Securities Industry Commentator by Bill Singer Esq

In March 2014, Kantor established BBB, and from approximately 2014 to 2017, he and others solicited and received approximately $1.5 million from more than 700 investors in BBB's binary options.  Kantor told investors that they could place binary option trades, or a BBB representative could do so for them, and that the predetermined profits promised them would be based on the actual prices of securities, currencies and other investments at particular points in time.  However, Kantor did not inform the investors that a BBB computer software program fraudulently altered data associated with binary options investments, so that the probability of investors earning a profit favored BBB and disadvantaged investors.  Kantor also fraudulently persuaded several BBB investors' to convert their BBB investments into "ATM Coin," a worthless cryptocurrency that he told investors was worth as much as $600,000. 

In October 2017, after FBI agents informed Kantor that they were investigating his involvement in binary options, Kantor directed a co-conspirator to alter BBB customer lists.  Around the same time, Kantor deleted emails related to his scheme.  When interviewed by the FBI, Kantor falsely stated that he had not been involved in binary options since August 2013.

The SEC's complaint alleges that between July 2015 and July 2018, Conwell and Hoffman raised over $3.3 million from approximately 46 investors through the sale of unregistered GT Media, Inc. securities. According to the complaint, Conwell, who was previously enjoined by the SEC and criminally convicted for stealing money from investors, made numerous false representations to investors, including that two Fortune 500 companies were seeking to acquire GT Media and that GT Media would soon conduct an initial public offering. The complaint also alleges that Conwell misappropriated $161,500 from investors, which he used to pay his personal expenses. According to the complaint, Hoffman, a registered representative and investment advisory representative at a large nationwide financial firm, solicited certain of his advisory clients to invest in GT Media securities without disclosing his financial conflicts of interest, including his compensation from GT Media and his short-term loans to GT Media that were repaid using investor funds.

The SEC separately instituted a settled cease-and-desist proceeding against GT Media. According to the SEC's order, between at least February 2013 and July 2018, GT Media raised approximately $4 million by offering and selling unregistered GT Media common stock to 55 investors. Without admitting or denying the SEC's findings, GT Media consented to the SEC's order, which finds that the company violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act and imposes a cease-and-desist order and a $173,436 civil penalty.

[F]rom 2014 to early 2016, approximately 40 retail clients of Behn and Fieldstone invested more than $7 million in Aequitas securities, which were the subject of a previous Commission enforcement action.  The order finds that Behn and Fieldstone failed to disclose to their clients that Aequitas had provided Fieldstone with a $1.5 million loan and access to a $2 million line of credit, both of which had terms that created a significant financial incentive for Behn and Fieldstone to recommend Aequitas securities to their clients.  The order further finds that Behn and Fieldstone made material misstatements and omissions in reports filed with the Commission, including false representations that the repayment terms of the loan from Aequitas were not contingent on Fieldstone clients investing in Aequitas. 

In addition, the order finds that Behn and Fieldstone fraudulently induced a client to invest $1 million in Fieldstone.  Within days of Fieldstone receiving the $1 million, Behn used approximately $500,000 to pay his personal taxes and make other payments to himself or for his personal benefit. 

In October 2011, the SEC charged Gregory E. Webb, the Chairman and CEO of InfrAegis, Inc., and InfrAegis, with conducting a fraudulent, unregistered offering that raised over $20 million from at least 395 investors nationwide. According to the SEC's complaint, Webb and InfrAegis made false and misleading claims about the company's commercial success and the existence of contracts for the installation of InfrAegis' products.

On February 28, 2014, a federal grand jury in Chicago returned an 11-count indictment against Webb for substantially similar conduct as alleged in the SEC's complaint. On July 11, 2016, a jury found Webb guilty on nine of the eleven counts and, on March 1, 2017, the court sentenced Webb to nine years' imprisonment and ordered Webb to pay $9 million in restitution. On December 11, 2018, the SEC obtained final judgment by consent against Webb, which included permanent injunctions and disgorgement with prejudgment interest totaling $682,409 that was deemed satisfied by the criminal restitution order.

[D]espite Rule 10b-18's ostensible limits on the scope of the safe harbor, the history of stock repurchases-exacerbated by the recent effects of the Tax Cuts and Jobs Act-shows that the Rule has failed to meet the purpose behind its promulgation: limiting the ability of the firm to manipulate its stock price and volume. Specifically, firms retain the ability to artificially inflate stock prices or meet performance goals through repurchases that benefit executives without corresponding improvements to the real value of the firm. This manipulative redirection of capital comes in part at the expense of American workers. 

• Securities Industry Commentator
• Bill Singer