Convertible Note Dealer in South Florida Agrees to Settle Unregistered Securities Case
On January 23rd, 2024, the Securities and Exchange Commission (SEC) took enforcement action against Aryeh Goldstein—and two companies that he owns and controls: Adar Bays, LLC, and Adar Alef, LLC. Mr. Goldstein was accused of acting as an unregistered penny stock dealer. He will now pay $1.25 million as part of a settlement agreement. Here, our Miami penny stock lawyer provides a comprehensive overview of the case.
SEC Enforcement Action: Unregistered Penny Stock
The SEC charged Aryeh Goldstein—a 51-year-old resident of Miami Beach—with operating as an unregistered securities dealer. Two companies owned and controlled by Mr. Goldstein—Adar Bays, LLC (a Florida entity) and Adar Alef, LLC (a Nevada entity)—were cited in the civil complaint. The alleged misconduct occurred between 2014 and 2021.
The SEC contends that these entities were used as part of convertible note financing with over 100 microcap companies (penny stocks). The practice led to the acquisition and sale of numerous company shares in the securities market that—pursuant to federal law designed to protect investors—required dealer registration with the SEC.
An Overview of the Sanctions Against the Convertible Note Dealer
Though Mr. Goldstein did not admit to or deny any of the specific allegations raised in the federal complaint from the SEC, he consented to the agency’s proposed penalties. These include:
- An immediate injunction against continued operation;
- Payment of $1.14 million in disgorgement and restitution;
- Payment of a $105,000 civil fine; and
- A five-year ban from penny stock offerings.
Penny Stocks Can Be Extremely Risky for Investors
Broadly speaking, a penny stock is defined as a microcap stock that trades under $5.00 per share. Many of these companies trade for well under $1.00 per share. They are thinly traded and can be very risky for investors. Here are the key reasons why:
- Low Liquidity: Penny stocks are often subject to limited liquidity. There are generally relatively fewer buyers and sellers in the market. As such, it can be difficult for investors to sell their shares quickly at a desirable price.
- Lightly Researched: Penny stocks are usually not well-researched by financial analysts. The lack of reliable, publicly available information about the companies’ financial health and business prospects makes it challenging for investors to make informed decisions.
- Price Manipulation (Fraud) Risk: Penny stocks are more susceptible to price manipulation. Due to their low price and limited trading volume, it is easier for scammers to manipulate stock prices through pump-and-dump schemes. An unsuspecting investor could get stuck with major financial losses.
Get Help From a Penny Stock Fraud Attorney in Florida
At Carlson & Associates, P.A., our Florida penny stock fraud lawyer is standing by, ready to protect your rights and your interests as an investor. If you lost money in an unregistered convertible note, we are here to help you find the best solution. Contact us now for a fully private case review. From our office in Miami, we handle penny stock fraud cases throughout South Florida.