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Securities and Exchange Commission v. BIH Corporation, et al., Civil Action No. 2:10-CV-577-FTM-29DNF (M.D. FL)
Jury Finds Orchestrator of Microcap Stock Pump-And-Dump Scheme Liable in SEC Enforcement Case
A federal court jury in Fort Myers, Fla., returned a unanimous verdict on August 8 finding Edward W. Hayter of Brooklyn, N.Y., liable for five counts of violating the federal securities laws in connection with a scheme to pump up the stock of a microcap corporation purportedly headquartered in Fort Myers in which Hayter profited by approximately $500,000. Hayter was the lone remaining defendant in the SEC’s enforcement case filed in 2010.
Evidence at the trial showed that among other things, press releases that Hayter and BIH issued in 2008 and 2009 falsely claimed BIH was purchasing a restaurant services corporation that purportedly had contracts with such major corporations as Citi Field and Applebee’s Restaurants. Other evidence showed that in order to hide his involvement in the scheme, Hayter and others created a fictitious businessman named Cris Galo who was allegedly an accomplished entrepreneur running BIH. Evidence showed all of BIH’s contact information traced back to Hayter and an associate in New York, with the Fort Myers office being only a mail drop. Trading records showed the false press releases contributed to BIH’s stock rising more than 2,700 percent in a matter of months, allowing colleagues of Hayter to sell stock and funnel approximately $500,000 in proceeds to his own corporations.
The SEC filed its complaint against Hayter, BIH, Wayne A. Burmaster Jr. on Sept. 20, 2010, alleging that they had engaged in fraud and illegal sales of securities. The SEC also alleged securities registration violations by Christopher L. Astrom and his company Bimini Reef Real Estate Inc., Damian B. Guthrie and his company Riverview Capital Inc., and Burmaster’s company North Bay South Corporation. The SEC named Baron International Inc., Beaver Creek Financial Corporation, and The Caddo Corporation as relief defendants.
According to the SEC’s complaint, Burmaster and Hayter released false information about BIH’s operations and business relationships, the company’s stock and dividend payments, and the identity of the individuals directing BIH’s affairs. The SEC alleged that as part of the scheme, Burmaster and Hayter illegally distributed BIH’s stock to North Bay, Bimini Reef, and Riverview, and those entities then dumped more than $1 million of BIH’s stock and divided illegally obtained sales proceeds among the defendants and relief defendants.
On Oct. 25, 2010, the Honorable John E. Steele, United States District Court Judge for the Middle District of Florida, entered judgments of permanent injunction and other relief against Astrom and Bimini Reef Real Estate as well as Guthrie and Riverview Capital, enjoining them from violating Sections 5(a) and 5(c) of the Securities Act of 1933. In addition to injunctive relief, the judgments order them to pay disgorgement, prejudgment interest, and penalties in amounts to be determined at a later date. Astrom and Guthrie are barred from participating in the offering of any penny stock. They consented to the entry of the judgments without admitting or denying the allegations in the complaint.
On Sept. 26, 2012, the court entered a default judgment against BIH and North Bay South Corporation and relief defendants The Caddo Corporation and Beaver Creek Financial, ordering disgorgement with a penalty against BIH and North Bay South Corporation to be determined at a later date. On Dec. 17, 2012, the court entered a default judgment against Baron International.
On July 14, 2014, the court entered a default judgment of permanent injunction and other relief against Burmaster, enjoining him from violating Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5. In addition to injunctive relief, the judgment orders Burmaster to pay, jointly and severally, disgorgement and prejudgment interest of $1,349,158 and a penalty in an amount to be determined at a later date. Burmaster is barred from participating in the offering of any penny stock.
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