FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges 10 Individuals in Scheme to Sell Stock in Blank Check Companies Secretly Bound for Reverse Mergers
04/16/2015 04:30 PM EDT
The Securities and Exchange Commission today announced fraud charges against 10 individuals involved in a scheme to offer and sell penny stock in undisclosed “blank check” companies bound for reverse mergers while misrepresenting to the public that they were promising startups with business plans.
Blank check companies generally have no operations and no value other than their status as a registered entity, which makes them attractive targets for unscrupulous individuals seeking reverse mergers with clean shells ripe for pump-and-dump schemes. The federal securities laws impose various requirements on blank check companies to prevent such illicit use. The SEC alleges that Daniel P. McKelvey of Foster City, Calif., Alvin S. Mirman of Sarasota, Fla., and Steven Sanders of Lake Worth, Fla., routinely evaded these requirements by creating undisclosed blank check companies and installing figurehead company officers while falsely depicting in registration statements and other SEC filings that the companies were pursuing real business ventures under these officers. Allegedly concealed from the public was the fact that the companies were controlled at all times by McKelvey, Mirman, or Sanders for the sole purpose of entering into reverse mergers with unidentified companies so they could profit from the sales.
“The federal securities laws prohibit the registration and sale of stock in undisclosed blank check companies given their frequent use in perpetrating pump-and-dump schemes,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “We allege that McKelvey, Mirman, and Sanders went to extreme lengths to run an illicit supply chain of undisclosed blank check companies, including the complete fabrication of business plans and installation of illusory executives.”
According to the SEC’s complaint filed in U.S. District Court for the Southern District of Florida, McKelvey, Mirman, and Sanders collectively developed nearly two dozen undisclosed blank check companies and sold most of them for a total of approximately $6 million in ill-gotten gains. They were thwarted from further sales when the SEC instituted stop order proceedings last year that led to the suspension of the registration statements of four issuers before they could be further packaged for sale. The scheme allegedly involved forging or falsifying hundreds of certifications filed with the companies’ SEC filings as well as communications from impersonating e-mail accounts, management representation letters to accountants, notarizations on applications to the Financial Industry Regulatory Authority, and securities purchase agreements used in the sales of the undisclosed blank check companies.
The SEC’s complaint alleges that Steven Sanders’s brother Edward G. Sanders of Coral Springs, Fla., Scott F. Hughes of Duluth, Ga., and Jeffrey L. Lamson of El Dorado Hills, Calif. assisted the scheme by acting as corporate nominees with knowledge of the false business plans, drafting or providing false business plans, or recruiting other nominee officers.
The SEC’s complaint charges McKelvey, Mirman, Steven Sanders, Hughes, Lamson, and Edward Sanders with violating or aiding and abetting violations of the antifraud, reporting, recordkeeping, and internal control provisions of the federal securities laws. The SEC seeks disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, and permanent injunctions as well as officer-and-director bars and penny stock bars.
The SEC’s complaint also names four relief defendants for the purpose of recovering illicit proceeds of the scheme in their possession: Mirman’s wife Ilene P. Mirman, a company managed by McKelvey called Forte Capital Partners LLC, and two companies managed by Steven Sanders named AU Consulting LLC and MBN Consulting LLC.
The SEC additionally charged four other figurehead officers and directors who agreed to settle their cases in separate administrative proceedings: Edward T. Farmer of Sarasota, Fla., William J. Gaffney of Cumming, Ga., Kevin D. Miller of Alpharetta, Ga., and Ronald A. Warren of Peachtree Corners, Ga. They consented to SEC orders without admitting or denying the findings that they violated the antifraud, reporting, recordkeeping, and internal control provisions of the federal securities laws. They are barred from serving as an officer or director of a public company and from participating in penny stock offerings, and they must disgorge ill-gotten gains plus prejudgment interest.
The SEC’s investigation, which is continuing, is being conducted by Jeffrey T. Cook in the Miami Regional Office as part of the Microcap Fraud Task Force. The case is being supervised by Eric R. Busto, and the SEC’s litigation will be led by Patrick R. Costello
Showing posts with label SHELL COMPANIES. Show all posts
Showing posts with label SHELL COMPANIES. Show all posts
Tuesday, April 21, 2015
Tuesday, March 3, 2015
SEC MOVES TO THWART PUMP-AND-DUMP SCHEMES BY SUSPENDING TRADES IN 128 SHELL COMPANIES
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Suspends Trading in 128 Dormant Shell Companies to Put Them Out of Reach of Microcap Fraudsters
03/02/2015 10:15 AM EST
The Securities and Exchange Commission today announced it has suspended trading in 128 inactive penny stock companies to ensure they don’t become a source for pump-and-dump schemes.
