The Securities and Exchange Commission today announced fraud charges against a Florida man who was part of a scheme to register and sell stock in blank check companies masked as promising startups to illicitly profit off the investing public.
The SEC's order finds that Sheldon R. Rose created more than a dozen blank check companies, which have no operations and no value other than their registered status to sell stock. Rose installed friends and family as figurehead company officers and shareholders so he could secretly control the companies and their securities. Registration statements and other corporate filings made it falsely appear that these companies were pursuing real business ventures. The companies were actually bound for nothing more than reverse mergers by which all their securities, including a pool of purportedly unrestricted shares, were sold to enrich Rose and others.
Rose is connected to a scheme the SEC halted last year with fraud charges against 10 other people. In a parallel action, the U.S. Attorney’s Office for the Southern District of Florida today announced criminal charges against Rose and a former broker-dealer registered representative named Ian Kass, whom the SEC charged last month.
Rose has agreed to settle the charges and is barred from future penny stock offerings or from serving as an officer or director of a public company. An administrative law judge will determine monetary sanctions.
“Rose illicitly profited by creating a supply chain of blank check companies with the illusion that they were legitimate startups in order to register securities for sale in reverse mergers,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.
The SEC’s order finds that Rose and his company MKJJ Consulting LLC violated or aided and abetted violations of the antifraud, reporting, recordkeeping, and internal control provisions of the federal securities laws.
The SEC’s continuing investigation is being conducted by Jeffrey T. Cook in the Miami Regional Office as part of the Microcap Fraud Task Force. The case is being supervised by Eric R. Busto. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of Florida and the Federal Bureau of Investigation.