The Securities and Exchange Commission announced charges against Marc Andrew Tager and Jersey Consulting LLC, a Utah-based company and several solicitors of the company’s securities in an ongoing offering fraud that has already targeted more than 80 individual investors.

The SEC’s complaint, filed in federal district court in Salt Lake City, Utah, alleges that, since September 2014, Marc Andrew Tager of Utah and his company, Jersey Consulting LLC, have engaged in the fraudulent offering of unregistered Jersey securities and employed paid telemarketers to raise at least $6 million from investors located across the U.S. None of the telemarketers-Suzanne Aileen Gagnier, Kenneth Stephen Gross, Jeffrey Rowland Lebarton, and Jonathan Edward Shoucair-are registered to sell securities. According to the complaint, Jersey investors were promised extraordinary returns of 100% or more within 12 months from the application and licensing of Jersey’s “soil remediation” technology, and were misled about the commercial viability of Jersey’s technology and Jersey’s purported rights to a “mineral rich” claim in Arizona. Jersey in fact had no rights to the claim and its technology was not commercially viable. Jersey also failed to disclose Tager’s prior felony conviction and that investor funds were diverted to pay for Tager’s personal expenses, including the purchase of a Harley-Davidson motorcycle. Read More

On March 14, 2018, the Securities and Exchange Commission charged Elizabeth Holmes and  Silicon Valley-based private company Theranos Inc., with raising more than $700 million from investors through an elaborate, years-long fraud scheme in which they exaggerated or made false statements about the company’s technology, business, and financial performance.  Theranos and Elizabeth Holmes have agreed to resolve the SEC charges against them.  Importantly, in addition to a penalty, Holmes has agreed to give up majority voting control over the company, as well as to a reduction of her equity which, combined with shares she previously returned, materially reduces her equity stake.

The SEC complaints allege that Theranos, Elizabeth Holmes, and Balwani made numerous false and misleading statements in investor presentations, product demonstrations, and media articles by which they deceived investors into believing that its key product – a portable blood analyzer – could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood testing industry.  In truth, according to the SEC’s complaint, Theranos’ proprietary analyzer could complete only a small number of tests, and the company conducted the vast majority of patient tests on modified and industry-standard commercial analyzers manufactured by others. Read More

On February 21, 2018, the Securities and Exchange Commission charged a former bitcoin-denominated platform known as BitFunder and its operator with operating an unregistered securities exchange and defrauding users of that Bitcoin exchange. The SEC also charged the operator with making false and misleading statements in connection with an unregistered offering of securities.

The SEC alleges that BitFunder and its founder, Jon E. Montroll, operated BitFunder as an unregistered online securities exchange and defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 bitcoins. The SEC also alleges that Montroll sold unregistered securities that purported to be investments in the exchange and misappropriated funds from that investment as well in connection with BitFunder. Read More

On March 23rd the Securities and Exchange Commission announced charges and a preliminary injunction and asset freeze against Niket Shah, a New Jersey resident who it alleges stole more than $250,000 in a Ponzi scheme in which his friends and coworkers invested.

Based on investor complaints, the SEC moved quickly to investigate and charge Shah. According to the SEC’s complaint, unsealed on March 22, 2018, in federal court in Brooklyn, New York, Shah used Spark Trading Group, LLC to defraud more than 15 investors into contributing hundreds of thousands of dollars to two funds that Shah marketed. Shah obtained investments for the funds by lying about his success as a trader, Spark Trading’s returns, and how he intended to use investors’ money, including altering financial statements to make the funds appear profitable when they were actually losing money. For instance the complaint alleges that Shah promised investors he would pay them monthly returns and guaranteed against losses. According to the complaint, Shah misused investor money for his own benefit and suffered substantial losses on the amounts actually invested. When investors sought their money back, he lied and said the money had been frozen by government agencies, including the Commission. Read More

A federal judge has ordered the co-founder and former CEO of investment management firm F-Squared Investments to pay over $13 million after a federal jury found him liable for making false and misleading statements to investors as the public face of F-Squared.

The Securities and Exchange Commission has charged Brian Sodi, a penny stock promoter based in Florida with defrauding investors in a pair of gold mining stocks by secretly amassing shares before touting the companies publicly.  He allegedly sold the bulk of his stock and reaped more than $1.1 million in illicit profits after his promotions caused the share prices and trading volumes to skyrocket.

The SEC’s complaint alleges that Brian Sodi, known in penny stock circles as “Mailman” for his pervasive participation in direct-mailed penny stock promotions, committed a fraud known as scalping.  He allegedly disseminated promotions recommending the purchase of the stocks in Southern USA Resources Inc. and Goff Corporation without disclosing he owned shares and planned to sell them through a foreign bank.  Sodi also allegedly hid from investors that he was being paid in stock for one of these promotions.  According to the SEC’s complaint, Brian Sodi proceeded to unload hundreds of thousands of his own shares to the detriment of other investors who bought in to the hype. The unlawful practice of promoting a stock while secretly selling is known as scalping. Read More

On March 19th the Securities and Exchange Commission announced that Electronic Transaction Clearing (ETC), a registered broker-dealer headquartered in Los Angeles, has agreed to settle charges that it illegally placed more than $25 million of customers’ securities at risk in order to fund its own operations.