The trading suspensions are the latest in a microcap fraud-fighting initiative known as Operation Shell-Expel in which the SEC Enforcement Division’s Office of Market Intelligence utilizes technology to scour the over-the-counter (OTC) marketplace and identify dormant companies ripe for abuse. The proactive efforts have prevented fraudsters from having the opportunity to manipulate these thinly-traded stocks by pumping the companies’ stock value through false and misleading promotional campaigns and then dumping the stocks after investors buy in.
Since it began in 2012, Operation Shell-Expel has resulted in trading suspensions of more than 800 microcap stocks, which comprises more than 8 percent of the OTC market. Once a stock has been suspended from trading, it cannot be relisted unless the company provides updated financial information to prove it’s actually operational. It’s extremely rare for a company to fulfill this requirement, and the trading suspensions essentially render the shells worthless and useless to scam artists.
“Operation Shell-Expel continues to be an efficient way to combat microcap fraud by denying fraudsters the empty nests they need to hatch their schemes,” Andrew J. Ceresney, Director of the SEC Enforcement Division. “We are getting increasingly aggressive and adept at ridding the microcap marketplace of dormant shells within a year of the companies becoming inactive.”
Today’s massive trading suspension identifies dormant shell companies in 24 states and Canada.
The Operation Shell-Expel initiative has been led by William Hankins, Margaret Cain, Robert Bernstein, Victoria Adraktas, LaVerne Patterson, Jessica P. Regan, Leigh Barrett, and John Gibbons 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.
SEC Suspends Trading in 128 Dormant Shell Companies to Put Them Out of Reach of Microcap Fraudsters
03/02/2015 10:15 AM EST
The Securities and Exchange Commission today announced it has suspended trading in 128 inactive penny stock companies to ensure they don’t become a source for pump-and-dump schemes.
The trading suspensions are the latest in a microcap fraud-fighting initiative known as Operation Shell-Expel in which the SEC Enforcement Division’s Office of Market Intelligence utilizes technology to scour the over-the-counter (OTC) marketplace and identify dormant companies ripe for abuse. The proactive efforts have prevented fraudsters from having the opportunity to manipulate these thinly-traded stocks by pumping the companies’ stock value through false and misleading promotional campaigns and then dumping the stocks after investors buy in.
Since it began in 2012, Operation Shell-Expel has resulted in trading suspensions of more than 800 microcap stocks, which comprises more than 8 percent of the OTC market. Once a stock has been suspended from trading, it cannot be relisted unless the company provides updated financial information to prove it’s actually operational. It’s extremely rare for a company to fulfill this requirement, and the trading suspensions essentially render the shells worthless and useless to scam artists.
“Operation Shell-Expel continues to be an efficient way to combat microcap fraud by denying fraudsters the empty nests they need to hatch their schemes,” Andrew J. Ceresney, Director of the SEC Enforcement Division. “We are getting increasingly aggressive and adept at ridding the microcap marketplace of dormant shells within a year of the companies becoming inactive.”
Today’s massive trading suspension identifies dormant shell companies in 24 states and Canada.
The Operation Shell-Expel initiative has been led by William Hankins, Margaret Cain, Robert Bernstein, Victoria Adraktas, LaVerne Patterson, Jessica P. Regan, Leigh Barrett, and John Gibbons 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.
Wednesday, November 5, 2014
SEC, FINRA ISSUE ALERT TO INVESTORS REGARDING SHELL COMPANIES BEING SOLD AS PENNY STOCKS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission’s Office of Investor Education and Advocacy and the Financial Industry Regulatory Authority (FINRA) today issued an alert warning investors that some penny stocks being aggressively promoted as great investment opportunities may in fact be stocks of dormant shell companies with little to no business operations.
The investor alert provides tips to avoid pump-and-dump schemes in which fraudsters deliberately buy shares of very low-priced, thinly traded stocks and then spread false or misleading information to pump up the price. The fraudsters then dump their shares, causing the prices to drop and leaving investors with worthless or nearly worthless shares of stock.
“Fraudsters continue to try to use dormant shell company scams to manipulate stock prices to the detriment of everyday investors,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “Before investing in any company, investors should always remember to check out the company thoroughly.”
