Titanium Blockchain Infrastructure Services, Inc., EHI Internetwork and Systems Management, Inc. aka EHI-INSM, Inc., and Michael Alan Stollery aka Michael Stollaire

Litigation Release No. 24160 / June 7, 2018

Securities and Exchange Commission v. Titanium Blockchain Infrastructure Services, Inc., EHI Internetwork and Systems Management, Inc. aka EHI-INSM, Inc., and Michael Alan Stollery aka Michael Stollaire Civil Action No. 2:18-CV-04315-DSF (JPRx) (C.D. Cal. filed May 22, 2018)

The Securities and Exchange Commission announced that on May 30, 2018 the United States District Court for the Central District of California entered a preliminary injunction and orders freezing assets and other relief involving an initial coin offering (ICO) that raised as much as $21 million from investors in and outside the U.S. The court also appointed a permanent receiver over Titanium Blockchain Infrastructure Services Inc., the firm behind the alleged scheme. The preliminary injunction was entered with the consent of the defendants in the action.

The SEC complaint, filed under seal on May 22, 2018, charged that Titanium President Michael Alan Stollery, a/k/a Michael Stollaire, lied about business relationships with the Federal Reserve and dozens of well-known firms, including PayPal, Verizon, Boeing, and The Walt Disney Company. The complaint alleged that Titanium’s website contained fabricated testimonials from corporate customers and that Stollaire publicly – and fraudulently – claimed to have relationships with numerous corporate clients. The complaint alleged that Stollaire promoted the ICO through videos and social media and compared it to investing in “Intel or Google.” The district court granted the SEC’s application for a temporary restraining order and orders freezing assets and other emergency relief on May 23. The complaint and temporary restraining order were unsealed on May 29.

The SEC’s complaint charged Stollaire and Titanium with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and 10b-5(c) thereunder. The complaint charged another Stollaire company, EHI Internetwork and Systems Management Inc., with violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and 10b-5(c) thereunder. The complaint seeks permanent injunctions, return of allegedly ill-gotten gains plus interest and penalties, and a bar against Stollaire to prohibit him from participating in offering digital securities in the future.

The SEC’s investigation, which is continuing, is being conducted by David S. Brown and supervised by Joseph G. Sansone and Diana K. Tani of the SEC’s Market Abuse Unit in coordination with supervision by Mr. Cohen.  Assisting the investigation is Morgan Ward Doran of the Cyber Unit and Roberto Grasso of the Los Angeles Regional Office. The litigation is being conducted by David VanHavermaat and supervised by Amy Jane Longo of the Los Angeles Regional Office.

The SEC’s Office of Investor Education and Advocacy has issued an Investor Bulletin on initial coin offerings and a mock ICO website to educate investors. Additional information about ICOs is available on Investor.gov and SEC.gov/ICO. Investors in the Titanium ICO who believe they may be a victim should contact the SEC through www.SEC.gov/tcr and reference SEC v. Titanium Blockchain Infrastructure Services, Inc., et al., Civil Action No. 2:18-CV-04315-DSF (JPRx) (C.D. Cal.).

https://www.sec.gov/litigation/litreleases/2018/lr24160.htm

Jehu Hand, et al.

Litigation Release No. 24159 / June 6, 2018

USA v. Jehu Hand, Case No. 1:15-cr-10386-WGY (D. Mass.)

Securities and Exchange Commission v. Jehu Hand, et al., Civil Action No. 1:15-cv-14109 (D. Mass. filed Dec. 10, 2015)

The Securities and Exchange Commission announced that on May 21, 2018, a jury in federal court in Boston, Massachusetts convicted Jehu Hand, a licensed attorney in California, of securities fraud, wire fraud, and conspiracy to commit those offenses in connection with two pump-and-dump schemes that defrauded investors in Greenway Technology, a Las Vegas, Nevada-based company purporting to develop resorts for gay and lesbian travelers, and a second company, Crown Marketing. He will be sentenced by the court at a later date.

The allegations regarding Greenway Technology in the criminal indictment against Hand stem from the same conduct alleged in the SEC’s complaint against him. According to the SEC’s complaint, filed in federal court in Boston on December 10, 2015, Hand facilitated a scheme to pump and dump Greenway’s stock by authoring false legal opinion letters that were designed to evade restrictions on stock sales by company insiders and clear the way for Greenway stock held by him and other scheme participants to be sold to unsuspecting investors in the market. According to the complaint, Hand and his co-schemers secretly planned and orchestrated the sale of Greenway stock to the public without proper securities registration statements and at prices artificially inflated by news releases, promotional materials, or blast e-mails containing false, exaggerated or misleading information, and by engaging in undisclosed coordinated trading of the stock. These efforts were designed to generate the appearance of demand for the stock and to increase its price even though Greenway had no operations or assets at the time. According to the complaint, between August 2012 and January 2013, after the stock price had been pumped, the participants in the scheme sold more than 12 million net shares of Greenway stock, causing losses to the investing public of more than $850,000.

The SEC’s action against Hand, which is pending, seeks disgorgement of ill-gotten gains plus pre-judgment interest and penalties as well as a penny stock bar and permanent injunctions against further violations of the securities laws.

For further information, see Litigation Release 23424 (Dec. 11, 2015) and Litigation Release No. 23858 (June 15, 2017).

https://www.sec.gov/litigation/litreleases/2018/lr24159.htm

Ralph T. Iannelli et al.

Litigation Release No. 24158 / June 6, 2018

Securities and Exchange Commission v. Ralph T. Iannelli et al., Civil Action No. 2:18-cv-05008 (U.S. District Court for the Central District of California)

The Securities and Exchange Commission charged an equipment leasing company and its founder with defrauding investors in connection with sales of over $80 million in promissory notes.

