On September 8, 2021, the Securities and Exchange Commission charged Nevada resident Frederick Bauman with playing a critical role as an attorney who facilitated the unregistered sale of millions of shares of securities by two groups engaged in securities fraud.

According to the SEC's complaint, between 2016 and August 2019, Bauman authored at least a dozen legal opinion letters falsely stating that certain shareholders were not affiliated with the public companies whose stock they held. The complaint alleges that in reality, the public companies and shareholders were under common control, and the shareholders were therefore affiliates of the companies. Stock held by an affiliate of a public company is restricted, and only small quantities of such stock can be legally offered or sold to the public without a securities registration statement in effect. A registration statement contains important information about a public company's business operations, financial condition, results of operation, risk factors, and management. According to the complaint, Bauman provided the opinion letters to transfer agents - entities that record the ownership and transfer of securities, and thus routinely track whether particular securities are subject to resale restrictions. The transfer agents allegedly relied on Bauman's false letters in treating shares of stock as unrestricted, and recording transfers on that basis. The complaint alleges that Bauman's letters thus facilitated sales of millions of shares that could not legally be sold to the public without a registration statement.

The SEC's complaint, filed in federal district court in Nevada, charges Bauman with violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933. Without admitting or denying the allegations, Bauman consented to the entry of a final judgment permanently enjoining him from future violations of the charged provisions. In addition, Bauman consented to a five-year penny stock bar and a five-year conduct-based injunction that restricts his ability to prepare opinion letters. Bauman agreed to pay a $60,000 civil penalty, $13,000 in disgorgement, and $1,653 in prejudgment interest. The settlement is subject to court approval.

The SEC's case is being handled by Nita Klunder, Kathleen Shields, Eric Forni, Trevor Donelan, and Amy Gwiazda of the Boston Regional Office. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.