U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23903 / August 11, 2017
Securities and Exchange Commission v. Hidalgo Mining Corp., et al., No. 17-cv-80916 (S.D. Fla. filed Aug. 4, 2017)
SEC Charges Mining Company and its Owners With Engaging in an Offering Fraud Involving a Mexican Silver Mine
The Securities and Exchange Commission has charged a Florida-based mining company and its owners with defrauding investors in an unregistered securities offering involving a silver mine located near Mexico City, Mexico.
The SEC's complaint alleges that from at least August 2009 through March 2013, Hidalgo Mining Corp. and its principals John W. Boyer and Joshua F. McAlees raised approximately $10.35 million from about 85 investors nationwide, purportedly to fund mining operations for a silver mine located near Mexico City, Mexico. Boyer, McAlees, and a team of sales agents they employed promised investors that, in exchange for their investment, they would have the right to the future production of silver from the mine at a certain price per ounce or a cash payout. But, Hidalgo, Boyer and McAlees didn't tell investors that 10% of their money would be used to pay sales commissions. Boyer and McAlees also allegedly didn't tell investors that they didn't have the immediate financial ability to simultaneously make good on about $3.5 million of investor principal they personally guaranteed, had they been called upon to honor all of those guarantees simultaneously. In March 2013, according to the complaint, Hidalgo, Boyer and McAlees stopped raising capital from investors.
The SEC's complaint further alleges that Boyer, McAlees, and the sales agents were not registered with the SEC as broker-dealers. The SEC encourages investors to check the backgrounds of people selling them investments by using the SEC's investor.gov website to quickly identify whether they are registered professionals.
The SEC's complaint, filed in the U.S. District Court for the Southern District of Florida on August 4, 2017, charges Hidalgo, Boyer and McAlees with violating Sections 5(a), 5(c), and 17(a)(2) of the Securities Act of 1933, and Boyer and McAlees with violating Section 15(a)(1) of the Securities Exchange Act of 1934. Without admitting or denying the SEC's allegations, Hidalgo, Boyer and McAlees each consented to the entry of a final judgment permanently enjoining each of them from violating the charged provisions of the federal securities laws. The judgments also require Hidalgo to pay disgorgement of $7,444,750, prejudgment interest of $953,981, and a civil penalty of $178,156; Boyer to pay disgorgement of $28,675, prejudgment interest of $3,852, and a civil penalty of $26,724; and McAlees to pay disgorgement of $23,500, prejudgment interest of $3,157, and a civil penalty of $26,724. The settlements are pending final approval by the court.
The SEC's investigation was conducted by Raynette R. Nicoleau and supervised by Chedly C. Dumornay.