SEC Charges Two Individuals for Fraud and Issuer for Unregistered Sale of Securities
Litigation Release No. 24526 / July 1, 2019
U. S. Securities and Exchange Commission v. Thomas V. Conwell and Kerry L. Hoffman, No. 19-cv-4409 (N.D. Ill. filed July 1, 2019)
The Securities and Exchange Commission today charged Thomas V. Conwell of Fort Myers, Florida and Kerry L. Hoffman of Chicago, Illinois for fraudulently selling securities to retail investors.
The SEC's complaint alleges that between July 2015 and July 2018, Conwell and Hoffman raised over $3.3 million from approximately 46 investors through the sale of unregistered GT Media, Inc. securities. According to the complaint, Conwell, who was previously enjoined by the SEC and criminally convicted for stealing money from investors, made numerous false representations to investors, including that two Fortune 500 companies were seeking to acquire GT Media and that GT Media would soon conduct an initial public offering. The complaint also alleges that Conwell misappropriated $161,500 from investors, which he used to pay his personal expenses. According to the complaint, Hoffman, a registered representative and investment advisory representative at a large nationwide financial firm, solicited certain of his advisory clients to invest in GT Media securities without disclosing his financial conflicts of interest, including his compensation from GT Media and his short-term loans to GT Media that were repaid using investor funds.
The SEC's complaint, filed in federal district court in Chicago, charges Conwell and Hoffman with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the broker-dealer registration provisions of Section 15(a) of the Exchange Act. The complaint also charges Conwell with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act and Hoffman with violating the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC seeks permanent injunctions and monetary relief.
The SEC separately instituted a settled cease-and-desist proceeding against GT Media. According to the SEC's order, between at least February 2013 and July 2018, GT Media raised approximately $4 million by offering and selling unregistered GT Media common stock to 55 investors. Without admitting or denying the SEC's findings, GT Media consented to the SEC's order, which finds that the company violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act and imposes a cease-and-desist order and a $173,436 civil penalty.
The SEC's investigation was conducted by James A. Davidson and Wilburn Saylor and was supervised by Anne C. McKinley of the Chicago Regional Office. The litigation will be led by John E. Birkenheier, James A. Davidson and Anne C. McKinley.