Company Co-Founder Charged in Stock Manipulation Scheme
Today, the Securities and Exchange Commission charged the co-founder of a Dakota Plains Holdings, Inc. (OTCPINK: DAKP) with manipulating its stock price and concealing his control of the company to attain lucrative financial payouts.
According to the SEC’s complaint, Ryan Gilbertson and Michael Reger co-founded DAKP and installed their fathers as figurehead executives so they could secretly wield control of the company and issue millions of shares of stock to themselves, family, and friends.
Gilbertson and Reger allegedly caused the company to enter into an agreement to borrow money from them under generous terms that included extra bonus payments to Gilbertson, Reger, and other lenders based on the price of Dakota Plains stock after 20 days of trading following a reverse merger into a company with publicly-traded shares.
According to the SEC’s complaint, Gilbertson enlisted friends and associates including Douglas Hoskins and Thomas Howells to choreograph extensive sales and purchases of Dakota Plains stock and cause the price to skyrocket from 30 cents to more than $11 per share during that 20-day period. The inflated stock price obligated Dakota Plains to make bonus payments totaling $32 million to Gilbertson, Reger, and others. After meeting his target to receive the bonus payments, Gilbertson ceased his alleged manipulation efforts. The stock price then steadily declined to pennies per share and was delisted a few months ago.
“As alleged in our complaint, Gilbertson enriched himself by more than $16 million through his secret control of the company while he and his associates defrauded shareholders and manipulated the stock price,” said David Glockner, Director of the SEC’s Chicago Regional Office. “Corporate insiders must fully disclose their stock ownership and trading activities and cannot abuse their power in order to secretly reward themselves.”
Reger consented to an SEC order finding that he obtained illicit payments and skirted public disclosure requirements by spreading his Dakota Plains stock holdings among 10 accounts in different names to conceal that he owned more than one-fifth of the company’s shares and reaped millions of dollars in bonus payments. Without admitting or denying the findings, Reger agreed to pay $6.5 million in disgorgement, $669,365.85 in interest, and a $750,000 penalty.