According to the SEC’s complaint, between 2014 and 2017, Essex Capital Corporation and its founder, Ralph T. Iannelli, made a series of false and misleading statements and illusory personal guarantees to registered investment advisers to induce them to invest millions of dollars of their clients’ money in Essex’s failing equipment leasing business. The SEC alleges that Essex and Iannelli provided one investment adviser with fake financial statements that overstated Essex’s assets by more than $20 million and falsely told another investment adviser that Essex would assign equipment leases to its clients when the same leases had already been pledged as collateral for bank loans. The SEC’s complaint further alleges that as Essex’s finances deteriorated, the company resorted to frequent Ponzi-like payments, paying interest and principal to existing Essex investors with funds raised from newer investors. At the same time, Iannelli allegedly paid himself millions of dollars in bonuses and siphoned millions of dollars out of Essex through interest-free loans with no maturity date. According to the SEC, Iannelli personally owes the company over $6.4 million.

The SEC’s complaint, filed in the U.S. District Court for the Central District of California, charges Iannelli and Essex with violations of Section 17(a) of the Securities Act of 1933 and 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. It seeks disgorgement of allegedly ill-gotten gains along with interest, monetary penalties, and permanent injunctions against Iannelli and Essex. The SEC has also requested emergency relief against Defendants, including a preliminary injunction, an asset freeze, and the appointment of a receiver over Essex.

The SEC’s investigation was conducted by Yolanda Ochoa, Marc J. Blau, and Rhoda Chang with assistance from the Office of Compliance, Inspections and Examinations. The litigation will be led by Douglas Miller and Gary Leung and supervised by Amy Jane Longo.

https://www.sec.gov/litigation/litreleases/2018/lr24158.htm

Alderson et al

The Securities and Exchange Commission has charged two former managers of SEC-registered investment adviser deVere USA, Inc. for allegedly making misleading statements and omissions concerning economic conflicts of interest and other issues.

The SEC’s complaint, filed in federal district court in Manhattan, alleges that former deVere USA CEO, Benjamin Alderson, and a former manager, Bradley Hamilton, misled clients and prospective clients about the benefits of pension transfers while concealing material conflicts of interest, including the substantial compensation that Alderson and Hamilton personally stood to receive.

The SEC’s complaint charges Alderson and Hamilton with violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”). The complaint also charges Alderson with aiding and abetting violations of Sections 204, 206(4) and 207 of the Advisers Act and Rules 204-2 and 206(4)-7 thereunder, and seeks an injunction, disgorgement plus interest, and civil money penalties.

The SEC separately instituted a settled administrative proceeding against deVere USA. According to the SEC order, deVere USA failed to disclose agreements with overseas product and service providers that resulted in compensation being paid to deVere USA advisers and an overseas affiliate. The SEC order also finds that deVere USA made materially misleading statements concerning tax treatment and available investment options. Without admitting or denying the SEC’s findings, deVere USA consented to the SEC’s order, which finds that the firm violated Sections 206(1), 206(2), 207, and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, and imposes a censure, cease-and-desist order, $8,000,000 civil penalty, and compliance with certain undertakings.

The SEC’s investigation was conducted by Michael Ellis, Haimavathi Marlier and Wendy Tepperman in the New York office. Assisting the investigation was Roseann Daniello in the New York office. The litigation against Alderson and Hamilton will be led by Ms. Marlier and Mr. Ellis, and the case is being supervised by Lara Shalov Mehraban. The SEC examination that led to the investigation was conducted by Michael Devine, Phillip Ma, Edward Perkins, and Joseph DiMaria of the New York office. The SEC appreciates the assistance of the United Kingdom’s Financial Conduct Authority.

https://www.sec.gov/litigation/litreleases/2018/lr24157.htm

Paul Gilman

Litigation Release No. 24156 / June 5, 2018

Securities and Exchange Commission v. Paul Gilman, Civil Action No. 3:18-cv-1421 (N.D Tex., filed June 4, 2018)

The Securities and Exchange Commission announced fraud charges against musician Paul Gilman and his companies, alleging that nearly all of the money they raised in securities offerings went to fund Gilman’s lavish personal spending in Las Vegas and California.

The SEC’s complaint charges Gilman used his companies – Oil Migration Group LLC, WaveTech29 LLC and GilmanSound LLC – to fraudulently solicit retail investors, including a nurse, a minister, and a businessman. Gilman, a self-dubbed “Whale Whisperer” who produced and starred in a documentary of his encounters with whales, claimed to be developing a revolutionary “soundwave” technology that would transform the oil and gas industry. According to the complaint, Gilman told OMG and Wavetech investors that he would use their funds to test, validate, further develop, and license the soundwave technology for use in oil and gas industry applications, and he promised the investors substantial profits. Instead, Gilman is alleged to have used substantially all of the investor funds for his personal benefit, including to pay for luxury Las Vegas hotels, restaurants, designer clothing, and large cash withdrawals at casino ATMs. Gilman also allegedly defrauded investors in GilmanSound, a company he claimed would revolutionize sound systems in sport stadiums. While GilmanSound provided some real services to major-league baseball stadiums, the SEC’s complaint alleges that a substantial amount of the GilmanSound investor funds also were misused for Gilman’s personal expenses.

The SEC’s complaint, filed in federal court in Dallas, charges Gilman, Oil Migration Group, Wavetech, and GilmanSound with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, disgorgement, and civil penalties.

The SEC’s investigation was led by David Whipple and Keith Hunter, and supervised by Eric R. Werner of the SEC’s Fort Worth Regional Office. The SEC’s litigation will be led by Keefe Bernstein and supervised by David Fraser.

