SEC Charges Aryeh Goldstein, Adar Bays, LLC, and Adar Alef, LLC for Failure to Register; Defendants Agree to Pay $1.25 Million to Settle

On January 23, 2024, the Securities and Exchange Commission (the “SEC”) announced the filing of an enforcement action against Aryeh Goldstein, a resident of Florida and New York, and two entities he controls, Adar Bays, LLC, located in Florida, and Adar Alef, LLC, doing business in Florida and New York, for failing to register as securities dealers in connection with their convertible note financing business that involved obtaining and selling securities of over 100 microcap companies.

The parties have agreed to settle the charges. Among other relief, Goldstein and his entities agreed to pay $1.25 million in monetary relief and to surrender or cancel all remaining shares of public companies allegedly obtained from their unregistered dealer activity.

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, alleges that, from at least 2014 through October 2021, the defendants operated as unregistered securities dealers in connection with their convertible note financing of 134 different microcap companies. According to the complaint, the defendants’ business involved loaning money to these microcap companies in exchange for promissory notes that, under certain circumstances, allowed the defendants to convert the debt into shares of the companies.

The complaint alleges that the convertible note financing business allowed the defendants to obtain a large number of shares of these microcap companies, which the defendants then sold into the securities marketplace under circumstances that required the defendants to register with the SEC as securities dealers. As further alleged in the complaint, through this business, and without registering as dealers or being associated with a registered dealer, the defendants generated significant profits through the regular sale of billions of converted shares to investors.

According to the complaint, the defendants extended cash loans to penny stock companies pursuant to Stock Purchase Agreements (“SPAs”) that typically provided the issuer with a six-month window to pay off the loan in cash. Although it was theoretically possible that issuers could pay the defendants back within the first six months, the SPAs provided for a substantial premium for cash repayment—typically 140% of the amount due plus other charges and interest. After the initial six-month cash repayment period, the issuers typically lost the right to repay in cash without the defendants’ consent.

After the six-month cash repayment period, the defendants generally had the right to convert the amount due under the SPA into newly issued shares of the issuer’s stock. The stock the defendants received was significantly discounted, generally 30% to 50% off the lowest trading price in the days preceding the conversion. The defendants sold the discounted stock to investors on the public securities markets often at a profit, sometimes up to five times the conversion price of the discounted stock.

Without admitting or denying the allegations of the complaint, Goldstein, Adar Bays, and Adar Alef consented to the entry of separate final judgments: (i) enjoining them from violating Section 15(a)(1) of the Securities Exchange Act of 1934; (ii) ordering payment of disgorgement of $1,044,252 plus prejudgment interest of $100,748 on a joint and several basis and, as to Goldstein, a civil penalty of $105,000; (iii) ordering them to surrender for cancellation all remaining shares they obtained through conversion of notes, as well as conversion rights under any remaining convertible notes; and (iv) imposing five-year penny stock bars against each defendant. The settlement is subject to court approval.

The action is just the latest of a string of actions by the SEC against Toxic Financiers acting as unregistered dealers since 2017:

• 1/23/2024 – SEC v. Aryeh Goldstein, Adar Bays, LLC, and Adar Alef, LLC (Complaint) 
• 9/28/2023 – SEC v. Adam Long, L2 Capital, LLC., and Oasis Capital, LLC (Complaint) 
• 6/16/2023 – SEC v. BHP Capital NY, Inc. and Bryan Pantofel (Complaint) 
• 6/01/2023 – SEC v. Auctus Fund Management, LLC, Louis Posner and Alfred Sollami, and Auctus Fund LLC (Complaint) 
• 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) 
• 9/24/2021 – SEC v. Carebourn Capital, L.P. and Chip Alvin Rice (Complaint) 
• 8/13/2021 – SEC v. GPL Ventures, Alexander J. Dillon, Cosmin I. Panait, GPL Management LLC, et. al., (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) 
• 3/24/2020 – SEC v. Justin W. Keener D/B/A JMJ Financial (Complaint) 
• 2/26/2020 – SEC v. John D Fierro and JDF Capital, Inc. (Complaint) 
• 3/22/2019 – SEC v. River North Equity LLC and Edwrd M Liceaga, et. al. (Complaint) 
• 11/17/2017 – SEC v. Ibrahim Almagarby and Microcap Equity Group LLC (Complaint) 

To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto 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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