SEC Continues to Focus on Microcap Fraud

Microcap fraud and retail investors continue to be key for the Commission. Last week, for example, the only new case filed by the agency was a manipulation action centered on a microcap issuer that was spearheaded by an attorney. This week begins with the settlement of another microcap fraud action. SEC v. Kueber, No. 15-cv-04479 (E.D.N.Y. ).

The action centered on Cynk Technology Corporation. The firm was not publically traded. It had no real assets. There was no revenue. Defendant Philip Kueber, however, had control of the firm’s shares. Mr. Kueber then:

· Created false shareholders and executives

· Filed a false registration statement for Cynk

· Filed a false affidavit with FINRA

Trading started. The share price spiked up to $21. The plan was clearly to sell the shares. The Commission, however, halted trading, ending the scheme.

Mr. Kueber settled with the Commission, consenting to the entry of a permanent injunction prohibiting future violations of Securities Act section 17(a) and Exchange Act section 10(b). The order also permanently bars Mr. Kueber from serving as an officer or director of a public company or participating in a penny stock offering. See Lit. Rel. No. 24325 (Oct. 26 2018).

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