Gerri Walsh, FINRA’s Senior Vice President for Investor Education, said, “Investors should be on the lookout for press releases, tweets or posts aggressively promoting companies poised for explosive growth because of their ‘hot’ new product. In reality, the company may be a shell, and the people behind the touts may be pump-and-dump scammers looking to lighten your wallet.”
The investor alert highlights five tips to help investors avoid scams involving dormant shell companies:
Research whether the company has been dormant – and brought back to life. You can search the company name or trading symbol in the SEC’s EDGAR database to see when the company may have last filed periodic reports.
Know where the stock trades. Most stock pump-and-dump schemes involve stocks that do not trade on The NASDAQ Stock Market, the New York Stock Exchange or other registered national securities exchanges.
Be wary of frequent changes to a company's name or business focus. Name changes and the potential for manipulation often go hand in hand.
Check for mammoth reverse splits. A dormant shell company might carry out a 1-for-20,000 or even 1-for-50,000 reverse split.
Know that "Q" is for caution. A stock symbol with a fifth letter "Q" at the end denotes that the company has filed for bankruptcy.
The Securities and Exchange Commission’s Office of Investor Education and Advocacy and the Financial Industry Regulatory Authority (FINRA) today issued an alert warning investors that some penny stocks being aggressively promoted as great investment opportunities may in fact be stocks of dormant shell companies with little to no business operations.
The investor alert provides tips to avoid pump-and-dump schemes in which fraudsters deliberately buy shares of very low-priced, thinly traded stocks and then spread false or misleading information to pump up the price. The fraudsters then dump their shares, causing the prices to drop and leaving investors with worthless or nearly worthless shares of stock.
“Fraudsters continue to try to use dormant shell company scams to manipulate stock prices to the detriment of everyday investors,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “Before investing in any company, investors should always remember to check out the company thoroughly.”
Gerri Walsh, FINRA’s Senior Vice President for Investor Education, said, “Investors should be on the lookout for press releases, tweets or posts aggressively promoting companies poised for explosive growth because of their ‘hot’ new product. In reality, the company may be a shell, and the people behind the touts may be pump-and-dump scammers looking to lighten your wallet.”
The investor alert highlights five tips to help investors avoid scams involving dormant shell companies:
Research whether the company has been dormant – and brought back to life. You can search the company name or trading symbol in the SEC’s EDGAR database to see when the company may have last filed periodic reports.
Know where the stock trades. Most stock pump-and-dump schemes involve stocks that do not trade on The NASDAQ Stock Market, the New York Stock Exchange or other registered national securities exchanges.
Be wary of frequent changes to a company's name or business focus. Name changes and the potential for manipulation often go hand in hand.
Check for mammoth reverse splits. A dormant shell company might carry out a 1-for-20,000 or even 1-for-50,000 reverse split.
Know that "Q" is for caution. A stock symbol with a fifth letter "Q" at the end denotes that the company has filed for bankruptcy.
Wednesday, April 9, 2014
SEC CHARGES HEWLETT-PACKARD WITH FCPA VIOLATIONS RELATED TO ALLEGATIONS HP BRIBED FOREIGN OFFICIALS
FROM: SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today charged Hewlett-Packard with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries in three different countries made improper payments to government officials to obtain or retain lucrative public contracts.
Hewlett-Packard has agreed to pay more than $108 million to settle the SEC’s charges and a parallel criminal case announced today by the U.S. Department of Justice.
The SEC’s order instituting settled administrative proceedings finds that the Palo Alto, Calif.-based technology company’s subsidiary in Russia paid more than $2 million through agents and various shell companies to a Russian government official to retain a multi-million dollar contract with the federal prosecutor’s office. In Poland, Hewlett-Packard’s subsidiary provided gifts and cash bribes worth more than $600,000 to a Polish government official to obtain contracts with the national police agency. And as part of its bid to win a software sale to Mexico’s state-owned petroleum company, Hewlett-Packard’s subsidiary in Mexico paid more than $1 million in inflated commissions to a consultant with close ties to company officials, and money was funneled to one of those officials.
“Hewlett-Packard lacked the internal controls to stop a pattern of illegal payments to win business in Mexico and Eastern Europe. The company’s books and records reflected the payments as legitimate commissions and expenses,” said Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit. “Companies have a fundamental obligation to ensure that their internal controls are both reasonably designed and appropriately implemented across their entire business operations, and they should take a hard look at the agents conducting business on their behalf.”
