The Securities and Exchange Commission obtained a court order halting an ongoing fraud involving stock in a South Florida-based company that claimed to be developing a revolutionary internet shopping application and raised more than $2.4 million from at least 26 investors nationwide.
The court also approved an emergency asset freeze.
The SEC complaint charges Dragon-Click Corp, its president Isaac Grossman, his wife Adriana Grossman, and her unregistered investment advisor Dragon Management in connection with an ongoing fraudulent offering of Dragon-Click stock and membership interests in Dragon Partners.
The SEC’s complaint alleges that from September 2014 through the filing of the complaint, Dragon-Click and Isaac Grossman solicited investors to purchase Dragon-Click stock, falsely claiming that investors would make huge profits and their money would be used to pay for the development and marketing of Dragon-Click’s internet shopping application.
Instead, according to the complaint, Isaac Grossman and his wife misused at least $1.3 million in investor funds to pay their personal living expenses and to fund their lifestyle, which included funding Isaac Grossman’s gambling habits as well as the purchase of luxury vehicles and jewelry.
Town Officials Who Hid Financial Troubles From Bond Investors Agree to Lifetime Municipal Security Bars
The SEC obtained lifetime bars prohibiting three town officials, who allegedly hid a deteriorating financial situation from investors, from participating in municipal bond offerings.
In addition to the lifetime municipal security bars, the final judgments, entered on June 6, 2018 by the Honorable Cathy Seibel of the U.S. District Court for the Southern District of New York, permanently enjoin Nachman Aaron Troodler, Nathan Oberman and Michael Klein from violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The final judgments order Nathan Oberman to pay $10,000 in civil penalties and Michael Klein to pay $25,000 in civil penalties, and they require Oberman and Klein to resign from their employment with Ramapo, N.Y. and prohibit them, for five and seven years, respectively, from being employed by Ramapo. Oberman and Klein consented to their respective final judgments without admitting or denying the allegations in the SEC’s complaint.
Nachman Aaron Troodler previously pled guilty to criminal charges in the parallel criminal case brought by the U.S. Attorney’s Office for the Southern District of New York.
The SEC’s litigation against Christopher St. Lawrence continues. The SEC is seeking injunctions, financial penalties, and an order prohibiting St. Lawrence from participating in future municipal bond offerings.
The SEC alleges that Ramapo officials resorted to fraud to hide the strain in the town’s finances caused by the approximately $60 million cost to build a baseball stadium as well as the town’s declining sales and property tax revenues. They cooked the books of the town’s primary operating fund to falsely depict positive balances between $1.4 million and $4.2 million during a six-year period when the town had actually accumulated balance deficits as high as nearly $14 million.
And because the stadium bonds issued by the Ramapo Local Development Corp. (RLDC) were guaranteed by the town, certain officials also masked an operating revenue shortfall at the RLDC and investors were unaware the town would likely need to subsidize those bond payments and further deplete its general fund.
CFTC Halts $5.5 Million Precious Metals Fraud
The Commodity Futures Trading Commission (CFTC) filed a civil enforcement action against Omega Knight 2, LLC; its owner and president, Aviv Michael Hen; and Erez Hen. The CFTC’s complaint charges the defendants with fraud and engaging in illegal, off-exchange transactions in precious metals.
The complaint also charges Omega Knight with failing to register with the CFTC as a Futures Commission Merchant (FCM), as required, and alleges that Aviv Hen, as controlling person for Omega Knight, is liable for Omega Knight’s violations of the Commodity Exchange Act.
From March 2013 and continuing through at least June 2017, Omega Knight allegedly engaged in a scheme to defraud customers located throughout the United States in connection with precious metals transactions. According to the CFTC, Omega Knight made numerous false statements to induce customers to enter into leveraged, financed and fully-paid precious metals transactions, and they received at least $5.5 million from at least 90 customers in connection with these transactions.
Rather than use all of the customer funds they collected to purchase metal for their customers’ precious metals transactions, Omega Knight and the Hens allegedly misappropriated customer funds to pay personal expenses, to distribute purported “profits” and disbursements to other customers, and to fund Omega Knight’s operations.
Through the issuance of false trade confirmations and account statements and other communications to customers, the defendants allegedly concealed their misappropriation and the fraudulent scheme.
The CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution, permanent registration and trading bans.
SEC Obtains Preliminary Injunction in Fraudulent ICO Scheme Touting Relationships With the Fed, Disney
The courts 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 SEC complaint 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 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.
SEC Charges Canadian Accountant With Insider Trading
The Securities and Exchange Commission charged a Vancouver-based Chartered Professional Accountant with illegally trading in the securities of a Canadian oil and gas company, using non-public information he obtained while working for a member of the company’s board of directors.
The SEC’s complaint alleges that in May 2016, while working as an accountant and personal assistant for a director of InterOil Corporation, Kurt Bordian received e-mail messages indicating that the company was entering into a merger agreement in which its stock would be acquired at a significant premium.
The complaint alleges that, shortly before the merger announcement, Bordian purchased out-of-the-money InterOil call options with near-term expiration dates, which meant that Bordian stood to profit only if InterOil’s stock price rose significantly shortly after he acquired the options. As alleged in the complaint, following the merger announcement, InterOil’s stock price increased over 37%, and Bordian sold the InterOil options contracts, making illicit profits of $220,500.
Without admitting or denying the allegations in the SEC’s complaint, Bordian consented to the entry of a final judgment that permanently enjoins him from future violations, prohibits him from acting as an officer or director of a public company, and orders him to pay disgorgement of $220,500, prejudgment interest of $14,358, and a civil penalty of $220,500.
Bordian also consented to a Commission order suspending him from appearing or practicing before the Commission as an accountant.
Perpetrators in California-Based Real Estate Investment Scheme Fined $89+ Million
The Securities and Exchange Commission has obtained final judgments against a group of Pasadena, Calif.-based companies at the center of a real estate investment scheme that the agency stopped through an emergency action in 2013.
The final judgments permanently enjoined Velocity Investment Group, Inc.; Bio Profit Series I, LLC; Bio Profit Series II, LLC; Bio Profit Series III, LLC; Bio Profit Series V, LLC; and Rockwell Realty Management, Inc. from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The court’s entry of these final judgments resolves this litigation in its entirety.
The court entered judgments against Yin Nan “Michael” Wang and Wendy Ko, on November 30, 2016, permanently enjoining them from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
The judgments also ordered Wang to pay over $81 million in disgorgement plus $6.5 million in interest, and a civil penalty of $1.5 million, and ordered Ko to pay nearly $1.5 million in disgorgement plus interest, and a civil penalty of $150,000.
Court Fines Insider Trader Over $38K
The U.S. District Court for the District of Oregon entered a consent judgment against Robert Morano, in an insider trading case brought by the SEC.
The SEC charged Morano, a former employee of UTi Worldwide, Inc., with insider trading based on material nonpublic information he learned about the company’s impending acquisition by DSV Air & Sea Holdings A/V.
The SEC’s complaint alleges that Morano obtained more than $38,000 in illegal profits by purchasing shares of UTi prior to the acquisition announcement.
Without admitting or denying the allegations, Morano consented to the entry of a judgment, which ordered him to pay disgorgement of $38,242 and prejudgment interest of $2,317. T
The judgment provides that upon subsequent motion by the SEC the Court will determine issues relating to a civil penalty.