Offering fraud actions are a key part of the Commission’s focus on the main street investor. In many instances it is the small retail investor – including those using retirement funds – that are fleeced by the charlatans selling shares that sound good but are not. This is particularly true now as the virus driven pandemic continues to unfold and many lost their job as the soring employment report this week more than illustrates. Three cases of this type, announced by the Enforcement Division this week, that fall in this group are discussed below.
SEC v. Findley, Civil Action No. 3:20 – cv- 00397 (D. Conn. Filed March 25, 2020) is an action which names as defendants Bernard Findley and Halitron, Inc. Mr. Findley is the Chairman and CEO of Halitron, an issuer which claims to be an “equity holding company” but has no apparent business. Over a two year period Defendants engaged in a scheme that enabled them to raise funds from investors through the sale of debt.
In 2016 Halitron claimed to have about $300,000 in revenue. By the next year that amount decreased to zero. Nevertheless, Mr. Findley published over the period a series of press releases discussing an about to be completed audit of the firm, a stock repurchase program and other financial transactions. Each was false. Yet Defendants were able to induce investors to purchase debt in return for the opportunity to acquire discounted shares. The funds raised benefitted Mr. Findley, not the investors. The complaint, which is pending, alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). See Lit. Rel. No. 24781 (March 25, 2020).
SEC v. Lahr, Civil Action No. 5:20 (E.D. Pa. Filed March 24, 2020) is an action which names as defendants Todd Lahr and Thomas Megas. Defendant Lahr is an attorney licensed to practice in Pennsylvania. He was also a Commission registered investment adviser for several years and is the founder of THL Holdings, LLC and co-founder of Merran Global Holdings, Inc. both private Nevada firms. Defendant Megas, a British National resident in Switzerland, is the co-founder of Ferran.
In early 2012 Mr. Lahr began soliciting investors to purchase interests in THL Holdings. Those solicited are primarily clients from his law practice and friends. Potential investors were told that THL had indirect mining interests in Canada and New Guinea. Over a two-year period about $1.4 million was raise from 20 investors in THL Holdings. Those investor were assured that their funds would be invested in the company. Nevertheless, a large portion was misappropriated.
In 2015 Defendants began implementing a plan for the sale of Ferran shares. Part of the plan was to use portions of the offering proceeds to repay some of the THL Holdings investors. About $140,000 was raised from four investors, one of which had purchased shares in THL Holdings. The investors were assured their funds would be utilized in connection the same foreign mining interest discussed with the THL Holdings share purchasers. Again, portions of the offering proceeds were misappropriated. The complaint, which is pending, alleges violations of Securities Act Sections 5(a), 5(c), 17(a)(1) and 17(a)(3) and Exchange Act Section 10(b). See also Lit. Rel. No. 24778 (March 24, 2020).
SEC v. Tarver, Civil Action No. 5:20-cv-00056 (N.D. Tx. Filed March 10, 2020). Named as defendants in the action are Joe Leland Tarver, Rock and Roll Cycles, LLC and Cycle for Life, Inc. Mr. Tarver is the managing member of each entity. Over a three year period, beginning in July 2014, Mr. Tarver raised just under $500,000 from 18 investors who purchased promissory notes from one of the entity defendants. Those notes carried interest rates that ranged from 6% to 9%. Investors were told that the funds would be used to manufacture custom tricycles for disabled children and adults. Interest on the notes would be paid from the profits. When the promised interest was not paid, some investors filed suit. Nevertheless, the note sales continued. There were no profits to pay investors. The complaint, which is pending, alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). See Lit. Rel. No. 2477 (March 23, 2020).