Welcome to The BR Investigations and Enforcement Forum ("B.R.I.E.F."), Blank Rome’s monthly newsletter highlighting enforcement priorities and compliance risk issues impacting businesses domestically and abroad. B.R.I.E.F. delivers concise insights into regulatory and sanctions developments, internal investigations, enforcement trends, and evolving financial crime risks.
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LEAD STORIES
DOJ Trade Fraud Task Force Surpasses $1 Billion in Recoveries; Establishes Permanent Enforcement Section
On July 14, 2026, the U.S. Department of Justice (“DOJ”), together with the U.S. Department of Homeland Security (“DHS”) and U.S. Customs and Border Protection, announced that the Trade Fraud Task Force has surpassed $1 billion in combined civil and criminal recoveries, penalties, forfeitures, and publicly charged losses in less than one year. Assistant Attorney General Colin McDonald of DOJ’s National Fraud Enforcement Division stated that the milestone reflects “a fundamental shift in the federal government’s approach to customs and trade enforcement,” and that trade fraud will no longer be treated as “a mere surcharge or cost of doing business” but as “a serious economic crime.”
DOJ simultaneously announced two significant structural developments: (i) the creation of a new “Global Trade & Commerce Enforcement Section” (“GTCES”) as a permanent, dedicated litigating section within the National Fraud Enforcement Division, covering criminal customs, import, trade, sanctions, forced labor, and trade-based money laundering offenses; and (ii) the publication of a 27-page “Resource Guide to Trade Fraud Enforcement,” prepared jointly by DOJ and DHS, setting out enforcement priorities, statutory tools, and common trade fraud typologies for businesses and counsel. DOJ officials described the $1 billion milestone as “a baseline, not a finish line,” and cautioned that the port of entry is “only the starting point” for many investigations, with liability extending to customs brokers, downstream distributors, and other supply-chain participants who knowingly benefit from unlawfully imported merchandise.
Notable actions supporting the milestone include a $549 million civil settlement with Perfectus Aluminum, Inc.—described as the largest civil customs settlement in False Claims Act (“FCA”) history—for allegedly evading duties on aluminum extrusions disguised as pallets; and new criminal charges in the Northern District of Illinois against defendants accused of importing hundreds of gold jewelry shipments while falsely declaring their country of origin to avoid customs duties, including one matter alleging over $38 million in evaded duties, and another alleging over $13.6 million tied to Barkha Wholesale.
DOJ Resolves $7.3 Million FCA Customs Fraud Case Against Plastic Bag Importer
On July 15, 2026, DOJ announced a $7.3 million settlement with New York Packaging II LLC (doing business as Redi-Bag USA) and its chief executive officer, resolving allegations that the company violated the FCA by falsely declaring Hong Kong, rather than China, as the country of origin for imported polyethylene retail carrier bags in order to evade antidumping duties. According to DOJ, the defendants allegedly concealed the products’ Chinese origin by directing employees to cover “Made in China” markings, instructing the manufacturer to remove origin markings, and canceling orders scheduled for customs inspection. The settlement reflects the continued use of civil FCA enforcement, alongside criminal prosecution, as a central tool in DOJ’s trade fraud enforcement program.
Scoular Company Resolves $10.2 Million FCPA Case Tied to Cartel Proceeds
On July 17, 2026, DOJ announced that The Scoular Company, an agricultural supply chain company based in Omaha, Nebraska, agreed to pay over $10 million to resolve a DOJ investigation into a years-long scheme in which the company relied on bribery of Mexican customs officials to move shipments of corn and other products across the U.S.-Mexico border. Scoular entered into a three-year deferred prosecution agreement in connection with a criminal information filed in the Western District of Texas charging the company with one count of conspiracy to violate the Foreign Corrupt Practices Act’s (“FCPA”) anti-bribery provisions.
According to DOJ, between 2013 and 2019, Scoular employees authorized customs brokers to pay Mexican officials more than $400,000 in bribes so that shipments could cross the border despite failing inspections for prohibited material, avoiding more than $6.5 million in fees and costs. Assistant Attorney General A. Tysen Duva stated that “a portion of those bribes ultimately benefited people who helped operate a cartel, even though Scoular did not know about it,” and that the resolution “shows that bribery and corruption not only undermine fair play and competition for Americans, but also hurt our national security interests in stopping the scourge of dangerous cartel activity.” U.S. Attorney for the Western District of Texas, Justin R. Simmons added that “nothing crosses into or out of Mexico without the approval and payment to Mexican drug cartels,” and that companies engaged in cross-border trade “bear a significant amount of responsibility” to avoid benefiting cartels.
