Philip Verges Indicted for Manipulating Five Publicly Traded Companies and Defrauding Investors of Over $200M

On December 10, 2024, a federal grand jury in Dallas, Texas, returned an indictment charging a Texas businessman for his role in a yearslong scheme involving at least five publicly traded companies.

According to court documents, Philip Verges, 59, of Dallas, controlled five publicly traded companies, which he used to engage in an investment fraud scheme from approximately January 2017 through August 2022.

• Altemet Systems Inc. (“AL YI”) was a Wyoming corporation, with its principal place of business in Addison, Texas, which traded under the symbol ALYI
• Priority Aviation, Inc. (“PJET”) was a Wyoming corporation, with its principal place of business in Dallas, Texas, which traded under the symbol PJET
• Puration, Inc. (“PURA”) was a Wyoming corporation, with its principal place of business in Farmersville, Texas, which traded under the symbol PURA
• Vaycaychella, Inc. (“VAYK”) was a Wyoming corporation, with its principal place of business in Las Vegas, Nevada, which traded under the symbol VAYK
• Waterpure International, Inc. (“WPUR”) was a Florida corporation, with its principal place of business in Dallas, Texas, which traded under the symbol WPUR

As part of the alleged scheme, Verges concealed his involvement in these five companies from the investing public by appointing trusted friends to serve as nominees. Verges then allegedly entered into sham consulting agreements with the companies that allowed the companies to execute convertible notes, which could be converted to shares at a steep discount from their fair market value. 

Verges allegedly artificially inflated the price and trading volume of shares by, among other things, issuing false public press releases and financial statements that omitted Verges’ involvement in the issuers. As further alleged, Verges then sold his convertible notes to intermediaries who converted the notes into shares at below-market prices, sold the shares into the market for a profit, and shared the proceeds from the sales with Verges. In total, the alleged scheme resulted in approximately $211 million in losses to the public.

Verges is charged with one count of securities fraud and two counts of money laundering. If convicted, he faces a maximum penalty of 20 years in prison on the securities fraud count and 10 years in prison on each money laundering count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The SEC Action

Verges was previously charged by the Securities and Exchange Commission (the “SEC”) on September 26, 2023.  In that case, Verges was charged along with James D. Tilton, Jr., Robert F. Malin, Linda Malin, Esq., and Blue Citi, LLC  for their roles in an alleged scheme to pump and dump more than $112 million of stock in the same five penny stock companies: Alternet Systems, Inc. (“ALYI”), Priority Aviation, Inc. (“PJET”), Puration, Inc. (“PURA”), Vaycaychella, Inc. (“VAYK”), and WaterPure International, Inc. (“WPUR”) (collectively, the “PSCs”).

The SEC’s complaint alleges that, between at least June 2017 and June 2022, Verges orchestrated the scheme so that Blue Citi, JDT Trading LLC, and other accomplices that Verges nominated received at least 5.2 billion shares of stock in the PSCs, with an aggregate conversion price of approximately $15 million. These shares had an aggregate market value of over $112 million at the time of issuance, representing a significant discount (86.64%) below the market price.   

The defendants then carried out Verges’s scheme in multiple phases.

• First, Verges obtained de facto control over the PSCs, which he concealed by installing figurehead CEOs for each PSC. Verges then caused the PSCs to issue convertible promissory notes and debt settlements in exchange for, among other things, payments on sham consulting service contracts that Verges and his companies entered into with the PSCs.
• Next, Verges sold the debt instruments to the Nominees and then directed the PSCs to issue illicitly obtained and significantly discounted unrestricted shares of PSC stock to the Nominees to satisfy the conversions of their debt instruments. Robert Malin and Linda Malin (collectively, the “Malins”) through Blue Citi, and Tilton, individually and through JDT, proceeded to offload the discounted shares and collectively received more than $52 million in trading proceeds.
• Finally, the Malins, Tilton, and the Nominees kicked back a significant portion of those trading proceeds to Verges-controlled companies: SMEA2Z, 143 Partners, and West Cucharras (collectively, the “Verges Companies”). As a result of the scheme, the Verges Companies received more than $19 million from the Nominees, including at least $12.5 million from Blue Citi and $475,000 from Tilton and JDT.

