Wednesday, November 11, 2009

Yorkville Possible Subject of SEC Investigation

Yorkville Advisors, LLC- which has operated a PIPE (Private Investment in Public Equity) fund since 2001 -may be in hot water with the Securities and Exchange Commission. Sources indicate that the SEC may have already or is about to launch a formal investigation of this fund and its managers. Our sources confirm the commission has been contacted by several concerned Yorkville investors, though SEC representatives have not made any comment regarding the inquiry.

Clients may have been prompted to go to the SEC by what some could consider questionable investments, in addition to the onerous fees collected by Yorkville (YA Global Investments). Yorkville deal documents and their audit show the following:

* Yorkville and its funds take fees on all sides of their transactions- including structuring.

* They take their management fee as well as a healthy portion of the profits from their funds and then write-off all their costs against these fees. In simple terms – it would appear they have no costs of their own.

* 'Double Dipping' - Investors being charged twice.

Sources close to the SEC allege that Mark A. Angelo and Matthew Beckman – key people at Yorkville's PIPE fund– may soon be hit with inquires. Yorkville also operates under the name YA Global Investments. It is a complex structure many theorize is utilized to circumvent taxes, among other reasons. It is possible that there may be some irregularities on a deal announced October 19, 2009 with Finnish drug developer Biotie Therapies Oyj (HEL: BTH1V)

What is wrong here? The deal is as follows:

Oct 23, 2009 (M2 EQUITYBITES via COMTEX) -- 23 October 2009 - Finnish drug developer Biotie Therapies Oyj (HEL: BTH1V) said today the fund YA Global Master SPV Ltd committed to subscribe and pay up to EUR20m for ordinary no-par Biotie shares in the next 36 months, under a stand-by equity distribution agreement. The deal aims to secure the financing of Biotie's working capital in the short and medium-term. YA Global is entitled to a one-time commitment fee of EUR200,000 in shares and has already received customary structuring and due diligence fees. At any time during the 36 months Biotie may request YA Global to purchase shares. The maximum portion of the commitment amount to be used at a time is EUR50,000 for the first tranche, EUR100,000 for the second tranche and EUR300,000 for the subsequent tranches. The pricing of the shares will be determined as 95% of the lowest daily volume-weighted average price of the five days after the date on which Biotie shall have sent YA Global a notice to buy shares, but will be at least 85% of the volume-weighted average price of Biotie shares on OMX Nordic Exchange in Helsinki on the last trading day preceding the notice.

Maple Energy could be another target of the eagle eyes at the SEC as some believe that Yorkville Advisors artificially inflated the funds value with the goal of tidying up its balance sheet so its PIPE fund looked stronger to attract new investors.

November 05 2005- Maple Energy secures $30m funding facility for new opportunities
Peru-based oil and gas group Maple Energy has secured a US$30 million financing facility with American investment group Yorkville Advisors, which manages YA Global Master SPV Ltd.

As is usual with Yorkville – which funds numerous small cap natural resources companies – the package has been structured as a standby equity distribution agreement (SEDA). This means that Yorkville has agreed to subscribe for up to US$30 million of Maple’s shares as and when the company needs the cash over the next 30 months. Maple will use the proceeds from the SEDA as a means of raising additional working capital, including for its Ethanol Project, and for general corporate purposes.

Rex Canon, Maple’s chief executive, said the facility gave Maple certainty and flexibility of funding. “The capital can be accessed quickly and at attractive pricing enabling Maple to respond to new opportunities and funding requirements as and when they appear,” he said.

In addition some industry experts are speculating that the SEC may be looking at cases of possible manipulation by Yorkville in SEDAs or Standby Equity Distribution Agreements.

Also at issue is- Richard Y. Roberts - his activities believed to include influence peddling, on behalf of Yorkville, behind closed doors. Roberts served as a Commissioner of the U.S. Securities and Exchange Commission (SEC) 1990-1995. In addition to his service at the SEC, from 2002 to 2004 Mr. Roberts served as a member of the District 10 Regional Consultative Committee of the National Association of Securities Dealers, Inc., and from 1999 to 2001, he served as a member of the Market Regulation Advisory Board of the NASD and from 1996 to 1998 he served as a member of the Legal Advisory Board of the NASD. Currently Mr. Roberts is a partner at Roberts, Raheb and Gradler, a regulatory and legislative consulting firm he co-founded in March 2006, where he provides legal, consulting and advisory services to clients on issues relating to financial institution regulation and legislation. He is closely linked to Yorkville.

