New evidence in the Caledonian case suggests that the owners of co-defendant Verdmont traded in the penny stock Goff Corp. for their own benefit.
Panamanian broker-dealer Verdmont had previously stated in court documents that it had only conducted a single day trade for its own account, which resulted in a profit of $11,300, and that all other trades in the manipulated stocks had been effected on behalf of clients.
Verdmont has made an application for a judgment on the pleadings on the basis of the currently submitted evidence, effectively trying to have the case dismissed.
In response to the motion, the SEC has filed two investment account applications that show that Verdmont owner Glynn Fisher is the director of Cayman company Creekside Capital – the beneficial owner is Pescata Foundation – and that fellow Verdmont principal Taylor Housser is the owner and director of BVI-based Jacametra Inversiones, S.A.
An excerpt of trading records also submitted by the SEC shows that both companies traded in Goff Corporation – one of four allegedly restricted and manipulated penny stocks.
According to the single sheet of trading records for the period of March 18 to April 3, 2013, Jacametra Inversiones made a profit of $23,905 and Creekside Capital made a profit of $19,899.
Creekside Capital was incorporated in Cayman in October 2003 and Jacametra Inversiones was incorporated in January 2007, according to the records. The SEC said it had obtained the documents from foreign regulators.
The SEC case claims that restricted securities of four companies “were passed off” as free trading stock held by shareholders unaffiliated with the issuers. Stock certificates were then transferred, without restrictive legends, to Caledonian Bank and Caledonian Securities in Cayman, Clear Water Securities and Legacy Global Markets in Belize, and Verdmont Capital in Panama or brokerage accounts held by these firms.
The companies sold the stock from those accounts to the public and thereby violated U.S. securities laws, the SEC alleges.
The stock sold involved four practically worthless penny stock shell companies whose stock price was manipulated in pump and dump schemes and ultimately collapsed to zero, according to the SEC.
The commission maintains that its amended complaint, filed on June 5, properly alleges a prima facie case that Verdmont had violated Section 5 of the Securities Act by selling securities issued by Goff Corp., Norstra Energy and Xumanii, Inc., in unregistered distributions and that the case should go to trial.
Verdmont does not deny that it sold the penny stocks on behalf of clients to the public but maintains that, even if the stocks were restricted, it is covered by the broker-dealer exemptions to Section 5.
The next hearing in the case is scheduled for July 16.
The court also extended the time for Caledonian to respond to the amended complaint by 60 days until Aug. 24. The SEC and Caledonian’s liquidators are currently negotiating a settlement.