The U.S. Securities and Exchange Commission has shut down a South Florida-based investment scheme that defrauded over 100 retail investors, many of whom are seniors.
Additionally the assets of the operators of the scheme have had their assets frozen.
The SEC says it has filed an emergency action and obtained an asset freeze against the operators of the scheme. Two of the those charged were previously barred by the Commission from acting as brokers and offering penny stocks to investors.
According to the SEC's complaint unsealed this week, NIT Enterprises, Inc., NIT's CEO Gary R. Smith, Jason M. Ganton, and James E. Cleary, Jr., raised $4.9 million from investors while making misrepresentations. Ganton and Cleary allegedly represented that NIT was raising money to fund the company's efforts to develop its radiation protection products for medical and military applications, which would generate significant returns. In contrast, the SEC alleges that Smith misappropriated $1.25 million or 25% of total investor proceeds to pay for personal expenses, while NIT Enterprises and Smith have paid 25% of proceeds as undisclosed commissions. The SEC's complaint further alleges the operators made baseless promises of NIT's future profitability, imminent initial public offering, and expectations to "double or triple" their investment. Ganton and Cleary, with Smith's knowledge, allegedly concealed their disciplinary histories and prior SEC actions and bars, including through Ganton's use of an alias when soliciting investors.
"This action is part of our Recidivist Initiative to devote resources to bringing actions against alleged recidivists," Eric I. Bustillo, Director of the SEC's Miami Regional Office said. "We continue our ongoing focus to rid the markets of repeat securities law violators, especially those that target seniors and the elderly."
The SEC's complaint charges all defendants with violating the anti-fraud and registration provisions of the federal securities laws and also charges the individuals for, either directly or indirectly, acting as unregistered broker-dealers and violating past Commission orders.
Judge Cecilia M. Altonaga of the U.S. District Court for the Southern District of Florida granted the SEC's request for a temporary restraining order and temporary asset freeze against the defendants, and issued an order directing tthem to provide a sworn accounting. In addition, the complaint seeks relief including injunctions, civil penalties, and disgorgement.
The SEC's investigation, which is continuing, is being led by Michael J. Gonzalez and Eric E. Morales of the Microcap Fraud Task Force 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, Mr. Morales and Mr. Gonzalez, under the supervision of Andrew O. Schiff. The SEC appreciates the assistance of Florida's Office of Financial Regulation.