SEC Charges Two Canadian Citizens With Penny Stock Fraud Involving Tennessee Coal Mining Company
The Securities and Exchange Commission today charged a pair of Canadian citizens with conducting an international microcap fraud scheme by stockpiling shares in a coal mining company and funding a multi-million dollar promotional campaign to hype the stock while simultaneously dumping their shares and routing the proceeds through offshore accounts.
The SEC alleges that after Bruce D. Strebinger facilitated a reverse merger between shell company Americas Energy Company-AECo and a private start-up company in Knoxville, Tenn., he and Brent Howard Chapman each acquired substantial positions of more than 5 percent of the common stock without publicly disclosing their beneficial ownership stake as required under the federal securities laws. Meanwhile, Strebinger and Chapman orchestrated an aggressive campaign to promote Americas Energy stock to prospective investors through blast e-mails and direct mailings of stock promotion reports that contained false and misleading statements.
According to the SEC’s complaint filed in U.S. District Court for the Northern District of Georgia, as the scheme was attracting new investors and Americas Energy’s share price was significantly increasing, Strebinger and Chapman were secretly selling their shares through an intricate web of offshore corporations, foreign accounts, and financial institutions located in Canada, Nevis, Panama, Switzerland, and the Turks and Caicos Islands. Strebinger and Chapman generated proceeds of more than $17 million through their elaborate scheme.
“Strebinger and Chapman rigged a penny stock in their favor while staging a massive promotional campaign,” said William P. Hicks, Associate Director for Enforcement in the SEC’s Atlanta Regional Office. “They disguised their scheme by dumping their shares in relatively small amounts over extended periods of time, and they attempted to hide their proceeds from U.S. regulators by routing them through offshore accounts.”
The SEC previously suspended trading in Americas Energy stock.
The SEC’s complaint alleges that Strebinger and Chapman violated Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(d), and 20(b) of the Securities Exchange Act of 1934, and Rules 10b-5, 13d-1, and 13d-2(a). They are also charged with aiding and abetting each other’s Exchange Act violations. The SEC’s complaint alleges that Muskateer Investments Inc., a Nevis-based entity beneficially owned by Strebinger, violated Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2(a). The SEC’s complaint seeks permanent injunctions, disgorgement of ill-gotten gains along with prejudgment interest, financial penalties, penny stock bars, an accounting, and the repatriation of any stock sales proceeds transferred to any offshore sites.
The SEC has named Strebinger’s wife as a relief defendant in its complaint for the purposes of seeking disgorgement of ill-gotten gains from the scheme that may be located in her accounts. Muskateer Investments also is listed as a relief defendant along with a company beneficially owned by Strebinger’s wife called Furla Blue SpA and a company beneficially owned by Chapman called Lance Investments S.A.
The SEC’s investigation, which is continuing, is being conducted out of the Atlanta Regional Office by Lucy T. Graetz and Aaron W. Lipson under the supervision of William P. Hicks and Rhea K. Dignam in coordination with the Enforcement Division’s Microcap Fraud Task Force. The SEC’s litigation will be led by Kristin B. Wilhelm and W. Shawn Murnahan. The SEC appreciates the assistance of the British Columbia Securities Commission, Swiss Financial Market Supervisory Authority, and Financial Industry Regulatory Authority.