SEC Obtains Summary Judgment Against StratoComm Penny Stock Defendants
On February 19, 2014, the United States District Court for the Northern District of New York in Albany, New York granted the Securities and Exchange Commission’s motion for summary judgment on liability against all defendants. Read More
SEC Charges Dewey & LeBoeu Executives with Securities Fraud
On March 6, 2014, the Securities and Exchange Commission (“SEC”) announces charges against five executives at Dewey & LeBoeuf,and finance professionals. They are are accused of facilitating a $150 million fraudulent bond offering by Dewey & LeBoeuf, the international law firm where they worked. The SEC alleges that the five turned to accounting fraud when the firm needed money to weather the economic recession and steep costs from a merger. Read More
SEC Shuts Down Pyramid Scheme Using Phony Companies l Securities Lawyer 101
On March 5, 2014, the Securities and Exchange Commission (“SEC”) announced an emergency enforcement action to stop a fraudulent pyramid scheme by phony companies masquerading as a legitimate international investment firm. The SEC has obtained a federal court order to freeze accounts holding money stolen from U.S. investors by Fleet Mutual Wealth Limited and MWF Financial – collectively known as Mutual Wealth. Read More
What are the OTC Markets Reporting Requirements?
Unlike securities listed on stock exchanges such as NASDAQ or the NYSE, securities may trade through the OTC Markets interdealer quotation system whether they are a Securities and Exchange Commission (“SEC”) reporting issuer or not. There are three reporting standards for companies quoted by OTC Markets which vary depending upon the level of disclosure provided to investors.
OTCMarkets OTCQB & OTCQX Reporting Standard Read More
SEC Announces Trading Suspension of Aventura Equities
On March 5, 2014, the Securities and Exchange Commission (“SEC”) announced the temporary trading suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (“Exchange Act”), of trading in the securities of Aventura Equities, Inc. (“Aventura”) commencing at 9:30 a.m. EST on March 5, 2014, and terminating at 11:59 p.m. EDT on March 18, 2014. The Commission temporarily suspended trading in the securities of Aventura because of questions concerning the adequacy and accuracy of publicly available information about Aventura. Read More
How Can I Remove a DTC Chill Or Global Lock? Securities Lawyer 101
DTC Chills and global locks continue to be a growing problem for small companies. The Depository Trust and Clear Corporation (“DTCC”), through its subsidiaries, provides clearing, settlement and information services for securities. DTCC’s subsidiary, the Depository Trust Company (“DTC”) was created to improve efficiencies and reduce risk in the clearance and settlement of securities transactions. Not all securities are eligible to be settled through DTC. Issuers must satisfy the criteria set by DTCC to be settled through DTC. All companies must satisfy this criteria in order to be DTC eligible, including both Securities and Exchange Commission (“SEC”) reporting and non-reporting issuers. Read More
Jerry Williams AKA Monk Ordered to Pay Over $9,600,000
On February 12, 2014, the Securities and Exchange Commission (“SEC”) announced that a Connecticut federal court entered judgments against a former Connecticut-based stock promoter, Jerry S. Williams, and two companies that he controlled, Monk’s Den, LLC and First In Awareness, LLC. Read More
What Is a Naked Short Sale? Securities Lawyer 101
The Short Seller Scape Goat
In recent years, the activities of short sellers have been the subject of controversy. While short selling is a simple process it is widely misunderstood. While the average investor profits when he invests in a stock whose price goes up, a short seller profits when it invests in a stock whose price goes down. Read More
Investor Relations & General Solicitation After the JOBS Act
Investor relations also known as stock promotion involves the publication of information about a public company to increase its stock price and trading volume. The person who publishes this information is sometimes referred to as a “Stock Promoter”. Read More
The SEC Speaks About the Registration Statement Process
The Securities and Exchange Commission recently announced the issuance of Commissioner Elisse B. Walter’s statement, “The Commission’s Registration Process: How to Better Administer an Ounce of Prevention”. The release is a reminder of the importance of preventive action by the SEC and the securities industry at the registration statement stage to nip securities violations in the bud. This statement addressed the registration statement phase of a going public transaction as well as the registration phase applicable to market participants. Read More
SEC Suspends Trilliant Exploration
On February 28, 2014, the Securities and Exchange Commission (“Commission”) ordered the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Trilliant Exploration Corp. (“Trilliant”) of New York, Read More
OTCQX Proposes Amendments to its OTCQX Rules
On February 13, 2014, the OTC Markets proposed amendments to its OTCQX rules. The will impact US and international companies seeking listings on the OTCQX. The OTC Markets OTCQX is the premier market tier of the OTC Markets.
