U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25930 / January 23, 2024
Securities and Exchange Commission v. Aryeh Goldstein, Adar Bays, LLC, and Adar Alef, LLC, No. 1:24-CV-20261 (S.D. Fla. filed Jan. 23, 2024)
SEC Charges Convertible Note Dealer for Failure to Register; Defendants Agree to Pay $1.25 Million to Settle
The Securities and Exchange Commission today announced the filing of an enforcement action against Aryeh Goldstein, a resident of Florida and New York, and two entities he controls, Adar Bays, LLC, located in Florida, and Adar Alef, LLC, doing business in Florida and New York, for failing to register as securities dealers in connection with their convertible note financing business that involved obtaining and selling securities of over 100 microcap companies. The parties have agreed to settle the charges. Among other relief, Goldstein and his entities agreed to pay $1.25 million in monetary relief and to surrender or cancel all remaining shares of public companies allegedly obtained from their unregistered dealer activity.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, alleges that, from at least 2014 through October 2021, the defendants operated as unregistered securities dealers in connection with their convertible note financing of 134 different microcap companies. According to the complaint, the defendants’ business involved loaning money to these microcap companies in exchange for promissory notes that, under certain circumstances, allowed the defendants to convert the debt into shares of the companies. The complaint alleges that the convertible note financing business allowed the defendants to obtain a large number of shares of these microcap companies, which the defendants then sold into the securities marketplace under circumstances that required the defendants to register with the SEC as securities dealers. As further alleged in the complaint, through this business, and without registering as dealers or being associated with a registered dealer, the defendants generated significant profits through the regular sale of billions of converted shares to investors.
Without admitting or denying the allegations of the complaint, Goldstein, Adar Bays, and Adar Alef consented to the entry of separate final judgments: (i) enjoining them from violating Section 15(a)(1) of the Securities Exchange Act of 1934; (ii) ordering payment of disgorgement of $1,044,252 plus prejudgment interest of $100,748 on a joint and several basis and, as to Goldstein, a civil penalty of $105,000; (iii) ordering them to surrender for cancellation all remaining shares they obtained through conversion of notes, as well as conversion rights under any remaining convertible notes; and (iv) imposing five-year penny stock bars against each defendant. The settlement is subject to court approval.
The SEC's litigation is being handled by Alfred Day, Lauchlan Wash, Ellen Moynihan, Kevin Currid, and Rory Alex of the SEC's Boston Regional Office, with assistance from Alex Lefferts of the Division of Enforcement's Office of Investigative & Market Analytics.