Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, December 2, 2009

SEC and Compass Capital Group Settle Charges Relating to Offering of Unregistered Securities

The U.S. District Court for the District of Nevada entered a final judgment against Mark A. Lefkowitz and Compass Capital Group, Inc., two defendants in the SEC's pending civil action concerning an unlawful offering of unregistered stock by 21st Century Technologies, Inc. Without admitting or denying the allegations of the Commission's complaint, Lefkowitz and Compass Capital consented to the entry of permanent injunctions and penny stock bars, and to pay disgorgement of $750,000 of illicit trading profits and a civil penalty of $50,000.

The Commission's complaint alleged that Lefkowitz and Compass Capital, an entity that he controls, aided and abetted a scheme to defraud investors of 21st Century, by engaging in a public offering of millions of shares of 21st Century's common stock while posing as a Wall Street financing source for the company. Investors were not told that 21st Century, a now-defunct business development company, had sold to Lefkowitz and Compass Capital, and entities introduced by them, millions of shares of its stock in unregistered transactions, at a discount to market prices, and that the defendants and the other entities immediately resold the shares to public market investors for almost-guaranteed profits. By acting as statutory underwriters of 21st Century's unregistered offering, Lefkowitz and Compass Capital also violated the securities registration provisions of the federal securities laws, and acted as unregistered broker dealers by inducing others to purchase the shares. The complaint also alleged that Lefkowitz and Compass Capital failed to report their ownership of more than five percent of the outstanding shares of 21st Century in 2003 and 2004.

Lefkowitz and Compass Capital were ordered to disgorge $750,000 of trading profits, are barred from participating in any offering of penny stock for a period of five years. Additionally, Lefkowitz was ordered to pay a civil money penalty in the amount of $50,000.

The Commission's litigation against the one remaining defendant, John Hopf, is ongoing.

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It is one thing to study trends in how certain publicly-traded companies conduct business to value-devalue their stock value, then posting good, sound advice through good Penny Stock Lists. It's another thing when you're being completely deceitful to the point of artificially inflating values of shares to benefit those who found out from "the inside" what's going to happen, then hampering unfair buzz. Practices such as these will inevitably catch up to them as in this case.

Posted by: Penny Stock Lists | Dec 22, 2009 12:36:53 PM

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