These proposals include changes to the rules governing OTCQX market professionals, initial eligibility standards and issuer requirements. Read More
Richard Altomare Convicted of Securities Fraud
On February 26, 2014, the United States Attorney for the Southern District of Florida, and Federal Bureau of Investigation (FBI), Miami Field Office, announce that a federal jury convicted Richard Altomare, 65, of Palm Beach County, on four counts of an indictment, including one count of mail fraud and three counts of securities fraud. Altomare was the former CEO of Universal Express, Inc.
According to the indictment and evidence presented during the trial, Altomare carried out a scheme to artificially inflate the share price and trading volume of stock for a publicly traded company then known as Sunset Brands, Inc. (SSBN). Altomare agreed to pay a former business associate to purchase shares of SSBN stock to give the investing public the false impression that SSBN’s stock was rising and that there was a public market for SSBN stock. Unbeknownst to Altomare, his former associate was an informant for the FBI. Read More
SEC Charges Clean Energy l Securities Lawyer 101
On February 25, 2014, the Securities and Exchange Commission (the “SEC”) announced SEC charges against an Arizona-based private equity fund manager and his investment advisory firm for orchestrating a scheme to misallocate their expenses to the funds they manage. Read More
George Louis Theodule Sentenced to 150 Months
On February 26, 2014, the United States Attorney for the Southern District of Florida and Federal Bureau of Investigation, announced the unsealing of an indictment charging George Louis Theodule, former resident of Wellington, Florida. Theodule was charged with multiple counts of wire fraud, securities fraud, and money laundering. Theodule was arrested on August 23, 2013, and had his initial appearance before U.S. Magistrate Judge Dave Brannon later that morning. Read More
Anthonie R. Sparrow Sentenced in $16 Million Scheme
On February 25, 2014, the FBI announced that Anthonie R. Sparrow pled guilty for his role in perpetrating a $16 million securities fraud scheme that victimized hundreds of investors around the world. Sparrow was charged in December 2009 and extradited from Spain. Read More
Reverse Mergers l The Game Changers
Shell brokers continue to tout the virtues of reverse merger transactions, despite recent rule changes that eliminate many if not all of the benefits once conferred by them. Seeking to persuade clients to use their services, these promoters often securities lawyers hark back to the glory days of the reverse merger. Read More
FINRA Fines Brown Brothers Harriman $8 Million for Compliance Failures
The Financial Industry Regulatory Authority (FINRA) announced today that it has fined New York-based Brown Brothers Harriman & Co. (Brown Brothers Harriman) $8 million for substantial anti-money laundering compliance failures including, among other related violations, its failure to have an adequate anti-money laundering program in place to monitor and detect suspicious penny stock transactions. Brown Brothers Harriman also failed to sufficiently investigate potentially suspicious penny stock activity brought to the firm’s attention and did not fulfill its Suspicious Activity Report (SAR) filing requirements. Read More
Reverse Merger Bootcamp l Going Public Attorneys
Over recent years, the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”) have overhauled the rules and regulations applicable to reverse merger transactions. Not only have the SEC and FINRA jumped on the bandwagon to eliminate them, but as will be explained, Depository Trust Company and national securities exchanges have joined in their efforts. Among the SEC’s efforts to stem microcap fraud is a campaign to eliminate dormant shell companies to prevent them from being used in reverse merger transactions. Read More
New Proposals To Amend FINRA Rule 5110
On January 9, 2014, FINRA submitted proposals to the SEC to amend FINRA Rule 5110. FINRA’s proposals seek to:
(i) narrow the definition of “participation or participating in a public offering;”
(ii) modify the lock-up restrictions to exclude certain securities acquired or converted to prevent dilution to stockholders; and
(iii) clarify that the information requirements are applicable only to relationships with a “participating” FINRA member. Read More
SEC Shuts Down 20 Bogus S-1 Registration Statements After Promotion Stock Secrets Research Report
On February 3, 2014, the Securities and Exchange Commission (“SEC”) announced the filing of stop order proceedings against 20 purported mining companies for providing false information in their S-1 registration statements. Of the 20 S-1 registration statements, 18 were opined upon by the same attorney, Diane Dalmy, who is the subject of a pending SEC proceeding.
