHER READING:

Aggressive regulation

SEC chair White says there’s ‘work to do’ in implementing Dodd-Frank

Rising Star: Theresa Trzaskoma, Brune & Richard

____________________________________________________________________________________________________

“It defies logic to presume that all of the rise in the value of a company’s stock price over 13 years… is reasonably tied to two directors’ failure to disclose their trading,” Scheindlin said in a ruling quoted in the report.

Now the SEC will come up with a lower amount. And the judge wants the SEC attorneys to have a “credible explanation” of why it is reasonable, before a trial commences.

However, the SEC was allowed to seek some $750 million in unpaid taxes and some $138 million in profits related to the sale of unregistered securities.

Earlier this month, Scheindlin found no insider trading in the case following a one-day bench trial.

“While it is difficult to draw the line between inchoate desire and something more material, that line must be drawn somewhere,” Scheindlin said in a ruling.

Sam Wyly has denied allegations and said disputed trusts were legitimate.

Insider trading enforcement is a top priority for the SEC. In recent years, the SEC has filed insider trading cases against hundreds of entities and individuals.

Two months ago, a jury found the Wyly brothers liable for fraud in a SEC case. Government attorneys claim the brothers employed an “elaborate sham system” related to offshore trusts to hide trades, FinAlternatives reported.

The SEC wanted the court to approve a penalty for fraud of more than $553 million. The attorney representing the Wylys believes the government was being unfair.

“We have tried in good faith to resolve this case, but the government, to date, has been unrealistic and unreasonable in what it can expect to extract from the Wyly family,” Stephen Sussman was quoted by FinAlternatives.

But the SEC saw things differently.

"It is time to hold the Wylys accountable," the SEC had said in a court document quoted by Reuters. "It is time to strip away the immense profits that flowed from their misconduct. It is time to impose the maximum penalty allowable under the securities laws.”

Contributing Author

author image

Ed Silverstein

Ed Silverstein is a veteran writer and editor for magazines, websites and newspapers. A graduate of Harvard's Kennedy School of Government, he has won several...

Bio and more articles

Join the Conversation

Advertisement. Closing in 15 seconds.