SEC Obtains Preliminary Injunction in International Microcap Fraud Scheme

Litigation Release No. 24327 / October 30, 2018

Securities and Exchange Commission v. Roger Knox et al., No. 18-cv-12058 (D. Mass. filed October 2, 2018)

United States v. Roger Knox, No. 1:18-cr-00309 (D. Mass. filed October 23, 2018)

The Securities and Exchange Commission has obtained a preliminary injunction and continued asset freeze against two individuals and their companies involved in a scheme that generated more than $165 million of illegal sales of stock in at least 50 microcap companies.

The court originally entered a temporary restraining order and asset freeze on October 2, 2018. The preliminary injunction and continued asset freeze order, which were entered by a federal district court in Massachusetts on October 26, 2018, preliminarily enjoined U.K. citizen Roger Knox and his Swiss-based company, Wintercap SA, from violating offering, antifraud, and registration provisions of the federal securities laws. It also preliminarily enjoined German citizen Michael T. Gastauer and six of his entities from aiding and abetting Knox and Wintercap's violations of the same provisions. The court's preliminary injunctions will remain in effect until the litigation of this matter is concluded.

According to the SEC's complaint, Knox and Wintercap helped microcap securities holders evade federal securities laws that restrict sales by large shareholders. The complaint charges that Knox and Wintercap helped sellers conceal their stock ownership and provided anonymous access to brokerage accounts to sell the shares in the U.S. market. Gastauer allegedly aided and abetted the fraud by establishing several U.S. corporations and allowing Knox to use their bank accounts to disburse the proceeds of his illegal stock sales. The complaint also names as relief defendants two family members of Gastauer and a U.K. entity Gastauer controlled.

In a parallel criminal action, on October 23, 2018, a federal grand jury in the District of Massachusetts indicted Knox on one count of securities fraud and one count of conspiracy to commit securities fraud.