Financial Crime Weekly: SEC Charges Tai Mo Shan With Misleading Terra USD Investors, Rocket Companies Sued Over Alleged Kickback Scheme

Consumer Financial Protection Bureau Sues Rocket Homes, Alleges Kickback Scheme

The Consumer Financial Protection Bureau sued Rocket Homes, a division of Rocket Companies, Inc. RKT, on Monday in what it said is an action stop the company from providing incentives to real estate brokers and agents to steer homebuyers to Rocket Mortgage, LLC for loans.

The CFPB alleged that Rocket Homes pressured real estate brokers and agents not to share information with clients concerning products which were not offered by Rocket Mortgage, including the availability of down payment assistance programs. 

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"Rocket engaged in a kickback scheme that discouraged homebuyers from comparison shopping and getting the best deal," said CFPB Director Rohit Chopra. 

"At a time when homeownership feels out of reach for so many, companies should not illegally block competition in ways that drive up the cost of housing," Chopra added.

The CFPB also sued Jason Mitchell and his real estate brokerage firm, JMG Holding Partners LLC, which does business as The Jason Mitchell Group, for allegedly participating in the kickback scheme. 

Rocket Homes denied the allegations in a statement late Monday, calling the lawsuit "flimsy" and part of a "political agenda.”

"The CFPB's allegations are false and a distortion of reality. The accusation that homebuyers paid more when working with Rocket Homes is a lie. Additionally, the notion that Rocket Homes penalized real estate brokers or agents for helping clients compare rates and choose the best lender for them is also a lie," the statement said, per Yahoo Finance. 

SEC Charges Tai Mo Shan With Misleading Investors About Terra USD

The Securities and Exchange Commission last Friday charged Tai Mo Shan Ltd. with misleading investors about the stability of Terra USD, when UST dropped from its purportedly fixed exchange rate of 1 UST to $1, known as a peg. 

The SEC also charged Tai Mo Shan with offering and selling securities in unregistered transactions by acting as a statutory underwriter with respect to certain of its offers and sales of LUNA LUNA/USD, a crypto asset issued by Terraform and offered and sold as a security. 

"This case reminds us that, too many times in the crypto markets, we've seen significant investor losses due to fraud," said SEC Chair Gary Gensler. 

"Here, the impact reverberated throughout the crypto markets, eventually costing the savings of countless investors. Regardless of the labels, crypto market participants should comply with the securities laws where applicable and not deceive the public. Otherwise, investors get hurt," Gensler added. 

Tai Mo Shan agreed to pay $73,452,756 in disgorgement, $12,916,153 in prejudgment interest, and a $36,726,378 civil penalty as part of the settlement. Tai Mo Shan also agreed to cease and desist from violations of the registration and fraud provisions it violated, without admitting or denying the SEC's findings.

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