The Securities and Exchange Commission (SEC) on September 22, 1015, filed fraud charges against Eldrick Woodley, a Houston-based investment advisor, for the embezzlement of more than $147,000 in client capital.

According to the SEC’s complaint, filed in the U.S. District Court for the Southern District of Texas, Houston Division, Woodley, doing business as the advisory firm Woodley & Co. Wealth Strategies, undertook a fraudulent scheme to steal money from his advisory clients. The SEC claims that to perpetrate his scheme, Woodley submitted a series of fraudulent fee invoices to the custodian of his clients’ accounts to collect funds from various clients, allegedly as indemnity for services that Woodley implemented and investments he made on his clients’ behalf. Read More

The Securities and Exchange Commission (SEC) on September 28, 2015 charged Tokyo-based conglomerate Hitachi, Ltd. with violating the Foreign Corrupt Practices Act (FCPA) when it falsified documents regarding payments to South Africa’s ruling political party connected with contracts to construct two multi-billion dollar power plants.

Hitachi has agreed to pay $19 million to settle the SEC charges.

The SEC alleges that Hitachi sold a 25% stake in a South African subsidiary to a company serving as a front for the African National Congress (ANC). This arrangement gave the front company and the ANC the ability to share in the profits from any power station contracts that Hitachi secured. Hitachi was ultimately awarded two contracts to build power stations in South Africa and paid the ANC’s front company approximately $5 million in “dividends” based on profits derived from the contracts. Through a separate, undisclosed arrangement, Hitachi paid the front company an additional $1 million in “success fees” that were inaccurately booked as consulting fees without appropriate documentation. Read More

The Securities and Exchange Commission (SEC) announced on September 25, 2015 that on September 24, 2015, a jury in federal district court in Chicago, Illinois, returned a verdict finding Ralph J. Pirtle and Morando Berrettini responsible for insider trading in the stocks of three companies: Lifeline Systems, Inc., Invacare, Inc., and Intermagnetics Corporation.

The SEC’s first amended complaint, which was filed in March 2010, alleged that Pirtle, the former Director of Real Estate for a subsidiary of Royal Philips, NV, (“Philips”), tipped his friend and business associate, Morando Berrettini, about Philips’ plans to acquire the three separate companies in late 2005 and early 2006. On each occasion, following the tip, Berrettini purchased shares in the companies. According to the SEC’s complaint, Berrettini made profits of approximately $240,000 on his trades. Read More

The Securities and Exchange Commission (SEC) filed a civil injunctive action on September 25, 2015, in the United States District Court for the District of Colorado relating to the fraudulent offer and sale of stock in GenAudio, Inc. The SEC charged GenAudio, Inc. (“GenAudio”), a Colorado corporation, its corporate successor in interest, Astound Holdings, Inc. (“Astound”), a Delaware corporation, and GenAudio’s founder and chief executive officer, Taj Jerry Mahabub, a resident of Broomfield, Colorado, with the fraudulent and unregistered offer and sale of more than $6.8 million in GenAudio stock.

According to the SEC’s complaint, from approximately March 2010 through April 2012, GenAudio raised more than $4.5 million in two private placements of its common stock based in large part on representations that Apple, Inc. (“Apple”) planned to acquire GenAudio or enter into lucrative licensing agreements to incorporate its technology across Apple’s products worldwide.
The SEC’s complaint alleges that GenAudio and Mahabub told prospective investors that Apple’s senior management advocated acquiring GenAudio’s technology, and that a third party had valued GenAudio’s technology at more than $1 billion. However, according to the SEC allegations, GenAudio had only demonstrated its technology and had technical discussions with mid-level Apple personnel, none of whom had indicated that Apple was interested in a transaction with GenAudio. The SEC further claims that during the scheme, Mahabub falsified documents and pocketed more than $2.3 million through his offer and sale of his personal stock in GenAudio. Read More

On September 24, 2015 the Securities and Exchange Commission (SEC) charged six men, including a father and three sons, with securities fraud associated with Gerova Financial Group Ltd., whose shares once traded on the New York Stock Exchange. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against the six regarding the fraud. Those charged are Jason Galanis, his father John Galanis, brothers Derek Galanis and Jared Galanis, along with Gerova president and chairman Gary Hirst and investment adviser Gavin Hamels. Jason Galanis is a securities fraud recidivist who was charged by the SEC in 2007 and his father, John Galanis, has been a defendant in several SEC enforcement actions dating back to the early 1970s, including actions that involved securities fraud.

