The SEC filed additional charges in a fooball-related boiler room scheme. It also charged a penny stock company CEO and his business partner with defrauding investors and an investor relations executive with insider trading.
In addition, FINRA took action against ConvergEx Execution Solutions for reporting and other failures, and against Gilford Securities for disclosure and other failures.
SEC Charges More in Football-Related Boiler Room Scheme
Football fans and would-be investors might have thought the game was over back in September, when the SEC charged the operators of a South Florida-based boiler room scheme with defrauding seniors and other investors they pressured into purchasing stock in a company that purportedly developed groundbreaking technology for the National Football League to use in the Super Bowl. But they would have been wrong.
Thought Development Inc. (TDI), a Miami Beach-based company, was touted by the boiler room operators, and claimed that its signature invention is a laser-line system that generates a green line on a football field for a first-down marker visible not only on television but also to players, officials and fans in the stadium. The first group of wrongdoers went down, but there was more yet to come.
In another round of charges, the SEC went after four executives who made the scheme possible, as well as the three companies they operate. Brothers Dean Baker of Coral Springs, Florida, and Daniel Baker of Valley Village, California, were charged, along with Bret Grove of Delray Beach, Florida, and Demosthenes Dritsas of Newhall, California. In addition, the SEC also charged DDBO Consulting, DBBG Consulting and CalPacific Equity Group.
Approximately $1.7 million was raised through these companies from more than 110 investors who were told that an IPO in TDI was imminent and that their money would be used to develop the groundbreaking technology.
The four execs and their companies made deals with Peter Kirschner, the mastermind of the original scheme, to solicit investors and sell stock. They lied to investors about TDI and about where the money was going, and pocketed what they didn’t use to hire sales agents to push the stock further.
The defendants have all agreed to settle the SEC’s charges, while Daniel Baker and Dritsas have also entered into plea agreements in criminal cases relating to this action.
In parallel actions, the U.S. Attorney’s Office for the Central District of California announced criminal charges against Daniel Baker and Dritsas, and the U.S. Attorney’s Office for the Southern District of Florida announced criminal charges against Dean Baker and Grove as well as Kirschner and Stuart Rubens. The latter two were charged by the SEC in the initial complaint filed last year. Dean Baker was previously barred from association with any FINRA member firm in 2006.
Penny Stock CEO, Con Artist Charged with Investor Fraud
The SEC has charged Lex Cowsert, the CEO of penny stock company CytoGenix and his business partner Christopher Plummer with defrauding investors via false press releases.
According to the agency, the pair used those releases to portray CytoGenix as a successful company that developed vaccines, when it was actually on the skids.
The releases touted CytoGenix with extravagant claims about the microcap company’s revenue and other benefits flowing from a “shared revenue agreement” with Franklin Power & Light, an electricity provider supposedly operated by Plummer. But Franklin was a sham, and CytoGenix had actually lost all of its vaccine patents and other intellectual property in a lawsuit.
To make matters worse, Plummer and Cowsert stole proceeds from CytoGenix stock offerings that they told investors would be used for energy production projects and other corporate purposes.
Cowsert took $91,000 in cash, telling investors to make checks out to him personally. He then put the checks into his personal bank account and paid personal expenses with the proceeds. Not to be outdone, Plummer defrauded a shareholder out of more than 6.5 million free-trading shares of CytoGenix stock.
Plummer also ran a similar but separate scheme around the same time in 2010. This one also involved a microcap company that also sent out a flurry of press releases filled with bogus information.
Among the faked claims were another deal with Plummer’s phony power company, this time to own and operate solar energy farms across the country. That microcap issuer was financially in the suds and couldn’t financially or logistically come up with any kind of product, certainly not launch full-scale energy farms. To this day it has no operations, customers or revenues.
Trading in both CytoGenix and the other microcap company was suspended in 2011 as part of a mass suspension. Plummer is already serving a multiyear federal prison term for yet another fraud unrelated to either of these, and has two prior fraud convictions.
The SEC seeks permanent injunctions along with disgorgement, prejudgment interest, financial penalties, and orders barring Plummer and Cowsert from acting as officers or directors of a public company and from participating in a penny stock offering. The investigation is continuing.
Investor Relations Executive Charged with Insider Trading
The SEC has charged Kevin McGrath, a partner at a New York-based investor relations firm, with insider trading on confidential information he learned about two clients while he helped prepare their press releases.