South Florida Arbitration & Litigation Lawyer Blog
Securities and Exchange Commission v. John G. Rizzo, Civil Action No. 13 CV 1801 MMA (BLM) (S.D. Cal. August 2, 2013)
SEC Charges Penny Stock CEO in International Boiler Room Scheme
The Securities and Exchange Commission recently announced charges against a penny stock company CEO in Boca Raton, Fla., for orchestrating an international boiler room scheme.
The SEC alleges that John G. Rizzo, the former CEO of iTrackr Systems Inc., used offshore boiler rooms to solicit foreign investors as he attempted to evade registration requirements under the U.S. securities laws. The boiler rooms raised approximately $2.5 million from investors living in the United Kingdom. Unbeknownst to investors, Rizzo funneled the money raised to his bank account in Belize. After paying commissions to the boiler room operators, he used investor money to pay his personal expenses.
In a parallel action, the U.S. Attorney’s Office for the Southern District of California announced criminal charges against Rizzo on August 2, 2013.
According to the SEC’s complaint filed August 2, 2013 in U.S. District Court for the Southern District of California, Rizzo used U.S.-based escrow agents and bank accounts to make iTrackr investments appear more legitimate to investors. After investors wired funds to one of the U.S. bank accounts, Rizzo arranged for the money to be transferred to his Belize account in an effort to conceal his undisclosed use of investor funds to pay boiler room operators and his own expenses.
The SEC’s complaint alleges that Rizzo agreed to pay the boiler room operators a commission of up to 80 percent of the amount they raised from investors. The arrangement was never disclosed to iTrackr investors.
The SEC’s complaint alleges that Rizzo violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks disgorgement with prejudgment interest, financial penalties, officer-and-director and penny stock bars, and a permanent injunction against Rizzo.
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