SEC Charges Spartan Securities Group and Island Capital Management with Creating and Selling Fraudulent Companies
In recent years, the micro-cap market has seen increased scrutiny by the Securities and Exchange Commission (SEC). On February 20, 2019, the SEC filed a complaint charging Spartan Securities Group, Ltd., a broker-dealer based in Clearwater, Florida, and Island Capital Management, LLC, which does business as Island Stock Transfer, also based in Clearwater, with creating at least 19 fraudulent public companies from 2009 to 20141.
The SEC complaint further alleges that Spartan and Island Stock Transfer sold “free-trading” securities worth at least $3.7 million off the names of those fraudulent companies.2
Carl E. Dilley, Micah J. Eldred and David D. Lopez, all with Spartan Securities, were also named in the complaint which alleges that they were involved in filing fraudulent Form 211 applications with the Financial Industry Regulatory Authority (FINRA) to publicly list the companies’ common stock and ultimately enable the shares to become free-trading and available to public investors.3
The SEC alleges that Dilley and Eldred knew the companies were fake, or at a minimum were reckless in not knowing from the onset that the 14 “free trading” securities by Alvin Mirman and Sheldon Rose (the Mirman/Rose Companies) and 5 by Michael Daniels, Andy Fan and Diane Harrison (the Daniels Companies) were pursuing their stated plans under false pretenses and instead being packaged for sale as public vehicles and that the shareholders were mere nominees for the control persons.4
The complaint alleges that Dilley schemed with Mirman and Rose and Eldred schemed with Daniels, Fan and Harrison, to defraud the public that the Mirman/Rose Companies and Daniels Companies were operating businesses with independent management and shareholders, rather than undisclosed “blank check” companies, also known as “shells” or “vehicles” for sale.
Spartan Securities Group and Island Stock Transfer jointly issued a press release on February 21, 2019, in which the company and principals “vehemently” denied any wrongdoing and expressed anticipation of their day in court, citing that Spartan and Island did not know these 19 named companies listed in the SEC Complaint were operated by alleged fraudsters.5
If you have been the victim of securities fraud, it is critical that you are prepared for the unique ins and outs of the FINRA arbitration process. Our Michigan Securities Law Firm has over 20 years’ experience and have helped countless individuals recover from investment losses. Call us if you have questions about investment fraud, financial schemes, broker misconduct or about your broker’s management of your account. Our Securities Law Office is here to help!
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1,3 SEC Charges Broker-Dealer and Transfer Agent in Microcap Shell Factory Fraud, www.sec.gov, 2/20/2019
Link: https://www.sec.gov/news/press-release/2019-16
2 SEC Sues Clearwater Financial Firms, Alleges They Sold Sham Company Stock, by Crystal Owens, Tampa Bay Business Journal, 2/22/2019
Link: https://www.bizjournals.com/tampabay/news/2019/02/22/sec-sues-clearwater-financial-firms-alleges-they.html
4 Complaint for Injunctive and Other Relief, SEC vs. Spartan Securities Group, LTD, Island Capital Management, LLC, Carl E. Dilley, Micah J. Eldred and David D. Lopez, 2/20/2019
Link: https://www.sec.gov/litigation/complaints/2019/comp24405.pdf
5 SEC Sues Spartan Securities Group and Island Stock Transfer for Involvement in “Microcap Shell Factory Fraud” by Michael Goode, 2/21/2019
Link: https://www.goodetrades.com/2019/02/sec-sues-spartan-securities/