More than two years ago, we published the first in a series of articles about problems surrounding the declaration and payment of a special dividend by penny stock issuer, Calissio Resources Group, Inc. (CRGP). We followed up with a second and third article as legal actions brought by COR Clearing, LLC against a growing number of parties were filed. By the summer of 2016, the Calissio case had become difficult to follow, since access to nearly all the court pleadings was restricted to participants in the case; the judge had agreed to the restrictions in part because those filings contained sensitive trading records naming owners of CRGP stock.
The story began on June 16, 2015, when Calissio, a purported mining company that claimed to own properties in Mexico, declared two stock dividends. One was to be a small stock dividend; the other a large cash dividend that would pay $0.011 a share, or a total of about $1.3 million. The record and pay dates for both were the same, June 30 and August 17, respectively. As we explained in our earlier articles, although the company described the cash dividend as a regular quarterly distribution, at all times between the declaration date and the ex dividend date it qualified as a special dividend: one more than 25 percent of the value of CRGP’s stock.
Special dividends differ from regular dividends in one significant way: the ex-dividend date is set after, not before, the record date. The record date is fixed by the issuer. Only shares outstanding as of that time will qualify for the dividend payment. The ex date is the first day on which the stock will trade without the dividend, and is set for one day after the pay date. The pay date, like the record date, is set by the company. The ex date is set by the Financial Industry Regulatory Authority (“FINRA”); in this case it was two days, not one, after the pay date of August 17. Read More
The Securities and Exchange Commission charged Ibrahim Almagarby and his company with acting as unregistered dealers in the sale of billions of shares of numerous penny stock issuers.
The SEC’s complaint, filed in federal district court in south Florida, alleges that, beginning in January 2013, Ibrahim Almagarby and his company, Microcap Equity Group LLC (MEG), engaged in a business that purchased aged penny stock issuer debts. After converting the debts into equity, they sold the resultant shares into the market. At the time of this conduct, the complaint alleges that neither Ibrahim Almagarby nor MEG were registered with the SEC as a dealer and Almagarby was not associated with a registered broker or dealer. Through these activities, Ibrahim Almagarby and MEG purchased over $1.1 million of aged debts of 39 microcap issuers and sold into the market over 7.4 billion shares generating over $1.4 million in ill-gotten gains. Read More
On November 21, 2017, the Securities and Exchange Commission (“SEC”) announced Oyster Bay, New York, and its former top elected official with defrauding investors in the town’s municipal securities offerings by hiding the existence and potential financial impact of side deals with a businessman who owned and operated restaurants and concession stands at several town facilities.
According to the SEC’s complaint filed in U.S. District Court for the Eastern District of New York, Oyster Bay agreed several years ago to indirectly guarantee four separate private loans to the vendor totaling more than $20 million. The agreement to indirectly guarantee the debts allegedly stemmed from the concessionaire’s longstanding close relationship with then-town supervisor John Venditto and other officials that involved gifts, bribes, kickbacks, and political support. Read More
On November 20, 2017, the Securities and Exchange Commission (“SEC”) announced the agenda and panelists for the 36th Annual Government-Business Forum on Small Business Capital Formation.
The November 30 Small Business event will begin at 9 a.m. Central Standard Time (10 a.m. Eastern Standard Time) with opening remarks from the SEC Chairman and Commissioners followed by a morning panel discussion that will explore how capital formation options are working for small businesses. Panelists will include representatives of Texas-based small businesses and advisors to the small business community. Read More
On November 20, 2017, the Securities and Exchange Commission (“SEC”) announced that Paul G. Cellupica has been named Deputy Director of the agency’s Division of Investment Management. Mr. Cellupica will oversee a number of the division’s strategic, rulemaking, and industry engagement initiatives.
“Paul Cellupica’s extensive experience and knowledge of investor needs, and understanding of how the Commission and its staff operate, will be tremendous assets to the agency during a critical period of change and evolution in the investment management industry,” said Ms. Blass. “He is committed to advancing the SEC’s regulatory priorities in a thoughtful and strategic way, in order to promote the long-term interests of investors.” Read More
On October 27, 2017, Randall James, Nashville, Tennessee resident, who isn’t registered to sell investments, has agreed to settle charges that he defrauded investors in his company Global Maximus Productions, which purportedly produced pay-per-view entertainment and concerts.
The SEC alleges that Randall James promised investors significant profits and a return of their principal within a short period of time, claiming he would use their money to produce concerts and other events that would be live-streamed online and generate profits. According to the SEC’s complaint, James instead spent investor funds on his personal living expenses, including personal meals, housing, and payments to his ex-wife. Read More
On November 2, 2017, the Securities and Exchange Commission (“SEC”) charged Osiris Therapeutics, a Maryland-based biotech company, and four former top executives with prioritizing revenue growth over lawful accounting and misleading investors in the process.
The SEC alleges that Osiris Therapeutics routinely overstated company performance and issued fraudulent financial statements for a period of nearly two years. According to the SEC’s complaint, the company improperly recognized revenue using artificially inflated prices, backdated documents to recognize revenue in earlier periods, and prematurely recognized revenue upon delivery of products to be held on consignment. Osiris Therapeutics and its executives also allegedly used pricing data that they knew was false and attempted to book revenue on a fictitious transaction, among other accounting improprieties. Read More
On October 31, 2017, the Securities and Exchange Commission (“SEC”) announced that the SEC filed an action to enforce compliance with a document subpoena issued and served upon Wynn Gustafson in an SEC investigation captioned In the Matter of WAG Trading and Investments Company LLC.
As set forth in the SEC’s papers, Wynn Gustafson is the President of WAG Company LLC, formerly known as WAG Trading and Investment Company LLC (“WAG Trading”). According to documents produced to the SEC, WAG Trading is in the business of conducting international transactions buying, selling, and redeeming so-called “historical bonds” in China, Hong Kong, Ghana, Singapore, and Germany. As set forth in the SEC’s papers, “historical bonds” are often used to perpetuate fraudulent schemes. Read More
On October 31, 2017, Thomas Buck, former Merrill Lynch broker, has agreed to pay more than $5 million to settle SEC charges that he fraudulently schemed to increase his personal income by obtaining excessive commissions and fees from investors.
According to the SEC’s complaint, Merrill Lynch paid financial advisors a portion of the commissions, fees, or other revenue they generated in customer and client accounts. The SEC alleges that Thomas Buck represented to certain customers with commission-based accounts that the total annual commissions they paid would not exceed certain limits, and then he traded in those accounts and generated commissions that exceeded the amounts he promised. Read More
On October 11, 2017, the Securities and Exchange Commission (“SEC”) announced fraud charges against JustInfo LLC, a Kentucky-based entity, a California-based tax preparer who solicited investors on behalf of the entity, and the entity’s majority owner, for lying to investors in a futures trading scheme.
According to the SEC’s complaint, JustInfo LLC pooled investor funds for the ostensible purpose of trading futures contracts. The complaint alleges that David Weddle, the majority owner of JustInfo, and Scott Allensworth, doing business as Capital Growth Group Associates, raised at least $2.84 million from at least 57 investors by selling investment contracts. The complaint further alleges that throughout the period of the offering, Weddle and Allensworth stole at least $1 million for their own use and to make payments of purported returns to prior investors in classic Ponzi-fashion. Weddle allegedly created false trading reports, which Allensworth sent to investors, to cover up JustInfo’s trading losses and maintain the appearance that the investment was profitable. Read More