The SEC encourages investors to check the backgrounds of people selling them investments by using the SEC’s investor.gov website to quickly identify whether they are registered professionals.

https://www.sec.gov/litigation/litreleases/2018/lr24156.htm

Edward Withrow, et al.

Litigation Release No. 24155 / June 4, 2018

Securities and Exchange Commission v. Edward Withrow, et al., No. 15-cv-13348 (D. Mass. filed Sept. 14, 2015)

United States v. Edward Withrow, No. 15-cr-10261 (D. Mass. filed Sept. 14, 2015)

A former chairman of a Massachusetts-based medical diagnostics company previously called Endeavor Power Corp., whom the Securities and Exchange Commission has charged with a scheme to defraud potential investors in Endeavor’s publicly traded stock, has pleaded guilty in a federal court in Boston, Massachusetts, to making false statements to the SEC.

On May 23, 2018, California resident Edward Withrow III pleaded guilty to one count of making false statements in connection with his sworn investigative testimony to the SEC in August 2013 relating to questions about who owned approximately 40 million unrestricted shares of Endeavor’s stock, and whether Withrow ever tried to determine who owned those shares. He is currently scheduled to be sentenced on September 27, 2018.

The SEC’s complaint, filed in September 2015, charged Withrow and two others with violating the antifraud provisions of the federal securities laws and related rules. Withrow also was charged with failing to file the requisite reports with the SEC disclosing his ownership of Endeavor Power stock. The SEC’s litigation against Withrow, which seeks disgorgement of allegedly ill-gotten gains plus interest, penalties, and permanent injunctive relief, as well as a penny stock bar and an officer-and-director bar, is pending.

https://www.sec.gov/litigation/litreleases/2018/lr24155.htm

Woojae (Steve) Jung

Litigation Release No. 24153 / May 31, 2018

Securities and Exchange Commission v. Woojae (Steve) Jung, No. 1:18-cv-04811 (S.D.N.Y. filed May 31, 2018)

The Securities and Exchange Commission today charged an employee of a prominent investment bank with repeatedly using his access to highly confidential information in order to place illicit and profitable trades in advance of deals on which the bank was providing investment banking advisory services.

According to the SEC’s complaint, Woojae “Steve” Jung, a Vice President of Investment Banking who worked in the bank’s San Francisco and New York offices, used sensitive client information in order to trade in the securities of 12 different companies prior to the announcement of market-moving events.  The SEC alleges that between 2015 and 2017, Jung used an account held in the name of a friend living in South Korea to place these illegal trades and generate profits of approximately $140,000.  As alleged in the complaint, by using his friend’s brokerage account, Jung attempted to evade detection by skirting his employer’s requirements that he pre-clear his trades and that he use an approved brokerage firm that would have reported the trading to his employer.

The SEC’s complaint, filed in federal district court in Manhattan, charges Jung with violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. It seeks disgorgement of allegedly ill-gotten gains, pre-judgment interest, penalties, and injunctive relief from Jung.  The complaint also names Jung’s friend, Sungrok Hwang, as a relief defendant to have him disgorge illicit gains that Jung generated by trading in his brokerage account.  The U.S. Attorney’s Office for the Southern District of New York today unsealed criminal charges against Jung.

The SEC’s investigation was conducted by Megan Bergstrom, David Brown, and Diana Tani of the Market Abuse Unit in the Los Angeles Regional Office with assistance from John Rymas of the unit’s Analysis and Detection Center.  Gary Leung will lead the SEC’s litigation.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.

https://www.sec.gov/litigation/litreleases/2018/lr24153.htm

Steven Pagartanis

Litigation Release No. 24152 / May 30, 2018

Securities and Exchange Commission v. Steven Pagartanis, Civil Action No. 18-cv-3150 (E.D.N.Y., filed May 30, 2018)(JFB)

The Securities and Exchange Commission today charged a former registered representative with defrauding long-standing brokerage customers in an $8 million investment scam.

According to the SEC’s complaint, Steven Pagartanis, who was affiliated with a registered broker-dealer, told some investors – including retirees who had been Pagartanis’s customers for many years – that he would invest their funds in either a publicly-traded or private land development company. He promised that the funds would be safe and also promised guaranteed monthly interest payments on the investments. At Pagartanis’s direction, his investors wrote checks payable to a similarly-named entity that was secretly controlled by Pagartanis. In all, the customers invested approximately $8 million, which Pagartanis used to pay personal expenses and make the guaranteed “interest” payments to his customers. To conceal the scam, which unraveled earlier this year when Pagartanis stopped making the so-called interest payments to customers, Pagartanis created fictitious account statements reflecting ownership interests in the land development companies.

The Suffolk County District Attorney’s Office today filed criminal charges against Pagartanis.

The SEC’s complaint, filed in federal district court in Brooklyn, charges Pagartanis with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking a judgment ordering Pagartanis to disgorge his ill-gotten gains plus prejudgment interest, and to pay financial penalties.

The SEC’s investigation, which is continuing, is being conducted by Gerald Gross, Haimavathi Marlier, Sheldon Mui and Neil Hendelman of the New York Regional Office. The litigation will be led by Ms. Marlier and Mr. Mui. The case is being supervised by Lara Shalov Mehraban. The SEC appreciates the assistance of the Suffolk County District Attorney’s Office and FINRA.

https://www.sec.gov/litigation/litreleases/2018/lr24152.htm

Beaufort Securities Ltd. and Panayiotis Kyriacou; Dennis J. Mancino, William T. Hirschy, DJK Investments 10 Inc., TJM Investments Inc., and WT Consulting Group, LLC

On March 2, 2018, the Securities and Exchange Commission announced securities fraud charges against a U.K.-based broker-dealer and its investment manager in connection with manipulative trading in the securities of HD View 360 Inc., a U.S.-based microcap issuer.  The SEC also announced charges against HD View’s CEO, another individual, and three entities they control for manipulating HD View’s securities as well as the securities of another microcap issuer, West Coast Ventures Group Corp.  The SEC further announced the institution of an order suspending trading in the securities of HD View.

