Securities Regulation Daily Final judgment bars penny stock company and owner, orders millions in disgorgement
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Wednesday, February 8, 2017

Final judgment bars penny stock company and owner, orders millions in disgorgement

In a litigation release, the SEC announced consent final judgments in Florida federal court against a penny stock company and its owner, as well as a relief defendant, in a fraudulent stock offering case. The SEC alleged that the company’s CEO used deceptive tactics and a boiler room to raise more than $6.5 million from investors while misleading them as to the success of the business. The final judgment permanently enjoins further violations, imposes industry bars, and orders disgorgement of nearly $4.5 million from the CEO and the relief defendant (a separate firm owned by the CEO) and $6.6 million from the penny stock company (SEC v. Oxford City Football Club, Inc., February 8, 2017).

Fraud and "boiler room" tactics. The SEC charged Oxford City Football Club, Inc. and its CEO with marketing the company as "the largest publicly traded diversified portfolio of professional sports teams in the world" and the owner of a "diversified portfolio of academic institutions" when, in reality, there was no truth to those claims. According to the Commission’s complaint, Oxford’s CEO operated a "boiler room" from which millions of shares of unregistered offerings were sold through fraudulent practices designed to deceive investors as to Oxford’s stock value and the potential for future profits and into believing that Oxford was a thriving conglomerate, the Commission alleged. One of the CEO’s tactics involved false claims to potential investors that telephone conversations were being recorded using a "verbal verification system" and threatening to sue them based on the "recordings" if they refused to pay.

Sanctions. The court enjoined Oxford’s CEO from violating the antifraud provisions of the Securities Act and the Exchange Act and barred him from the issuance, purchase, offer, or sale of securities, participating in any penny stock offering, and serving as an officer or director of a public company. The court also ordered disgorgement of $2,240,173, plus prejudgment interest, from both the CEO and the relief defendant. These disgorgement amounts are deemed satisfied by a $6.6 million restitution order entered against the CEO in a parallel criminal case.

The court also enjoined Oxford from further violations and ordered disgorgement of $6.6 million, plus prejudgment interest.

In related administrative proceedings, the CEO consented to an associational bar, and Oxford agreed to an order revoking the registration of each class of its securities.

The release is No. LR-23745.

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