SEC Charges Penny Stock Dealers with Failing to Register with the Commission
Litigation Release No. 24748 / February 26, 2020
Securities and Exchange Commission v. John D. Fierro and JDF Capital, Inc., No. 3:20-cv-2104 (D.N.J. February 26, 2020)
On February 26, 2020, the Securities and Exchange Commission charged John D. Fierro, a New Jersey resident, and his company, JDF Capital, Inc., with failing to register as dealers with the SEC. Fierro and JDF bought and sold billions of newly issued shares of penny stock, generating millions of dollars in profits.
The SEC's complaint, filed in federal court in New Jersey, alleges that between January 2015 and November 2017, Fierro and JDF engaged in the business of purchasing convertible notes from penny stock issuers, converting the notes into shares of stock at a large discount from the market price, and selling those newly issued shares into the market at a significant profit. Fierro and JDF allegedly purchased convertible notes from more than 20 separate issuers and sold more than 6.5 billion shares of newly issued penny stock into the market, generating over $2.3 million in profits. As alleged, at the time of this conduct, neither Fierro nor JDF were registered as dealers with the SEC, in violation of the mandatory registration provisions of the federal securities laws. By failing to register, Defendants avoided certain regulatory obligations for dealers that govern their conduct in the marketplace, including regulatory inspections and oversight, financial reporting requirements, and maintaining books and records.
The SEC's complaint charges Fierro and JDF with violating the registration provision of Section 15(a)(1) of the Securities Exchange Act of 1934. The complaint also charges Fierro as a control person under Section 20(a) of the Exchange Act for JDF's violations. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, civil penalties, and penny stock bars.
The SEC's investigation was conducted by Antony Richard Petrilla, Hope Hall Augustini, and Joshua Braunstein and supervised by Brian O. Quinn and Carolyn M. Welshhans. The litigation will be led by Messrs. Braunstein and Petrilla and supervised by Jan Folena.