SEC Charges Florida Broker-Dealer Spartan Securities Group for Its Role in Microcap (Penny Stock) Fraud Scheme
On February 20th, 2019, the Securities and Exchange Commission (SEC) announced securities fraud charges against a Clearwater, Florida-based brokerage firm, a third-party company, and several individuals. The broker-dealer in question — Spartan Securities Group, Ltd. (CRD#: 104478) — allegedly helped a company called Island Capital Management LLC set up at least 19 “sham” entities. Here, our Miami investment fraud lawyers provide an overview of the allegations against Spartan Securities.
The Allegations: Facilitating the Creation of ‘Sham’ Companies
According to the complaint filed by the SEC, Spartan Securities Group helped a firm doing business under the name Island Stock Transfer set up more than nearly 20 “blank check” companies. These companies were presented to the public as having legitimate business operations. However, in reality, the SEC contends that these were not companies in any real sense.
A blank check company is a company that is so early in its development stage that it has no valid business operations nor does it even have a real, viable business plan. Essentially, an investor is giving the company a “blank check” to use the funds as the company deems fit. They are highly speculative, potentially fraudulent entities. Importantly, the SEC has cracked down on ‘blank check’ companies in recent years. Unfortunately, these types of companies have been used in penny stock fraud schemes. As noted by federal regulators, these type of entities are not eligible for certain exemptions from securities registration requirements.
Federal regulators contend that two Spartan Securities Group representatives — Micah James Eldred of Clearwater (CRD#: 1959598) and Carl Eddie Dilley of Clearwater (CRD#: 4644729) — knew or should have known that Island Stock Transfer was using its brokerage firm to facilitate the creation of these fraudulent entities.
Registered Broker-Dealers Play a Key Gatekeeping Role in the Securities Industry
As a representative for the Miami regional office of the Securities and Exchange Commission stated in the agency’s press release regarding this case, registered brokerage firms play an important gatekeeping role in protecting investors and in ensuring market fairness. Among many other obligations, broker-dealers have a professional duty to prevent so-called ‘blank check’ companies from running their fraudulent operations through them. Firms should not give cover to these companies.
When an investor sustains financial losses as the result of the negligent or reckless action of a financial advisor or a brokerage firm, they may be able to hold the individuals or entities legally liable for any resulting losses. Broker negligence claims are complex. Investment fraud victims should always be ready to seek professional legal support.
Get Help From Our Miami, FL Investment Fraud Lawyers Today
At Carlson & Associates, P.A., our investment fraud attorneys are committed to offering Florida investors strong and sophisticated legal representation. We help investors recover compensation for any losses caused by fraud or negligence.
To set up a strictly confidential review of your microcap (penny stock) loss claim, please do not hesitate to call us today at 305-372-9700. We represent investors in Miami and throughout Florida.
Resources:
sec.gov/news/press-release/2019-16
brokercheck.finra.org/firm/summary/104478
brokercheck.finra.org/individual/summary/1959598
brokercheck.finra.org/individual/summary/4644729
https://www.carlson-law.net/finra-complaint-florida-financial-advisor-falsified-data/
