The SEC’s focus on years old microcap fraud continues. On Friday the agency filed a years old microcap fraud manipulation action against a band of defendants who were largely recidivists. There the public had been bilked out of over $11 million in manipulations involving six issuers. Today’s microcap fraud action only involved four persons who were not recidivists and one issuer. The result was the same however – the investing public lost almost $2 million. Since the manipulation ended in 2016 there is little hope that the defrauded investors will recoup any of their lost investment. SEC v. Osegueda, Civil Action No. 2:19-cv-04348 (C.D. Cal. Filed May 20, 2019).
The Commission’s complaint names as defendants David Osegueda, Ishmail Ross, Zachary Logan and Jessica Snyder. The case centers on Green Cures & Botanical Distribution, Inc. The firm was supposedly in the cannabis and later beverage business. Neither proved profitable.
Mr. Osegueda and a partner acquired a shell which they named Green Cures in February 2014. Efforts to make a profit in the cannabis business over the next year failed. By December 2015 Defendant Osegueda, who had been joined by Mr. Ross, met with Zachary Logan who was reputed to be a stock expert. Mr. Logan was supposed use his expertise to assist in making a market for the shares of Green Cures.
Over the next eighteen months the three men deposited their shares in the firm with a broker. Those documents represented that Green Cures was not a shell company and that it was current in its submissions to OTC Link where the shares were traded. Other papers represented that Messrs. Osegueda, Ross and Logan, who collectively controlled the firm, were not affiliates of the company. Each of the representations made to the broker was false.
Over a two month period in early 2014 the four Defendants organized a promotional campaign for the stock. It included false and misleading press releases issued without the knowledge of Green Cures’ CEO – a figure head – email blasts and text messages as well as posts on Twitter and InvestorsHubcom message board.
The campaign that began in March continued until November 2016. By that point Messrs. Osegueda, Ross and Logan had sold stock and obtained proceeds of, respectively $857000, $887,000 and $164,000 based on the dramatic rise in the share price that followed the promotions. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and each subsection of 17(a) and Exchange Act Section 10(b). The case is pending. See Lit. Rel. No. 24472 (May 20, 2019).
FCPA Institute: On June 21 and 22, 2019, Professor Mike Koehler will conduct the FCPA Institute at the Offices of Dorsey & Whitney LLP in Minneapolis, Minnesota. The Institute provides a unique learning experience for those seeking to elevate their knowledge of the Foreign Corrupt Practices Act. Professor Koehler is one of the foremost scholars on the FCPA and conducts an interesting and most informative program. The program is live in Minneapolis and also webcast. You can obtain more information about the program and register here.