Lastly, on the Yorkville table at the may be a question of special inside knowledge utilized in the following deals:
www.secform4.com/insider-trading/1271849.htm

9 comments:

  1. 2nd Grade Bike Rack


    http://2ndgradebikerack.blogspot.com/2009/12/shuffling-missoulas-sustainable-systems.html
    Friday, December 11, 2009

    Shuffling Missoula's Sustainable Systems

    At least two major lawsuits have been filed against a Missoula company who shuttered a long standing Montana oilseed plant in Culbertson, and has received over 1$ million in grants and loans from the State of Montana.

    Sustainable Systems, who was sold to Greenshift Corporation's (GERS.OB) GS Agrifuels in March of 2007 and was last heard from leasing out their shuttered Culbertson "facility" to Great Plains Oil and Exploration, was bought out in June of 2009 by [Greenshift's] Carbonics Capital (CICS.OB), much to the surprise of investors.

    A financial report filed in November 2009 by Paul Miller of Carbonics Capital shows a host of monies still owed to the State and at least one Montana business. Three notes payable to the Montana Department of Agriculture are identified totaling $124,000 on loans that were interest and payment deferred until February 2006, and subsequently deferred until March 2011. Carbonic's November 10-Q also shows three notes payable totalling over $390,000, with a fourth of $600,000, to Great Northern Development. The report highlights a summons and complaint served on Sustainable Systems by Sheridan Electric Cooperative for $67,000 and a $14,000 case before the Montana Department of Labor regarding unpaid employee vacation time at the Culbertson oilseed plant.

    A group of Sustainable System's investors filed a lawsuit in Montana District Court against the company in April naming Greenshift, Greenshift's CEO Kevin Kreisler, GS Agrifuels, Viridis Capital, and Sustainable System's founder Paul Miller as defendants.

    The group's lawsuit highlights losses in excess of $6 million by the plaintiffs. Perhaps the most recognizable name on the plaintiffs list is David Max, who was hailed as bringing biodiesel to Missoula and his attempts to bring back Air America talk radio with Al Franken. Although the latest information regarding this lawsuit has not been obtained, the November 10-Q filed statements from Carbonics state that three of the former shareholders have entered into settlement agreements to release all obligations.

    In September, Travelers Insurance filed a Federal lawsuit in Helena against Sustainable Systems charging breach of contract regarding a General Indemnity Agreement for over $250,000. Travelers paid the Montana Department of Agriculture $113,000 in May for distribution to farmers who were shorted when the company failed earlier this year. The Montana Department of Agriculture had to step in, after taking Sustainable's commodities license, to payback all farmers proper. Travelers also paid $130,000 to North Dakota for the same purpose, as Sustainable was required to turn over their ND license as well.

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  2. Although there is still very much to play out in this saga, the most aggravating aspect to me is the lack of government accountability and transparency. Wouldn't it be nice in the private sector if we could just drop items off of our performance report we didn't want anyone to notice?

    Massive political points can be garnered, using the media and press releases paid for my us, all the while pumping money into entities that may look dodgy to begin with. (Seriously, Keven Kreisler?)

    As late as 2008 this company was given a $375,000 Montana Department of Commerce RCT grant (#09-57) for algae research of all things. I attempted to obtain the application for this grant , just the application, and was denied. Imagine if I had tried to obtain the results of their photobioreactor CO2 sequestration pursuits.

    A comprehensive look at Sustainable Systems Culbertson oilseed plant venture and most of their known loans and grants, as well as a background of Greenshift, can be found in one of my previous posts here.

    Although Sustainable Systems may come through with Sweetness & Light on their existing loans and lawsuits, which would be a great thing for the people of Montana, a quick analysis of the shuffling companies that surround Keven Kreisler (including Greenshift, Viridis Capital, and YA Global Investments just to name a few) doesn't look all that good. The latest of news from just yesterday, Greenshift and YA Global have entered into a restructuring agreement. In my opinion it's just another questionable action in a long line of shuffling Sustainable Systems.

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  3. Another Hedge Fund Discloses PIPEs Probe
    Matthew Goldstein

    Should have been caught years ago.

    12/01/05 - 07:12 AM EST
    Cornell Capital Partners, a hedge fund that specializes in finance for ailing penny-stock companies, is being investigated by securities regulators for its trading activity in shares of nine companies.

    The Jersey City, N.J.-based hedge fund, which has more than $200 million in assets, disclosed the investigation in its most recent audited financial statement, a copy of which was obtained by TheStreet.com. Copies of the hedge fund's 2004 financial statement were mailed to Cornell investors in late August.

    The Securities and Exchange Commission investigation of Cornell stems from a broad-based regulatory inquiry into allegations of manipulative trading in the $17 billion-a-year market for PIPEs, the Wall Street acronym for private investment in public equity.