The SEC complaint alleges that in early 2010, Jason Galanis and Hirst orchestrated a scheme to secretly issue $72 million of unrestricted Gerova shares to a Galanis family friend in Kosovo. According to the complaint, Jason Galanis, his father, and his brothers directed sales of the shares from the Kosovo friend’s brokerage accounts and had the proceeds wired to them and their associates who collectively realized at least $16 million in illicit earnings. Read More

On October 1, 2015, the Securities and Exchange Commission (“SEC”) announced it had frozen the assets and filed fraud charges against the operator of a worldwide pyramid scheme who falsely promised investors that they would profit from a venture allegedly backed by the company’s enormous amber holdings.

The SEC’s complaint stated that California resident Steve Chen and 13 California-based entities, including USFIA Inc. (“USFIA”), are at the center of the purported scheme. According to the complaint, since at least April 2013, USFIA and Chen’s other entities have raised more than $32 million from investors in and outside the United States. Allegedly, Chen and his companies misled investors about claims to own or control amber deposits worth billions of dollars in a lucrative initial public offering for USFIA that never happened.

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The Financial Industry Regulatory Authority (FINRA) announced today that it has expelled Halcyon Cabot Partners, Ltd., and barred Chief Executive Officer Michael Morris and Chief Compliance Officer Ronald Heineman from the securities industry, for securities fraud, sales practice abuses, and widespread supervisory and anti-money laundering failures. FINRA found that Halcyon, Morris and Heineman engaged in a scheme to conceal a kickback of private placement fees.

FINRA’s investigation found that Halcyon, Morris and Heineman, along with a previously barred registered representative, Craig Josephberg, agreed to conceal the discount the issuer provided to a venture capital firm when it purchased a private placement in a cancer drug development company. The scheme was effected through a bogus placement fee agreement that was entered into after the venture capital firm had already agreed to purchase the entirety of the offerings. Halcyon did not perform any work, as there was already a buyer in place, but rather returned almost all of its $1.75 million placement fee to the investor through sham consulting agreements. This fraudulent scheme allowed the drug company to conceal that it was selling its shares at a discount. Read More

On September 8, 2015, Judge Alvin Thompson of the U.S. District Court for the District of Connecticut entered a judgment against Joseph Apuzzo, former Chief Financial Officer of Terex Corporation. Apuzzo consented, without admitting or denying the allegations in the SEC’s complaint, to be permanently enjoined from violation of Sections 10(b) and 13(b)(5) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5 and 13b2-1 thereunder, and from aiding and abetting violation of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rule 13a-1 thereunder, and to pay a penalty of $100,000.

Upon motion by the SEC, Judge Thompson will determine whether to impose an officer and director bar against Apuzzo. Apuzzo, who was a Certified Public Accountant at the time of the alleged fraudulent conduct, has further agreed to the entry of an SEC order suspending him from appearing as an accountant before the SEC, with a right to apply for reinstatement after five years. The SEC issued such an Order on September 16, 2015. Read More

On Thursday, September 3, 2015, United States District Court Judge Denis R. Hurley of the United States District Court for the Eastern District of New York issued an order and judgment imposing relief against Defendant Anthony Knight, the former Chairman of failed Long Island-based internet startup, iShopNoMarkup.com, Inc.

Judge Hurley ordered Knight to pay $2.3 million in disgorgement, over $2.5 million of prejudgment interest, and a $330,000 civil penalty.  Read More

On September 23, 2015, the Securities and Exchange Commission (SEC) charged a consultant and his friend with insider trading in the options of P.F. Chang’s China Bistro based on nonpublic information about an impending acquisition offer.

The SEC claims that Richard G. Condon, a consultant to Panda Restaurant Group, tipped Jonathan Ross with confidential details about the bidding process for P.F. Chang’s that he learned while providing executive coaching services to Panda’s top management executives. Panda was involved in the bidding process, but did not ultimately make a tender offer for P.F. Chang’s. Read More

Posted By the Going Public Attorneys

On September 24, 2015, the Securities & Exchange Commission (SEC) announced a new resource on its website that is designed to enhance transparency by providing information about the SEC proposals and rulemaking in a single location. The SEC’s new online resource will streamline information making it easier for investors and market participants to follow specific rules or rulemaking programs.

