SEC Charges Six Individuals in International Microcap Fraud Schemes
Litigation Release No. 24712 / January 10, 2020
Securities and Exchange Commission v. Bajic et al., No. 20-cv-00007 (S.D.N.Y. filed January 2, 2020)
Securities and Exchange Commission v. Ciapala et al., No. 20-cv-00008 (S.D.N.Y. filed January 2, 2020)
The Securities and Exchange Commission charged six individuals and their companies with participating in schemes that allegedly generated more than $35 million of illegal sales of stock in at least 45 microcap companies. The charges contained in two complaints reflect investigations by staff in the SEC's New York and Boston offices, and assistance from multiple regulators outside the U.S.
According to one SEC complaint, Steve M. Bajic, a citizen of Canada and Croatia, and Rajesh Taneja, a Canadian citizen, helped shareholders secretly dump large quantities of microcap stock, coordinating the illegal stock sales with Kenneth Ciapala, a citizen of the U.K. and Switzerland, and Anthony Killarney, a U.K. citizen, and Swiss-based company Blacklight SA. The SEC's complaint also alleges that Christopher McKnight, a Canadian citizen, and Aaron Wise, a U.S. citizen, fraudulently transferred, and hid the sources of, funds used to promote several of the microcap stocks.
A second complaint alleges that Ciapala and Blacklight facilitated the sale of millions of unregistered shares of EMS Find Inc. (EMSF) while the microcap stock's price was being artificially inflated and dumped into the market. The complaint further alleges that Ciapala and Blacklight engaged in manipulative trading of EMSF stock. In a parallel action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against Ciapala and Blacklight.
The SEC's complaints charge Bajic, Taneja, Killarney, Ciapala, and their companies with violating Sections 17(a)(1) and (3) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5(a) and (c) thereunder, Sections 13(d) and 15(a) of the Exchange Act, and Sections 5(a) and 5(c) of the Securities Act. Ciapala and Blacklight were also charged with violating Section 9(a)(2) of the Exchange Act. McKnight and Wise were charged with aiding and abetting the violations of Sections 5(a) and 5(c) and 17(a)(1) and (3) of the Securities Act, and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder. McKnight was also charged with violating Section 17(a)(3) of the Securities Act. The SEC is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, penalties, and penny stock bars.
The SEC's investigations were conducted by Trevor Donelan, Rebecca Israel, Kathleen Shields, Eric Forni, Jonathan Allen, J. Lauchlan Wash, David Scheffler, Susan Anderson, and Amy Gwiazda in the SEC's Boston Regional Office and by Joseph Darragh, Kristine Zaleskas, Paul Gizzi, Michael Paley, and Judith Weinstock in the SEC's New York Regional Office.
The SEC appreciates the assistance of the U.S. Attorneys' Offices for the Southern District of New York and the District of Massachusetts, the Federal Bureau of Investigation, the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission, the Royal Canadian Mounted Police, the Cyprus Securities and Exchange Commission, the Hong Kong Securities and Futures Commission, the Malta Financial Services Authority, the Mauritius Financial Services Commission, the New Zealand Financial Markets Authority, the Panamanian Superintendencia del Mercado de Valores, the Monetary Authority of Singapore, and the Financial Industry Regulatory Authority.