(HedgeCo.Net) The Securities and Exchange Commission has filed fraud charges against three individuals who participated in a scheme to bribe a stockbroker to buy a company’s stock in his customers’ accounts without the customers’ knowledge. The defendants allegedly took several steps to avoid detection, including using encrypted, content-expiring text messages, and pawning a watch to avoid a large bank withdrawal for one cash bribe.

According to the SEC’s complaint, which was filed in the United States District Court for the Eastern District of New York, from approximately July 2014 through October 2015, Jeffrey Auerbach and Jared Mitchell entered into purported “consulting agreements” with Gino M. Pereira, the CEO of Nxt-ID, Inc., a publicly-traded security technology company. The agreements were actually a guise through which Auerbach and Mitchell funneled cash bribes from Pereira to Richard Brown, a registered stockbroker, to buy Nxt-ID stock in Brown’s customers’ accounts. The SEC alleges that Brown did not disclose the fact or amount of the bribes he received to his customers. Earlier last week, on Monday, September 30th, the SEC filed a complaint against Pereira. All told, the fraudulent scheme cost investors over $100,000.

The complaints in these actions charge Auerbach, Brown, Mitchell, and Pereira with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. The complaints seek permanent injunctions, disgorgement plus interest, and penalties against all defendants, an officer-and-director bar against Pereira, and penny stock bars against Pereira, Brown, and Mitchell. On Friday, Pereira agreed to the entry of a partial judgment against him in which he consents to injunctive relief and bars with other monetary relief to be determined by the court in the future. This settlement is subject to court approval.