SEC CHARGES TEXAS-BASED OIL COMPANY AND CEO WITH DEFRAUDING INVESTORS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
06/18/2015 03:00 PM EDT

The Securities and Exchange Commission today charged a Texas-based oil company and its CEO with defrauding investors about reserve estimates and drilling plans, and charged the author of a stock-picking newsletter for his role in a fraudulent promotional campaign encouraging readers to buy the oil company’s penny stock shares.

The SEC alleges that shortly after becoming Norstra Energy’s CEO in March 2013, Glen Landry began making false and misleading claims about business prospects on Norstra’s website as well as in press releases and SEC filings.  Landry and Norstra Energy misled investors about the location of the company’s property in order to make the wells appear more promising and twice disclosed an inaccurate date to begin drilling operations to make the potential for oil riches appear imminent.

The SEC’s complaint filed in federal court in Manhattan alleges that promotional materials issued by Eric Dany falsely proclaimed that “Norstra Energy could be sitting on top of as much as 8.5 billion barrels of oil!” and said the planned wells had a 99 percent chance of profitability.  After the exaggerated statements about its property and prospects caused Norstra Energy’s stock price to increase nearly 600 percent in a three-month period, the SEC suspended trading in June 2013.

“When microcap companies appear to be misleading the investing public, the SEC investigates those promoting the stock as well as the culpability of company officers,” said Michael Paley, Co-Chair of the SEC Enforcement Division’s Microcap Fraud Task Force.  “We allege that as a longtime geologist, Landry was well aware that Norstra Energy did not have the oil reserves or drilling plans being touted to investors.  And as a self-proclaimed expert in oil-and-gas stocks, Dany knew that claims made about the company were false but touted the stock anyway in a spam e-mail campaign and a hard-copy mailer he was paid to endorse.”

The SEC’s complaint charges Norstra Energy, Landry, and Dany with fraud and seeks final judgments ordering permanent injunctions, return of allegedly ill-gotten gains with interest, and financial penalties.  The SEC also seeks to bar Landry from serving as an officer or director of a public company or participating in a penny stock offering.

The SEC’s investigation has been conducted by Yitzchok Klug and Michael Paley of the Microcap Fraud Task Force along with Christopher Castano and Nancy Brown in the New York Regional Office.  The SEC’s litigation will be led by Ms. Brown, and the case is being supervised by Sanjay Wadhwa.

COURT IMPOSES MONETARY JUDGEMENT AGAINST ATTORNEY AND OTHERS FOR ROLES IN UNREGISTERED STOCK SALES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Court Imposes Legal Services Bar Against Attorney, and Penny Stock Bars and Significant Monetary Relief Against All Defendants

On June 27, 2014, the U.S. District Court of Nevada issued an order imposing sanctions against an attorney, Marcus Luna, three other individuals - Nathan Montgomery, Adam Daskivich, and David Murtha - and their businesses for their roles in a multi-million dollar scheme to sell shares of Axis Technologies Group, Inc. stock in a public distribution without registration with the Commission. The Court's order:

Prohibits Luna from providing legal services to anyone in connection with the offer or sales of securities pursuant to, or claiming, an exemption under Regulation D.
Bars Luna, Montgomery, Daskivich and Murtha from participating in any offering of penny stocks.
Imposes disgorgement and prejudgment interest against:
Luna and St. Paul Venture Fund: $4.98 million
Montgomery and Minnesota Venture Capital: $2.51 million
Daskivich and Real Estate of Minnesota: $3.49 million
Murtha and Matrix Venture Capital: $1.72 million
Luna: joint and severally with other defendants: $2.39 million.
Imposes civil penalties against:
Luna and St. Paul Venture Fund: $2.03 million
Montgomery and Minnesota Venture Capital: $1.97 million
Daskivich and Real Estate of Minnesota: $2.73 million
Murtha and Matrix Venture Capital: $1.37 million
The court also denied the SEC's request for permanent injunctions for violations of the registration and fraud provisions of the federal securities laws, holding that the legal services and penny stock bars are sufficient.

The court previously granted the SEC's Motion for Summary Judgment on February 26, 2014, finding no genuine issues of material fact remained that the defendants each violated Section 5 of the Securities Act, and that Luna violated Sections 17(a)(1), (2), and (3) of the Securities Act, Section10(b) of the Exchange Act, and Rule 10b-5. The court then ordered the parties to further brief the issue of what remedies were appropriate given defendants' violations.

The Commission acknowledges the assistance of the Financial Industry Regulatory Authority.

This matter was litigated on behalf of the SEC by Anne Blazek and Timothy Leiman.

FINAL JUDGEMENT ENTERED IN KICKBACK STOCK SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

District Court Enters Final Judgment Setting a Civil Penalty in the Amount of $28,000 Against Defendant Health Sciences Group, Inc.

