SEC Charges Microcap Fraudster with Running a Pump-and-Dump Scheme
The SEC charged David Loflin on April 22,2019, for his role in a pump-and-dump scheme in the stock of Greenway Design Group, Inc., a Phoenix, Arizona company that was secretly controlled by David Loflin’s now-deceased business partner.
According to the SEC’s complaint, in 2013, David Loflin helped his business partner gain control of Greenway, using a front company to hide his partner’s identity. David Loflin then created back-dated convertible promissory notes to document debts owed by Greenway that could be repaid with the company’s stock. David Loflin purchased portions of the notes, converted them into stock and prepared all of the paperwork. David Loflin secured false attorney opinion letters in order to obtain stock certificates and deposit them for sale with his brokerage firm. The letters and paperwork contained false and misleading information, meant to give the impression that David Loflin was permitted to sell the shares into the open market.
The complaint also alleges that in 2015 and 2016, David Loflin and his business partner orchestrated a promotional campaign, including blast emails, to tout Greenway shares and pump its stock price and trading volume. This allowed David Loflin to dump his Greenway shares during and after that campaign for about $152,000 in trading proceeds.
Without admitting or denying the allegations of the complaint, David Loflin has consented to the entry of a judgment permanently enjoining him from violating the registration provisions of Sections 5 of the Securities Act of 1933 and the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, barring him from serving as an officer and director of a public company and from participating in any offering of penny stock, and ordering him to pay disgorgement with prejudgment interest and a civil penalty in amounts to be determined by the court.
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