More than one year prior, Promotion Stock Secrets published a featured report in which it noted blazing red flags of fraud in the same 20 S-1 registration statements. Read More
SEC Charges College Professor, Gonul Colak, in Naked Short Selling Scheme
On January 31, 2014, the Securities and Exchange Commission charged two Florida college professors with perpetrating a complex naked short selling scheme for more than $400,000 in illicit profits. Read More
Going Public For Canadian Issuers – Multijurisdictional Disclosure System
The Multijurisdictional Disclosure System was adopted in July 1991 by the U.S. Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators to facilitate cross-border public offerings of securities between the U.S. and Canada. The Multijurisdictional Disclosure System provides Canadian issuers with appealing options for accessing the U.S. capital markets and completing going public transactions. Read More
SEC Suspends Hi Score and OLIE After Janice Shell Research Report
On January 27, 2014, the Securities and Exchange Commission (the “SEC”) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of OLIE, Inc. (“OLIE”), of Vancouver, Canada, and of Hi Score Corp. (“Hi Score”), of Sunrise, Florida, commencing at 9:30 a.m. EST on January 27, 2014, and terminating at 11:59 p.m. EST on February 7, 2014. The SEC temporarily suspended trading in Hi Score and OLIE due to a lack of current and accurate information about the companies. It is not yet known whether the suspension will be followed by an SEC Enforcement action. Read More
David Kevin Lewis Sentenced to 30 Years for Oil and Gas Fraud
On January 24, 2014, a Texas court sentenced David Kevin Lewis, 52, to 30 years in federal prison for 23 counts of securities fraud and conspiracy and ordered to pay approximately $2.5 million in restitution, following his conviction.
Lewis was the chairman and director of field operations of Always Consulting, Inc., an oil and gas well company in Richardson, Texas. Bruce Kyle Griffith, 59, of Dallas, and Thomas Alden Markham, Jr., 63, of Plano, Texas, each pleaded guilty to their roles and were sentenced in December 2013 to 100 months and 21 months, respectively. Griffith, who was the president and CEO of Always Consulting, pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. Read More
Felon Barry Minkow Becomes Pastor and Cons Church Congregation Out of Millions
Last week, Barry Minkow pleaded guilty to embezzling funds from the San Diego Community Bible Church, a U.S. attorney’s statement said. Minkow was already serving a five-year sentence for securities fraud.