Blue Citi (the Malins) allegedly received 2,565,277,009 shares in the PSCs valued at $47,175,155.96 at the time of issuance, for a total discount of over $40 million.

After the stock issuances, the Malins directed Blue Citi to sell its shares to third parties who, in turn, would sell the shares into the market at a substantial profit. Blue Citi received nearly $36 million in proceeds through the sale of its shares, paying Verges, through the Verges Companies, more than $12.5 million.

Verges facilitated many of these transactions by directly corresponding with the PSCs’ transfer agents using one of his aliases (“Mike Murphy” and “Tom Faye”), and indirectly by instructing the PSCs’ figurehead CEOs to approve share issuances to Blue Citi.  We also found many examples of Verges going by the alias “Mike Murphree” (according to internet sources, his mother’s maiden name is Murphree) when writing online promotional material.

JDT (James Tilton) allegedly received 1,163,406,191 shares in the PSCs valued at $37,166,488.58 at the time of issuance, for a total discount of over $35 million.

Between June 2018 and September 2022, JDT sold these shares of ALYI, VAYK, and PURA stock and received proceeds of more than $16 million from the sales. Tilton and JDT then paid Verges, through the Verges Companies, at least $475,000.

According to the complaint, Verges artificially inflated trading volume in the PSC’ stocks by authoring and publishing more than 1,400 press releases between September 2017 and August 2022, some of which were false and misleading, in an effort to ensure that the fraud participants and Verges’s other nominees sustained a market in which to sell their stock. Verges even created an account on InvestorsHub (“IHUB”) under the alias 4weed, where he shared the press releases.

The complaint alleges that the inflated trading volume allowed Verges’s nominees to dump their discounted stock into the market for proceeds of more than $52 million. Those nominees then kicked back a portion of their trading proceeds to Verges and his companies. 

Further, the complaint alleges that Verges hid his control over the PSCs. The SEC alleges that Verges directed the preparation of the OTC Market disclosures by Tilton for the PSCs, instructing Tilton to omit material information, including a $350,000 convertible promissory note in PURA issued to SMEA2Z (Verges) in April 2018 and a $1 million note in ALYI issued to Blue Citi on April 8, 2021, resulting in materially misleading financial statements. Both Verges and Tilton knew that Verges controlled the PSCs, which should have been disclosed in the OTC Disclosure Statements. The SEC also alleges that Verges hid the name of the accountant who prepared the PSC’s financial statements, instead stating that they were prepared by the CEOs of the PSCs.

According to the complaint, bank and trading records show that Blue Citi received at least $35,946,798.92 in trading proceeds from selling the PSCs’ stock, with Robert Malin receiving at least $11,877,763.24 from Blue Citi and Linda Malin receiving at least $533,750 from Blue Citi, and JDT received at least $16,522,750 in trading proceeds from its sales of the PSCs’ stock. And, over the course of the fraud, Verges and his companies received at least $19,168,916.30 from Blue Citi, JDT, Tilton, and the Other Nominees.

The complaint alleges that Robert and Linda Malin knowingly participated in the fraud, directed Blue Citi’s sales of stock, and paid kickbacks to Verges-owned companies. The complaint further alleges that Tilton participated in the fraud by preparing, at Verges’s direction, false and misleading public disclosures about the PSCs and directing JDT’s payment of kickbacks to Verges-owned companies.

The SEC’s complaint, filed in the U.S. District Court for the Northern District of Texas, charges Verges with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The complaint also charges Blue Citi, Robert Malin, Linda Malin, and Tilton with violating, directly or indirectly, the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder. The complaint also names SMEA2Z, 143 Partners, West Cucharras, and JDT as relief defendants. The SEC is seeking disgorgement with prejudgment interest against all defendants and relief defendants; permanent injunctions, civil penalties, and penny-stock bars against all defendants; and officer-and-director bars against Verges, Robert Malin, Linda Malin, and Tilton. 

More information can be found here, in our previous article.

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.

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Brenda Hamilton, Securities Attorney
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