Litigation Release No. 23724 / January 23, 2017

United States v. George N. Krinos, No. 4:17-CR-00001

In the Matter of George N. Krinos et al., Administrative Procedural File No. 3-16202

Ohio Man Pleads Guilty To Securities Fraud

On January 12, 2017, a Boardman, Ohio man, who was a respondent in an earlier SEC enforcement action, pleaded guilty to charges filed by the U.S. Attorney's Office for the Northern District of Ohio alleging that he defrauded investors out of nearly $1.2 million and committed related criminal tax violations.

On January 3, 2017, the U.S. Attorney's Office filed a two-count criminal information against George N. Krinos, alleging that he engaged in a securities fraud scheme and willfully failed to collect and pay payroll taxes for his employees. The criminal information alleged, among other things, that from 2011 through 2014, Krinos, through his various companies known as Krinos Holdings, sold unregistered securities to at least 10 investors on the pretense that the funds would be used for legitimate business purposes, including to provide venture capital to various client companies seeking funding from Krinos Holdings. The information alleged that Krinos instead used the investors' money for personal expenses and unauthorized foreign currency transactions.

The charges in the criminal information arise from similar conduct alleged in a related SEC enforcement action. On October 16, 2014, in an administrative proceeding, the SEC charged Krinos, Krinos Holdings, and Fordgate Acquisition Corp. with violations of the federal securities laws. The SEC's Division of Enforcement alleged that, among other things, from January 2012, through at least November 2013, Krinos, through Krinos Holdings, raised approximately $1 million from at least 18 investors through the unregistered sale of common stock and secured convertible debenture notes. The Division alleged that throughout this period, Krinos made materially false and misleading representations to investors about the use of investor funds and Krinos Holdings' business operations and prospects. The Division also alleged that Fordgate Acquisition Corp., a public shell company Krinos acquired, failed to make required filings with the SEC. The Order alleged that Krinos and Krinos Holdings willfully violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, that Krinos willfully violated Sections 206(1), 206(2), and 207 of the Investment Advisers Act of 1940 and aided and abetted and caused violations of Section 203A of the Advisers Act, and Fordgate violated Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-3 thereunder.

On December 21, 2015, Chief Administrative Law Judge Brenda P. Murray issued an Initial Decision on Default against Krinos, Krinos Holdings, and Fordgate, in which she imposed a cease-and-desist order and an industry bar on Krinos and ordered him to pay more than $1.4 million in disgorgement, prejudgment interest and a civil penalty. The initial decision became final on February 3, 2016.

For further information, see Securities Act Release No. 9665 (Oct. 16, 2014), Initial Decision Release No. 929 (Dec. 21, 2015), Securities Act Release No. 10033 (Feb. 3, 2016).