SEC Charges Gatekeepers in Microcap Frauds
Today, The Securities and Exchange Commission barred several market participants from the penny stock industry for their roles in various sham initial public offerings (IPOs) of microcap stocks that defrauded investors. Those charged in two separate cases include attorneys, transfer agents, and microcap management teams.
Case 1 – Sham MicroCap IPOs
Michael J. Muellerleile, esq., Lan Phuong Nguyen, esq., Joel Felix, M2 Law Professional Corp., and American Energy Development Corp.
In one case, Newport Beach, Calif.-based securities lawyer Michael J. Muellerleile authored false and misleading registration statements used in sham IPOs for five microcap issuers in order to transfer unrestricted shares of penny stocks to offshore market participants.
Muellerleile’s law firm M2 Law Professional Corp. also is charged along with Lan Phuong Nguyen, an attorney who assisted Muellerleile by signing false and misleading attorney opinion letters, and Joel Felix, the CFO of one of the issuers, for making false and misleading statements. The SEC today suspended trading in that issuer, American Energy Development Corp (OTC: AEDC).
Case 2 – Transfer Agent Ignored “Red Flags” in the Transfer of Large Blocks of MicroCap Securities
Empire Stock Transfer and its supervisor of operations Matthew J. Blevins
In another case, Nevada-based stock transfer agent Empire Stock Transfer and its supervisor of operations Matthew J. Blevins transferred large blocks of several penny stock securities without restrictions to offshore nominees despite red flags indicating the shares were likely part of an illegal operation. The SEC previously charged several offshore entities behind the illegal sales of unregistered penny stocks made possible by Empire Stock Transfer and Blevins.
“These enforcement actions bar any further penny stock activity by these market participants, including attorneys and a transfer agent supervisor who betrayed the trust that investors place in gatekeepers to protect them in this highly risky market,” said Stephanie Avakian, Deputy Director of the SEC’s Enforcement Division. “The SEC is committed to combating microcap fraud through the investigative work of its Microcap Fraud Task Force, the initiatives of its Microcap Fraud Working Group, and repeated warnings to investors about the red flags of penny stock investing.”
See the SEC’s press release HERE.