A Penny Stock Scam Case with a Difference: Multiple CEOs from Earlier Scams
Penny stock scams have long been a target of the SEC’s Enforcement division. These cases frequently focus on the issuance of millions of shares of unregistered stock coupled with the concealment of the person who is actually behind the scheme. The latter is a key point in the penny stock fraud action filed this week, SEC v. Rosenbaum, Civil Action No. 3:25-cv-01716 (N.D. Tex. Filed July 1, 2025).
Named as defendants in this action are: Keith A. Rosenbaum, William A. Justice, Randell R. Torno; and Brian D. Shibley. Defendants Justice, Shibley and Torono were each the CEO of a penny stock firm (collectively the “CEOs”) in an earlier action. Mr. Rosenbaum is a disbarred California attorney. Each person was charged earlier by the Commission for their role in an alleged $112 million pump-and-dump scheme orchestrated by Philip Verges.
The action here centered on June 2017 through June 2022. During that period Mr. Verges directed the CEOs to sign, or to permit their signature to be signed, on incomplete disclosure statements published on a penny stock trading platform. Those materials, among other things, concealed the role of Mr. Verges and his directive regarding the false disclosure papers — the papers were executed without taking reasonable steps to ensure they were accurate. Mr. Rosenbaum is also alleged to have executed 17 attorney opinion letters for one of the nominees after being suspended from practicing law in California. Subsequently, he executed 73 more opinion letters. The complaint alleges violations of each subsection of Securities Act Section 17(a) and Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5.
Defendants resolved the action. Each of the CEOs consented to the entry of injunctions based on the statutes cited and an officer-and-director bar along with the payment of disgorgement totaling $22,398.08 plus prejudgment interest of $2,011.92; Defendants Torno and Shibley were each directed, in addition, to pay a penalty of $35,000. Mr. Rosenbaum consented to the entry of a consent judgment based on the antifraud provisions as well as an order regarding the payment of disgorgement, prejudgment interest, civil penalties and a penny stock bar, all to be resolved at a later date. See Lit. Rel. No. 26344 (July 10, 2025).