The Commission announced that on March 10, 2014, the United States District Court for the Southern District of Florida entered a Final Judgment setting a civil penalty in the amount of $28,000 against Defendant Health Sciences Group, Inc. ("HESG"), pursuant to Section 20(d) of the Securities Act of 1933 ("Securities Act") and Section 21(d) of the Securities Exchange Act of 1934 ("Exchange Act").

The Final Judgment follows a previous order by United States District Judge Robert N. Scola, Jr. in which the Court entered a Judgment of Permanent Injunction and Other Relief against HESG, enjoining the company from violations of Section 17(a)(1) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5(a).

The Commission commenced this action by filing its Complaint on August 14, 2013, against HESG and co-defendant, Thomas Gaffney. The Complaint alleged the defendants engaged in a fraudulent scheme involving HESG's stock, illicit kickbacks, and phony agreements to mask those kickbacks. On November 20, 2013, the Court entered a Final Judgment of Permanent Injunction and Other Relief by consent against Gaffney, enjoining him from violations of Section 17(a)(1) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5(a), and permanently barring him from participating in an offering of penny stock, and from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act.

PENNY STOCK PROMOTER CHARGED FOR ATTEMPTING TO GENERATE FALSE APPEARANCE

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

SEC Charges San Diego-Based Promoter in Penny Stock Scheme

The Securities and Exchange Commission today charged a penny stock promoter in the San Diego area for fraudulently arranging the purchase of $2.5 million worth of shares in a penny stock company in an attempt to generate the false appearance of market interest and induce other investors to purchase the stock.

The SEC alleges that David F. Bahr of Rancho Santa Fe, Calif., artificially increased the trading price and volume of iTrackr Systems stock when he conspired with a purported businessman with access to a network of corrupt brokers. What Bahr didn't know was that the purported businessman was actually an undercover FBI agent. During a test run of their arrangement, Bahr paid a $3,000 kickback in exchange for the initial purchase of $14,000 worth of iTrackr shares.
In a parallel action, the U.S. Attorney's Office for the Southern District of California today filed criminal charges against Bahr.

The SEC also has issued an order to suspend trading in iTrackr securities.
According to the SEC's complaint filed in federal court in San Diego, Bahr set out to give the markets a false impression of supply and demand in iTrackr stock where none actually existed. He coordinated the purchase of iTrackr shares so the stock price could remain high enough for him to effectively promote it at a later date and artificially inflate the price even higher. Bahr arranged for the dissemination of promotional material that overstated the likelihood of iTrackr's success and future profits.

According to the SEC's complaint, Bahr connected with the undercover agent in November 2012 and was told that that he represented a group of registered representatives who had trading discretion over certain client accounts. In exchange for a 30 percent kickback, the brokers could arrange to purchase iTrackr stock through their customers' accounts and hold the shares for up to a year in order to avoid sales that might decrease iTrackr's stock price. Bahr agreed to pay the kickback and sought the purchase of 10 million iTrackr shares at an average of 25 cents per share for a total of $2.5 million. Bahr agreed not to disclose the kickback to any iTrackr investors.

According to the SEC's complaint, Bahr agreed to a test run involving the purchase of modest amounts of iTrackr stock on the open market, and Bahr would then pay a small commission. During the first week of December 2012, a total of 135,000 iTrackr shares were purchased, which represented approximately 32 percent of iTrackr's trading volume during that time. Bahr was then informed that the test purchases totaled approximately $14,000, and he owed a $4,000 commission. Bahr paid $3,000 through a wire transfer, and he asked another person to pay the remaining $1,000.
The SEC's complaint alleges that Bahr violated Section 17(a)(1) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks financial penalties, a penny stock bar, and a permanent injunction against Bahr.

The SEC's investigation, which is continuing, has been conducted by Marc Blau and Sara Kalin of the Los Angeles Regional Office. The SEC acknowledges the assistance of the U.S. Attorney's Office for the Southern District of California, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority (FINRA).

SEC CHARGES PENNY STOCK PROMOTER WITH FRAUD

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., June 18, 2013 — The Securities and Exchange Commission charged a penny stock promoter in the San Diego area for fraudulently arranging the purchase of $2.5 million worth of shares in a penny stock company in an attempt to generate the false appearance of market interest and induce other investors to purchase the stock.

The SEC alleges that David F. Bahr of Rancho Santa Fe, Calif., artificially increased the trading price and volume of iTrackr Systems stock when he conspired with a purported businessman with access to a network of corrupt brokers. What Bahr didn’t know was that the purported businessman was actually an undercover FBI agent. During a test run of their arrangement, Bahr paid a $3,000 kickback in exchange for the initial purchase of $14,000 worth of iTrackr shares.

