SEC Charges Three Men in San Diego-Based Microcap Fraud (SEC Release)FINRA Arbitrator Invokes Ineligibility Sua Sponte To Bar Expungement (BrokeAndBroker.com Blog)
[M]adison Timber's top revenue producers, selling more than $80 million of its unregistered securities to at least 44 retail investors. The complaint also alleges that the defendants reaped millions of dollars in commissions and other payments on their sales of Madison Timber's securities even though the securities were not registered with the Commission and defendants were not registered as broker-dealers. According to the complaint, the defendants told investors that their money would be used to finance the right to harvest timber and promised annual returns of 12 to 15 percent. In truth, the complaint alleges, Madison Timber never obtained any harvesting rights. Instead, Madison Timber's principal, Arthur Lamar Adams, forged deeds and cutting agreements and used the investors' funds for personal expenses and to develop an unrelated real estate project.
Procopio, Zouvas, and Hansen agreed to have Zouvas sell a note issued by Cuba Beverage to Hansen with the understanding that Hansen would convert the note into shares of Cuba Beverage, sell the shares into the market, and kick back a third of the sale proceeds to each of Zouvas and Procopio. According to the SEC's complaint, to sell the Cuba Beverage shares into the market immediately after converting the note, Hansen had to convince his brokerage firm that the shares qualified for an exemption from the SEC's registration requirements. The SEC alleges that the three men schemed to mislead the brokerage firm into believing that a valid exemption applied. As a result, Hansen was able to sell 180 million shares into the market for prices ranging from $.0002 to $.0006, and reap illegal trading proceeds of about $75,000. The SEC further alleges that Zouvas made material misrepresentations regarding payments he had received, in Cuba Beverage's 2014 third quarter and annual reports submitted to OTC Markets Group, Inc.
In June 2015, the SEC charged Feldman and six other individuals, as well as two purported gold mining companies, Massachusetts-based DFRF Enterprises LLC, and Florida-based DFRF Enterprises, LLC, for their roles in the scheme that targeted investors in Spanish and Portuguese-speaking communities. The complaint alleged that the defendants falsely told investors that the DFRF companies owned more than 50 gold mines in Africa and Brazil, and that an investment in these companies would be fully insured and guaranteed. Feldman appeared in promotional videos for the DFRF companies as part of a sales pitch to investors. The defendants allegedly raised more than $15 million from at least 1,400 investors between 2014 and 2015.. . .The SEC previously obtained final judgments against the DFRF companies and all of the other individual defendants, requiring them to pay more than $29 million in disgorgement and prejudgment interest, and more than $2.9 million in penalties.
[R]iehl provided accounting services to Amish and Mennonite communities and developed his own investment program, pooling money raised by selling promissory notes to community members. Riehl allegedly raised approximately $60 million over nearly a decade and promised to invest the funds in business and real estate loans to others in the religious community. According to the complaint, Riehl falsely claimed he required two co-signers on every loan, and would personally guarantee repayment with interest. The SEC's complaint further alleges that Riehl also sold investors promissory notes issued by Trickling Springs Creamery, a dairy business that he owned, without informing the investors about the company's financial difficulties and mounting debt. The complaint alleges that in late 2018 when the dairy was in dire straits, Riehl diverted money to it from at least one investor, against the investor's wishes. In a 2019 letter to investors, Riehl allegedly apologized for his dishonesty, including repeatedly stating that he required two co-signers on each loan, which gave a "false sense of security, in that such a considerable percentage of the funds were channeled into my personal projects." Trickling Springs Creamery ultimately failed, filing for bankruptcy in December 2019, and Riehl was unable to pay back investors.