The SEC’s new page provides links to releases concerning SEC rulemaking activity, including concept releases, proposed rules, final rules, interpretive releases, and policy statements.  It also links to announcements concerning SRO rulemaking, PCAOB rulemaking, instructions for Exchange Act Exemptive Applications, other SEC notices, and public petitions for rulemaking submitted to the SEC.   Read More

The Securities and Exchange Commission (SEC) announced on September 22, 2015 that the Honorable Paul A. Crotty of the United States District Court for the Southern District of New York has entered an Order approving a stipulation and agreement between the SEC and defendants Enrico Dallavecchia, the former Chief Risk Officer of Fannie Mae, and Thomas Lund, Fannie Mae’s former Senior Vice President and head of its single-family guarantee business.

The Order resolves the SEC’s case against defendants Dallavecchia and Lund deriving out of the respective parts each had in Fannie Mae’s disclosure of its exposure to subprime and reduced documentation mortgage loans between December 6, 2006 and August 8, 2008. Read More

On September 21, 2015 the Securities and Exchange Commission (SEC) charged two men behind a scheme that defrauded investors in YaFarm Technologies Inc., a company that purported to provide stem cell therapy.

The SEC’s complaint filed in federal court in Boston charged Frank Morelli III, of Florence, Colorado, and Louis Buonocore, of Woburn, Massachusetts, for their roles in the alleged scheme. In a parallel case, the U.S. Attorney’s Office for the District of Massachusetts filed a criminal information against Buonocore on September 21, 2015.

According to the SEC’s complaint, Morelli and Buonocore concealed their ownership of virtually all of YaFarm’s stock, secretly controlled its operations, and paid stock promoters in 2013 to tout it as a legitimate company with growing operations. The SEC also alleges that the two caused YaFarm to issue materially false and misleading information about business developments that did not exist, including a March 2013 press release announcing an insinuated partnership with the Integrative Stem Cell Institute. Read More

On September 15, 2015, the Securities and Exchange Commission (SEC) charged a microcap issuer, The Mobile Star Corporation, and its CEO George Ivakhnik, with defrauding investors by issuing false press releases about the company’s business and prospects.

The SEC claims that shortly after Ivakhnik became CEO of the company in the spring of 2012, he began concocting and issuing press releases that had no factual basis. These press releases portrayed a company with considerable financial acumen and resources actively engaged in a wide variety of business ventures including: a ski resort, the manufacture of karaoke booths, the funding of an “event center” in Long Beach, California, and an agreement with a “major higher education institution” to provide financial consulting expertise” and to help “restructure and secure financing.” Read More

On September 17, 2015, the Securities and Exchange Commission (SEC) announced that on September 16, 2015, the federal court in Boston, Massachusetts, entered a final judgment against defendant Julio Cruz of Duluth, Georgia, a defendant in a previously-filed actio. On February 2015, the (SEC) charged two Portuguese companies operating under the name Wings Network, plus three company officers and 12 promoters of Wings Network, including Cruz, with carrying out an international pyramid scheme targeting Latino communities in the U.S.

In settling the SEC’s charges, Cruz confessed that he was a promoter of defendants Tropikgadget Unipessoal LDA and Tropikgadget FZE, which operated under the name Wings Network, appearing in promotional videos on the internet and traveling to several states, including Texas, during 2014 to present at Wings Network promotional events. Cruz also confessed that while in Texas he solicited friends to attend a Wings Network presentation given by Wings Network principal Carlos Barbosa, who lauded the Wings Network opportunity. Barbosa is also a defendant in the SEC’s enforcement action. Read More

The Securities and Exchange Commission (SEC) announced on September 16, 2015 that Chief Judge Gregory M. Sleet of the United States District Court for the District of Delaware entered a final default judgment against Defendant James Meagher on September 14, 2015 in SEC v. Dynkowski, et al., Civil Action No. 1:09-361, a penny stock manipulation case the SEC filed on May 20, 2009.
The SEC’s complaint alleged that Meagher engaged in a market manipulation scheme involving the stock of Xtreme Motorsports of California, Inc., which made about $257,000 in illegitimate earnings. Read More

The Securities and Exchange Commission (SEC) announced on September 18, 2015 charges against Robert DeWayne Milligan, who was president of a California-based business known as America’s Natural Energy (“ANE”), for engaging in the fraudulent offering of unregistered securities.