According to the plea agreement, Minkow opened unauthorized church bank accounts, forged signatures on checks and used congregation donations as his own personal piggy bank. Read More
SEC Provides Additional Guidance For Rule 506(c) Offerings
On January 23, 2014, the Securities and Exchange Commission (the “SEC”) issued new guidance concerning Rule 506(c) in its Compliance and Disclosure Interpretations. In the Compliance and Disclosure interpretations, the SEC addresses Rule 506 offerings that commenced prior to Rule 506(c)’s effectiveness on September 23, 2013. Read More
What Is Caveat Emptor? Going Public Lawyers
The Latin phrase Caveat Emptor means “let the buyer beware.” The application of the Caveat Emptor principle is most often applied in the sale of property where a purchaser has a specific period of time to discover any defects. After that period of time expires, the buyer accepts any defects he failed to detect. In the offer and sale of securities, the Caveat Emptor theory is reversed. Read More
Steven Palladino Sentenced to 10-12 Years
On January 24, 2014, the Securities and Exchange Commission (“SEC”) announced that a Massachusetts state court judge sentenced Massachusetts resident Steven Palladino to a prison term in a criminal action filed by the Suffolk County (Massachusetts) District Attorney. The criminal action against Palladino and his company, Massachusetts-based Viking Financial Group, Inc., was initially filed in March 2013 and involves the same conduct alleged in a civil securities fraud action brought by the Commission in April 2013.
Suffolk Superior Court Judge Janet Sanders sentenced Palladino, of West Roxbury, Massachusetts, to serve a prison term of 10-12 years, followed by a probationary period of five years, and to pay restitution to victims, for crimes that he committed in connection with a Ponzi scheme perpetrated through Viking.
At the same hearing, Palladino pled guilty to criminal charges that included conspiracy, being an open and notorious thief, larceny, and larceny from elderly person(s). Viking also pled guilty to related charges and was sentenced to a probationary period of five years and ordered to pay restitution to victims. The Court set a further hearing for March 7, 2014 to determine, among other things, the amount of restitution to be paid to victims.
The SEC previously filed an emergency action against Viking and Palladino (collectively, “Defendants”) in federal district court in Massachusetts. In its complaint, the Commission alleged that, since April 2011, Defendants misrepresented to at least 33 investors that their funds would be used to conduct the business of Viking – which was purportedly to make short-term, high interest loans to those unable to obtain traditional financing. The Commission also alleged that Palladino misrepresented to investors that the loans made by Viking would be secured by first interest liens on non-primary residence properties and that investors would be repaid their principal, plus monthly interest at rates generally ranging from 7-15%, from payments that borrowers made on loans. The complaint alleged that, in truth, Defendants made very few real loans to borrowers, and instead used investors’ funds largely to pay earlier investors and to pay for the Palladino family’s substantial personal expenses, including cash withdrawals, gambling debts, vacations, luxury vehicles and tuition.
The Commission first filed this action on April 30, 2013, seeking a temporary restraining order, asset freeze, and other emergency relief – which the Court granted. On May 15, 2013, the Court also issued an escrow order, which ordered Defendants to deposit all funds and assets in their possession into an escrow account. The asset freeze and escrow order have remained in effect at all times since April 30, 2013 and May 15, 2013, respectively. On July 15, 2013, the Court held that Defendants’ conduct violated securities anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. On November 18, 2013, the Court entered orders that enjoined Defendants from further violations of the antifraud provisions of the securities laws and ordered them to pay disgorgement of $9,701,738, plus prejudgment interest of $122,370.
On September 4, 2013, the Commission filed a motion for contempt against Palladino for violations of the asset freeze and the escrow order. The motion alleged that Palladino violated the asset freeze by transferring three vehicles that he owned (solely or jointly with his wife) into his wife’s name and using the vehicles as collateral for new loans – effectively cashing out the equity in these vehicles. The motion also alleged that Palladino violated the escrow order by failing to deposit all cash in his possession into the escrow account. On November 15, 2013, the Court held Palladino in contempt and ordered that he restore ownership of the vehicles that he had transferred into his wife’s name. Subsequently, Palladino restored ownership of two of the vehicles but has failed to restore ownership of one vehicle. As a result, the Court refused to dismiss the contempt finding against him at hearings on December 3, 2013 and January 17, 2014. The Court has set a further hearing date of February 20, 2014 to address, among other things, whether Palladino remains in contempt.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. 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 and compliance 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 Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com