Among other things, the SEC found that ETC violated the Customer Protection Rule, which is intended to safeguard customers’ cash and securities so that they can be promptly returned if a broker-dealer fails.  It requires broker-dealers to maintain physical possession or control of customers’ fully paid and excess margin securities. Read More

On March 13th the Securities and Exchange Commission charged foreign affiliates of KPMG, Deloitte & Touche, and BDO for their involvement in audit work that circumvented the full oversight of the Public Company Accounting Oversight Board (PCAOB).

The firms agreed to settle the charges by paying penalties or disgorging their profits from the audits.

According to the SEC’s orders, the Zimbabwe affiliates of Deloitte & Touche and KPMG improperly audited the majority of assets and revenues of a publicly traded company without registering with the PCAOB.  The two principal auditors – KPMG’s affiliate in South Africa and BDO’s Canadian affiliate – were registered with the PCAOB but improperly relied upon the work of the two unregistered foreign component auditors to complete their audits of the company.  This violated PCAOB standards requiring sufficient analysis and inquiry when using the work of another auditor.  Read More

On March 14th the Securities and Exchange Commission charged Jun Ying, a former chief information officer of a U.S. business unit of Equifax with insider trading in advance of the company’s September 2017 announcement about a massive data breach that exposed the social security numbers as well as other personal information of about 148 million U.S. customers.

According to the SEC’s complaint, Jun Ying, who was next in line to be the company’s global CIO, allegedly used confidential information entrusted to him by the company to conclude that Equifax had suffered a serious breach.  The SEC alleges that before Equifax’s public disclosure of the data breach, Ying exercised all of his vested Equifax stock options and then sold the shares, reaping proceeds of nearly $1 million.  According to the complaint, by selling before public disclosure of the data breach, Ying avoided over $117,000 in losses. Read More

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According to an SEC complaint filed in 2016 in federal court in Miami, Ariel Quiros allegedly misused more than $50 million in investor funds to purchase a different ski resort and to fund personal expenses such as income taxes and two luxury New York City condominium purchases. Investors were told their money would specifically be used for construction projects at the Jay Peak Resort and a nearby proposed biomedical research facility. Read More

SEC Suspends Penny Stock Issuers-Posted by Brenda Hamilton. The SEC has suspended four penny stock issuers who failed to comply…

On January 9, 2018, the U.S. Securities and Exchange Commission (“SEC”) announced the temporary suspension of trading in the securities of three penny stock issuers:

• Blacksands Petroleum, Inc. (BSPE),
• China Education Alliance, Inc. (CEAI),
• DoMark International, Inc. (DOMK), and
• East Coast Diversified Corp. (ECDC)

The SEC suspended trading in the securities of the foregoing penny stock issuers due to a lack of current and accurate information about the companies. Each issuer had not filed certain periodic reports with the Commission. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (“Exchange Act”). The SEC cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by these companies.

All three penny stock issuers were quoted by the OTC Markets interdealer link. Each of the issuers had undergone name changes and engaged in reverse merger transactions before becoming delinquent with their SEC filings. Read More

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More than two years ago, we published the first in a series of articles about problems surrounding the declaration and payment of a special dividend by penny stock issuer, Calissio Resources Group, Inc. (CRGP).  We followed up with a second and third article as legal actions brought by COR Clearing, LLC against a growing number of parties were filed.  By the summer of 2016, the Calissio case had become difficult to follow, since access to nearly all the court pleadings was restricted to participants in the case; the judge had agreed to the restrictions in part because those filings contained sensitive trading records naming owners of CRGP stock.

The story began on June 16, 2015, when Calissio, a purported mining company that claimed to own properties in Mexico, declared two stock dividends.  One was to be a small stock dividend; the other a large cash dividend that would pay $0.011 a share, or a total of about $1.3 million.  The record and pay dates for both were the same, June 30 and August 17, respectively.  As we explained in our earlier articles, although the company described the cash dividend as a regular quarterly distribution, at all times between the declaration date and the ex dividend date it qualified as a special dividend:  one more than 25 percent of the value of CRGP’s stock.

Special dividends differ from regular dividends in one significant way:  the ex-dividend date is set after, not before, the record date.  The record date is fixed by the issuer.  Only shares outstanding as of that time will qualify for the dividend payment.  The ex date  is the first day on which the stock will trade without the dividend, and is set for one day after the pay date.  The pay date, like the record date, is set by the company.  The ex date is set by the Financial Industry Regulatory Authority (“FINRA”); in this case it was two days, not one, after the pay date of August 17.  Read More

The Securities and Exchange Commission charged Ibrahim Almagarby and his company with acting as unregistered dealers in the sale of billions of shares of numerous penny stock issuers.

