Securities Law Prof Blog

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

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Thursday, December 1, 2011

Feds Charge 13 in Securities Kickback Schemes

The SEC, U.S. Attorney for the District of Massachusetts, and FBI today announced parallel cases filed in federal court against several corporate officers, lawyers and a stock promoter alleging they used kickbacks and other schemes to trigger investments in various thinly-traded stocks.

The criminal case charged 13 defendants who engaged in criminal activity in the midst of an undercover FBI operation. According to the charges filed in U.S. District Court, the schemes involved secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies; the kickbacks were to be concealed through the use of sham consulting agreements. What the insiders and promoters did not know was that the purported investment fund representative was actually an undercover agent.

The criminal defendants include Kelly Black-White and James Prange, both of whom were in the business of finding capital for emerging companies. The civil case names some of the individuals who were charged criminally, and the SEC also issued trading suspensions in the stocks of a number of the companies involved in the criminal cases.

The SEC suspended trading in seven microcap companies involved in the kickback-for-investment schemes:

1st Global Financial Inc. (FGFB) based in Las Vegas
 
Augrid Global Holdings Corp. (AGHD) based in Houston
 
ComCam International, Inc. (CMCJ) based in West Chester, Pa.
 
MicroHoldings US, Inc. (MCHU) based in Vancouver, Wash.
 
Outfront Companies (OTFT) based in Fla.
 
Symbollon Corp./Symbollon Pharmaceuticals, Inc. (SYMBA) based in Medfield, Mass.
 
ZipGlobal Holdings Inc. (ZIPG) based in Hingham, Mass.

MicroHoldings and ZipGlobal are also charged civilly by the SEC with fraud.

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