U.S. judge approves but critiques SEC's 'phantom' deal with bank

miércoles 28 de septiembre de 2016 13:23 GYT

By Nate Raymond

NEW YORK, Sept 28 (Reuters) - The U.S. Securities and Exchange Commission on Wednesday won approval of a settlement with failed Cayman Islands-based Caledonian Bank Ltd, despite criticism by a federal judge of the regulator's handling of the case and of the accord itself.

U.S. District Judge William Pauley in Manhattan questioned whether the SEC's $25 million settlement with Caledonian was in the public's interest, given that the regulator had turned that sum into a "phantom judgment" by waiving payment.

Pauley, who has previously scolded the SEC for blunders that triggered the bank's collapse in February 2015, said the settlement "raises many questions," including how victims would benefit from the non-monetary accord.

But Pauley noted the ability of judges to block regulatory settlements was narrowed in 2014, when an appeals court voided a judge's rejection of a $285 million accord between the SEC and Citigroup Inc.

"For better or worse, the public's interest in 'knowing the truth' behind a litigation is not to be considered to evaluate the decree," Pauley wrote.

Neither the SEC nor Caledonian's lawyer responded immediately to requests for comment.

The SEC in 2015 sued Caledonian and three broker-dealers in Belize and Panama, accusing them of offering and selling unregistered penny stocks to investors through several "pump-and-dump" schemes.

The SEC obtained an order freezing their assets, resulting in nearly $76.7 million in Caledonian's U.S.-based accounts being frozen.   Continuación...