Each month, we publish a roundup of the most important SEC enforcement developments for busy in-house lawyers and compliance professionals. This month, we examine:
May was the first month of David Woodcock’s tenure as the new Director of the SEC Division of Enforcement. In remarks last month, Woodcock described his intention to return to “a targeted, principled, evidence-based” enforcement regime, and he endorsed a “quality over quantity” approach. He also signaled that the agency will adopt a more cooperative approach and will reward parties for cooperation and transparency.
On May 6, 2026, the Securities and Exchange Commission charged 21 individuals in connection with what the agency describes as a sprawling insider trading operation spanning roughly six years. The SEC alleged that two lawyers were at the center of the alleged scheme: Nicolo Nourafchan, an M&A associate who worked at multiple global law firms, and Robert Yadgarov, a solo practitioner. According to the SEC, the two defendants allegedly misappropriated material nonpublic information concerning more than a dozen pending corporate transactions from Nourafchan’s employers. Nourafchan allegedly accessed confidential deal files at his firms—including draft merger agreements, signing checklists, and board presentations—even when he was not staffed on the matters in question. He and Yadgarov then allegedly funneled that information through an elaborate network of 19 friends, relatives, and even a hair stylist, who traded on the tips and agreed to “kick back a portion of the trading profits.” The complaint alleges that the participants “generally established ‘long’ positions in companies that were targeted for acquisition” by purchasing shares and call options ahead of public announcements, collectively generating millions in illicit gains.
The SEC’s complaint, filed in the U.S. District Court for the District of Massachusetts, asserts claims under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 against all defendants, and additionally charges eight of them with violating Exchange Act Section 14(e) and Rule 14e-3 in connection with tender offer related trading. The agency seeks permanent injunctions, disgorgement of profits with prejudgment interest, and civil monetary penalties.
In parallel actions, the U.S. Attorney’s Office for the District of Massachusetts brought criminal charges against 30 defendants in two separate indictments.
On May 4, 2026, the SEC filed a consent motion for a final judgment to settle its claims against Elon Musk for allegedly failing to timely disclose his acquisition of Twitter shares in early 2022. The SEC accused Musk of violating Exchange Act Section 13(d) by missing the 10-day window to publicly report that he had purchased more than 5% of Twitter’s stock, allegedly saving $150 million as he continued “purchasing shares at artificially low prices.” As part of the settlement, a revocable trust held by Musk will pay a civil penalty of $1.5 million—the largest settlement in SEC history for this type of beneficial ownership reporting violation—and will be permanently enjoined from violations of Section 13(d) and Rule 13d-1, while Musk will be dismissed in his personal capacity. No party will pay any disgorgement, which the SEC sought in its action against Musk.
The D.C. federal judge overseeing the case, Judge Sparkle L. Sooknanan, has questioned whether the SEC could add the revocable trust as a party to facilitate a settlement, rather than obtain relief from Musk himself. The SEC argued that the trust is a suitable defendant “because it was the entity that funded, purchased, and held the shares of Twitter stock at issue in this case.” It further contended that “[e]njoining the Revocable Trust in its own name would also be in the public interest, as the proposed injunction binds the Revocable Trust, all ‘the Revocable Trust’s officers, agents, servants, employees, and attorneys’ and anyone else who acts in concert or participation with the Revocable Trust, including Musk as trustee.”
As of June 24, 2026, the Court has not ruled on the proposed consent judgment.
On May 22, 2026, the SEC brought a settled administrative proceeding against Foot Locker for separation agreements that discouraged whistleblowing by senior staff in violation of Exchange Act Rule 21F-17(a), which prohibits any person from taking any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation. While the provision at issue did not prevent former Foot Locker staff from participating in SEC investigations, it barred former employees from receiving whistleblowing related money in connection with any SEC investigation against the company—specifically stating that “by signing this Agreement and General Release, [the individuals] understand and agree that [they] are waiving the right to receive any award of monetary or other benefits or any other legal or equitable relief whatsoever resulting from any such charge or proceeding by [them] … even if it is sought on [their] behalf by an agency [or] governmental authority….”
