Skip to main content

SEC Announces Charges Against Florida-Based Penny Stock Schemes


Washington D.C., Aug. 14, 2013 —

The Securities and Exchange Commission today announced the latest charges in a joint law enforcement crackdown on penny stock schemes with ties to the Florida region.

The SEC charged two microcap companies, their CEOs, and one penny stock promoter for spearheading illegal kickback schemes.  The SEC also charged two other microcap companies, their CEOs, and four other promoters with arranging the payment of bribes to hype the companies in which they had a stake in order to create a false sense of market activity and illegally generate stock sales.

“Interested only in lining their own pockets, these company officers and promoters used underhanded tactics to cheat investors and manipulate penny stocks” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.  “Their utter disregard for investors underscores the importance of stamping out microcap fraud.”  

The SEC has worked closely with the U.S. Attorney’s Office for the Southern District of Florida and the Federal Bureau of Investigation’s Miami Division to uncover the penny stock schemes.  Parallel criminal charges were announced today against the same nine individuals facing SEC charges. 

The SEC has now charged 40 individuals and 24 companies in this series of penny stock investigations.  The first actions were announced in October 2010.

The SEC’s complaints filed today in U.S. District Court for the Southern District of Florida charged the following penny stock companies and officers:

The SEC’s complaints charge the following penny stock promoters:

According to the SEC’s complaints, one of the schemes (Health Sciences Group/Gaffney) involved an arrangement to pay an undisclosed kickback to a pension fund manager in exchange for the fund’s purchase of restricted shares of stock in the company.  Two other schemes (Nationwide PharmAssist/Molinari and Balbirer) involved agreements to pay undisclosed kickbacks to hedge fund principals in return for their funds’ purchase of restricted shares.

The SEC’s complaints allege that other schemes involved the arrangement of inducement payments by officers or promoters of penny stock companies to coordinate the manipulation of their stock.  Those who arranged the payment of bribes to create fictitious market movement were Redfin Network/Schultz, VHGI/Martin, and promoters Greene, Santamaria, and Simon.  In his scheme, Freedman arranged to pay an undisclosed bribe to a stockbroker who agreed to purchase a microcap company’s stock in the open market for his customers’ discretionary accounts. 

The SEC’s complaints allege that the companies, officers, and promoters violated Section 17(a)(1) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and/or 10b-5(c).  The SEC seeks financial penalties, disgorgement of ill-gotten gains plus prejudgment interest, and permanent injunctions.  The SEC also seeks penny stock bars against each of the officers and promoters, and officer-and-director bars against Gaffney, Martin, Molinari, and Schultz.

The SEC’s investigation was conducted in the Miami Regional Office by senior counsels Trisha D. Sindler and Michelle I. Bougdanos under the supervision of assistant regional director Chedly C. Dumornay.  The SEC’s litigation will be led by Patrick R. Costello and Andrew Schiff.  The SEC appreciates the assistance and cooperation of the U.S. Attorney’s Office for the Southern District of Florida and the FBI’s Miami Division.


Return to Top