Aggregated News From Investment Management Regulators

SEC Charges Microcap Fraud Scheme Participants Attempting to Capitalize on the COVID-19 Pandemic


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The Securities and Exchange Commission has filed an emergency action and obtained an asset freeze against five individuals and six offshore entities for an alleged fraudulent scheme that generated more than $25 million from illegal sales of multiple microcap companies’ stock, including four that were the subject of recent SEC trading suspension orders: Sandy Steele Unlimited Inc., WOD Retail Solutions Inc., Bioscience Neutraceuticals, Inc., and Rivex Technology Corp.

The SEC’s complaint alleges that from at least January 2018 to the present, Canadian citizen Nelson Gomes, working with Canadian Michael Luckhoo-Bouche and others, enabled corporate control persons that were unknown to the public to conceal their identities while dumping their company’s stock into the market for purchase by unsuspecting investors. The complaint alleges that these illegal stock sales were often boosted by promotional campaigns that, in some instances, included false and misleading information designed to fraudulently capitalize on the COVID-19 pandemic. For example, the alleged promotions included claims that Sandy Steele could produce medical quality facemasks and that WOD Retail had automated kiosks for retailers to use in response to the COVID-19 pandemic. The complaint also charges Canadians Shane Schmidt, Douglas Roe, and Kelly Warawa with fraudulently dumping shares of Sandy Steele.

“Microcap stocks can be particularly vulnerable to manipulative schemes, and investors should be alert to the heightened risks that exist during this national emergency,” said Paul Levenson, Director of the SEC’s Boston Regional Office. “The SEC will continue to act quickly to protect investors from investment scams, including those seeking to capitalize on the COVID-19 crisis.”

The SEC’s complaint, filed in federal district court in Boston, charges Gomes, Luckhoo-Bouche, Roe, Warawa, FFS Capital Limited, and Atlantean Management Corporation with violating the antifraud and registration provisions of the federal securities laws. The complaint also charges Schmidt with violations of the antifraud provisions and Paifang Trading Limited, Artefactor Limited, Meadow Asia Limited, and Thyme International Limited with registration violations. The SEC seeks permanent injunctions, conduct based injunctions, disgorgement of allegedly ill-gotten gains plus interest, civil penalties, and penny stock bars.

The U.S. Attorney’s Office for the District of Massachusetts today announced parallel criminal charges against Schmidt.

The SEC’s case is being handled by Trevor Donelan, Eric Forni, Kathleen Shields, J. Lauchlan Wash, Susan C. Anderson, and Amy Gwiazda in the Boston Regional Office and Katherine Bromberg of the Division of Enforcement’s Retail Strategy Task Force. This enforcement action is the result of the staff’s ongoing investigation following the trading suspensions. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Massachusetts, the Federal Bureau of Investigation, Financial Industry Regulatory Authority, the British Columbia Securities Commission, the Ontario Securities Commission, the Alberta Securities Commission, the Royal Canadian Mounted Police, the Cayman Islands Monetary Authority, the Hong Kong Securities and Futures Commission, and the Monetary Authority of Singapore.

The SEC’s Office of Investor Education and Advocacy and the Division of Enforcement’s Retail Strategy Task Force previously issued an investor alert cautioning investors to be aware of COVID-19 scams. The SEC also has information available on microcap stocks, including red flags to look for when investing in microcap stocks.

Regulator Information

Abbreviation: SEC
Jurisdiction: United States

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