Promoter in Securities Kickback Scheme Barred from Penny Stock Offerings
Litigation Release No. 24063 / March 5, 2018
Securities and Exchange Commission v. Edward Henderson, No. 11-cv-12116 (D. Mass. filed Dec. 1, 2011)
A federal court has barred the promoter in a securities kickback scheme from participating in penny stock offerings for the rest of his life.
According to the SEC's complaint, filed in December 2011, Edward Henderson was one of several individuals charged with engaging in a scheme to trigger investments in various thinly-traded stocks through secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies. The SEC alleged that Henderson and the investment fund representative, who was an undercover FBI agent, agreed that Henderson would receive a fee for introducing the representative to executives willing to pay kickbacks in exchange for funding for their companies. Henderson allegedly received $12,650 for introducing an executive to the fund representative, which was a portion of the kickback that the executive paid.
The final judgment, entered on February 28, 2018 by the federal district court in Boston, Mass., permanently prohibits Henderson from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, holds him liable for $12,650 in disgorgement, representing profits from the alleged illegal conduct, but deems it satisfied by a forfeiture order entered against Henderson in a related criminal action. The judgment also prohibits Henderson from participating in penny stock offerings.
The court's entry of judgment against Henderson resolves the litigation in its entirety. The court previously entered judgment against Michael Lee, ZipGlobal Holdings, Inc., Paul Desjourdy, Microholdings US, Inc. and James Wheeler. The SEC's cases arose from an alleged kickback scheme that was exposed by an undercover operation of the Federal Bureau of Investigation's Boston office.
The SEC's Office of Investor Education and Advocacy has warned investors that some stock promotions are conducted by paid promoters or company insiders who stand to profit. Investors who receive a stock promotion should carefully research the company before investing.