GHS Investments LLC and its owners, Mark Grober, Sarfraz Hajee and Matthew Schissler, settle with SEC – agree to pay disgorgement and fines and surrender remaining notes, warrants and stock.

On August 19, 2024, GHS Investments, LLC (“GHS”) and its owners, Mark Grober, Sarfraz Hajee and Matthew Schissler, came to a settlement with the Securities and Exchange Commission (the “SEC“), agreeing to pay disgorgement and fines and surrender remaining notes, warrants and stock. 

According to the SEC, from 2017 through 2022 (the “relevant period”), GHS operated as an unregistered securities dealer and sold billions of shares of stock from at least 23 issuers into the public market and generated millions of dollars in profits for its own account. During the relevant period, GHS engaged in the regular business of acquiring convertible, variable rate notes from penny stock securities issuers, converting the notes into stock at a substantial discount from the prevailing market price, and selling the resulting newly issued shares of the issuers’ stock into the public market to obtain profits from the difference between the discounted share price it received and the prevailing market price of the stock.

Because GHS was not registered with the SEC as a securities dealer, GHS avoided certain regulatory obligations that govern the conduct of dealers in the marketplace, including the requirements to follow financial responsibility rules and maintain certain books and records. Grober, Hajee, and Schissler managed the day-to-day operations of GHS and shared the decision-making authority over GHS’s acquisition and disposition of convertible notes during the relevant period. As a result, GHS violated and Grober, Hajee, and Schissler caused GHS’s violations of Section 15(a)(1) of the Exchange Act.

GHS will pay $2,030,806 in disgorgement, prejudgment interest of $221,458.43, and a civil penalty of $173,080.62.  Each of Grober, Hajee and Schissler will also pay a $10,000 penalty and consent to cease and desist from committing or causing any violations and any future violations of Section 15(a)(1) of the Exchange Act.

GHS  will also have to (i) surrender for cancellation all rights to all shares of common stock that it received in connection with convertible, variable rate notes; (ii) surrender all conversion rights under all remaining convertible, variable rate notes; and (iii) surrender for cancellation and retirement all remaining warrants that it received in connection with convertible, variable rate notes.

The SEC didn’t include a list of issuers in which GHS still holds notes, warrants and shares, but a search for “GHS Investments” on Edgar shows that GHS has done toxic financings with dozens of issuers through the years.

The settlement with GHS is just the latest win for the SEC against toxic lenders operating as unregistered securities dealers who leave a trail of destruction and investor losses in their paths.

• In the SEC vs JOHN D. FIERRO, et al., Civil Action No. 20-02104 (GC) (JBD), the court ordered the defendants to pay disgorgement of $4,053,148, prejudgment interest of $1,326,440, and a civil penalty of $500,000, for a total judgment of $5,879,588. The court also ordered the defendants to surrender certain stock and conversion rights under existing convertible securities for cancellation. (read more here)
• In the SEC vs GPL VENTURES LLC, et al., 21-cv-6814 (AKH), the court ordered the defendants to pay $29,681,569 in disgorgement and $2,489,799 in prejudgment interest, total civil penalties of $7,000,000 and directed the defendants to surrender for cancelation all remaining unconverted convertible notes still held, with a face value of approximately $11 million. (read more here)
• In the SEC vs BHP CAPITAL NY, INC. and BRYAN PANTOFEL, Case No. 1:23cv22233-GAYLES-TORRES, the court ordered the defendants to pay a total of $2,553,073.44 in disgorgement, prejudgment interest, and penalties and directed the defendants to surrender for cancellation and retirement all remaining warrants, shares, and conversion rights on convertible notes still held by the defendants.
• In the SEC vs. IBRAHIM ALMAGARBY and MICROCAP EQUITY GROUP, LLC, Case No. 17-62255-CIV-COOKE/HUNT, the court ordered the defendants to disgorge $885,126.30 in total net profits and $182,150.69 in prejudgment interest, for a total of $1,067,276.99. The court also ordered the defendants to surrender their remaining shares for cancellation. (read more here)
• In the SEC vs JUSTIN W. KEENER, d/b/a JMJ Financial, Case No. 20-cv-21254-BLOOM/Louis, the court ordered the defendant to pay disgorgement of $7,786,639, prejudgment interest of $1,425,266, and a civil penalty of $1,030,000, for a total judgment of $10,241,905.  The court also ordered the defendant to surrender for cancellation all stock and conversion rights under existing convertible securities. (read more here)

The courts also denied Carebourn Capital, L.P.’s Motion for Judgement on the Pleadings to dismiss the SEC case filed against that penny stock financier in the Securities and Exchange Commission v. Carebourn Capital, L.P., et al., Civil Action No. 21-cv-02114 (D. Minnesota filed September 24, 2021). That case is in the final stages, with the two sides hacking out remedies for a settlement.  The final judgment in the SEC’s favor could come any week now. (read more here).

The SEC also has many other cases against toxic lenders as unregistered securities dealers that are still in progress, including the following:

• 5/7/2024 – SEC v. Curt Kramer, Power Up Lending Ltd., Geneva Roth Remark Holdings, Inc., and 1800 Diagonal Lending, LLC (formerly known as Sixth Street Lending LLC) (Complaint)
• 4/29/2024 – SEC v. Tri-Bridge Ventures, LLC and John Francis Forsythe, III (Complaint) (read more here)
• 1/23/2024 – SEC v. Aryeh Goldstein, Adar Bays, LLC, and Adar Alef, LLC (Complaint) (read more here)
• 9/28/2023 – SEC v. Adam Long, L2 Capital, LLC., and Oasis Capital, LLC (Complaint) (read more here)
• 6/01/2023 – SEC v. Auctus Fund Management, LLC, Louis Posner and Alfred Sollami, and Auctus Fund LLC (Complaint) (read more here)
• 9/22/2022 – SEC v. Morningview Financial, LLC and Miles M Riccio (Complaint) 
• 8/02/2022 – SEC v. Crownbridge Partners, LLC, Soheil Adhoot, and Sepas Ahdoot (Complaint) 
• 6/07/2022 – SEC v. LG Funding, LLC and Joseph Lerman (Complaint)
• 9/03/2020 – SEC v. John M. Fife, Chicago Venture Partners, L.P., Iliad Research and Trading, L.P., St. George Investments LLC, Tonaquint, Inc., and Typenex Co-Investment, LLC (Complaint) 

To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Park Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected]. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
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