Tag Archives: SEC

SEC obtains judgment against Katy attorney involved in Ponzi scheme

The SEC has obtained a partial judgment against Christopher K. Brenner, an attorney licensed to practice in Colorado and Texas, who resides in Katy, Texas.

The partial judgement orders that disgorgement of profits, interest and a penalty be imposed, with the amounts to be determined at a later date. Mr Brenner was involved in a business called Atlantic Rim Funding, whose owner is now serving a 20 year jail sentence in California for an unrelated securities fraud.

Basically, Mr Brenner acted as an attorney on behalf of Atlantic Rim. He would approach small business owners who were seeking loans and assure them that if they made a deposit in escrow Atlantic would be able to secure loans ten times the amount deposited. Mr Brenner acted as the escrow agent from September 2011 until March 2012. Prior to that, from December 2010 until August 2011, another attorney, Jay Mac Rust from Stephenville, Tx was the escrow agent. SEC action against Mr Rust continues.

The two attorneys defrauded 29 small business owners who deposited $13.8 million (Mr Brenner raised $3.4 million from 15 clients). According to the SEC, Brenner took $105,000 to pay himself and diverted $490,000 to the owner (Rust allegedly took $224,000 for himself and sent $438,000 to the owner). The defendants used a lot of the funds to trade in speculative securities derivatives. Atlantic never had any intention to obtain the loans. Some of the later deposits taken were used to repay earlier investments so that the collective net loss was about $6 million.

The small business owners were from all over the country, though many were from the Greater Houston area. For instance, Mr Brenner had clients in Houston, Pearland, Spring and Conroe.

Back in 2009, the Colorado Division of Securities won an injunction against Mr Brenner for violations of the state’s Securities Act . He was the CFO of Equity Edge LLC, which was alleged to have misled 57 investors into pumping $10 million into mortgages on used mobile homes. Those charges were later dismissed. (As an aside, the owner of Equity Edge was sued by the SEC in 2015 for fraud in the effective successor company to Equity Edge, conducted between 2010 and 2014).

Prior to Atlantic, Mr Rust was involved in another scam with the now jailed owner. After his involvement with Atlantic finished, Mr Rust went on to create a patent trolling company that targeted small businesses. In November 2014, his company settled with the Federal Trade Commission over charges that they used deceptive sales claims and bogus legal threats.

Clearly the lesson for investors is that you need to perform due diligence before handing over your money. All the players involved had ‘previous’.

 

 

SEC charges Houston man with $4.7 million fraud

The Securities and Exchange Commission (SEC) has charged a Houston man, Glenn Hardaway with fraudulently raising $4.7 million from fellow members of a nationwide “Success club”.

The defendant had a company, Hardaway Net-Works (HNW) that purportedly provided network services to a few hotels in the Houston area. Between 2010 and 2016, the company had total revenues of $24,812, yet Hardaway kept selling securities issued by HNW by using baseless projections about HNW’s business operations.

The SEC claimed that Hardaway paid himself $924,000 in salary during the life of the fraud and spent about $1 million in other expenses supporting his lifestyle.

The “Success Club” was an organization called Global Information Network (GIN). GIN was founded in 2009 by Kevin Trudeau, a con-man who was first convicted of fraud in 1991 and settled with the Federal Trade Commission (FTC) in 2004 over dubious weight loss programs that he advertised on late-night infomercials. In 2007 he was fined $37.6 million for breaching the 2004 agreement and in 2013 was jailed for 10 years for contempt of court and failure to pay the fine. ┬áThe FTC allege GIN is a Ponzi scheme (meaning investors who gave to Hardaway have probably lost money twice over).

In addition the SEC also allege that, in April 2015, Hardaway used $40,000 of investor funds to acquire Vortronnix, a public reporting “shell” company. Hardaway became Vortronnix’s President, CEO, CFO, Treasurer and Chairman. After it was acquired, Vortronnix filed a 10-Q and Hardaway signed the filings and management certifications, despite knowing there had been no review of the company’s financial statements by the auditors. He ignored the request from the auditors to withdraw the 10-Q filing.

Vortronnix remains delinquent in its public reports with the SEC and has never traded publicly.

SEC v Darrell Glenn Hardaway

Sugar Land company settles with SEC on allegations over $36 million bank fees

CVR Energy, a Sugar Land based holding company engaged in refining and nitrogen fertilizer manufacturing, has settled a case with the SEC without admitting or denying the SEC’s allegations.

In February 2012, Carl Icahn launched a $30 a share hostile bid worth $2.3 billion for the company. The company said the bid undervalued it and hired Goldman Sachs and Deutsche Bank to defend it against the takeover offer. If they kept CVR independent, each would get $9 million (and possibly a $4 million discretionary bonus). If they found a white knight, they would get 0.525% of the transaction value. If they failed to defend the company and Icahn took over, they would also get 0.525%.

Lo and behold, the original $30 offer was accepted and the banks got $18 million for failing to do their job compared to $9 million had they been successful. After taking control Icahn tried to get out of paying investment banking fees (after all they were each getting $18 million for zero added value) and is currently suing the lawyers for malpractice.

The SEC alleged that the company didn’t disclose the true nature of the arrangement with the banks and had it done so, shareholders may have formed a different opinion of the value of the bid. The company agreed to settle without paying any fines.

CVR is still 82% owned by Icahn and its shares currently trade at $23.57. It share price has nearly doubled since Donald Trump won the election. Carl Icahn is a special advisor to Trump, advising the President on regulations.