The US Securities and Exchange Commission (SEC) today announced fraud charges against a US citizen who was part of a scheme to register and sell stock in blank cheque companies disguised as promising startups to illicitly profit from unsuspecting investors.
The latest SEC case comes just a day after Leon Cooperman’s hedge fund Omega Advisors, Inc. was charged with insider trading by the watchdog, as reported by Finance Magnates.
According to the SEC, Sheldon Rose created more than a dozen blank cheque companies, which have no operations and no value other than their registered status to sell stock. He reportedly used friends and family as figurehead company officers and shareholders so he could secretly control the companies and their securities.
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Registration statements and other corporate filings made it falsely appear that these companies were pursuing real business ventures. However, the companies were actually bound for nothing more than reverse mergers by which all their securities, including a pool of purportedly unrestricted shares, were sold to enrich Rose.
Rose has agreed to settle the charges and is barred from future penny stock offerings or from serving as an officer or director of a public company. The courts will determine monetary sanctions.
Eric I. Bustillo, Director of the SEC’s Miami Regional Office, said: “Rose illicitly profited by creating a supply chain of blank check companies with the illusion that they were legitimate startups in order to register securities for sale in reverse mergers”.
The SEC’s order found that Rose and his company MKJJ Consulting, violated or aided and abetted violations of the antifraud, reporting, recordkeeping, and internal control provisions of the federal securities laws.
In a parallel action, a Florida court also today announced criminal charges against Rose.