SEC Sues New York Based Firm and Its Managing Member for Acting as Unregistered Securities Dealers

(HedgeCo.Net) The Securities and Exchange Commission has announced charges against LG Capital Funding, LLC (“LG Capital”) and its managing member Joseph Lerman of Brooklyn, New York, for failing to register as securities dealers with the SEC. LG Capital and Lerman allegedly bought and sold billions of newly-issued shares of microcap securities, or “penny stocks,” which generated millions of dollars for LG Capital and Lerman.

The SEC’s complaint, filed in the Eastern District of New York, alleges that between at least January 2016 and December 2021, LG Capital engaged in the business of purchasing convertible notes from penny stock issuers, converting the notes into shares of stock at a large discount from the market price, and selling those newly issued shares into the market at a significant profit. LG Capital allegedly purchased over 300 convertible notes from more than 100 separate issuers and sold more than 22 billion shares of newly issued penny stock into the market, generating sales proceeds of approximately $30 million and net profits of approximately $20 million. As alleged, neither LG Capital nor Lerman were registered as a dealer with the SEC or associated with a registered dealer, in violation of the mandatory registration provisions of the federal securities laws. By failing to register, LG Capital and Lerman avoided certain regulatory obligations for dealers that govern their conduct in the marketplace, including regulatory inspections and oversight, financial responsibility requirements, and maintaining books and records.

The SEC’s complaint charges LG Capital and Lerman with violating the registration provision of Section 15(a)(1) of the Securities Exchange Act of 1934, and charges Lerman with violating Section 20(a) of the Securities Exchange Act of 1934. The SEC seeks a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, a civil penalty, a penny stock bar, and other equitable relief. The complaint also names as relief defendants LG Capital’s two other members, Daniel Gellman and Boruch Greenberg, and LG Capital’s primary employee, Eli Safdieh, who all allegedly received illicit proceeds from LG Capital and Lerman’s violations.

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