According to the SEC’s complaint filed in the U.S. District Court for the Central District of California, from at least May 2010 through May 2014, Milligan raised over $1.3 million from approximately 39 investors in multiple states for ANE, which he represented to be a business engaged in oil and gas exploration in the Williston Basin of North and South Dakota. According to the complaint, ANE was, in reality, primarily a scheme that Milligan used to fund his personal lifestyle, which included cash withdrawals, gambling, travel, and shopping. Read More

The Securities and Exchange Commission (SEC) announced that, on September 18, 2015, Eric McPhail was sentenced to 18 months in prison and two years of supervised release for his role in an insider trading ring that traded inside information about Massachusetts-based American Superconductor Corporation. McPhail had previously been found guilty by a jury of criminal charges of conspiracy and securities fraud for his conduct. The criminal charges against McPhail arose out of the same conduct that is the subject of a civil insider trading action filed by the SEC against McPhail and others in July 2014.

The U.S. Attorney’s Office for the District of Massachusetts indicted McPhail and another defendant, Douglas Parigian, in a Superseding Information dated May 11, 2015, related to the insider trading ring. The Information charged that McPhail had a history, pattern and practice of sharing confidences with an individual who had material, nonpublic information concerning American Superconductor’s quarterly earnings and other business activities (the “Inside Information”). This individual provided McPhail with the inside information with the understanding that it would be kept confidential. Read More

On September 8, 2015, the Securities and Exchange Commission (“SEC”) initiated public cease-and-desist proceedings pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”) against Ditto Holdings, Inc. (“Ditto Holdings”). In anticipation of the institution of these proceedings, Ditto Holdings submitted an Offer of Settlement (the “Offer”) which the SEC accepted.

Ditto Holdings owns 100% of Ditto Trade, Inc. (“Ditto Trade”), which purports to be a “first-of-its-kind social brokerage firm.” Since July of 2010, Ditto Trade has been registered with the SEC as a broker-dealer pursuant to Section 15 of the Exchange Act.

From April 2009 to September 2013, Ditto Holdings raised approximately $10 million from more than two hundred investors located throughout the United States through a series of common and preferred stock offerings which were purportedly exempt from the SEC’s registration provisions.

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On September 17, 2015 the SEC imposed sanctions against a Florida based CPA for producing deficient and fraudulent audits and quarterly reviews for eight publicly traded companies, issuing false and misleading audit opinions on the companies’ annual financial statements.

Terry L. Johnson, of Casselberry, Florida, agreed to settle the SEC charges on fraud and will be suspended from practicing as an accountant on behalf of any publicly traded company or other entity regulated by the SEC.

During the investigation, the Commission discovered that following his release from prison, convicted felon and former certified public accountant Stephen P. Corso, of Encinitas, California, served as the Chief Financial Officer of several publicly-traded companies, including Primco Management, Inc., one of Johnson’s audit clients.  Corso signed Primco’s annual and quarterly financial reports and certifications filed with the SEC using the alias names “Steven J. Corso” or “Steven John Corso”. Corso was barred in 2009 from appearing and practicing before the SEC as an accountant due to his felony conviction for wire fraud and attempted tax evasion.  Corso is also alleged to have solicited business on the false pretense that he was an “SEC Consultant and Attorney.” Corso acquired more than $460,000 in illegal profits generated from his violation of the prior SEC order.

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We recently wrote about a bungled dividend distribution made by Calissio Resources Group, Inc. (CRGP) that resulted in the imposition of a U3 “extraordinary event” trading halt by the Financial Industry Regulatory Authority (“FINRA”).  The halt was lifted two weeks later.  FINRA offered no explanation for the action.  U3 halts are rare for domestic issuers, and usually have to do with problems, actual or potential, with clearance and settlement.

On September 16, 2015, FINRA applied a U3 halt to another OTC issuer, SWK Holdings Corporation (SWKH).  The action came a little more than 20 minutes into the trading session, at 9:53 a.m.  Once again, shareholders were left wondering what had happened, but they didn’t have to wonder for long:  FINRA quickly furnished a UPC advisory addressing the reasons for the halt.  The regulator stated that it had been brought “because of issues related to perceived post-split trading and subsequent price adjustments,” adding that “members are reminded to observe Ex-Dividend dates announced by FINRA on the Daily List.”

While that may have seemed opaque to some, a quick look at recent SEC filings made by SWKH clarified what the regulator meant.  More than two hours before the bell, the company posted a Form 8-K to Edgar, in which it explained that “the previously disclosed 1-for-100 reverse stock split of its common stock, immediately followed by a 10-for-1 forward stock split of its common stock was executed effective as of 5:00 p.m. on September 15, 2015. Beginning with the opening of trading on September 16, 2015, the Company’s common stock will trade on OTC Markets on a post-split basis…” Read More

FINRA Rule 2040 became effective late last month and has the potential to provide increased transparency in EB-5 Offerings. Rule 2040 requires broker-dealers who sell securities in EB-5 offerings to disclose finder’s fees paid to non-registered foreign persons and receive written acknowledgement from the investors that such fees were disclosed to them. FINRA Rule 2040 also limits the circumstances under which a foreign person may be paid a finder’s fee.