    PIPEs are a popular financing route for tiny, cash-strapped companies, which raise money by selling discounted shares to investors in a privately negotiated transaction. But the ability of a big trader to purchase thousands of shares of discounted stock also makes the PIPEs market ripe for abuse by unethical short-sellers -- traders who bet a stock will decline in price.

    Mark Angelo, the founder and president of Cornell, says regulators haven't told him they've found any wrongdoing involving the hedge fund. Angelo says Cornell is probably being investigated because it's a major PIPEs player and is involved in so many deals each year.

    "I think they're looking at all people in the PIPEs space,"' says Angelo. "Most of our investors view it as non-issue."
    Since its inception in 2001, Cornell has provided financing to more than 120 speculative, mostly money-losing companies, many of which trade shares on the over-the-counter Bulletin Board. In the third quarter of this year, Cornell was the ninth most active PIPEs investor, sinking $38 million into 10 different deals, according to PlacementTracker, a private placement research firm.



    The investigation of Cornell began in July 2004 with the SEC requesting information about its "funding of and trading" in shares of Bio-One, a defunct nutritional supplement company that had operated out of Winter Springs, Fla. Cornell had been the primary investor in two PIPEs deals that raised $25 million for Bio-One and enabled the company to make two small acquisitions.

    By this summer, the SEC investigation had expanded to include eight other companies Cornell had invested in. The audit doesn't disclose the names of the other companies. However, the 13-page report notes that Cornell received a subpoena from the SEC on July 18, 2005, seeking documents "related to the funding of and trading in the common stock of Bio-One and eight other portfolio companies in which the partnership is invested."

    Two months ago, the SEC reached a settlement with Bio-One over allegations that its financial statements failed to disclose an August 2004 default on a $15 million promissory note to a company it had acquired earlier that year.

    Angelo says the SEC began investigating Cornell because it had provided financing to Bio-One. But he says Bio-One company kept the default on the promissory note hidden from Cornell, too.

    "We have no idea why we were named in this, other than that we are an investor," says Angelo. "I have no idea why we were named."
    Angelo declined to discuss the eight other companies the SEC has asked for information about. An SEC spokesman declined to comment.

    One of the allegations regulators are looking at in the PIPEs probe is that some hedge funds routinely shorted a stock once they learned a PIPEs deal was in the works. Regulators contend that such premature short trades are illegal, because knowledge of such deals is confidential, nonpublic information.

    It's not uncommon for stocks of companies doing PIPEs deals to drop in price after it becomes public that the company has sold thousands of shares at a discount.

    ReplyDelete
  4. Dave Patch's Blog
    If you want to beat the SEC in an enforcement case, just go out and buy one of them.
    Jun
    8 Written by: dpatch
    6/8/2006 11:03 AM

    Cornell Capital has always been on the slippery side of PIPE financing. Read the message boards and when Cornell Capital comes up there is rarely a positive word to be uttered. Apparently Cornell always seems to come out smelling like roses in their PIPE deals and is best known for the death spiral financing deals that have destroyed companies over the years.



    As written previously by Matt Goldstein on TheStreet.com, (http://www.thestreet.com/_tscs/markets/matthewgoldstein/10255157.html & http://www.thestreet.com/_tscs/stocks/brokerages/10284937.html) Cornell has not been too far from the sights of the Securities and Exchange Commission in their investigations into PIPE dealings. Rumors have come and gone that Cornell was in trouble with the SEC and that some were looking to jump ship before the big wave struck them down.



    So maybe the best way Cornell sees to avoiding any SEC enforcement action is to go out and pay big money to an SEC attorney out of the division of enforcement.



    SEC Official Joins PIPEs Firm



    By Chidem Kurdas, New York Bureau Chief | Thursday, June 08, 2006





    NEW YORK (HedgeWorld.com)—Yorkville Advisors LLC, the manager of Cornell Capital and a large player in private investments in the public equity of small-cap companies, has hired Eric Hansen as senior legal counsel. Mr. Hansen worked for the Securities and Exchange Commission for 17 years, recently holding the titles of senior counsel and branch chief in the Division of Enforcement. During his SEC tenure he helped investigate instances of hedge fund fraud such as the well-known Lipper convertibles case Previous HedgeWorld Story and complex accounting problems at mortgage companies Fannie Mae and Freddie Mac.



    Yorkville has gathered an exceptionally strong legal department that also includes former SEC attorney David Fine. Mr. Hansen will report to managing partner Mark Angelo.



    Mr. Angelo said, in a statement, that fund pricing and valuation is one of the most critical challenges facing the industry and having Mr. Hansen's insight on this complex issue is invaluable.



