All information in this report was compiled from public records maintained by the SEC.
Fraudulently Using Client Assets for Loan Collateral
Joshua W. Coleman, 37, of North Wales, Pennsylvania, on June 20 entered an offer of settlement for an SEC order for committing fraud by obtaining loans using advisory assets as collateral without his clients’ permission.
Coleman founded Vesta Advisors, an investment adviser registered with the SEC, from July 27, 2018, until May 21, 2020. He also previously held SIE, Series 7, and Series 66 securities licenses. From December 2018 through June 2022, Coleman orchestrated a scheme through Vesta Advisors and other companies to get over $200 million in illicit loan proceeds from lenders by misrepresenting his authority over, and the value of securities pledged as collateral for the loans, according to the SEC.
Coleman pledged more than $160 million in advisory client securities to obtain the loans, the SEC alleged. He induced lenders to issue the loans by forging client signatures and faking documents such as account statements. Then Coleman used the loan proceeds to pay for private investments, repay earlier loans, and pay for personal business expenses. To repay his advisory clients and other lenders, he lied to two private lenders about collateral and the use of the loan and fabricated bank statements and other documents. Ultimately, Coleman defaulted on the loans.
The SEC barred Coleman from associating with any dealer, municipal security dealer, broker, investment adviser, transfer agent, or statistical rating organization and from offering any penny stock.
Unregistered Broker and a Penny Stock Scheme
Damon R. Durante, 46, of Irvine, California, on June 30 entered into an SEC cease-and-desist order for unregistered broker activity by selling shares of a microcap company to investors.
From April 2019 to July 2020, Durante offered and sold stock in Dallas-based Global Resource Energy (GBEN) to investors, earning 50% of the sales proceeds for investor transactions, the SEC said. He also worked with a network of salespeople to sell GBEN shares on the open market, making 35% of the sales proceeds for these completed transactions. Durante and the sales network sold over 2.8 million GBEN shares.
In a parallel criminal case, United States v. Collins, et al., 1:20-cr-00842-BYP (N.D. Ohio), Durante was sentenced to six months in prison for acting as an unlicensed stockbroker, selling GBEN shares to investors and failing to provide material information. The SEC suspended trading in GBEN on Aug. 17, 2020. An undisclosed control person allegedly directed Durante to work with a network of salespeople to sell restricted shares of GBEN. Durante was unaware of the fraudulent agreement, according to the SEC. To distance himself from the sales, the undisclosed control person transferred the restricted GBEN shares to an entity Durante controlled.
Durante was ordered to pay a disgorgement of $355,625 with prejudgment interest of $37,726. The SEC also barred him from associating with any dealer, broker, transfer agent, municipal security dealer, investment adviser, or statistical rating organization and from participating in the offering of any penny stock.
Additionally, a separate proceeding was filed on June 30 by the SEC, charging five others for their roles in the fraudulent scheme, including Thomas Collins, Patrick Thomas, Gary Kouletas, Scott Levine, and Brian Kingsfield. The SEC also charged Kingsfield for acting as an unregistered broker. All consented to disgorgement with prejudgment interest, civil penalties, and penny stock bars. Thomas and Collins also agreed to officer-and-director bars.
Unregistered Broker Activity Resembles Naked Short Selling
Bryan Pantofel, 28, of Miami, Florida, and BHP Capital, on July 6 entered into an SEC order for failing to register as securities dealers while converting penny stocks into newly issued shares of stock at discounted prices.
Pantofel was the managing member of BHP Capital. The SEC alleges that from December 2017 through mid-2022, BHP Capital purchased over 100 convertible notes and associated warrants from 47 microcap issuers and converted them into about four billion newly issued shares of stock at deeply discounted prices, according to the SEC. The newly issued shares were sold into the market for millions of dollars in profit. During this time, neither Pantofel nor BHP Capital were registered as dealers with the SEC.
Pantofel and BHP Capital were ordered to pay over $2.5 million in monetary relief. BHP Capital must also surrender for cancellation the securities obtained from the unregistered broker activity.
Telemarketing Stock Fraud Scheme
Matthew William Wheeler, 39, of Miami, Florida, on July 7 entered into an SEC order for acting as an unregistered broker in stock transactions that resulted in two charges of conspiracy to commit mail and wire fraud.
Wheeler worked from a telephone sales room in Miami Lakes, Florida, selling shares of Sanomedics International Holdings stock from 2009 until 2012 and shares of Cool Fun Free stock in 2015. During these timeframes, he was never registered as a broker with the SEC and received commissions of about $162,000.
In 2016, Wheeler was convicted of two counts of conspiracy to commit mail and wire fraud. He was sentenced to a 16-month prison term with three years of supervised release. The trial transcripts reveal Wheeler told potential investors he was paid only in company stock and did not earn commissions. Additionally, he did not tell investors they were indefinitely restricted from selling Sanomedics stock.
The SEC barred Wheeler from associating with any dealer, municipal security dealer, broker, investment adviser, transfer agent, or statistical rating organization and from participating in the offering of any penny stock.
More Telemarketing, Mail, and Wire Fraud
James Wayne Long, 66, of Miami, Florida, currently incarcerated in Butner, North Carolina, on July 7 entered into an SEC order for acting as an unregistered broker in stock transactions that resulted in one count of conspiracy to commit mail and wire fraud.
Long worked from the same telephone sales room in Miami Lakes, Florida as Wheeler, selling Fun Cool Free Stock shares from January 2015 through July 2015. Long acted as an unregistered broker and made false statements to investors that Fun Cool Free made millions in profits, was expanding its app from Apple to Android, and no commissions or fees would be charged to investors. He received $17,000 in commissions from selling the shares.
In June 2017, Long was convicted of one count of conspiracy to commit mail and wire fraud and sentenced to 38 months in jail and three years of supervised release.
The SEC barred Long from associating with any dealer, broker, transfer agent, municipal security dealer, investment adviser, or statistical rating organization and from participating in the offering of any penny stock.
Gassing Up Gas and Oil Prospects
William Glen Baker, 52, of Terrell, Texas, on July 7, entered into an SEC order for acting as an unregistered broker and misleading investors.
Baker was the president and sole owner of Cannon Operating Company, which offered and sold working interests in oil and gas prospects. From about January 2018 to September 2020, the SEC alleges Baker sold securities to investors in the form of working interests in four prospects in Oklahoma. The SEC alleged Baker provided misleading sales materials to investors and received commissions totaling around $362,500. Baker was never registered with the SEC as a broker or dealer during this time.
The SEC barred Baker from associating with any dealer, broker, municipal security dealer, investment adviser, statistical rating organization, or transfer agent and from participating in the offering of any penny stock.