FINRA only permits broker-dealers to pay transaction based compensation to non-registered foreign finder if  the finders’ activity is limited to an initial referral, and the broker-dealer complies with the following requirements:

1. the broker-dealers has assured itself that the finder who will receive the compensation is not required to register in the U.S. as a broker-dealer nor is subject to a disqualification as defined in Article III, Section 4 of FINRA’s By-Laws, and has further assured itself that the compensation arrangement does not violate applicable foreign law;
2. the finder is non U.S. citizen or foreign entity domiciled outside the U.S.;
3. the investors are non U.S. citizens or foreign entities domiciled abroad transacting business in either foreign or U.S. securities;
4. investors are given a disclosures, similar to those required by Rule 206(4)-3(b) of the Investment Advisers Act of 1940, that disclose what compensation is paid to finders;
5. investors provide written acknowledgment to the broker-dealers of the existence of the finder’s fee agreement and the acknowledgment is retained by the broker-dealer and made available for inspection by FINRA;
6. records reflecting payments made to finders are maintained on the broker-dealer’s books, and written agreements between the broker-dealers and the finder are available for inspection by FINRA; and
7. the confirmation of each investment indicates that a finders fee is being paid pursuant to the written agreement between the finder and the broker-dealer.

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On September 2, 2015, the Financial Industry Regulatory Authority (FINRA) issued an investor alert warning about investor relations activity and stock promotions sent through popular messaging applications (Apps) such as WhatsApp. These messaging Apps allow users to almost instantly exchange messages which makes them appealing tools for scammers engaged in pump and dump schemes seeking to trick investors.

According to FINRA’s investor alert, scammers use messaging apps to transmit spam messages that promote penny stocks or microcap stocks. They used spam activity disseminated over WhatsApp as an example. Recently, WhatsApp users were flooded with text messages touting Avra, Inc. (AVRN), a penny stock. The App messages appeared to be sent from individuals at well-known brokerage firms. Using only a first name (“Hi it’s Will at XYZ firm…”), the text would talk up the stock. One WhatsApp message claimed AVRN was “going to double in the next few days.” Another said it “is going up 300% next week.”

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For penny stock enthusiasts looking for a little late-summer entertainment, the issues surrounding an extremely large special dividend distributed by Calissio Resources Group, Inc. (CRGP) have proved to be of unusual interest.  On June 16, 2015, the company announced that its board had approved a “quarterly cash and stock dividend.”  It went on to explain that the cash dividend would have a value of approximately $1.3 million, or $0.011 a share, and would be accompanied by a “special stock dividend of 3%” (of what?).  The record date would be June 30, and the pay date would be 17 August.  Not much is clear about the proposed transactions, except that CRGP’s management may have failed to understand how dividends work.  Or, in the view of at least one clearing firm, it may have understood all too well.  On June 16, CRGP closed at $0.021, giving it a market cap of $2.7 million, based on its claimed 129 million shares outstanding.

On June 30, the record date, the stock closed at $0.009, giving it a market cap of $1.2 million.  Either way, the proposed cash dividend would have been a special dividend, as it would be worth more than 25 percent of the value of the company’s stock.  No matter what date the company had in mind—the declaration date of June 16 or the record date of June 30—the cash dividend would be a special, not a regular, dividend.  Special dividends are governed by different rules.  The most important difference for the purposes of this discussion is that for regular dividends, the ex-dividend date—the date on which the stock begins to trade without the dividend attached—is set for two days before the record date.  For special dividends, the ex date is deferred until one business day after the pay date.  Therefore, anyone holding CRGP stock through 18 August would qualify to receive the cash dividend. Read More

On September 8, 2015, the Securities and Exchange Commission (SEC) charged a sports supplements and nutrition company with committing a series of accounting and disclosure violations, including the failure to properly report perks provided to its executives as compensation. MusclePharm Corporation agreed to settle the charges along with three current or former executives and the company’s former audit committee chair who were found to have been involved in various aspects of the company’s misconduct.