Under the deferred prosecution agreement (“DPA”), Scoular agreed to pay a $9,769,521 criminal penalty and $414,351 in forfeiture ($10,183,872 total)—reflecting a 25 percent reduction from the bottom of the applicable U.S. Sentencing Guidelines range in recognition of cooperation and remediation. Scoular did not receive credit under DOJ’s Corporate Enforcement and Voluntary Self-Disclosure Policy because it did not voluntarily and promptly disclose the conduct. DOJ did not require an independent compliance monitor, instead requiring Scoular to self-report on its compliance program during the DPA term. A customs broker involved in the scheme, Carlos Leopoldo Alvelais, previously pleaded guilty to conspiracy to violate the FCPA. This resolution illustrates a recurring compliance risk: cross-border logistics and customs-clearance payments—even where structured as ordinary inspection or processing fees—can create significant FCPA exposure, particularly where customs brokers or other intermediaries serve as conduits for payments to foreign officials.
Treasury Sanctions Cartel-Linked, Fuel-Smuggling Network; FinCEN Issues New Alert
On June 30, 2026, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) and Financial Crimes Enforcement Network (“FinCEN”) announced coordinated actions targeting a fuel-smuggling network linked to Cartel de Jalisco Nueva Generación (“CJNG”). OFAC sanctioned two Mexican nationals and nine entities tied to the scheme, which involved cross-border smuggling, falsified customs documents, and shell companies used to evade Mexican taxes while generating tens of millions of dollars annually for the cartel. Secretary of the Treasury Scott Bessent stated that the action “highlights the extent to which Mexico’s cartels are expanding beyond traditional drug trafficking to generate revenue for their criminal organizations.”
Concurrently, FinCEN issued a supplemental alert providing financial institutions with updated typologies and red flags for identifying cartel-linked fuel-smuggling and tax-evasion schemes (commonly referred to in Mexico as “huachicol”), building on a prior FinCEN alert that had already prompted financial institutions to file more than 160 Suspicious Activity Reports detailing over $7 billion in suspicious activity in the preceding 12 months, primarily involving transactions between the United States and Mexico. This action underscores that sanctions and anti-money laundering (“AML”) enforcement targeting cartel-adjacent commercial activity—not just narcotics trafficking directly—remains a significant compliance priority for financial institutions and companies with cross-border operations near the U.S.-Mexico border, including in the energy and logistics sectors.
SEC Charges Former Director and Associates in Insider Trading Scheme Tied to Desktop Metal Acquisition
On July 17, 2026, the U.S. Securities and Exchange Commission (“SEC”) charged Ali El Siblani, a former senior executive and director of Desktop Metal, Inc., along with three of his friends—Jamal (“Jimmy”) Chammout, Ali Jawad, and Rabih Rakha, all of Michigan—in connection with alleged insider trading ahead of Desktop Metal’s August 2021 announcement that it would acquire The ExOne Company at a premium. According to the SEC’s complaint, filed in the Eastern District of Michigan, Desktop Metal had entrusted El Siblani with highly sensitive, nonpublic information about the proposed acquisition, including the premium the company planned to pay ExOne shareholders.
Rather than safeguarding that information as required under Desktop Metal’s internal policies, El Siblani breached his fiduciary duty by tipping his three friends before the deal was publicly announced; each of the tippees is alleged to have simultaneously begun building substantial positions in ExOne securities and continuing to buy stock up until the announcement. El Siblani, Jawad, and Rakha have agreed to settle the SEC’s charges. This action serves as a reminder that traditional tipper-tippee insider trading enforcement remains a durable enforcement priority even amid the broader recalibration of SEC enforcement volume.
