Broker Dealer Cites Technicality for Relief in $17.2 Million Case

The judge rejected the prosecutors’ bid to bring this case under the 2010 Dodd Frank Act and its limit of

In a case set before US District Judge Jose L. Linares in the Court of New Jersey, a broker who has been accused in a USD 17.2 million pump-and-dump scheme has argued that the Securities and Exchange Commission (SEC) cannot seek to debar him from the industry as the 5 year limit for civil penalties that had been established by the US Supreme Court in a previous case between the SEC and Kokesh had been exceeded.

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The broker dealer, Guy Gentile, argued that the SEC had commenced action in March 2016 which was 6 months later than the 5 year limit for any such punitive action to commence. The broker dealer also said that he was not trying to contest the power of the court to enjoin him in any future action but rather the ability of the SEC to push for action after the time limit had expired.

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The broker dealer also argued that seeking an injuction was equitable to the case of Kokesh and hence would be applicable to this situation as well and that the SEC’s argument that an injuction would not serve as punishment was incorrect.


Prosecutors have said that Gentile had obtained control over a large volume of penny stock shares of 2 companies and had inflated the prices of the shares by trading them between each other, and also releasing promotional material to encourage retail investors to buy these stocks.

After pushing the prices higher, he dumped the shares onto retail customers, making about $17.2 million while the investors lost a lot of money when the prices of the shares dropped.

In January 2017, the judge allowed Gentile’s motion seeking to dismiss the indictment as he found that the misconduct happened in 2008 and hence was covered by the 5 year time limit which was in effect at that time. The judge had rejected the prosecutors’ bid to bring this case under the 2010 Dodd Frank Act and its limit of 6 years, saying that it was retroactive.

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