These charges arise in part from an undercover operation by the Federal Bureau of Investigation, which also resulted in related criminal prosecutions against these defendants by the Office of the United States Attorney for the Eastern District of New York.

In a complaint filed in the U.S. District Court for the Eastern District of New York, the SEC alleges that Beaufort Securities Ltd. and Peter Kyriacou, an investment manager at Beaufort, manipulated the market for HD View’s common stock.  The scheme involved an undercover FBI agent who described his business as manipulating U.S. stocks through pump-and-dump schemes.  Kyriacou and the agent discussed depositing large blocks of microcap stock in Beaufort accounts, driving up the price of the stock through promotions, manipulating the stock’s price and volume through matched trades, and then selling the shares for a large profit.

The SEC’s complaint against Beaufort and Kyriacou alleges that they:

  • opened brokerage accounts for the undercover agent in the names of nominees in order to conceal his identity and his connection to the anticipated trading activity in the accounts
  • suggested that the undercover agent could create the false appearance that HD View’s stock was liquid in advance of a pump-and-dump by “gam[ing] the market” through matched trades
  • executed multiple purchase orders of HD View shares with the understanding that Beaufort’s client had arranged for an associate to simultaneously offer an equivalent number of shares at the same price

A second complaint filed by the SEC in the U.S. District Court for the Eastern District of New York alleges that in a series of recorded telephone conversations with the undercover agent, HD View CEO Dennis Mancino and William T. Hirschy agreed to manipulate HD View’s common stock by using the agent’s network of brokers to generate fraudulent retail demand for the stock in exchange for a kickback from the trading proceeds.  According to the complaint, the three men agreed that Mancino and Hirschy would manipulate HD View stock to a higher price before using the agent’s brokers to liquidate their positions at an artificially inflated price.  The SEC’s complaint also alleges that Mancino and Hirschy executed a “test trade” on Jan. 31, 2018, coordinated by the agent, consisting of a sell order placed by the defendants filled by an opposing purchase order placed by a broker into an account at Beaufort.  Unbeknownst to Mancino and Hirschy, the Beaufort account used for this trade was a nominal account that was opened and funded by the agent.  The SEC’s complaint also alleges that, prior to their contact with the undercover agent, Mancino and Hirschy manipulated the market for HD View and for West Coast by using brokerage accounts that they owned, controlled, or were associated with –including TJM Investments Inc., DJK Investments 10 Inc., WT Consulting Group LLC – to effect manipulative “matched trades.”

The SEC’s complaint against Beaufort and Kyriacou charges the defendants with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  The SEC also charged Hirschy, Mancino, and their corporate entities with violating Section 17(a)(1) of the Securities Act of 1933, Sections 9(a)(1), 9(a)(2), and 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder.  The SEC is seeking injunctions, disgorgement, prejudgment interest, penalties, and penny stock bars from Beaufort and Kyriacou.  With respect to Hirschy, Mancino, and their corporate entities, the SEC is seeking injunctions, disgorgement, prejudgment interest, penalties, penny stock bars, and an officer-and-director bar against Mancino.

The investigation was conducted in the SEC’s New York Regional Office by Tejal Shah and Joseph Darragh, Lorraine Collazo, and Michael D. Paley of the Microcap Fraud Task Force and supervised by Lara S. Mehraban, and in Washington, D.C. by Patrick L. Feeney, Robert Nesbitt, and Kevin Guerrero, and supervised by Antonia Chion.  Preethi Krishnamurthy and Ms. Shah will lead the SEC’s litigation against Beaufort and Kyriacou.  Ann H. Petalas and Mr. Feeney, under the supervision of Cheryl Crumpton, will handle the SEC’s litigation against Mancino, Hirschy, and their entities.  The SEC appreciates the assistance of the Office of the United States Attorney for the Eastern District of New York, the Federal Bureau of Investigation, the Internal Revenue Service, the Alberta Securities Commission, the Ontario Securities Commission, the Financial Conduct Authority of the United Kingdom, and the Financial Industry Regulatory Authority.

The Commission’s investigation in this matter is continuing.

https://www.sec.gov/litigation/litreleases/2018/lr24067.htm

Jeffrey O. Friedland, Global Corporate Strategies LLC, and Intiva Pharma LLC, Defendants, and Lane 6552 LLC, Kathy B. Friedland, Aspen Upper Ranch LLC, Assurance Management, LLC, and The Jeffrey and Kathy Friedland Irrevocable Trust, Relief Defendants , Case.

Litigation Release No. 24066 / March 8, 2018

Securities and Exchange Commission v. Jeffrey O. Friedland, Global Corporate Strategies LLC, and Intiva Pharma LLC, Defendants, and Lane 6552 LLC, Kathy B. Friedland, Aspen Upper Ranch LLC, Assurance Management, LLC, and The Jeffrey and Kathy Friedland Irrevocable Trust, Relief Defendants , Case. No. 1:18-cv-00529 (D. Colo. Filed March 5, 2018)

The Securities and Exchange Commission has filed fraud charges in a scheme to inflate the share price of an Israeli medical marijuana company’s common stock. The court today entered a partial asset freeze of the proceeds of the alleged fraud.

