SEC Charges Three Canadians with Securities Fraud

Litigation Release No. 25287 / December 10, 2021]

Securities and Exchange Commission v. Jay Scott Kirk Lee, Geoffrey Allen Wall, and Benjamin Thompson Kirk, No. 1:21-cv-11997 (D. Mass filed December 9, 2021)

The Securities and Exchange Commission today announced that it filed an action yesterday afternoon charging three individuals with violations of the federal securities laws for a scheme in which they coordinated the dumping of shares of as many as ten issuers into the market while disguising from transfer agents, brokers and, ultimately, the investing public, their virtual entire control of the public floats of these companies. They generated tens of millions of dollars of proceeds from this fraud, while investors were left with near-worthless shares of various public companies.

According to the SEC's complaint, between at least 2011 and 2016, Canadian citizens Jay Scott Kirk Lee, Geoffrey Allen Wall, and Benjamin Thompson Kirk were some of the more prolific clients of Frederick L. Sharp and his offshore platform, which was essentially a complete service provider for all the illicit needs of those dedicated to committing penny stock fraud. (Previously, the SEC filed an action against Sharp and associates of his for violations of the anti-fraud and registration provisions of the federal securities laws arising from their creation, maintenance and profiting from this platform. See SEC Press Release No. 2021-148 (Aug. 9, 2021) (https://www.sec.gov/news/press-release/2021-148)). Through this platform, Lee, Wall, and Kirk, were able to utilize a network of offshore front companies to conceal their control of shares in public companies, unload those shares on unsuspecting retail investors, and disburse to their various bank accounts throughout the world the proceeds of their fraud. They communicated with one another and with Sharp and his associates using encrypted communication devices and an encrypted communications system supplied by the platform, using handles and aliases to hide their behavior. For example, the complaint alleges that in 2013, Lee, Wall, and Kirk surreptitiously gained control of Nutranomics, Inc.'s free-trading stock, directed the distribution of shares of the company to offshore brokerage accounts under the Sharp platform, hired promoters to tout the company's stock, and then sold their secret large positions on the precipitous price rise, netting millions of dollars.

Key to the fraud was maintaining the appearance to the unknowing public that the shares of the public companies were disparately and unrelatedly owned when, in fact, they were under the control of the three defendants working together to dump them. To do this, Lee, Wall and Kirk's hid their control from brokers and transfer agents who serve as "gatekeepers" to assure that shares controlled by company affiliates (including those who control 5% or more of a company's shares) are not sold to the public without proper disclosure in a registration statement.

The SEC's complaint, which was filed in federal district court in Boston, charges Lee, Wall and Kirk with violating the antifraud and registration provisions of the federal securities laws. The SEC is seeking permanent injunctions, conduct based injunctions, disgorgement of allegedly ill-gotten gains plus interest, civil penalties, and penny stock bars.

The SEC's investigation has been led by Edward Gerard, Steve Susswein, and Shipra Wells of the Commission's Washington, DC Office, with the assistance of Trevor Donelan of the Commission's Boston Regional Office, and supervised by J. Lee Buck, II. Senior Trial Counsel James E. Smith will lead the Commission's litigation of this matter. The SEC appreciates the assistance of the Financial Industry Regulatory Authority, the British Columbia Securities Commission, the Mauritius Financial Services Commission, and the CuraĤao Korps Landelijke Politiediensten.