Microcap Shell Factory Fraud. Scam re-emerges from the booming 1920s.

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History repeats itself.

In the booming 1920s, before regulation imposed by the New Deal, scamsters would literally form public corporations, go public and sell shares, based on fictitious businesses. Stock manipulators like Joe Kennedy would reap fortunes at a clip by selling shares after the public securities price of the shares was run up.. There were “pools” in which investors conspired to perpetrate this kind of fraud. A notable scam of the 1920s was the “Radio Pool,” in which crooked Wall Streeters would drive up RCA (the leading stock of the booming 1920s) stock, unload their shares for huge profits, then leave unwary investors with collapsed prices for RCA.

Now, even after 85 years of regulation by the SEC, it happened again.

On February 20, 2019, the Securities and Exchange Commission filed suit against a broker-dealer, a transfer agent, and three officers of the broker dealer and transfer agent for creation of twelve “blank check” companies, called a “Microcap Factory Fraud.” The SEC Release stated that the activity took place from 2009 through 2014.

The SEC alleged that Spartan Securities Group, Ltd. (a broker-dealer) and its transfer agent, Island Capital Management LLC, formed 19 public companies for purpose of effectuating the fraud. According to the SEC court complaint, the corporations were only shells with no real business.

The SEC alleged that Spartan filed fraudulent FINRA (Financial Industry Regulatory Authority) papers to  list the shell companies’ common public stock to allow shares to become available to the market.

The SEC further alleged that broker-dealer Spartan’s officers, Carl E. Dilley and Micah J. Eldred, signed the false FINRA papers even though purportedly knew  that the companies were fake and/or failed to investigate obvious indicators of the fraud, called “red flags.”

The SEC complaint claims that Island Stock Transfer and certain officers facilitated public trading of the stock of 12 of the fake companies.

A legal basis of the SEC claims included violation of Exchange Act Rule 15c2-11, prohibiting fraud by broker- dealers.

Anthony M. Abraham, Esq., PC, has represented many investors who have claimed against Broker-Dealers, Bankrupt and other estates for return of assets taken through fraud. Anthony M. Abraham, Esq., PC is experienced in broker fraud, churning and unauthorized trading claims. If you were victimized in this scheme and need help, please call us Toll Free at 1-877-430-4877 for a Free Consultation or email us at Anthony@Abrahamattorneys.com.