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March 02, 2018 at 09:54 AM
The Securities and Exchange Commission charged three-time recidivist Steven 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 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 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 to enforce that order.
According to the SEC’s 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-dealers 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.
“As alleged in our complaint, Muehler tells small businesses that he runs a successful broker-dealer enterprise that can raise millions of dollars from investors. In truth, Muehler is a repeat securities-law violator who already admitted to defrauding small businesses the last time the Commission brought an enforcement action against him,” Michele Wein Layne, director of the SEC’s Los Angeles regional office, said in a statement.
The SEC 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 complaint seeks permanent injunctions, disgorgement plus interest, and penalties.
Insider Trader to Pay SEC Penalty Three Time His Profits
A former Merck & Co. 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 SEC action.
According to the SEC’s complaint, 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 — sent on Nov. 20, 2014 at 4:04 p.m. — 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 Xie replied to the email approximately six minutes later and acknowledged receiving it. Approximately 14 minutes after he received the Merck attorney’s email, Xie bought 80 shares of Cubist stock. On Jan. 21, 2015, the date the tender offer was completed, Xie sold his Cubist stock and realized illegal profits of approximately 39%.