The SEC’s complaint, which was filed on March 5 in federal district court in Denver, alleges that Colorado resident Jeffrey O. Friedland touted OWC Pharmaceutical Research Corp. while misrepresenting both his own investment in OWC and the true nature of his professional relationship with the company.  As alleged in the Complaint, Friedland was compensated with more than five million OWC shares for handling the company’s media and investor relations efforts.  Friedland then touted OWC to media, industry, and investors, creating the false impression that he was merely an early investor in OWC and later, a member of its advisory board, without disclosing his role as a paid promoter.  Friedland is alleged to have sold his OWC shares for almost $7 million, after which he and his spouse placed a portion of the proceeds in an investment account in the name of Lane 6552, acquired two homes in all-cash purchases, and made other purchases and uses of the funds. Friedland’s sales took place from March through September 2017 and were made through accounts in the names of Lane 6552 LLC and Intiva Pharma LLC. The United States District Court today, among other things, froze certain accounts that received proceeds of Lane 6552’s sales of OWC stock.

The SEC’s Complaint charges Friedland, Global Corporate Strategies LLC, and Intiva Pharma LLC with violations of Sections 17(a) and (b) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking injunctions, disgorgement, prejudgment interest, penalties and penny stock bars. The complaint also named Kathy B. Friedland, Lane 6552 LLC, Aspen Upper Ranch LLC, Assurance Management, LLC, and the Jeffrey and Kathy Friedland Irrevocable Trust as relief defendants.

The investigation has been conducted by Michael T. Grimes, Keith O’Donnell, William Connolly, Shipra G. Wells, and Josh Felker, and supervised by Melissa R. Hodgman. Christian Schultz and Timothy Halloran will lead the SEC’s litigation under the supervision of Fred Block. The SEC appreciates the assistance of Financial Industry Regulatory Authority (FINRA) The SEC’s investigation is ongoing.

https://www.sec.gov/litigation/litreleases/2018/lr24066.htm

Robert M. Morano

Litigation Release No. 24065 / March 8, 2018

Securities and Exchange Commission v. Robert M. Morano, No. 3:18-cv-00386 (D. Ore. filed Mar. 5, 2018)

The Securities and Exchange Commission charged a former communications specialist with insider trading based on nonpublic information he learned about an impending acquisition of the company where he worked.

The SEC alleges that Robert M. Morano, a former employee of UTi Worldwide, Inc., obtained more than $38,000 in illegal profits by purchasing shares in the company before it and DSV Air & Sea Holdings A/V jointly announced UTi’s acquisition. According to the SEC’s complaint, Morano, who was responsible for helping the company publish press releases and other communications, learned confidential details about the planned acquisition the day before it was publicly announced and immediately bought approximately 17,500 shares of UTi in three brokerage accounts. The next day, after DSV and UTi’s announcement was made public, UTi’s shares increased over 50% on heavy trading, and Morano sold all of his shares.

The SEC’s complaint, filed in federal court in Oregon on March 5, 2018, charges Morano with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking an injunction, disgorgement plus interest, and a penalty.

The SEC’s case is being led by Brian T. Fitzsimons, and supervised by Brian O. Quinn, Jan M. Folena, and Scott W. Friestad. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

https://www.sec.gov/litigation/litreleases/2018/lr24065.htm

Edward Henderson

Litigation Release No. 24063 / March 5, 2018

Securities and Exchange Commission v. Edward Henderson, No. 11-cv-12116 (D. Mass. filed Dec. 1, 2011)

A federal court has barred the promoter in a securities kickback scheme from participating in penny stock offerings for the rest of his life.

According to the SEC’s complaint, filed in December 2011, Edward Henderson was one of several individuals charged with engaging in a scheme to trigger investments in various thinly-traded stocks through secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies. The SEC alleged that Henderson and the investment fund representative, who was an undercover FBI agent, agreed that Henderson would receive a fee for introducing the representative to executives willing to pay kickbacks in exchange for funding for their companies. Henderson allegedly received $12,650 for introducing an executive to the fund representative, which was a portion of the kickback that the executive paid.

The final judgment, entered on February 28, 2018 by the federal district court in Boston, Mass., permanently prohibits Henderson from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, holds him liable for $12,650 in disgorgement, representing profits from the alleged illegal conduct, but deems it satisfied by a forfeiture order entered against Henderson in a related criminal action. The judgment also prohibits Henderson from participating in penny stock offerings.

The court’s entry of judgment against Henderson resolves the litigation in its entirety. The court previously entered judgment against Michael Lee, ZipGlobal Holdings, Inc., Paul Desjourdy, Microholdings US, Inc. and James Wheeler. The SEC’s cases arose from an alleged kickback scheme that was exposed by an undercover operation of the Federal Bureau of Investigation’s Boston office.

The SEC’s Office of Investor Education and Advocacy has warned investors that some stock promotions are conducted by paid promoters or company insiders who stand to profit. Investors who receive a stock promotion should carefully research the company before investing.

https://www.sec.gov/litigation/litreleases/2018/lr24063.htm

Jersey Consulting LLC

The Securities and Exchange Commission today announced charges against a Utah-based company, its principal, 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.

The U.S. Attorney’s Office for the District of Utah, which conducted a parallel investigation of the matter, announced that Tager and others were indicted on securities fraud, among other criminal charges. Additionally, the Utah Department of Commerce‒Division of Securities, which also conducted a parallel investigation of the matter, announced that it had filed a civil action against Jersey, Tager, and others for violating the antifraud and licensing and registration provisions of Utah law.