According to the SEC’s order, the scheme involving Hewlett-Packard’s Russian subsidiary occurred from approximately 2000 to 2007. The bribes were paid through agents and consultants in order to win a government contract for computer hardware and software. Employees within the subsidiary and elsewhere raised questions about the significant markup being paid to the agent on the deal and the subcontractors that the agent expected to use. Despite the red flags, the deal went forward without any meaningful due diligence on the agent or the subcontractors.
The SEC’s order finds that bribes involving Hewlett-Packard’s subsidiary in Poland occurred from approximately 2006 to 2010. Acting primarily through its public sector sales manager, the subsidiary agreed to pay a Polish government official in order to win contracts for information technology products and services. The official received a percentage of net revenue earned from the contracts, and the bribes were delivered in cash from off-the-books accounts.
According to the SEC’s order, Hewlett-Packard’s subsidiary in Mexico paid a consultant to help the company win a public IT contract worth approximately $6 million. At least $125,000 was funneled to a government official at the state-owned petroleum company with whom the consultant had connections. Although the consultant was not an approved deal partner and had not been subjected to the due diligence required under company policy, HP Mexico sales managers used a pass-through entity to pay inflated commissions to the consultant. This was internally referred to as the “influencer fee.”
Hewlett-Packard consented to the SEC’s order, which finds that it violated the internal controls and books and records provisions of the Securities Exchange Act of 1934. The company agreed to pay $29 million in disgorgement (approximately $26.47 million to the SEC and $2.53 million to satisfy an IRS forfeiture as part of the criminal matter). Hewlett-Packard also agreed to pay prejudgment interest of $5 million to the SEC and fines totaling $74.2 million in the criminal case for a total of more than $108 million in disgorgement and penalties.
The SEC’s investigation was conducted by David A. Berman and Tracy L. Davis of the FCPA Unit in San Francisco. The SEC appreciates the assistance of the U.S. Department of Justice’s Fraud Section and the U.S. Attorney’s Office for the Northern District of California as well as the Federal Bureau of Investigation, Internal Revenue Service, and Public Prosecutor’s Office in Dresden, Germany.
The Securities and Exchange Commission today charged Hewlett-Packard with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries in three different countries made improper payments to government officials to obtain or retain lucrative public contracts.
Hewlett-Packard has agreed to pay more than $108 million to settle the SEC’s charges and a parallel criminal case announced today by the U.S. Department of Justice.
The SEC’s order instituting settled administrative proceedings finds that the Palo Alto, Calif.-based technology company’s subsidiary in Russia paid more than $2 million through agents and various shell companies to a Russian government official to retain a multi-million dollar contract with the federal prosecutor’s office. In Poland, Hewlett-Packard’s subsidiary provided gifts and cash bribes worth more than $600,000 to a Polish government official to obtain contracts with the national police agency. And as part of its bid to win a software sale to Mexico’s state-owned petroleum company, Hewlett-Packard’s subsidiary in Mexico paid more than $1 million in inflated commissions to a consultant with close ties to company officials, and money was funneled to one of those officials.
“Hewlett-Packard lacked the internal controls to stop a pattern of illegal payments to win business in Mexico and Eastern Europe. The company’s books and records reflected the payments as legitimate commissions and expenses,” said Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit. “Companies have a fundamental obligation to ensure that their internal controls are both reasonably designed and appropriately implemented across their entire business operations, and they should take a hard look at the agents conducting business on their behalf.”
According to the SEC’s order, the scheme involving Hewlett-Packard’s Russian subsidiary occurred from approximately 2000 to 2007. The bribes were paid through agents and consultants in order to win a government contract for computer hardware and software. Employees within the subsidiary and elsewhere raised questions about the significant markup being paid to the agent on the deal and the subcontractors that the agent expected to use. Despite the red flags, the deal went forward without any meaningful due diligence on the agent or the subcontractors.
The SEC’s order finds that bribes involving Hewlett-Packard’s subsidiary in Poland occurred from approximately 2006 to 2010. Acting primarily through its public sector sales manager, the subsidiary agreed to pay a Polish government official in order to win contracts for information technology products and services. The official received a percentage of net revenue earned from the contracts, and the bribes were delivered in cash from off-the-books accounts.
