6 Charged for Violating Antifraud Provisions of the Federal Securities Laws
On February 16, 2016, the Securities and Exchange Commission (SEC) charged PV Enterprises, Inc. (“PVEC”) and Panagiotis Villiotis (“Villiotis”) with violations of the registration and antifraud provisions of the federal securities laws. The SEC also charged Virtual Sourcing, Inc. (“Virtual”), Norman Birmingham (“Birmingham”), Mario Faraone (“Faraone”) and Sweet Challenge LLC (“Sweet Challenge”) with violations of the registration provisions of the federal securities laws.
PVEC and Virtual are both microcap stock companies who entered into business transactions with a specific Financing Company in Miami, which resulted in the companies issuing millions of shares of their companies’ stock to the Financing Company in purported reliance on an exemption from registration which exempts securities issued in court-approved exchanges for “bona fide outstanding securities, claims or property interests.”
The SEC’s complaint, filed in federal court in Florida, alleges that:
- PVEC and Virtual sold outstanding debt liabilities to the Financing Company; the Financing Company then sued PVEC and Virtual in separate actions in a Florida state court for defaulting on their respective obligations; and the parties settled the actions by requesting the state court allow PVEC and Virtual to pay the Financing Company in company shares that would be exempt from registration pursuant to Section 3(a)(10) of the Securities Act of 1933 (“Securities Act”).
- In seeking the Florida state court’s approvals, both PVEC and Virtual made material misstatements and withheld significant information, thereby rendering the Section 3(a)(10) exemption unavailable for any stock issuances to the Financing Company.
- Specifically, PVEC lied to the Florida state court by misrepresenting that the underlying claims sold to the Financing Company were bona fide, when in fact the claims were fabricated by PVEC. PVEC also misrepresented that none of the money received by its purported creditors would be kicked back to PVEC, when in fact a majority of the money received by the purported creditors was kicked back to PVEC and Villiotis.
- Virtual misrepresented that it and its creditor, Sweet Challenge, were not under common control of Birmingham, and also misrepresented that funds received by Sweet Challenge would not be kicked back to Virtual and to Virtual employees, including Faraone.
The complaint alleges that PVEC and Villiotis violated Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. It further alleges that PVEC, Villiotis, Virtual, Birmingham, Faraone and Sweet Challenge all violated Sections 5(a) and 5(c) of the Securities Act. The SEC seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest thereon, and civil penalties against all defendants. It also seeks penny stock bars against Villiotis, Birmingham and Faraone and seeks an officer and director bar against Villiotis. The SEC’s investigation is continuing.
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.