The SEC’s complaint, among other things, charges Jersey and Tager with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rule 10b‒5 and Gagnier, Gross, Lebarton, Shoucair with violating Sections 5(a) and 5(c) of the Securities Act and Section 15(a)(1) of the Exchange Act. The complaint also charges Jersey and Tager with aiding and abetting each solicitor’s violations of Section 15(a)(1) of the Exchange Act and each solicitor with aiding and abetting Jersey’s violations of Section 17(a)(2) of the Securities Act, Section 10(b) of the Exchange Act, and Exchange Act Rule 10b‒5(b). The SEC also named, as relief defendants in its complaint, Jersey Consulting associates Matthew E. Mangum and Matthew, J. Freitas as well as Premier Marketing Solutions, Inc., Equity First Properties Inc., Roxane Marie Gross, and Christine L. Shoucair. The SEC seeks, among other relief, an asset freeze, permanent injunctions, conduct-based injunctions, disgorgement of ill-gotten gains plus prejudgment interest thereon, and civil penalties.

The SEC’s investigation was conducted by James Thibodeau of the Salt Lake Regional Office, and the litigation will be led by Amy Oliver and Daniel Wadley. The Commission appreciates the assistance of the U.S. Attorney’s Office for the District of Utah, the FBI, the Utah Department of Commerce‒Division of Securities, and the Utah Attorney General’s Office.

https://www.sec.gov/litigation/litreleases/2018/lr24064.htm

AVEO Pharmaceuticals, Inc., et al.

Litigation Release No. 24062 / March 5, 2018

Securities and Exchange Commission v. AVEO Pharmaceuticals, Inc., et al., Civil Action No. 1:16-cv-10607-NMG (D. Mass. March 29, 2016)

A federal district court in Boston, Massachusetts has entered final consent judgments in a fraud case brought by the Securities and Exchange Commission against the former CEO and former Chief Medical Officer of Massachusetts-based biotech company AVEO Pharmaceuticals, Inc.

In its First Amended Complaint, filed on September 1, 2016, the SEC alleged that AVEO and its former CEO, Tuan Ha-Ngoc, former CFO, David Johnston, and former Chief Medical Officer, William Slichenmyer misled investors about the company’s communications with the Food and Drug Administration concerning the approval status of AVEO’s flagship drug candidate, tivozanib. The SEC alleged that the defendants misled the public by intentionally withholding their knowledge that, due to concerns about patient death rates in an earlier tivozanib clinical trial, the FDA staff had recommended an additional clinical trial, which would likely have entailed millions of dollars in additional expenses and a multi-year delay in tivozanib’s FDA approval process.

On December 8, 2017, the court entered a final consent judgment against Ha-Ngoc, ordering him to pay a civil penalty of $80,000 and enjoining him from future violations of Section 17(a)(2) and (3) of the Securities Act of 1933 and Rule 13a-14 under the Securities Exchange Act of 1934.

On February 12, 2018, the court entered a final consent judgment against Slichenmyer, ordering him to pay disgorgement and prejudgment interest of $2,835.54 and enjoining him from future violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. After a contested hearing, in an order entered March 1, 2018, the court also ordered Slichenmyer to pay a civil penalty of $50,000.

AVEO previously paid a $4 million penalty to settle the SEC’s charges without admitting or denying the allegations in its complaint.  The litigation against Johnston is ongoing.

For further information, see Litigation Release No. 23503.

https://www.sec.gov/litigation/litreleases/2018/lr24062.htm

Stefan Lumiere

The Securities and Exchange Commission has obtained a final judgment against a hedge fund manager the agency charged with falsely inflating assets in portfolios he managed. The SEC also barred him from the securities industry.

According to the SEC’s complaint, filed June 15, 2016, Stefan Lumiere and fellow hedge fund manager Christopher Plaford engaged in a fraudulent scheme to falsely inflate the value of securities held by a hedge fund advised by their firm. For an 18-month period, Lumiere and Plaford used sham broker quotes to mismark as many as 28 securities per month, surreptitiously passing their desired prices along to brokers via his personal cell phone or a flash drive delivered by a courier. The fund consequently reported artificially inflated returns and monthly net asset values, and paid out millions of dollars in inflated management and performance fees to its investment adviser.

Lumiere and Plaford were also charged criminally for their alleged conduct. Lumiere was convicted after a trial and was sentenced to eighteen months imprisonment followed by three years’ supervised release and a $1 million fine. Plaford pled guilty but has not yet been sentenced. The SEC’s action against Plaford has been stayed pending the completion of the criminal case.

The final judgment against Lumiere, entered on February 20, 2018 by the U.S. District Court for the Southern District of New York, enjoins Lumiere from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Based on the entry of the judgment and Lumiere’s criminal conviction, the SEC barred Lumiere from the securities industry.

The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.

https://www.sec.gov/litigation/litreleases/2018/lr24061.htm

Steven J. Muehler, Claudia M. Muehler, Koorosh “Danny” Rahimi, AltaVista Capital Markets, LLC, AltaVista Private Client, LLC, and AltaVista Securities, LLC

The Securities and Exchange Commission today charged three-time recidivist Steven J. Muehler with operating an unregistered broker-dealer, facilitating an unregistered securities offering, and defrauding small businesses, while promising to help them raise money from investors. Three companies under Muehler’s control, Muehler’s wife, Claudia M. Muehler, and his associate, Koorosh “Danny” Rahimi, were also charged. Because the scheme is ongoing, the SEC is also seeking a preliminary injunction to stop Muehler’s ongoing violations of the securities laws, pending trial of the action.