Federal Court Deals Setback to Kalshi in SDNY While State-Federal Battle Over Prediction Markets Intensifies
On July 7, 2026, U.S. District Judge Analisa Torres of the Southern District of New York (“SDNY”) denied Kalshi’s motion for a preliminary injunction in KalshiEX LLC v. Williams, a decision widely reported on July 8, 2026, ruling that New York’s gambling laws are not preempted by the Commodity Exchange Act and that Kalshi had failed to show a likelihood of success on its argument that the United States Commodity Futures Trading Commission (“CFTC”)-registered status shields it from state gambling regulation. The ruling directly conflicts with an earlier Third Circuit decision holding that New Jersey’s gambling laws do not override CFTC authority over Kalshi’s event contracts, deepening a circuit split that market participants expect will eventually require Supreme Court resolution.
New York Attorney General Letitia James filed the SDNY ruling as supplemental authority in a separate, ongoing CFTC lawsuit against New York over the same jurisdictional question. On June 29, 2026, the Ingham County Circuit Court in Michigan—a state court—granted a 14-day temporary restraining order against Kalshi at the request of Michigan Attorney General Dana Nessel. The order made Michigan the third state, after Nevada and Massachusetts, to secure a court order restricting Kalshi’s operations. Other courts, including in Minnesota, have signaled skepticism toward the platforms’ preemption arguments. For companies operating in or adjacent to the prediction markets space, this fragmented and rapidly evolving landscape—spanning federal preemption doctrine, state gambling law, and CFTC enforcement policy—creates significant near-term regulatory uncertainty.
DOJ/SEC Announce Parallel Spoofing Enforcement Action
On June 25, 2026, DOJ announced the guilty plea of Mingran Wang, the founder and investment manager of a fund, in a spoofing case. The SEC simultaneously brought a parallel civil enforcement action against the same fund manager based on the same underlying conduct. The coordinated action reflects continued DOJ/SEC alignment on spoofing enforcement.
CFTC and SEC Bring Parallel Settled Actions Against Netrios LP Ltd. and Red Acre Ltd.
On June 29, 2026, the CFTC announced a settlement against two foreign firms, Netrios LP Ltd. and Red Acre Ltd., for facilitating illegal off-exchange leveraged or margined retail commodity transactions with U.S. customers who were not eligible contract participants. Netrios agreed to pay a $1.75 million civil penalty and Red Acre agreed to pay a $750,000 penalty (a combined $2.5 million), and both firms were ordered to cease and desist. The SEC separately announced settled charges against the same two firms—reflecting continued CFTC/SEC focus on market access, registration boundaries, and offshore intermediaries facilitating U.S. customer activity.
SEC Forms New Retail Fraud Working Group
On July 7, 2026, the SEC announced the formation of a new “Retail Fraud Working Group,” dedicating enforcement resources specifically to schemes targeting retail investors. The initiative signals that retail-investor protection remains a resourced priority even amid the broader recalibration of SEC enforcement priorities.
CFTC Charges North Carolina Commodity Pool Operator with Fraud
On July 7, 2026, the CFTC announced fraud charges against Trevor Vernon, a North Carolina commodity pool operator, and his company, continuing the agency’s enforcement focus on fraud affecting retail commodity pool participants.
KEY ENFORCEMENT TRENDS
Trade Fraud Enforcement Becomes a Permanent, Institutionalized DOJ Priority
The creation of DOJ’s permanent GTCES —combined with the $1 billion recovery milestone and the publication of a comprehensive enforcement resource guide—signals that trade and customs fraud enforcement has moved from a temporary task-force initiative to a permanent institutional priority. Companies across the supply chain, including customs brokers, downstream distributors, and commercial end-users—not just importers of record—should expect continued and expanding scrutiny. The breadth of DOJ's stated enforcement scope, covering criminal customs violations, import fraud, sanctions evasion, forced labor violations, and trade-based money laundering, makes this a risk for any company with significant import operations.
FCPA Enforcement Intersects with National Security and Organized Crime Concerns
The Scoular resolution illustrates that foreign bribery enforcement continues and increasingly intersects with national security and organized crime concerns. DOJ’s public statements explicitly framing the case in cartel-nexus terms—even where the company did not itself know that bribe payments would benefit cartel operatives—underscores that the compliance risk extends beyond traditional FCPA exposure. Cross-border logistics and customs-facilitation payments present a recurring compliance blind spot: intermediaries such as customs brokers may serve as conduits for payments that ultimately reach designated criminal organizations. Companies with high-volume cross-border trade operations, particularly at the U.S.-Mexico border, should review their third-party due diligence and intermediary payment controls.