The SEC’s complaint, filed in federal district court in south Florida, alleges that, beginning in January 2013, Ibrahim Almagarby and his company, Microcap Equity Group LLC (MEG), engaged in a business that purchased aged penny stock issuer debts. After converting the debts into equity, they sold the resultant shares into the market. At the time of this conduct, the complaint alleges that neither Ibrahim Almagarby nor MEG were registered with the SEC as a dealer and Almagarby was not associated with a registered broker or dealer. Through these activities, Ibrahim Almagarby and MEG purchased over $1.1 million of aged debts of 39 microcap issuers and sold into the market over 7.4 billion shares generating over $1.4 million in ill-gotten gains. Read More

On November 21, 2017, the Securities and Exchange Commission (“SEC”) announced Oyster Bay, New York, and John Venditto its former top elected official with defrauding investors in the town’s municipal securities offerings by hiding the existence and potential financial impact of side deals with a businessman who owned and operated restaurants and concession stands at several town facilities.

On November 21, 2017, the Securities and Exchange Commission (“SEC”) announced Oyster Bay, New York, and its former top elected official with defrauding investors in the town’s municipal securities offerings by hiding the existence and potential financial impact of side deals with a businessman who owned and operated restaurants and concession stands at several town facilities.

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of New York, Oyster Bay agreed several years ago to indirectly guarantee four separate private loans to the vendor totaling more than $20 million.  The agreement to indirectly guarantee the debts allegedly stemmed from the concessionaire’s longstanding close relationship with then-town supervisor John Venditto and other officials that involved gifts, bribes, kickbacks, and political support.  Read More

On November 20, 2017, the Securities and Exchange Commission (“SEC”) announced the agenda and panelists for the 36th Annual Government-Business Forum on Small Business Capital Formation.

The November 30 Small Business event will begin at 9 a.m. Central Standard Time (10 a.m. Eastern Standard Time) with opening remarks from the SEC Chairman and Commissioners followed by a morning panel discussion that will explore how capital formation options are working for small businesses.  Panelists will include representatives of Texas-based small businesses and advisors to the small business community. Read More

On November 20, 2017, the Securities and Exchange Commission (“SEC”) announced that Paul G. Cellupica has been named Deputy Director of the agency’s Division of Investment Management.  Mr. Cellupica will oversee a number of the division’s strategic, rulemaking, and industry engagement initiatives.

“Paul Cellupica’s extensive experience and knowledge of investor needs, and understanding of how the Commission and its staff operate, will be tremendous assets to the agency during a critical period of change and evolution in the investment management industry,” said Ms. Blass. “He is committed to advancing the SEC’s regulatory priorities in a thoughtful and strategic way, in order to promote the long-term interests of investors.” Read More

On October 27, 2017, Randall James, Nashville, Tennessee resident, who isn’t registered to sell investments, has agreed to settle charges that he defrauded investors in his company Global Maximus Productions, which purportedly produced pay-per-view entertainment and concerts.

The SEC alleges that Randall James promised investors significant profits and a return of their principal within a short period of time, claiming he would use their money to produce concerts and other events that would be live-streamed online and generate profits. According to the SEC’s complaint, James instead spent investor funds on his personal living expenses, including personal meals, housing, and payments to his ex-wife. Read More

On November 2, 2017, the Securities and Exchange Commission (“SEC”) charged Osiris Therapeutics, a Maryland-based biotech company, and four former top executives with prioritizing revenue growth over lawful accounting and misleading investors in the process.

The SEC alleges that Osiris Therapeutics routinely overstated company performance and issued fraudulent financial statements for a period of nearly two years. According to the SEC’s complaint, the company improperly recognized revenue using artificially inflated prices, backdated documents to recognize revenue in earlier periods, and prematurely recognized revenue upon delivery of products to be held on consignment. Osiris Therapeutics and its executives also allegedly used pricing data that they knew was false and attempted to book revenue on a fictitious transaction, among other accounting improprieties. Read More

On October 31, 2017, the Securities and Exchange Commission (“SEC”) announced that the SEC filed an action to enforce compliance with a document subpoena issued and served upon Wynn Gustafson in an SEC investigation captioned In the Matter of WAG Trading and Investments Company LLC.

As set forth in the SEC’s papers, Wynn Gustafson is the President of WAG Company LLC, formerly known as WAG Trading and Investment Company LLC (“WAG Trading”). According to documents produced to the SEC, WAG Trading is in the business of conducting international transactions buying, selling, and redeeming so-called “historical bonds” in China, Hong Kong, Ghana, Singapore, and Germany. As set forth in the SEC’s papers, “historical bonds” are often used to perpetuate fraudulent schemes. Read More