The SEC’s complaint, which was filed in federal court in Los Angeles, also charges Muehler with violating a cease-and-desist order issued by the Commission in 2016 barring Muehler from associating with any broker-dealer. The SEC has filed a parallel action in the same court to enforce that Commission order.

According to the complaint, Muehler’s companies are not registered as broker-dealers. But since at least November 2015, Muehler and his companies have nonetheless agreed to provide broker-dealer services to more than 20 small businesses, including identifying and soliciting investors and utilizing a purportedly proprietary online securities exchange to help raise funds from investors. In return, Muehler and his companies received fees, the right to a percentage of any funds raised from investors, and the right to an equity stake in each small business customer.

The SEC also alleges that in offering broker-dealer services, Muehler and his companies made numerous fraudulent claims to potential customers, including that Muehler and his companies had $50 million on-hand to invest in their customers’ securities, that they had previously helped customers raise millions of dollars, and that their proprietary online exchange was registered with the SEC. They also concealed that Muehler is subject to a Commission cease-and-desist order and has been sanctioned by California and Minnesota securities regulators.

The SEC’s complaint alleges that Claudia Muehler and Danny Rahimi helped Muehler carry out this scheme.

The SEC’s complaint charges Muehler and the three companies he controls (AltaVista Capital Markets, LLC, AltaVista Private Client, LLC, and AltaVista Securities, LLC) with violating Section 5(c) of the Securities Act of 1933 and Section 15(a), Section 10(b), and Rule 10b-5 of the Securities Exchange Act of 1934, and also charges Muehler with violating Section 15(b)(6) of the Securities Exchange Act of 1934. It charges Claudia Muehler with aiding and abetting Muehler’s and the AltaVista Companies’ violations of the Securities Exchange Act of 1934, and charges Rahimi with violating Section 15(a) of the Securities Exchange Act of 1934.

The complaint also seeks permanent injunctions, disgorgement plus interest, and penalties.

The SEC’s investigation, which is ongoing, has been conducted by M. Lance Jasper and Benjamin Faulkner, and supervised by Spencer E. Bendell. The litigation will be led by Donald W. Searles and supervised by Amy J. Longo.

https://www.sec.gov/litigation/litreleases/2018/lr24060.htm

Leonard Genova

Litigation Release No. 24059 / March 1, 2018

Securities and Exchange Commission v. Leonard Genova, No. 2:18-cv-01298 (E.D.N.Y)

The Securities and Exchange Commission today charged former town attorney and deputy supervisor of Oyster Bay, New York, Leonard Genova, 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. The SEC charged Oyster Bay and the former town supervisor John Venditto in November 2017.

The SEC’s complaint against Genova, filed in U.S. District Court for the Eastern District of New York, alleges that Oyster Bay agreed to indirectly guarantee four separate private loans to the vendor totaling more than $20 million.  The SEC’s complaint alleges that Genova concealed the indirect loan guarantees when they should have been disclosed in connection with the Town’s 26 securities offerings from August 2010 to December 2015.  According to the complaint, this information was material to current and prospective investors due to the potential impact on the Town’s finances.

The SEC’s complaint charges Genova with violations of Section 17(a)(1) and (a)(3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  He also is charged with aiding and abetting violations and as a control person under Section 20(a) of the Exchange Act for the Town’s violations of the Exchange Act.

Genova has agreed to settle the case by agreeing to permanent injunctions against violating the charged securities laws or participating in any offerings of municipal securities. The proposed settlement is subject to approval by the court, which also will determine, at a later date, whether to impose a civil penalty and the amount of any such penalty.

The SEC’s continuing investigation is being conducted by the SEC’s New York office and the Enforcement Division’s Public Finance Abuse Unit, including Alison R. Levine, Ladan F. Stewart, Charles Riely, Creighton L. Papier, Joseph Chimienti, and Jonathan Wilcox.  The case is being supervised by Sanjay Wadhwa, LeeAnn Ghazil Gaunt, and Mark R. Zehner.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York and the Federal Bureau of Investigation.

https://www.sec.gov/litigation/litreleases/2018/lr24059.htm

Analytica Bio-Energy Corp., et al., Marvin Winick

The Securities and Exchange Commission today announced fraud charges against Canadian-based penny stock company Analytica Bio-Energy Corp., a shareholder controlling its affairs, and a former officer for filing false reports with the SEC and for the controlling shareholder’s fraudulent scheme to sell unregistered shares to the public. In a related matter, the SEC also filed an application seeking a court order requiring Analytica’s accountant, Marvin Winick, to comply with an SEC suspension order from 2006.

The SEC’s complaint, filed in the U.S. District Court for the District of Columbia, alleges that from 2013 to 2014, Douglas Murdock, who was an undisclosed control person of Analytica, orchestrated a scheme to fraudulently procure Analytica shares and sell them in unregistered transactions. Murdock also fraudulently induced Analytica’s transfer agent to remove the restrictive legend from company shares. While Murdock conducted this scheme, he and Luiz Brasil, Analytica’s former President, substantially assisted Analytica’s filing of numerous misleading periodic reports with the SEC.

The SEC’s complaint charges Analytica and Murdock with violating Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5(b) thereunder, and charges Murdock and Brasil with aiding and abetting those violations. Murdock is also charged with violating Sections 5(a), 5(c), 17(a)(1), and 17(a)(3) of the Securities Act of 1933, and Section 10(b) of the Exchange Act and Rules 10b-5(a) and 10b-5(c) thereunder.

Without admitting or denying the SEC’s allegations, Murdock and Brasil agreed to the entry of judgments permanently enjoining them from future violations of the charged sections of the federal securities laws; imposing penny stock bars and officer-and-director bars; and providing that, upon the SEC’s motion, the court shall determine whether it is appropriate to order disgorgement of ill-gotten gains and/or a civil penalty.

