Securities and Exchange Commission v. Carrillo Huettel LLP, Luis J. Carrillo, Wade D. Huettel, Gibraltar Global Securities, Warren Davis, John B. Kirk, Benjamin T. Kirk, Dylan L. Boyle, James K. Hinton Jr., Luniel de Beer, Joel P. Franklin, Pacific Blue Energy Corporation, Tradeshow Marketing Company Ltd., and Dr. Luis Carrillo, Civil Action No. 13 Civ. 1735 (GBD) (S.D.N.Y.)
SEC CHARGES SAN DIEGO LAWYERS AND OTHERS IN AN INTERNATIONAL MARKET MANIPULATION SCHEME
The Securities and Exchange Commission recently charged a group of Canadian stock promoters, two San Diego attorneys, a Bahamas-based broker-dealer, and other participants in an international “pump-and-dump” scheme involving two publicly-traded U.S. companies, Pacific Blue Energy Corporation (Pacific Blue) and Tradeshow Marketing Company Ltd. (Tradeshow).
According to the SEC’s complaint, Canadian stock promoters John Kirk, Benjamin Kirk, Dylan Boyle, James Hinton, and their associates, used false and misleading promotions to pump up trading in the stock of the two “microcap” companies and made millions when they secretly dumped their own shares. Microcap companies typically have limited assets and low-priced stock that trades in low volumes. The SEC alleges that the promoters sent investors false and misleading emails about the companies through two websites they controlled, Skymark Research and Emerging Stock Report, and used “boiler room” sales calls to tout the stocks, falsely claiming that the recommendations were based on independent research by Skymark and Emerging Stock Report.
The SEC alleges that San Diego-based attorneys Luis Carrillo and Wade Huettel were central participants in the scheme, who helped the promoters conceal their ownership interests in the companies, drafted misleading public filings, and provided misleading legal opinions. As part of the scheme, their law firm, Carrillo Huettel LLP, secretly received proceeds of stock sales in the form of a sham “loan.”
The SEC’s complaint also alleges that Gibraltar Global Securities, a Bahamian broker-dealer, provided false affidavits and misleading statements that allowed Benjamin Kirk to secretly sell shares of the companies he was promoting. The SEC also charged Gibraltar’s president, Warren Davis, who signed misleading representations on behalf of Gibraltar.
According to the SEC, Tradeshow president Luniel de Beer, who served as chairman of Pacific Blue, received more than $330,000 in secret kickbacks for his part in the scheme. In addition, the SEC alleged that de Beer and Pacific Blue president Joel Franklin made misleading representations and facilitated the promoters’ stock sales. Franklin has agreed to a proposed settlement in this matter. Without admitting or denying the SEC’s allegations, Franklin consented to the entry of a final judgment that permanently enjoins him from violating Sections 5 and 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and consented to certain injunctive relief.
The SEC’s action was filed in the U.S. District Court for the Southern District of New York, alleging violations by Carrillo Huettel LLP, Carrillo, Huettel, Gibraltar Global Securities, de Beer, John Kirk, Benjamin Kirk, Boyle, Hinton, Pacific Blue, and Tradeshow of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC action also alleges that Carrillo Huettel LLP, Carrillo, Huettel and Gibraltar are liable for aiding and abetting, that de Beer is liable as a control person and for aiding and abetting, and that John Kirk, Ben Kirk, Boyle and Hinton are liable as control persons for violations of Section 10(b) of the Exchange Act and Rule 10b-5. The complaint also alleges violations by Franklin of Section 17(a)(2) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder. The SEC’s action further charges all defendants, including Warren Davis and Carrillo’s father, Dr. Luis Carrillo, with violations of Sections 5(a) and 5(c) of the Securities Act, and also names Dr. Luis Carrillo as a relief defendant who obtained ill-gotten gains.
The complaint seeks, among other things, a final judgment ordering the defendants to return their allegedly ill-gotten gains, with interest, and to bar Carrillo, Huettel, de Beer, John Kirk, Benjamin Kirk, Boyle, and Hinton from participating in future penny stock offerings and from serving as public company officers or directors. The SEC also seeks civil monetary penalties from Carrillo Huettel LLP, Carrillo, Huettel, and de Beer.
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