SEC Charges Attorney for Role in Fraudulent IPO Scheme
Litigation Release No. 24132 / May 2, 2018
Securities and Exchange Commission v. Adam Tracy and Securities Compliance Group, Ltd., Case No. 1:18-cv-01891-TCB (N.D.Ga.)
The Securities and Exchange Commission today announced charges against a Wheaton, Illinois-based securities lawyer and his law firm for their roles in a fraudulent scheme to conceal the identity of a company's principal control person, a convicted felon who had been previously incarcerated for securities fraud.
According to the SEC's complaint filed in the U.S. District Court for the Northern District of Georgia, Adam Tracy and his law firm, Securities Compliance Group, Ltd., were retained by a convicted felon and his company, Sonant Communications Corp., to file a registration statement with the SEC for an initial public offering of 10 million shares of common stock. The SEC alleges, however, that the felon asked Tracy to conceal his role with the company such that his involvement would be hidden from the SEC and the investing public. As alleged in the complaint, Tracy agreed to participate in the ruse by drafting and filing with the SEC two registration statements that omitted the felon's name, and, instead, named others, without their knowledge or consent, as being the principal officers and control persons of Sonant.
The SEC's complaint charges Tracy and Securities Compliance with aiding and abetting violations of Sections 17(a)(1) and (3) of the Securities Act of 1933. To settle the SEC's charges, the defendants agreed, without admitting or denying the allegations, to the entry of permanent injunctions, disgorgement of all legal fees received in connection with the scheme with prejudgment interest in the amount of $2,655.71, a civil monetary penalty of $25,000, and a penny stock bar against Tracy. Subject to court approval of the settlements, Tracy also has consented to the entry of an order suspending him from appearing or practicing before the SEC as an attorney.
The investigation was conducted in the SEC's Atlanta Regional Office by Edward H. Saunders and supervised by Justin C. Jeffries.