In a parallel action, the U.S. Attorney’s Office for the Southern District of California today filed criminal charges against Bahr.

"Bahr tried to artificially inflate the price and volume of iTrackr shares to the detriment of retail investors who wouldn’t have known the real story behind the flurry of market activity," said Michele Wein Layne, Director of the SEC’s Los Angeles Office. "Working with criminal authorities, we were able to stop Bahr’s misconduct before he could seriously impact the markets and harm investors."

According to the SEC’s complaint filed in federal court in San Diego, Bahr set out to give the markets a false impression of supply and demand in iTrackr stock where none actually existed. He coordinated the purchase of iTrackr shares so the stock price could remain high enough for him to effectively promote it at a later date and artificially inflate the price even higher. Bahr arranged for the dissemination of promotional material that overstated the likelihood of iTrackr’s success and future profits.

According to the SEC’s complaint, Bahr connected with the undercover agent in November 2012 and was told that that he represented a group of registered representatives who had trading discretion over certain client accounts. In exchange for a 30 percent kickback, the brokers could arrange to purchase iTrackr stock through their customers’ accounts and hold the shares for up to a year in order to avoid sales that might decrease iTrackr’s stock price. Bahr agreed to pay the kickback and sought the purchase of 10 million iTrackr shares at an average of 25 cents per share for a total of $2.5 million. Bahr agreed not to disclose the kickback to any iTrackr investors.

According to the SEC’s complaint, Bahr agreed to a test run involving the purchase of modest amounts of iTrackr stock on the open market, and Bahr would then pay a small commission. During the first week of December 2012, a total of 135,000 iTrackr shares were purchased, which represented approximately 32 percent of iTrackr’s trading volume during that time.

Bahr was then informed that the test purchases totaled approximately $14,000, and he owed a $4,000 commission. Bahr paid $3,000 through a wire transfer, and he asked another person to pay the remaining $1,000.

The SEC’s complaint alleges that Bahr violated Section 17(a)(1) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks financial penalties, a penny stock bar, and a permanent injunction against Bahr.

The SEC’s investigation, which is continuing, has been conducted by Marc Blau and Sara Kalin of the Los Angeles Regional Office. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of California, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority (FINRA).

SEC SETTLES PENNY STOCK MANIPULATION CHARGES WITH DEFENDANT

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Defendant Adam S. Rosengard Settles SEC Charges in Penny Stock Manipulation Case

The Securities and Exchange Commission announced today that Chief Judge Gregory M. Sleet of the United States District Court for the District of Delaware entered a final judgment against Defendant Adam S. Rosengard on February 25, 2013 in SEC v. Dynkowski, et al., Civil Action No. 1:09-361, a stock manipulation case the SEC filed on May 20, 2009. The SEC’s complaint alleges that Defendant Pawel P. Dynkowski and others engaged in market manipulation schemes involving at least four separate stocks. The complaint alleges that Rosengard violated Section 5 of the Securities Act of 1933 by acting as a nominee account holder in one of the schemes.

As alleged in the complaint, the schemes generally followed the same pattern: Dynkowski and his accomplices agreed to sell large blocks of shares for penny stock companies in exchange for a portion of the proceeds. The shares were put in nominee accounts that Dynkowski and his accomplices controlled. The defendants artificially inflated the market price of the stocks through wash sales, matched orders and other manipulative trading, often timed to coincide with false or misleading press releases, and then sold shares obtained from the issuers and divided the illicit proceeds.

As alleged in the complaint, Dynkowski orchestrated the manipulation scheme involving Xtreme Motorsports of California, Inc. stock in 2007. The complaint alleges that in this scheme Dynkowski and an accomplice engaged in wash sales, matched orders and other manipulative trading. As alleged in the complaint, Rosengard acted as a nominee account holder in the scheme. Specifically, he gave Dynkowski access to a brokerage account for the purpose of selling shares of Xtreme Motorsports stock. The complaint alleges that this scheme generated approximately $257,646 in illicit profits.

To settle the SEC’s charges, Rosengard consented to a final judgment that permanently enjoins him from violating Section 5 of the Securities Act; orders disgorgement of $165,646 with prejudgment interest of $21,297; and bars Rosengard from participating in any offering of a penny stock. No civil penalty was imposed, and part of the disgorgement obligation was waived, in light of Rosengard’s financial condition.

The SEC thanks the following agencies for their cooperation and assistance in connection with this matter: the U.S. Attorney’s Office for the District of Delaware; the Delaware State Police; United States Immigration and Customs Enforcement, Department of Homeland Security, Homeland Security Investigations; and the Department of the Treasury, Internal Revenue Service, Criminal Investigation.