SEC Charges Phony Company President for Role in Facilitating Fake Investment in Penny Stock Company
The Securities and Exchange Commission today charged a New York man for his role in a scheme to disseminate news of a fake investment to boost a struggling penny stock company.
The SEC alleges that Ronald Feldstein pretended to be the president of a private company, LED Capital Corp., and entered into an investment agreement with penny stock issuer Interlink-US-Network Ltd. Feldstein in fact held no such position at LED Capital Corp. and was merely being paid by Interlink’s management to play the role of a purported Interlink investor so they could spread news of a much-needed capital infusion. Feldstein then helped Interlink disseminate the false information in an SEC filing.
The SEC charged Interlink last year as part of a complaint against several perpetrators of an alleged green product-themed Ponzi scheme.
“Feldstein was nothing more than a fake president for hire who schemed with a public company to tout news of a sham investment and deceive investors,” said Andrew M. Calamari, Acting Regional Director of the SEC’s New York Regional Office.
According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Feldstein purportedly committed LED Capital Corp. – which in reality had no operations or assets – to pay $6 million for a minority block of Interlink shares that had an actual market value of less than $1.2 million. Although Feldstein knew the actual owner of LED Capital Corp., he concealed the purported contract committing his company to pay more than a 500 percent premium for a minority block of shares in a penny stock company that had liabilities far exceeding its assets. When SEC investigators spoke with the actual owner, he testified that he has been the sole officer-stockholder of LED Capital Corp. and never had any knowledge of the purported agreement. He testified that Feldstein had no authority or permission to act on behalf of the company, which he said doesn’t and likely never would have $6 million available to it. For his performance as the phony president of LED Capital Corp., Interlink awarded Feldstein shares of its common stock that had a market value of more than $400,000.
The SEC alleges that when Interlink sought to inform the stock market of the remarkable investment, Feldstein offered crucial assistance in developing the substance of a Form 8-K filing with the SEC to disclose the purported agreement. After Interlink’s CFO e-mailed Feldstein a draft Form 8-K for his review, Feldstein responded “Not good” and thereafter discussed the contents with Interlink’s CFO. Based on Feldstein’s comments, the agreement was instead called a “memorandum of understanding.” Feldstein then separately signed a memorandum of understanding on behalf of “LED Capital LLC” – a company similar in name to LED Capital Corp. but that does not actually exist. On Dec. 14, 2010, Interlink filed with the SEC the version of the Form 8-K that reflected Feldstein’s input.
The SEC’s complaint charges Feldstein with aiding and abetting violations by Interlink and its President of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder as well as violations by Interlink of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-11 thereunder. The Commission seeks injunctions from future violations of these provisions, disgorgement of ill-gotten gains, and a monetary penalty.
The SEC’s investigation was conducted in the New York Regional Office by Celeste Chase and Daniel Michael, and the litigation will be conducted by Howard Fischer and Daniel Michael. The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Eastern District of New York and the Federal Bureau of Investigation with this matter.