(HedgeCo.Net) The U.S. District Court for the District of Massachusetts entered final judgments against FFS Capital Limited, Paifang Trading Limited, Artefactor Limited, Meadow Asia Limited, and Thyme International Limited. Among other things, the judgments order these entities to pay a total of $12,895,750 in civil penalties, disgorgement, and prejudgment interest.
On June 9, 2020, the Commission filed an emergency action and obtained an asset freeze against five individuals and six offshore entities for an alleged fraudulent scheme that generated more than $25 million from illegal sales of multiple microcap companies’ stock.
The SEC’s complaint alleges that, beginning around January 2018 Canadian citizen Nelson Gomes, working with Canadian Michael Luckhoo-Bouche and others, ran a fraudulent business through which corporate control persons could conceal their identities while illegally dumping their company’s stock into the market for purchase by unsuspecting investors. The complaint alleges that these illegal stock sales were often boosted by promotional campaigns that, in some instances, included false and misleading information designed to fraudulently capitalize on the COVID-19 pandemic. The complaint also charged Canadians Shane Schmidt, Douglas Roe, and Kelly Warawa with fraudulently dumping shares of a microcap company, Sandy Steele Unlimited, Inc. The individual defendants used the entities FFS Capital, Paifang, Artefactor, Meadow Asia, and Thyme International to secretly hold shares for undisclosed control groups and sell those shares into increased demand that was generated through false and misleading stock promotions.
The court entered judgments by default against entity FFS Capital, Paifang, Artefactor, Meadow Asia, and Thyme International. FFS Capital was enjoined from further violations of the registration and antifraud provisions of Sections 5(a), 5(c), 17(a)(1) and 17(a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder, barred from participating in any offering of a penny stock, and ordered to pay disgorgement and prejudgment interest in the total amount of $8,186,376 and a civil penalty of $963,837. The order also imposed a conduct-based injunction restricting FFS Capital’s future trading in any stock. Paifang, Artefactor, Meadow Asia, and Thyme International were enjoined from further violations of the registration provisions of Sections 5(a) and 5(c) of the Securities Act and barred from participating in any offering of a penny stock. Paifang, Artefactor, Meadow Asia, and Thyme International were ordered to pay disgorgement and prejudgment interest in the amounts of $1,148,864, $1,236,234, $236,409, and $40,190 respectively, and civil penalties of $481,920, $481,920, $100,000, and $20,000, respectively.
