Six defendants in the Florida Shell Factory Fraud case, as it’s known, have been ordered to pay nearly $2 million in disgorgement for facilitating a pump-and-dump scheme. In the scheme, the defendants helped issue shares in fraudulent shell companies and sold them to investors at a profit.
Shell Factory Fraud Scheme Registered Fake Securities Offerings
According to the claim, the conspirators were accused of recruiting people to serve as straw CEOs for shell companies and preparing fraudulent corporate documents to register securities offerings with the U.S. Securities and Exchange Commission (SEC).
The conspirators then recruited nominee shareholders to create a class of unrestricted shares that could be publicly traded, allowing them to sell or transfer the shares to others or the public while evading insider trading prohibitions.
The straw CEOs would be given a set payment, and the alleged shareholders would be promised a fixed return.
According to court documents, the conspirators sought buyers to take control of the shell companies and secretly controlled unrestricted shares in a reverse merge. The shares would then be transferred to a third party not disclosed to the SEC or to the public, allowing shell buyers to engage in stock swindles or other manipulation schemes.
Judgments Issued in U.S. District Court
Of the shell factory fraud defendants, Ilene Mirman, was ordered to pay $1.76 million in disgorgement and prejudgment interest. Edward Sanders was ordered to pay $12,768. Daniel McKelvey, a “control person” in the scheme, was barred from acting as an officer or director of any issuer of a class of securities for a period of 10 years.
The judge also ordered Forte Capital Partners LLC, which is managed by McKelvey, to disgorge $75,803. Scott F. Hughes and Jeffrey L. Lamson, who acted as corporate nominees and knew about the false business plans, were ordered to disgorge $161,506 and $77,877, respectively.
Three of the co-conspirators, Steven Sanders, Daniel McKelvey and Alvin Mirman, have been sentenced to prison for their roles in a parallel criminal proceeding.
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