    The PIPE sector has been troubled by certain managers' manipulation of the market—several settled allegations that they took advantage of inside information to short-sell companies that were negotiating deals. The SEC has conducted a wide-reaching investigation into this type of abuse.



    Jersey City, N.J.-headquartered Yorkville specializes in structured finance and is one of the most active investors in the field, with more than $1 billion in committed equity capital in over 100 U.S. deals.

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  5. That's funny... I'm an investor and they don't have 1 Billion dollars!

    Where did you get that information?

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  6. Yorkville Advisors, LLC is probably in hot water with the Securities and Exchange Commission these days. The SEC has already or is about to launch a formal investigation of this fund, complete with massive subpoenas. This has long been in the works and the SEC has been slow in acting and the mainstream media have ignored multiple warning signs that Yorkville operates just shy of what may be legal.

    What prompted some investors to go to the SEC – apart from several questionable investments – are fees. As we were told – and is evidenced by a recent public accountant report – is as follows:
    • Yorkville and its funds take fees on all transactions. That is fine.
    • They take their management fee as well as a health portion of the profits and this write-off all their costs against these fees. In simple terms – they have no costs of their own.
    • But basically they charge investors twice.

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  7. Mark A. Angelo and Matthew Beckman – key people at Yorkville – may be hit soon with inquires we learned this week from sources close to the SEC office in New York City.
    Yorkville also operates under the name YA Global Investments. It is a complex structure for tax avoidance, among other reasons.

    The respected accounting firm McGlardley & Pullen in a December 31, 2008 accounting report defined the company as follows:

    The Limited Partnership Agreement provides for a reallocation to the General Partner of 20% of the net profit allocated to each Limited Partner. If there is a net loss for the year attributable to a Partner, the Loss is carried forward indefinitely. No reallocation is made from the capital account of such Limited Partner until prior losses for that Partner are fully recouped. The General Partner may, in its sole discretion, elect to waive or modify the performance allocation for Limited Partners that are partners, employees, of affiliates of the General Partner or its affiliates. For the year ended December 31, 2008, the incentive allocation amounted to $1,903, 955.

    Confusing? Yes.

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  8. So what is going on?

    We believe that several issues are at stake:

    • The SEC is reportedly looking at some irregularities on a deal announced October 19, 2009 with Finnish drug developer Biotie Therapies Oyj (HEL: BTH1V)

    • Peru-based oil and gas group Maple Energy is another target of the eagle eyes at the SEC and we hear that here the possibility exists of Yorkville artificially inflating values towards making balance sheets look good for investors.

    • Apart from that the SEC may be looking at some possible manipulations by Yorkville of SEDAs or Standby Equity Distribution Agreements.

    • Also an issue is if Richard Y. Roberts is doing some “undue” influence peddling on behalf of Yorkville.

    Who is he?

    From 1990-1995 Mr. Roberts served as a Commissioner of the U.S. Securities and Exchange Commission (SEC). In addition to his service at the SEC, from 2002 to 2004 Mr. Roberts served as a member of the District 10 Regional Consultative Committee of the National Association of Securities Dealers, Inc., and from 1999 to 2001, he served as a member of the Market Regulation Advisory Board of the NASD and from 1996 to 1998 he served as a member of the Legal Advisory Board of the NASD. Currently Mr. Roberts is a partner at Roberts, Raheb and Gradler, a regulatory and legislative consulting firm he co-founded in March 2006, where he provides legal, consulting and advisory services to clients on issues relating to financial institution regulation and legislation. He is closely linked to Yorkville.

    • And finally, on the table at the SEC is where special inside knowledge was used on some 100 and more insider deals conducted by our folks from Yorkville. See them at http://www.secform4.com/insider-trading/1271849.htm

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  9. One will not be surprised to read these days news about how someone has used taxpayers’ money to continue making profits. With the recent disclosure that Yorkville Advisors has been part of the Term Asset-Backed Securities Loan Facility Program since last year it is becoming obvious that these people will be high on the radar screen of the SEC and the prosecution.

    Yorkville received some $233 million of that financing, using it to buy $253 million in securities last year for its flagship, YA Global Investments. The TALF deals were made via a subsidiary of the fund, New Earthshell Corp., and placed with a special-purpose entity called YA TALF Holdings, Forbes reports. The hedge fund still owes the Fed $162 million.

    Yorkville said it “made the application to participate in the TALF program which included disclosure of participating funds, the interposed entities as well as providing all requested follow-up information. Yorkville and the participating entities were approved by the Federal Reserve Bank of NY as TALF-eligible participants.”

    Read more on http://www.finalternatives.com/node/13981

    ReplyDelete