SEC Charges Securities Lawyer and Microcap Agent with Fraud
Last week, The Securities and Exchange Commission charged an Arizona-based attorney and a Missouri-based agent of microcap shell companies with securities fraud and registration violations.
According to the SEC’s complaint, from February 2015 to April 2017, attorney William Scott Lawler engaged in schemes to fraudulently transfer control over the shares of two publicly-traded shell companies to his client. The SEC alleges that Lawler represented his client on the purchase of Broke Out Inc. (BRKO) and the predecessor to Immage Biotherapeutics Corp. (IMMG). Microcap agent Natalie Bannister participated in the BRKO scheme by arranging the sale of BRKO to the client. Among other deceptive conduct, the complaint alleges that Lawler directed and Bannister engaged in sham transactions. Lawler also drafted false attorney-opinion letters, one of which Bannister submitted to a broker, to falsely represent that the stock of BRKO and IMMG could be immediately sold publicly once his client took control of the companies. Further, Lawler and Bannister ensured a market for the BRKO stock when Bannister placed phony bids and offers for the stock at Lawler’s direction. After Lawler’s client gained control of the shares of BRKO and IMMG, the stocks were subject to promotional campaigns with drastic increases in volume and price. Brokerage accounts associated with Lawler’s client profited over $3 million before the Commission suspended trading.
“We allege that through deception and fraud Lawler and Bannister prevented broker-dealers from performing critical gatekeeping functions, which here resulted in public stock sales that never should have occurred,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “Attorneys must not misuse their specialized skills and knowledge of the securities laws to engage in fraud at the expense of unwitting investors.”
The SEC has charged Lawler and Bannister with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and the registration provisions of Section 5(a) and 5(c) of the Securities Act; and, as to Lawler, market manipulation provision of Section 9(a) of the Exchange Act.
The SEC’s investigation has been conducted by Hane L. Kim, Jennifer K. Vakiener, Joseph Darragh, and Steven G. Rawlings in the New York Office. The litigation will be led by Kevin McGrath, Ms. Kim, and Ms. Vakiener. The case is being supervised by Lara S. Mehraban. The SEC appreciates the assistance of the Financial Industry Regulatory Authority, the Alberta Securities Commission, the Cyprus Securities and Exchange Commission, the Financial Conduct Authority of the United Kingdom, the Monetary Authority of Singapore, the Ontario Securities Commission, the Securities and Commodities Authority of the United Arab Emirates, the Securities and Futures Commission of Hong Kong, and the Securities Commission of Malaysia.
Learn more HERE.