Adam Jackson
The U.S. Securities and Exchange Commission is trying to collect $6.2 million from two men accused of partaking in “a sophisticated, multiyear, multinational” penny stock pump-and-dump scheme.
On Tuesday, the agency asked a federal judge in Boston to sign off on a proposed judgment that would see William Kaitz, an alleged stock promoter, and Graham Taylor, who allegedly helped arrange a go-public merger, after the two were named in an Aug. 2021 suit concerning a broader $140 million scheme, Law 360 reported.
The criminal complaint for the case posits that the cohort acquired large amounts of microcap stocks from 2014 to 2018 before splitting up the shares among various shell companies to avoid regulatory scrutiny.
They then artificially inflated the stock prices by paying Colombia-based telemarketers and advertising firms to solicit and fool investors about the companies before selling off shares for a profit.
Joseph R. Bonavolonta, head of the FBI’s Boston division, said in a statement at the time that the parties are “accused of executing a sophisticated, global con that allegedly bilked unsuspecting investors out of tens of millions of dollars.”
“Investor confidence is essential to keeping our financial markets afloat and actions like the ones these individuals are charged with today chip away at the faith investors place in the process.”
The alleged scheme included a medical data company, a fabric maker, a food retailer, and a cannabis startup.
According to the SEC’s claims, Taylor arranged the merger of a public company with another defendant’s private company, “ultimately resulting in the distribution and fraudulent sale of shares associated with the resulting public company.”
Taylor also raked in “a significant cut of the illegal stock sale proceeds” as a beneficial owner of stocks held by nominee shareholders used in the scheme.
In the filing, the SEC determined that Taylor should pay nearly $5 million, which includes $3.43 million in disgorgement, nearly $1.3 million in prejudgment interest, and a civil penalty of more than $207,000.
The proposed judgment demands Kaitz pay the SEC more than $1.3 million, which includes nearly $813,000 in disgorgement, almost $280,000 in prejudgment interest and a $215,000 civil penalty.
Kaitz’s media company, Full Service Media LLC, was used to promote the stocks as “urgent and bullish investment opportunities” whenever other scheme participants wanted to dump some shares.
“The SEC also said Kaitz’s promotions stated that he was being paid by third parties who weren’t involved in the scheme as opposed to the parties who actually benefited from his handiwork,” the outlet reported.
Kaitz also lied to regulators about being paid by those involved in the scheme and omitted the fact that he had a burner phone that he used to cover his tracks.
Kaitz and Taylor would also be permanently barred from participating in an offering of penny stock.
