SEC Charges Florida-Based Transfer Agent and Owner with Defrauding Investors
The Securities and Exchange Commission today announced it has charged a Florida-based transfer agent and its owner with defrauding investors by using aggressive boiler room tactics to peddle worthless securities with promises of high returns or discounted prices.
Transfer agents are typically used by publicly-traded companies to keep track of the individuals and entities that own their stocks and bonds. The SEC alleges that Cecil Franklin Speight, whose firm International Stock Transfer Inc. (IST) was a registered transfer agent, abused the transfer agent function by creating and issuing fake securities certificates to both U.S. and international investors. While investors collectively sent in millions of dollars thinking they were purchasing high-yield investments and discounted stock, they ended up receiving counterfeit certificates that Speight and IST fooled them into thinking were legitimate.
In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York today announced criminal charges against Speight.
“Speight brazenly misused his transfer agent authority to commit fraud by creating fake certificates and acting as if he was authorized by issuers to do so,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “His promise of high-yield investment returns and his use of attorneys to receive investor money were simply lures to take advantage of unsuspecting investors.”
Speight and IST agreed to settle the SEC’s charges. Speight will be barred from serving as an officer or director of a public company and from participating in any penny stock offering. The court will determine monetary sanctions at a later date.
According to the SEC’s complaint filed Wednesday in U.S. District Court for the Eastern District of New York, Speight’s scheme included multiple securities, including the issuance of fake foreign bond certificates and stock certificates for a publicly-traded microcap company with no connection to IST. To bolster the appearance of the safety of the investments and conceal from investors how their money was really being spent, Speight enlisted two attorneys to receive investment funds into their own bank accounts. From there, the money was transferred to IST. Instead of making its way to any issuers, however, IST and Speight spent investors’ money almost as quickly as it came in. They used it to pay Speight’s personal expenses, and in Ponzi scheme fashion new investor money was used to fund interest payments to prior foreign bond investors. In all, Speight and IST stole more than $3.3 million from at least 70 investors.
The SEC’s complaint charges Speight and IST with violating the antifraud provisions of the securities laws, including Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. The complaint charges IST with violating the transfer agent books and records requirements of Section 17(a)(3) of the Exchange Act, and Speight with aiding and abetting such violations. Speight and IST have consented to the entry of judgments permanently enjoining them from future securities law violations and requiring them to pay disgorgement of all ill-gotten gains plus prejudgment interest and penalties as determined by the court, which must approve the settlement.
The SEC’s investigation was conducted by Sharon Binger, Adam Grace, Justin Alfano, John Lehmann, Elzbieta Wraga, and Jordan Baker in the New York office. An examination of IST was conducted by Debra Williamson, Ileana Rodriguez, and Brian Dyer and supervised by John Mattimore and Nicholas Monaco in the Miami office. The SEC’s litigation will be handled by Alexander Vasilescu, Justin Alfano, and John Lehmann. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York and the Federal Bureau of Investigation.