An SEC investigation found that MusclePharm omitted or understated nearly a half-million dollars’ worth of perks bestowed upon its executives, including approximately $244,000 paid to CEO Brad Pyatt related to automobiles, apparel, meals, golf club memberships, and his personal tax and legal services.  Even after the company began an internal review of undisclosed executive perks and then-audit committee chair Donald Prosser became directly involved in the process, MusclePharm continued filing financial statements that failed to disclose private jet use, vehicles, and golf club memberships for its executives. Read More

On September 8, 2015, the Securities and Exchange Commission (“SEC”) announced that Bankrate Inc. has agreed to pay $15 million to settle accounting and securities fraud charges. Three former executives also are charged in the case that involves fraudulent manipulation of the company’s financial results to meet analyst expectations.

The Commission alleges that Bankrate’s then-CFO Edward DiMaria, then-director of accounting Matthew Gamsey, and then-vice president of finance Hyunjin Lerner engaged in a scheme to fabricate revenues and avoid booking certain expenses in order to meet analyst estimates for two key financial metrics: adjusted earnings per share as well as adjusted earnings before interest, taxes, depreciation, and amortization. Bankrate consequently overstated its second quarter 2012 net income. Bankrate’s stock rose when the company announced the inflated financial results, and DiMaria allegedly proceeded to sell more than $2 million in company stock.

Lerner agreed to pay more than $180,000 to settle the Commission’s charges, while the litigation continues against DiMaria and Gamsey.

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On September 9, 2015, the Securities and Exchange Commission (SEC) announced fraud charges against three traders accused of repeatedly lying to customers relying on them for honest and accurate pricing information about residential mortgage-backed securities (RMBS).

The SEC alleges that Ross Shapiro, Michael Gramins, and Tyler Peters defrauded customers to illicitly generate millions of dollars in additional revenue for Nomura Securities International, the New York-based brokerage firm where they worked. They misrepresented the bids and offers being provided to Nomura for RMBS as well as the prices at which Nomura bought and sold RMBS and the spreads the firm earned intermediating RMBS trades. They also trained, coached, and directed junior traders at the firm to engage in the same misconduct.

In a parallel action, the U.S. Attorney’s Office for the District of Connecticut announced criminal charges against Shapiro, Gramins, and Peters, who no longer work at Nomura.

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On September 3, 2015, the Securities and Exchange Commission (“SEC”) charged Manny J. Shulman and David Hirschman for their involvement in the fraudulent, unregistered sale of securities of Caribbean Pacific Marketing, Inc. (“Caribbean Pacific”), a now-defunct Florida corporation that purported to be a sun-care and skin-care products start-up company. The Commission also charged Shulman for making misstatements and omissions in Caribbean Pacific’s registration statement.

According to the SEC’s complaint, Caribbean Pacific’s Form S-1 registration statement filed with the SEC, failed to disclose that Manny Shulman, a securities fraud recidivist, controlled the company’s day-to-day operations. According to the SEC charges, the Form S-1 registration statement failed to disclose the managerial role in the company of a securities attorney, William J. Reilly, who is also a securities fraud recidivist and a disbarred attorney. According to the SEC Charges, although two other individuals were listed in the Form S-1 registration statement as the corporate officers and directors of Caribbean Pacific, Shulman and Reilly actually controlled the company and ran it on a day-to-day basis. The SEC subsequently issued a trading suspension of Caribbean Pacific’s registration statement based on findings that it was materially misleading and deficient.

In addition, the SEC complaint alleges that from June 2012 through October 2012, Shulman and Hirschman engaged in a private, unregistered offering of Caribbean Pacific stock, raising $271,500 from 18 investors located in various states. The complaint also alleges that Shulman and Hirschman told investors that Caribbean Pacific would serve as a public shell that would later engage in a reverse merger with another company called Dreamscapes International Properties, Inc. (“Dreamscapes”). Instead of using investors’ money for expenses related to Caribbean Pacific’s Initial Public Offering (IPO) and the business development of Dreamscapes, the complaint alleges that Shulman and Hirschman misappropriated most of their money.

The Commission’s complaint alleges that Shulman and Hirschman both violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder and that Hirschman also violated Section 15(a) of the Exchange Act. The Commission is seeking financial penalties, disgorgement of ill-gotten gains plus prejudgment interest, and permanent injunctions against both Shulman and Hirschman and a penny stock bar against Hirschman. Shulman has consented, without admitting or denying the allegations of the complaint, to the entry of judgment ordering permanent injunctive relief against him and requiring him to pay disgorgement and a civil penalty, in amounts to be determined by the Court at a later date.

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, or to [email protected].  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.  For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490, Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 , IPO’s, OTC Pink Sheet listings, Form 10 and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or [email protected]. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
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www.SecuritiesLawyer101.com