According to the SEC’s order, Hewlett-Packard’s subsidiary in Mexico paid a consultant to help the company win a public IT contract worth approximately $6 million. At least $125,000 was funneled to a government official at the state-owned petroleum company with whom the consultant had connections. Although the consultant was not an approved deal partner and had not been subjected to the due diligence required under company policy, HP Mexico sales managers used a pass-through entity to pay inflated commissions to the consultant. This was internally referred to as the “influencer fee.”
Hewlett-Packard consented to the SEC’s order, which finds that it violated the internal controls and books and records provisions of the Securities Exchange Act of 1934. The company agreed to pay $29 million in disgorgement (approximately $26.47 million to the SEC and $2.53 million to satisfy an IRS forfeiture as part of the criminal matter). Hewlett-Packard also agreed to pay prejudgment interest of $5 million to the SEC and fines totaling $74.2 million in the criminal case for a total of more than $108 million in disgorgement and penalties.
The SEC’s investigation was conducted by David A. Berman and Tracy L. Davis of the FCPA Unit in San Francisco. The SEC appreciates the assistance of the U.S. Department of Justice’s Fraud Section and the U.S. Attorney’s Office for the Northern District of California as well as the Federal Bureau of Investigation, Internal Revenue Service, and Public Prosecutor’s Office in Dresden, Germany.
Thursday, March 6, 2014
COURT ACTS TO STOP FRAUDULENT PYRAMID SCHEME ON FACEBOOK, TWITTER
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission 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. The SEC alleges that Mutual Wealth has been exploiting investors through a website and social media accounts on Facebook and Twitter, falsely promising extraordinary returns of 2 to 3 percent per week for investors who open accounts with the firm. Mutual Wealth purports to invest customer funds using an “innovative” high-frequency trading strategy that allows “capital to be invested into securities for no more than a few minutes.” In classic pyramid scheme fashion, Mutual Wealth encourages existing investors to become “accredited advisors” and recruit new investors in exchange for a referral fee or commission.
According to the SEC’s complaint filed in U.S. District Court for the Central District of California, almost nothing that Mutual Wealth represents to investors is true. The company does not purchase or sell securities on behalf of investors, and instead merely diverts investor money to offshore bank accounts held by shell companies. Mutual Wealth’s purported headquarters in Hong Kong does not exist, nor does its purported “data-centre” in New York. Mutual Wealth also lists make-believe “executives” on its website, and falsely claims in e-mails to investors that it is “registered” or “duly registered” with the SEC. Approximately 150 U.S. investors have opened accounts with Mutual Wealth and collectively invested a total of at least $300,000.
“Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money,” said Gerald W. Hodgkins, an associate director in the SEC’s Division of Enforcement. “Fortunately we were able to quickly trace the fraud overseas and obtain a court order requiring Mutual Wealth to shut down its website before the scheme gains more momentum.”
According to the SEC’s complaint, Mutual Wealth operates through entities in Panama and the United Kingdom and uses offshore bank accounts in Cyprus and Latvia and offshore “payment processors” to divert money from investors. Mutual Wealth’s sole director and shareholder presented forged and stolen passports and a bogus address to foreign government authorities and payment processors.
The SEC alleges that Mutual Wealth leverages the scope and reach of social media to solicit investors with its fraudulent pitch. Mutual Wealth maintains Facebook and Twitter accounts that link to its website and serve as platforms through which it lures new investors. Some of Mutual Wealth’s “accredited advisors” then use social media channels ranging from Facebook and Twitter to YouTube and Skype to recruit additional investors and earn referral fees and commissions. Mutual Wealth’s Facebook page spreads such misrepresentations as “HFT portfolios with ROI of up to 250% per annum. Income yield up to 8% per week.” A Facebook post on Aug. 12, 2013, boasted “$1000 investment into the Growth and Income Portfolio made on April 8th, 2013 is now worth $2,112.77.” Mutual Wealth regularly posts status updates for investors on its Facebook page, and the comment sections beneath the posts are often filled with solicitations by the accredited advisors. Mutual Wealth also tweets announcements posted on its Facebook page.
The SEC’s complaint charges Mutual Wealth with violations of 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 Rule 10b-5. For the purposes of recovering investor money in their possession, the complaint names several relief defendants linked to offshore accounts to which investor funds were diverted from the scheme: Risort Partners Inc., Hullstar Capital LLP, Camber Alliance LLP, Kimrod Estate LLP, and Midlcorp Trade LTD.
