SEC Charges Unregistered Brokers in Penny Stock Scheme Targeting Seniors

The Securities and Exchange Commission today charged three Florida residents with fraudulent sales of stock in NIT Enterprises Inc., a South Florida technology company. The SEC previously charged NIT Enterprises, its former CEO, and two SEC-barred brokers with allegedly defrauding over 100 retail investors, many of them seniors.

In the latest action, the SEC’s complaints allege that Mason Newman, Christian Baquerizo, and Kevin Cardenas raised approximately $1.4 million selling unregistered NIT stock to retail investors, most of whom were seniors, and received nearly $500,000 in undisclosed commissions. According to the complaints, the defendants cold-called investors, making baseless promises about NIT’s future profitability and imminent public offering and leading investors to believe that NIT would use their funds primarily for research and development, while concealing that 30% or more of the funds invested would be used to pay commissions to the defendants. The SEC also alleges that Newman used an alias to conceal that the SEC had previously barred him from acting as a broker and offering penny stocks to investors.

“We will continue to pursue wrongdoers who prey on our most vulnerable senior investors,” said Eric I. Bustillo, Director of the Miami Regional Office. “Today’s action shows that alleged recidivists cannot shield themselves from detection and action by the SEC by using aliases or otherwise attempting to conceal their identity.”

The SEC’s complaints charge the defendants with violating the antifraud and registration provisions of the federal securities laws. The SEC seeks permanent injunctive relief, disgorgement of allegedly ill-gotten gains plus prejudgment interest and civil penalties. Baquerizo and Cardenas, without admitting or denying the SEC’s allegations, agreed to be enjoined from future violations of the charged provisions while leaving the resolution of monetary relief to a later date. The settlements are subject to court approval. Baquerizo and Cardenas also consented to industry and penny stock bars.

The SEC’s investigation was conducted by Michael J. Gonzalez and Eric E. Morales in the Miami Regional Office and supervised by Jason R. Berkowitz and Glenn S. Gordon. The SEC’s litigation is being led by Wilfredo Fernandez and Mr. Gonzalez and supervised by Andrew O. Schiff. The SEC appreciates the assistance of Florida’s Office of Financial Regulation.