SEC Obtains Final Judgment against Jeffrey Auerbach for Role in Bribery Scheme
On February 5, 2024, the Securities and Exchange Commission (the “Commission”) obtained a final judgment against defendant Jeffrey Auerbach, whom the SEC previously charged for his role in a fraudulent scheme to bribe a stockbroker to buy a company’s stock in his customers’ accounts without the customers’ knowledge.
The SEC’s complaint was filed on October 4, 2019, in the federal district court in the Eastern District of New York.
According to the Complaint, from approximately July 2014 through October 2015 (the “Relevant Period”), Auerbach, a former registered representative (i.e., a stockbroker) and purported investor-relations professional; Jarid Mitchell, a purported investor-relations professional recently imprisoned for a previous securities fraud conviction; Richard Brown, a then-registered stockbroker; and Gino M. Pereira, the then-CEO of Nxt-ID, Inc. (“NXTD”), a “security technology” company and public issuer with common stock traded on the Nasdaq Capital Market, defrauded investors by knowingly or recklessly engaging in a stockbroker bribery scheme. NXTD now trades as LogicMark, Inc. (LGMK).
The Complaint alleged that during the Relevant Period, Pereira caused NXTD to enter into purported “consulting agreements” with investor-relations companies owned by Auerbach and Mitchell to provide a pretense through which he could funnel bribes to Brown. That is, Pereira wired monies out of NXTD’s bank account to the entities’ bank accounts under the guise that the wires were payments for legitimate investor-relations services, when Pereira, Mitchell, and Auerbach knew that Mitchell and Auerbach would use at least some portion of the funds to bribe Brown to buy NXTD stock in his customers’ accounts.
In sum, Pereira sent Mitchell and Auerbach at least $136,000, and Mitchell and Auerbach paid Brown at least $20,000 in cash bribes, in exchange for Brown recommending and buying more than $750,000 worth of NXTD common stock in his customers’ accounts, without disclosing the fact or amount of the bribes he received to those customers.
From approximately September 1993 to November 2013, Auerbach was a registered representative associated with a series of broker-dealers registered with the Commission. On July 15, 2015, Auerbach consented to findings by the Financial Industry Regulatory Authority (“FINRA”) that he had violated FINRA Rule 2010 by engaging in undisclosed private securities transactions while working as a registered representative in 2008 and 2009. Auerbach was fined $15,000 and suspended from associating with any FINRA member firm for 90 days. While working as a registered representative, Auerbach was the subject of multiple customer complaints alleging, among other things, unsuitability and breach of fiduciary duty.
In 2016, the Commission sued Mitchell and Brown, and a grand jury in the Eastern District of New York indicted Mitchell and Brown, for their roles in another fraudulent broker bribery scheme relating to the securities of ForceField Energy Inc. Mitchell pleaded guilty in the criminal action and was sentenced to 36 months in prison on August 2, 2017. Mitchell also consented to a final judgment against him in the Commission’s action. See United States v. Mitchell et al., 16 Cr. 234 (E.D.N.Y.) (Docket Entry # 94) and SEC v. St. Julien et al., 16-cv-2193 (E.D.N.Y.) (Docket Entry # 46).
Without admitting or denying the SEC’s allegations, Auerbach consented to the entry of a final judgment permanently enjoining him from violations of the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The final judgment orders disgorgement of $3,000.00, representing Auerbach’s ill-gotten gains as a result of the conduct alleged in the SEC’s complaint, together with prejudgment interest of $5,846, but it deems the obligation to pay these amounts satisfied by the entry of the restitution order against Auerbach in the parallel criminal action filed against Auerbach based on the same conduct alleged in the SEC’s complaint, United States v. Auerbach, 19 Cr. 607 (E.D.N.Y.). The final judgment does not impose civil penalties in light of Auerbach’s conviction and sentence in the criminal proceeding.
Auerbach pleaded guilty in the criminal case on January 10, 2020, and was sentenced to 3 months imprisonment followed by 3 years supervised release and ordered to pay $111,782.48 in restitution. Auerbach’s restitution in the criminal case was satisfied on November 16, 2022.
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.
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