SEC Wins Summary Judgment Against Florida Unregistered Dealers

Litigation Release No. 24871 / August 20, 2020

Securities and Exchange Commission v. Ibrahim Almagarby, et al., No. 0:17-cv-62255-MGC (S.D. FL filed November 17, 2017)

On August 17, 2020, Judge Marcia G. Cooke of the United States District Court for the Southern District of Florida granted the SEC's motion for summary judgment against Ibrahim Almagarby and his company, Microcap Equity Group, LLC (MEG). The SEC's complaint alleged that Almagarby and MEG repeatedly purchased aged debt from penny stock issuers and, after converting the debt into equity at discounted prices, sold the newly issued shares into the market at a significant profit. At the time of this conduct, neither Almagarby nor MEG were registered with the SEC as a dealer and Almagarby was not associated with a registered broker or dealer.

The court ruled that Almagarby and MEG were required to be registered as dealers because they met the statutory definition by engaging in the regular business of buying and selling securities for their own account.  The court therefore found that they violated the dealer registration provisions of Section 15(a) of the Securities Exchange Act of 1934. The court also held Almagarby liable as a control person of MEG under Section 20(a) of the Exchange Act.

The court ruled that injunctive relief was appropriate, but held that it would determine at a later date what additional remedies are appropriate. The court also denied the defendants' cross motion for summary judgment.

The SEC is represented by Robert K. Gordon, W. Shawn Murnahan, William P. Hicks, and M. Graham Loomis.