In a related matter, the SEC filed an application seeking an order requiring Canadian accountant Marvin Winick to comply with a 2006 SEC order that suspended Winick from appearing or practicing before the Commission. According to the SEC’s application, Winick violated the SEC’s 2006 suspension order by preparing and consolidating financial statements that were included in periodic reports that Analytica filed with the Commission in 2013 and 2014. Winick has consented to the entry of a court order enforcing the SEC’s 2006 suspension order.

These actions are subject to Court approval.

The Commission also announced today the temporary suspension, for ten business days, of trading in the securities of Analytica.

The SEC’s investigation was conducted by Michael Brennan and was supervised by Antonia Chion, Melissa Hodgman, and Kevin Guerrero. The SEC’s litigation against Analytica, Murdock, and Brasil, and application concerning Winick, will be handled by David Mendel and Mr. Brennan, and will be supervised by Cheryl Crumpton. The SEC appreciates the assistance of the Ontario Securities Commission.

https://www.sec.gov/litigation/litreleases/2018/lr24058.htm

AmeraTex Energy, Inc., et al

The Securities and Exchange Commission today charged three Plano, Texas-based oil and gas companies and their principals, together with an accountant and compliance coordinator, for their roles in operating an $11.7 million offering fraud for oil drilling and operations projects allegedly located in Kentucky.

The SEC alleges that AmeraTex Energy, Inc., Lewis Oil Corp., Lewis Oil Company, Thomas Lewis (the CEO of all three entities), and former AmeraTex President, William Fort, sold unregistered securities and made numerous misleading statements to over 150 investors concerning the use of investor proceeds, including false information about prospect wells; false statements about sales commissions; and false guarantees regarding the comingling and loaning of funds. To conceal the growing number of investor and employee complaints that appeared online, the SEC further alleges that Lewis and Fort used services to suppress Internet search results that would otherwise have cautioned potential investors about the nature of the fraudulent offering. This scheme enabled Lewis to misappropriate more than $1 million.

The SEC also alleges that accountant Damon Fox and compliance coordinator Brian Bull played key roles in the scheme by adding legitimacy and credibility to the operations and taking significant actions of their own. Fox misleadingly categorized entries in the companies’ books and records and sent investors false K-1 statements. Bull reviewed many of the misrepresentations to investors, enabled the solicitation and acceptance of non-accredited investors, and filed false Forms D with the Commission.

The SEC’s complaint charges AmeraTex, Lewis Oil Corp., Lewis Oil Company, Lewis, Fort, and Fox with violations of Section 17(a) of the Securities Act of 1933 (the “Securities Act”), Section 10(b) of the Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder; and alternatively charges Fox with aiding and abetting AmeraTex’s, Lewis Oil Corp.’s, Lewis’s, and Fort’s violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. It further charges Lewis and Fort with violations of Section 15(a) of the Exchange Act and AmeraTex, Lewis, and Fort with violations Sections 5(a) and 5(c) of the Securities Act. Finally, the SEC charges Bull with violations Section 17(a)(2) of the Securities Act and aiding and abetting AmeraTex’s, Lewis’s, and Fort’s violations of Sections 5(a) and 5(c) of the Securities Act. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil monetary penalties against all defendants.

The SEC’s investigation was conducted by Sarah S. Mallett and supervised by Assistant Director James E. Etri in the Fort Worth Regional Office. The SEC’s litigation will be led by Matthew J. Gulde.

https://www.sec.gov/litigation/litreleases/2018/lr24057.htm

Yang Xie

Litigation Release No. 24056 / February 28, 2018

Securities and Exchange Commission v. Yang Xie, No. 18-CV-02779 (D.N.J. filed February 27, 2018)

A former Merck & Co. Inc. employee who bought stock in a company that Merck was preparing to acquire in a tender offer agreed to pay a penalty equal to three times his illegal insider trading profits to settle an action by the Securities and Exchange Commission.

According to the SEC’s complaint, on November 20, 2014 at 4:04 p.m., Yang Xie, then-Director of Global Health Outcomes Research for Merck, received an email from a Merck attorney discussing a contemplated merger between Merck and Cubist Pharmaceuticals, Inc. The email included an attachment advising recipients not to trade in Cubist’s stock until a full trading date had elapsed after a public announcement of the acquisition. The complaint alleges that, approximately six minutes later, Xie replied to the e-mail and acknowledged receiving it. Approximately 14 minutes after he received the Merck attorney’s email, Xie bought 80 shares of Cubist stock. On January 21, 2015, the date the tender offer was completed, Xie sold his Cubist stock and realized illegal profits of approximately 39%. During the SEC’s investigation that followed, Xie allegedly denied learning about Merck’s proposed acquisition of Cubist until the night before it was publicly announced.

The SEC’s complaint, filed in federal district court in New Jersey, charges Xie with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and Exchange Act Section 14(e) and Rule 14e-3. Without admitting or denying the SEC’s allegations, Xie has agreed to the entry of permanent injunctions as well as to pay disgorgement of $2,287, which represents Xie’s trading profits, plus prejudgment interest and a $6,681 civil penalty of three times his trading profits. The settlement is subject to court approval.

The investigation was conducted in the SEC’s Home Office by Adam Eisner and Keith O’Donnell and supervised by C. Joshua Felker, Stephan Schlegelmilch, and Melissa Hodgman. The SEC appreciates the assistance of the SEC’s Office of Inspector General, the U.S. Attorney’s Office for the District of New Jersey, and the Financial Industry Regulatory Authority.

https://www.sec.gov/litigation/litreleases/2018/lr24056.htm