Allegedly, 148 former staff have signed agreements that included this provision, suggesting a $1,000 fine per contract, totaling a civil penalty of $148,000, reflecting a significant decrease in civil penalty from many penalties imposed for similar violations in previous years, when Rule 21F-17(a) appeared to be a particular area of focus of Enforcement staff.
Before accepting Foot Locker’s offer, “the Commission considered steps undertaken by Foot Locker promptly after being approached by the Commission staff to comply with its … obligations [under whistleblower protection rules], as well as its responsiveness to and cooperation afforded [to] the Commission staff in its investigation.”
Foot Locker agreed to the fine and order “without admitting the findings herein.” This change from the standard “neither admit nor deny” language was made possible by the SEC’s rescission of its over 50-year policy that barred settling parties from denying the agency’s allegations against them. In explaining its decision to scrap this policy, the SEC contended that “the effect on the public interest from such denials may be minimal” and “the policy itself may have created an incorrect impression that the [C]ommission is trying to shield itself from criticism.” The Commission noted that “In the event of a breach of an existing no-deny provision, [it] will take no action to ask a district court to vacate a settlement (or to reopen an adjudicatory proceeding) in connection with the terms of the settlement agreement.” This change in policy leaves unaffected the SEC’s right to negotiate a party’s admission as part of a settlement.
On May 21, 2026, a Pennsylvania district court vacated its previous order granting the SEC’s motion for default judgment against two fund managers, Matthew Schrichte and Christopher Hill, for alleged fraud. The SEC initiated the action in 2016 against the fund managers, alleging they engaged in fraud by omitting material information in annual reports they sent to investors. Defendants had raised roughly $21 million from 75 investors in the fund, and the omitted information concerned interest-free loans the defendants had drawn from the fund based on the advice of accountants and counsel. The Commission alleged violations of Section 10(b) of the Exchange Act, Rule 10b-5, Section 17(a) of the Securities Act of 1933 (the “Securities Act”), and multiple provisions of the Investment Advisers Act.
The court found the alleged omissions immaterial as a matter of law, reasoning that, because the investors were already aware of cash flow difficulties related to the fund, the omissions would not have “significantly altered the ‘total mix’ of information” available to the investors. The court also concluded that the SEC failed to meet the heightened pleading standard for scienter, finding that Schrichte’s credible hearing testimony demonstrated that the loans, taken on professional advice, were taken with the intention to generate returns for investors, not enrich the defendants. Ultimately, the court held that the SEC had, “at most,” shown that Schrichte and Hill “may have violated the [f]und’s operating agreement, but not the securities laws.” The court therefore vacated the prior default judgment order and dismissed the complaint with prejudice.
On May 28, 2026, the SEC charged Nathan Fuller with fraud in connection with a crypto asset trading scheme. According to the complaint, Fuller solicited roughly 150 investors between late 2022 and mid-2024, collecting approximately $12.3 million by touting proprietary AI bots capable of executing rapid crypto trades. He allegedly enticed participants with projected gains of 40–50% in as few as 30 to 45 days and bolstered his credibility by falsely claiming that the capital was backstopped by a surety bond, FDIC coverage, a professional liability policy, and “a money-transmitter license issued by the Texas Department of Banking.” But Fuller held no such license, and none of the purported safeguards existed. The complaint alleges that Fuller deployed only “about 3% of the investment funds raised … to purchase crypto assets, and he did so without using any crypto bots.” He allegedly generated no profit. Instead, Fuller diverted at least $6.2 million to fund personal expenditures—including “an approximately $1 million house, gambling, trading cards, travel, a Jeep, and other personal expenses”—and recycled roughly $5.5 million in “Ponzi-like payments” to earlier participants. To keep the scheme afloat, Fuller allegedly manufactured fictitious account balances, invented sham entities, and circulated fabricated correspondence designed to reassure investors.
The complaint, filed in the Southern District of Texas, asserts claims under Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) of the Exchange Act, together with Rule 10b-5. The SEC alleges that no registration statement covering the joint-venture interests was ever filed with the Commission or any state authority. The agency is seeking injunctive relief, disgorgement, and monetary penalties.