Treasury and FinCEN Target Cartel Revenue Streams
OFAC and FinCEN are combining sanctions designations targeting cartel-linked commercial networks with detailed financial-typology guidance, indicating that financial institutions and companies with cross-border exposure near Mexico should expect continued AML and sanctions scrutiny of cartel revenue streams beyond narcotics trafficking, including fuel theft and smuggling. The resulting number of suspicious activity report (“SAR”) filings—totaling more than $7 billion in suspicious activity over twelve months—shows both the scale of the compliance challenge and the degree of regulatory focus. Financial institutions with correspondent banking, trade finance, or energy-sector exposure to U.S.-Mexico transactions should confirm that their monitoring programs address the specific typologies identified in FinCEN’s supplemental alert.
Insider Trading Enforcement Remains a Priority
The Desktop Metal insider trading action reinforces that traditional tipper-tippee enforcement remains a resourced, consistent SEC priority even amid broader recalibration of enforcement priorities. Compliance officers and in-house counsel overseeing information-barrier programs should not interpret the agency’s shift toward a “first principles” enforcement posture as a signal that classic insider trading cases are deprioritized. In fact, SEC, DOJ and CFTC (especially in the prediction markets space) have all made clear that insider trading is a top priority.
Prediction Markets Face Increasingly Fragmented Regulatory Landscape
The prediction markets industry faces an increasingly fragmented and adversarial regulatory environment. Conflicting judicial guidance—a Third Circuit ruling favoring CFTC preemption, a contrary SDNY ruling rejecting preemption under New York law, and multiple state-level orders—is accompanied by a deepening circuit split that may ultimately require Supreme Court resolution. The CFTC’s position that registered Designated Contract Markets are governed exclusively by the Commodity Exchange Act has not yet prevailed uniformly in federal courts. Companies, investors, and platforms operating in or adjacent to this space should monitor developments closely given the pace of new rulings and the prospect of additional state enforcement actions.
Cross-Agency SEC-CFTC Coordination Continues to Mature
A developing SEC-CFTC coordination is reflected in parallel enforcement actions against Netrios and Red Acre, the joint portfolio margining comment request, and the anticipated digital-asset regulatory-harmonization effort. Market participants operating across securities and derivatives markets should track these developments closely. The formation of the SEC’s Retail Fraud Working Group further confirms that retail-facing fraud remains a resourced priority for both agencies.
IN CASE YOU MISSED IT
Blank Rome Partners Recognized in Inaugural Lawdragon 500 Leading Global Investigations Lawyers Guide
Lawdragon published the inaugural edition of the Lawdragon 500 Leading Global Investigations Lawyers guide, “celebrating white-collar wonders, enforcement experts and investigative icons” and recognizing lawyers handling investigations by Congress, government agencies, and internal corporate inquiries, paired with standout white-collar defense practices. Blank Rome partner Shawn M. Wright, co-chair of the firm’s Litigation department, and based in Washington, D.C., was individually profiled in the guide’s introduction. Wright specializes in white-collar criminal defense with a focus on the FCPA, international anti-corruption laws, criminal antitrust, public corruption, congressional investigations, and FCA/government contracts matters.
Blank Rome also announced that 11 of its attorneys in total were recognized in the inaugural guide, organized by office: New York: Jennifer L. Achilles, Rither Alabre, Jerry D. Bernstein, Bradley L. Henry, Linda Imes, and David Spears. Philadelphia: Nicholas C. Harbist and Joseph G. Poluka. Washington, D.C.: William E. Lawler III, Jennifer A. Short, and Shawn M. Wright. The recognition reflects the depth and breadth of Blank Rome's white collar bench across the firm's New York, Washington, D.C., and Philadelphia offices and represents a significant, firm-wide distinction in the investigations and white-collar defense space.
Blank Rome’s White Collar Defense & Investigations Group Receives Pro Bono Practice Group of the Year Award
Blank Rome announced that its Pro Bono Practice Group of the Year Award was presented to the firm’s White Collar Defense & Investigations Group, recognizing the group’s pro bono contributions.
© 2026 Blank Rome LLP. All rights reserved. Please contact Blank Rome for permission to reprint. Notice: The purpose of this update is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.+