Friday, June 21, 2013

SEC Litigation Releases: Week in Review

SEC Charges San Diego-Based Promoter in Penny Stock Scheme, June 19, 2013, (Litigation Release No. 22730)

According to the complaint (PDF), David F. Bahr "artificially increased the trading price and volume" of penny stocks in iTrackr Systems "when he conspired with a purported businessman with access to a network of corrupt brokers." Bahr had arranged the fraudulent purchase of $2.5 million worth of shares in iTrackr with this businessman and "during a test run of their arrangement, Bahr paid a $3,000 kickback in exchange for the initial purchase of $14,000 worth of iTrackr shares." However, the purported businessman was actually an undercover FBI agent.  The SEC has charged Bahr with violating sections of the Securities Act and Exchange Act and seeks financial penalties, a penny stock bar, and a permanent injunction against Bahr.  Criminal charges have been filed against Bahr in a parallel action.

SEC Files Subpoena Enforcement Action Against Thomas G. Massey for Failure to Produce Documents in Market Manipulation Investigation, June 19, 2013, (Litigation Release No. 22729)

The SEC has filed a subpoena enforcement action against Thomas G. Massey. The SEC is "investigating possible market manipulation in connection with transactions in the securities of Chimera Energy Corporation." A subpoena was issued in February of this year "seeking, among other things, materials related [to] Massey's work on behalf of Chimera."

SEC Charges Two Executives in Ponzi Scheme at Dallas-Based Medical Insurance Company, June 18, 2013, (Litigation Release No. 22728a)

According to the complaint (PDF), Duncan MacDonald and Gloria Solomon victimized at least 80 investors by operating a $10 million Ponzi scheme through Global Corporate Alliance. The defendants allegedly promoted GCA as "a proven business with a strong track record of generating revenue from the sale of limited-benefit medical insurance" when "in reality GCA was merely a start-up company with no operating history and virtually no revenue." The SEC has charged MacDonald and Solomon with violating sections of the Securities Act and Exchange Act and seeks permanent injunctions, disgorgement, prejudgment interest, and financial penalties.

Criminal charges have been filed against the defendants in a parallel action.

Hedge Fund Manager James Fry, Previously Sued by the SEC for Fraud, Found Guilty of Securities Fraud, Wire Fraud, and Making False Statements to the SEC, June 14, 2013, (Litigation Release No. 22727)

It was announced last week that a jury found "James Fry guilty of five counts of securities fraud, four counts of wire fraud, and three counts of making false statements to the SEC during investigative testimony." The SEC had charged Fry with "fraudulently funnel[ing] more than $600 million of investor money into a Ponzi scheme operated by...Thomas Petters." According to the SEC, "Fry and his hedge fund management company collected more than $42 million in fees."

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