Former CEO Barred From Penny Stock Offerings For Stock Manipulation In Attempt To Uplist To Nasdaq
Former CEO Barred From Penny Stock Offerings For Stock Manipulation In Attempt To Uplist To Nasdaq
A federal district court in Jacksonville, Florida has barred the former CEO of a Florida-based franchisor of children’s educational programs from serving as an officer or director of a public company and from participating in penny stock offerings.
The Securities and Exchange Commission charged Brian Pappas, the former CEO of Creative Learning Corp., in August 2017 with fraud for making numerous false statements concerning payments to his family members, his business experience, his personal financial history, and his evaluation of the company’s disclosure and financial reporting controls. The SEC also charged Daniel O’Donnell, Creative Learning’s former COO, and Michelle Cote, the company’s founder, with engaging in manipulative trading to inflate the stock price in an attempt to improve the company’s chances of becoming a NASDAQ-listed company.
On November 2, 2018, the Honorable Timothy J. Corrigan of the U.S. District Court for the Middle District of Florida entered a final judgment against Pappas, permanently prohibiting him from violating, or aiding and abetting violations of, the:
- antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder
- anti-manipulation provisions of Section 9(a)(2) of the Exchange Act
- prohibition against making personal loans provisions of Section 13(k) of the Exchange Act
- reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder
- selective disclosure prohibition of Regulation FD
- books and records and internal control provisions of Sections 13(b)(2)(A) and (B) of the Exchange Act and Rule 13a-15 thereunder
- certification provisions of Rule 13a-14 under the Exchange Act
- beneficial ownership reporting provisions of Sections 13(d) and 16(a) of the Exchange Act and Rules 13d-1, 16a-2 and 16a-3 thereunder
- prohibition against falsifying books and records provisions of Rule 13b2-1 under the Exchange Act; and
- proxy contest solicitation provisions of Section 14(a) of the Exchange Act and Rule 14a-6(b) thereunder.
The judgment also permanently barred Pappas from serving as an officer or director of a public company and barred Pappas from participating in penny stock offerings for ten years. Finally, the judgment ordered Pappas to pay disgorgement of $3,000 and a civil penalty of $47,000. Pappas consented to the entry of the final judgment without admitting or denying the allegations in the SEC’s complaint. Creative Learning, O’Donnell, and Cote previously settled the SEC’s allegations.
The court’s entry of judgment against Pappas ends this litigation in its entirety.
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