SEC Seeks Enforcement Action After Reverse Merger

 

 

Business Lawyer - SEC DefenseThe Securities and Exchange Commission (SEC) filed an action to enforce compliance with document and testimony subpoenas served upon Jessica Gilbertson in an SEC investigation for possible violations of the securities laws captioned In the Matter of Dakota Plains Holdings, Inc. The case reflects a string of recent enforcement cases involving reverse merger issuers. According to the SEC and FBI, reverse mergers are often instruments of fraud and illegal activity by fraudsters.

According to the SEC’s application that was filed on December 10, 2015:

  • Dakota Plains Holdings, Inc. is a Wayzata, Minnesota-based company that became publicly traded as a result of a reverse merger. Prior to the reverse merger, it obtained $9 million in loans from several individuals and entities to whom it issued promissory notes.
  • The promissory notes provided that the noteholders would receive bonus payments based on the average price of the company’s stock in its first 20 days of public trading.
  • Ms. Gilbertson was one of the holders of the promissory notes and a significant Dakota Plains stakeholder.
  • Upon being publicly listed, the stock price of Dakota Plains almost immediately rose to $12 per share on very light volume and stayed at or near $12 per share for almost exactly 20 days. The price then declined gradually and the stock is currently trading under $1. As a result of the stock price during the initial 20-day period, Dakota Plains disclosed that the noteholders were entitled to receive payments of approximately $32.9 million.
  • As part of its investigation, in April 2015, the staff in the SEC’s Chicago Regional Office served an SEC subpoena on Ms. Gilbertson seeking, among other things, documents related to Dakota Plans and transactions in Dakota Plains securities, and served a further SEC subpoena for testimony in September 2015.
  • Despite multiple attempts by SEC staff, Ms. Gilbertson has not complied with the subpoenas, refusing to produce any documents or appear for testimony.The SEC’s application seeks an order from the federal district court compelling Ms. Gilbertson to comply fully with the SEC’s subpoenas.

The SEC is continuing its investigation and, to date, has not concluded that anyone has violated the securities laws.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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