SEC Charges Three Men in San Diego-Based Microcap Fraud
Litigation Release No. 24730 / January 31, 2020
Securities and Exchange Commission v. Alex C. Procopio, Mark S. Zouvas, and Christian R. Hansen, No. 3:20-cv-00182-BEN-LL (S.D. Cal. filed Jan. 29, 2020)
The Securities and Exchange Commission today announced charges against Alex Procopio, former CEO of San Diego-based Cuba Beverage Company, Mark Zouvas, the company's former CFO, and Christian Hansen, a corporate marketing consultant, for conducting a fraudulent kickback scheme involving the sale of Cuba Beverage's unregistered penny stock.
The SEC's complaint, filed in federal court in southern California, alleges that Procopio, Zouvas, and Hansen agreed to have Zouvas sell a note issued by Cuba Beverage to Hansen with the understanding that Hansen would convert the note into shares of Cuba Beverage, sell the shares into the market, and kick back a third of the sale proceeds to each of Zouvas and Procopio. According to the SEC's complaint, to sell the Cuba Beverage shares into the market immediately after converting the note, Hansen had to convince his brokerage firm that the shares qualified for an exemption from the SEC's registration requirements. The SEC alleges that the three men schemed to mislead the brokerage firm into believing that a valid exemption applied. As a result, Hansen was able to sell 180 million shares into the market for prices ranging from $.0002 to $.0006, and reap illegal trading proceeds of about $75,000. The SEC further alleges that Zouvas made material misrepresentations regarding payments he had received, in Cuba Beverage's 2014 third quarter and annual reports submitted to OTC Markets Group, Inc.
The SEC's complaint charges Procopio, Zouvas, and Hansen with violating the registration and antifraud provisions of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act. It also seeks relief including permanent injunctions, disgorgement of ill-gotten gains plus interest, penalties, and penny stock and officer and director bars.
The SEC's investigation was conducted by Sara Kalin, Roberto Tercero, Roberto Grasso, and Angela Hill of the Los Angeles Regional Office with assistance from the Microcap Fraud Task Force. The case is being supervised by Marc Blau and the litigation will be led by Amy Longo. The SEC appreciates the assistance of FINRA.