The Honorable Dolly M. Gee has granted the SEC’s request for a court order deactivating Mutual Wealth’s website and freezing assets in all accounts at any bank, financial institution, brokerage firm, or third-payment payment processor (including those commercially known as SolidTrust Pay, EgoPay, and Perfect Money) maintained for the benefit of Mutual Wealth.
The SEC’s investigation, which is continuing, has been conducted by H. Norman Knickle and Mark M. Oh and supervised by Conway T. Dodge. The SEC’s litigation will be led by Melissa Armstrong and Mr. Knickle. The SEC appreciates the assistance of the Federal Bureau of Investigation, Financial and Capital Market Commission of Latvia, Ontario Securities Commission, and Cyprus Securities and Exchange Commission.
The Securities and Exchange Commission 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. The SEC alleges that Mutual Wealth has been exploiting investors through a website and social media accounts on Facebook and Twitter, falsely promising extraordinary returns of 2 to 3 percent per week for investors who open accounts with the firm. Mutual Wealth purports to invest customer funds using an “innovative” high-frequency trading strategy that allows “capital to be invested into securities for no more than a few minutes.” In classic pyramid scheme fashion, Mutual Wealth encourages existing investors to become “accredited advisors” and recruit new investors in exchange for a referral fee or commission.
According to the SEC’s complaint filed in U.S. District Court for the Central District of California, almost nothing that Mutual Wealth represents to investors is true. The company does not purchase or sell securities on behalf of investors, and instead merely diverts investor money to offshore bank accounts held by shell companies. Mutual Wealth’s purported headquarters in Hong Kong does not exist, nor does its purported “data-centre” in New York. Mutual Wealth also lists make-believe “executives” on its website, and falsely claims in e-mails to investors that it is “registered” or “duly registered” with the SEC. Approximately 150 U.S. investors have opened accounts with Mutual Wealth and collectively invested a total of at least $300,000.
“Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money,” said Gerald W. Hodgkins, an associate director in the SEC’s Division of Enforcement. “Fortunately we were able to quickly trace the fraud overseas and obtain a court order requiring Mutual Wealth to shut down its website before the scheme gains more momentum.”
According to the SEC’s complaint, Mutual Wealth operates through entities in Panama and the United Kingdom and uses offshore bank accounts in Cyprus and Latvia and offshore “payment processors” to divert money from investors. Mutual Wealth’s sole director and shareholder presented forged and stolen passports and a bogus address to foreign government authorities and payment processors.
The SEC alleges that Mutual Wealth leverages the scope and reach of social media to solicit investors with its fraudulent pitch. Mutual Wealth maintains Facebook and Twitter accounts that link to its website and serve as platforms through which it lures new investors. Some of Mutual Wealth’s “accredited advisors” then use social media channels ranging from Facebook and Twitter to YouTube and Skype to recruit additional investors and earn referral fees and commissions. Mutual Wealth’s Facebook page spreads such misrepresentations as “HFT portfolios with ROI of up to 250% per annum. Income yield up to 8% per week.” A Facebook post on Aug. 12, 2013, boasted “$1000 investment into the Growth and Income Portfolio made on April 8th, 2013 is now worth $2,112.77.” Mutual Wealth regularly posts status updates for investors on its Facebook page, and the comment sections beneath the posts are often filled with solicitations by the accredited advisors. Mutual Wealth also tweets announcements posted on its Facebook page.
The SEC’s complaint charges Mutual Wealth with violations of 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 Rule 10b-5. For the purposes of recovering investor money in their possession, the complaint names several relief defendants linked to offshore accounts to which investor funds were diverted from the scheme: Risort Partners Inc., Hullstar Capital LLP, Camber Alliance LLP, Kimrod Estate LLP, and Midlcorp Trade LTD.
The Honorable Dolly M. Gee has granted the SEC’s request for a court order deactivating Mutual Wealth’s website and freezing assets in all accounts at any bank, financial institution, brokerage firm, or third-payment payment processor (including those commercially known as SolidTrust Pay, EgoPay, and Perfect Money) maintained for the benefit of Mutual Wealth.
The SEC’s investigation, which is continuing, has been conducted by H. Norman Knickle and Mark M. Oh and supervised by Conway T. Dodge. The SEC’s litigation will be led by Melissa Armstrong and Mr. Knickle. The SEC appreciates the assistance of the Federal Bureau of Investigation, Financial and Capital Market Commission of Latvia, Ontario Securities Commission, and Cyprus Securities and Exchange Commission.
Subscribe to:
Posts (Atom)