SEC, An Attorney But No Company

The Commission has long focused on microcap issuers which are often involved in market manipulation schemes. Facts such as the small size of the entities, low stock prices and small public float often combine to make the firms targets of manipulators. Key to those cases, however, is the fact that the companies are real – there is, actually corporations with listed securities outstanding. In the Commission’s most recent case in this area, however, there was no company, just a would-be securities lawyers who supposedly practiced in the area of securities law. SEC v. Coldcutt, Civil Action No. 22-cv-0274 (D.D.C. Filed March 1, 2022).

Mr. Coldcutt is a Canadian Citizen who practices law in California where he has offices. He claims to be a securities lawyer. The Commission brought a subpoena enforcement action against him in 2017. Two orders compelling compliance were issued against the attorney.

In 2017 two hedge fund managers approached the attorney. They were interested in acquiring a public company whose shares they could freely trade. Mr. Coldcutt complied, knowing that the point was to conduct a pump-and-dump scheme.

Mr. Coldcutt told the two managers he know of such an entity. It was supposedly in the fruit and distribution business. To facilitate the manipulation scheme, Mr. Coldcutt filed an S-1 registration statement with the Commission. In view of the subpoena enforcement action he did not, however, let his name appear in the filings. In 2019 the registration statement went effective after several amendments were filed. In fact, the entity was a sham – it did not exist. The managers were undercover FBI agents. The complaint alleges violations of each subsection of Securities Act Section 17(a). The case is pending. See Lit. Rel. No. 25338 (March 1, 2022).