Three Canadian citizens are facing charges that they orchestrated a sophisticated scheme involving penny stocks that defrauded many investors, the Securities and Exchange Commission announced.
A complaint filed by the SEC in federal court in Boston last week names Jay Scott Kirk Lee, Geoffrey Allen Wall and Benjamin Thompson Kirk as defendants in the alleged scheme that was carried out between 2011 and 2016. According to the SEC, the trio concealed their control of shares in penny stocks through a network of offshore front companies. They allegedly unloaded the shares on unsuspecting investors who were left with shares that were nearly worthless. Lee, Wall and Kirk allegedly gained tens of millions of dollars in proceeds from the fraud that were then disbursed to various bank accounts around the world.
The SEC said the three defendants were among the more prolific clients of Frederick L. Sharp, who was previously charged in August with violations of fraud and securities laws. Sharp allegedly created an offshore platform to facilitate illegal sales of stock in hundreds of penny stock companies.
“The defendants apparently believed that by joining Sharp’s network of clandestine accounts and cloak-and-dagger communications they would have the tools at their disposal to commit fraud without accountability,” said Melissa Hodgman, Associate Director of the SEC’s Enforcement Division. “Our action today has demonstrated that even the most sophisticated scheme is not beyond our enforcement efforts.”
The SEC said the trio used the Sharp platform to conceal their control of the shares in order to get past brokers and transfer agents who would have otherwise treated the shares as restricted stock that could only be sold under extremely limited circumstances.
Lee, Wall and Kirk were charged with violating the antifraud and registration provisions of the federal securities laws. The SEC is seeking to ban the trio from any further involvement in penny stocks, along with requiring them to pay back their ill-gotten gains and pay civil penalties.
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