The Securities and Exchange Commission (SEC) has eased up on pursuing fraudsters, particularly after presidential pardons and commuted sentences issued during the Trump administration. Notably, the SEC dropped civil enforcement actions against Ozy Media co-founder Carlos Watson, Nikola Corp. founder Trevor Milton, and venture capitalist Devon Archer, without requiring them to pay penalties or restitution to investors. This occurred despite presidential pardons not technically eliminating civil liability.
In the case of Carlos Watson, a federal judge had imposed a nearly 10-year prison sentence and ordered about $37 million in restitution, before his sentence was commuted. Similarly, British billionaire Joe Lewis, who was pardoned in November, had a judge order $5.4 million in fines and restitution in his criminal case, which was eliminated by the pardon. The SEC had previously reached a deal for Lewis to pay approximately $1.6 million, and later secured around $200,000 each from his two private pilots accused of using insider information.
This trend has led some experts, like Richard Painter, a corporate law professor and former White House ethics lawyer, to suggest that the SEC is reluctant to challenge presidential authority. Another case involves former Republican Congressman Stephen Buyer, who was pardoned by Trump after being convicted of insider trading and serving nearly two years in prison. Buyer was initially ordered to forfeit over $350,000 and pay a $10,000 fine for illegal gains related to the T-Mobile and Sprint merger. The SEC had charged Buyer with insider trading in 2021. Meanwhile, private litigation remains an option for investors seeking to recover funds from fraudsters.
Separately, Sam Bankman-Fried, co-founder of FTX, is also seeking a Trump pardon after his fraud conviction, and former Centerview banker Benjamin Taylor is getting an agreement to end his insider trading case. The SEC has cited "extraordinary cooperation" in some instances, such as with former Ozy executives Samir Rao and Suzee Han, to forgo monetary penalties, even though they were accused of engaging in schemes like impersonating a YouTube executive to defraud investors.
