FLORIDIAN FINED FOR MAKING FALSE AND MISLEADING STATEMENTS DURING CFTC INVESTIGATION

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Orders Sean R. Stropp to Pay $250,000 Penalty to Settle Charges of Making False and Misleading Statements During a CFTC Investigation

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Sean R. Stropp (Stropp), formerly of Jupiter, Florida. Stropp is ordered to pay a $250,000 civil monetary penalty for making false and misleading statements of material fact, and omitting material facts, to CFTC staff during a CFTC Division of Enforcement (DOE) investigation. The Order enforces the false statements provision of the Commodity Exchange Act (CEA), which was added by the 2010 Dodd-Frank Act.

In addition to the $250,000 civil monetary penalty, the Order requires Stropp to cease and desist from violating the relevant provision of the CEA and permanently prohibits him from, directly or indirectly, engaging in trading on or subject to the rules of any registered entity.

According to the Order, Stropp provided DOE staff a signed and notarized financial disclosure statement in connection with the CFTC’s investigation into potentially unlawful sales of off-exchange leveraged metals contracts by Stropp and his company Barclay Metals, Inc. (Barclay). In his statement, Stropp falsely represented that the statement included all his known assets and that the statement was true, correct, and complete, per the Order. Further, the Order finds that Stropp omitted material facts from the statement, including both his control of, and his spouse’s ownership interest in, another entity selling leveraged metals contracts and his ownership and control of two of that other entity's bank accounts.

CFTC DOE Acting Director Gretchen Lowe commented, “Lying or failing to disclose material information during a CFTC investigation is unacceptable, and those who do so must bear the consequences.”

CFTC Previously Settled with Stropp

On January 28, 2013, the Commission issued an Order finding that Stropp, Barclay, and others engaged in illegal, off-exchange metals transactions in violation of the CEA (see CFTC press release 6503-13, January 28, 2013).

Related Criminal Action

On August 20, 2013, the Manhattan (New York) District Attorney’s office announced Stropp’s indictment for operating a fraudulent investment scheme through the undisclosed leveraged metals entity at issue in the Order. According to the indictment, the scheme allegedly resulted in millions of dollars of customer losses. Stropp pleaded guilty to the charges on February 4, 2014 and was sentenced to one to three years in prison in New York, where he is currently incarcerated.

CFTC DOE staff responsible for this action are Jenny Chapin, Jeff Le Riche, Steve Turley, Charles Marvine, Rick Glaser, and Richard Wagner. The CFTC thanks the Manhattan District Attorney’s Office for its assistance.

SEC SUSPENDS TRADING IN 255 SHELL COMPANIES TO FIGHT FRAUD

FROM:  SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission today announced the latest actions in its microcap fraud-fighting initiative known as Operation Shell-Expel, suspending trading in 255 dormant shell companies ripe for abuse in the over-the-counter market.

Pump-and-dump schemes are among the most common types of fraud involving microcap companies.  Perpetrators will tout a thinly-traded microcap stock through false and misleading statements about the company to the marketplace. After purchasing low and pumping the stock price higher by creating the appearance of market activity, they dump the stock to make huge profits by selling it into the market at the higher price.

Since Operation Shell-Expel began in 2012, the SEC Enforcement Division’s Office of Market Intelligence has been cleaning up the microcap marketplace by scrutinizing penny stocks nationwide and identifying clearly inactive companies.  This has enabled the SEC to proactively suspend trading in several hundred dormant shell companies before fraudsters have an opportunity to manipulate them.

“A frequent element in pump-and-dump schemes has been the use of dormant shells,” said Andrew J. Ceresney, director of the SEC Enforcement Division.  “Because these shells all too often are used by those looking to manipulate stock prices, we will continue to protect unwary investors by suspending trading in shells.”

Today’s massive trading suspension involves dormant shell companies uncovered in 26 states and two foreign countries.  Once a stock has been suspended from trading, it cannot be relisted unless the company provides updated financial information to prove it is still operational.  It is extremely rare for a company to fulfill this requirement, so the trading suspension essentially renders the shells worthless and useless to scam artists.

“Policing this sector of the markets can be a challenge,” said Margaret Cain, a microcap specialist in the Office of Market Intelligence.  “There is often little or no reliable information about a microcap issuer, and the sheer number of these companies stretches law enforcement resources thin and makes this sector particularly dangerous for investors.  The approach we take with Operation Shell-Expel is both economical and efficient as the SEC continues its commitment to preventing microcap fraud.”

In addition to Ms. Cain, the Operation Shell-Expel initiative has been led by William Hankins, Robert Bernstein, Victoria Adraktas, Jessica P. Regan, Leigh Barrett, John Gibbons, and Megan Alcorn in the Office of Market Intelligence with assistance from the Enforcement Division’s Delinquent Filings Group.  The SEC appreciates the assistance of the FBI’s Economic Crimes Unit.