Nine people have been charged by the Securities and Exchange Commission with taking part in complex fraud schemes that took in hundreds of millions of dollars from retail investors via unlawful stock sales.
The SEC announced the charges in an emergency action filed in federal district court in Boston. According to the SEC’s complaint, the schemes were orchestrated by Canada resident Frederick L. Sharp with the help of two Canadian associates, Zhiying Yvonne Gasarch and Courtney Kelln.
In a press release, the commission said the defendants “enabled control persons of microcap companies whose stock was publicly traded in the US securities markets to conceal their control and ownership of huge amounts of penny stock.” The stocks were then allegedly secretly dumped into US markets in violation of federal securities laws. The SEC said the schemes, which took place from 2011 to 2019, caused significant harm to retail investors in the United States and around the world.
The emergency relief obtained in court included an order to freeze the assets of the defendants.
“We charge that the defendants created a network that enabled them to engage in multiple fraudulent schemes, making millions of dollars in unlawful profits at the expense of retail investors,” said Paul Levenson, Regional Director of the SEC’s Boston Regional Office. “Among other things, the emergency relief we have obtained will preserve assets to potentially be returned to harmed investors.”
The SEC also alleged three other Canadian residents—Mike K. Veldhuis, Paul Sexton and Jackson T. Friesen—collaborated with Sharp to dump huge stock positions while hiding their control positions and stock promotional activities from the investing public.
California resident Avtar S. Dhillon was accused of taking in millions of dollars in illicit proceeds from fraudulent stock sales. Dhillon was allegedly complicit with Valdhuis and his associates as well as with others, including Canadian resident Graham R. Taylor. The SEC also said Maryland resident William T. Kaitz worked as a promoter and allegedly touted stocks that Veldhuis, Sexton, and Friesen simultaneously planned to sell, while concealing their roles.
In a related action, Mexican resident Luis Jimenez Carrillo was charged with engaging in deceptive penny stock schemes that generated more than $75 million from the fraudulent sales of multiple microcap companies’ stock.
Under the complaint, Sharp, Kelln, Veldhuis, Sexton, Friesen, and Dhillon were charged with violating the antifraud and registration provisions of the federal securities laws. Veldhuis, Sexton, Friesen, and Dhillon are also charged with violating reporting provisions of the federal securities laws. Taylor, Gasarch, and Kaitz are each charged with violating one or more of the antifraud provisions of the federal securities laws. Taylor, Sharp, Kelln, Gasarch, and Kaitz are also charged with aiding and abetting violations by other defendants.