SEC Charges Two in Fraudulent Microcap Scheme

Litigation Release No. 25276 / December 2, 2021

Securities and Exchange Commission v. Carnovale, et al.;, ivil Action No. 1:21-cv-11938 (D. Mass. filed December 2, 2021)

The Securities and Exchange Commission charged two individuals for their participation in alleged fraudulent schemes involving unlawful microcap stock sales at the expense of unsuspecting retail investors.

The SEC's complaint alleges that, from 2016 through at least October 2020, Canadian residents Vincenzo Carnovale and Amar Bahadoorsingh secretly gained control of thinly traded microcap companies, hired stock promoters to create demand for their stock, and generated substantial illicit profits by selling the stock to unsuspecting investors. Carnovale and Bahadoorsingh allegedly hid the fact that they controlled the securities of publicly traded companies. They allegedly misled investors, brokers, and transfer agents (companies that maintain records of stock ownership) in order to convince these parties that the defendants' stock shares were eligible for trading in the public markets, when in fact their stock was not appropriately registered for sale with the SEC. They also allegedly caused the microcap companies to make materially false and misleading statements in their publicly filed financial statements and reports. Additionally, Bahadoorsingh allegedly fabricated documents that he provided to brokers and transfer agents, in order to avoid due diligence procedures those parties had in place to comply with the securities laws.

The SEC's complaint, filed in federal district court in Boston, Massachusetts, charges Carnovale and Bahadoorsingh with violating Sections 5(a), 5(c), 17(a)(1), and 17(a)(3) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5(a) and (c) thereunder. The complaint additionally charges Bahadoorsingh with violating Section 17(a)(2) of the Securities Act and Rule 10b-5(b) under the Exchange Act. The SEC seeks permanent and conduct-based injunctions, disgorgement of allegedly ill-gotten gains plus prejudgment interest, civil penalties, and penny stock bars against Carnovale and Bahadoorsingh.

In August 2021, the SEC brought a separate case against Bahadoorsingh and others, charging them with securities fraud and other alleged violations of the federal securities laws, based on separate alleged conduct.

The SEC's case was investigated by Trevor T. Donelan, David J. D'Addio, Dahlia Rin, Emily R. Holness, Rory Alex, Eric A. Forni, and Amy Gwiazda in the Boston Regional Office. The SEC appreciates the assistance of Financial Industry Regulatory Authority, British Columbia Securities Commission, Ontario Securities Commission, Royal Canadian Mounted Police, Securities and Futures Commission of Hong Kong, Monetary Authority of Singapore, Curaçao Korps Landelijke Politiediensten, and Mauritius Financial Services Commission.