Greenfield Farms went through some issues with debt.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 0:17-cv-62255
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
IBRAHIM ALMAGARBY and
MICROCAP EQUITY GROUP LLC,
Defendants, COMPLAINT
Plaintiff, Securities and Exchange Commission (the “Commission”), alleges as follows:
I. INTRODUCTION
1. This case involves the buying of more than $1.1 million of convertible debt of
microcap (i.e., penny stock) issuers and the subsequent selling of more than 7.4 billion shares of
the microcap issuers’ stock into the market by Ibrahim Almagarby and his wholly owned and
controlled business entity, Microcap Equity Group LLC (collectively, “Defendants”), without
either registering with the Commission as a dealer or being associated with an entity that was
registered with the Commission as a dealer.
2. Between January 2013 and July 2016, Defendants, as part of a regular business,
engaged in the buying and selling of securities for Defendants’ own accounts. Defendants
purchased from debtholders the aged debts of various microcap issuers of securities.
Contemporaneously, and as part of their purchase of the aged debt, Defendants obtained
agreements with the issuers permitting Defendants to, at their discretion, convert the debt into
Case 0:17-cv-62255-XXXX Document 1 Entered on FLSD Docket 11/17/2017 Page 1 of 10
2 shares of the issuers’ common stock. Defendants deposited these shares (once converted from
the debt) into their brokerage accounts and sold significant numbers of them into the market.
Finally, Defendants deposited the net proceeds from the stock sales into their bank accounts.
3. Defendants’ gained $1,474,901.63 from selling the shares, which represents the
difference between their known costs of acquiring the convertible debt securities and their net
proceeds obtained from converting the debt into shares and then selling the shares into the
market.
4. By virtue of their conduct, Defendants violated Section 15(a)(1) of the Securities
Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78o(a)(1)].
5. Additionally and alternatively, Ibrahim Almagarby is a controlling person of Microcap Equity Group LLC under Exchange Act Section 20(a) [15 U.S.C. § 78t(a)] and
Ibrahim Almagarby is therefore liable for Microcap Equity Group LLC’s violations of Section
15(a)(1).
6. Unless enjoined, Defendants are likely to commit such violations in the future.
Among other relief, Defendants should be enjoined from future violations and should be ordered
to disgorge, with prejudgment interest, any ill-gotten gains obtained as a result of their
violations, and ordered to pay an appropriate civil money penalty.
II. DEFENDANTS
7. Ibrahim Almagarby, age 27, on information and belief, resides in Tamarac,
Florida.
8. Microcap Equity Group LLC is a Florida limited liability company formed on
January 8, 2013, and is wholly owned and controlled by Ibrahim Almagarby. On information
and belief, Microcap’s principal place of business is in Tamarac, Florida.
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III. JURISDICTION AND VENUE
9. This Court has jurisdiction under Exchange Act Sections 21(d), 21(e), and 27
[15 U.S.C. § 78u(d), 78u(e), and 78aa]. In connection with the transactions and acts alleged
herein, Defendants, directly or indirectly, made use of the means and instruments of
transportation and communication in interstate commerce and of the mails.
10. Ibrahim Almagarby, during the relevant period, resided in the Southern District of
Florida. Microcap Equity Group LLC is a Florida limited liability company, and certain of the
transactions and acts alleged herein took place in the Southern District of Florida. Venue
therefore is proper in this district under Exchange Act Section 27 [15 U.S.C. § 78aa].
IV. FACTUAL BACKGROUND
A. Defendants Bought and Sold Large Volumes of Microcap Issuer Securities as
Part of their Regular Business.
11. Between January 2013 and July 2016, Defendants bought more than $1.1 million of convertible debt of 39 different microcap issuers and subsequently sold more than 7.4 billion
shares of the microcap issuers’ stock into the market.
12. Defendants purchased the convertible debt securities through agreements that
granted Defendants the right to convert the microcap issuers’ debts into shares of the issuers’
common stock. Defendants frequently exercised all or some of their conversion rights soon after
closing on the purchase of the convertible debts and then began selling the resulting shares into
the market using accounts that Defendants maintained at various brokerage firms.
13. Defendants’ buying and selling of securities is illustrated by the following
example:
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a. On or about July 1, 2016, Defendants acquired $20,184.10 in aged debt
issued by Halitron, Inc. (“Halitron”), a microcap issuer. Defendants
negotiated a debt purchase agreement to acquire the aged debt from the
debtholders at face value.
b. Defendants contemporaneously negotiated an agreement with Halitron
whereby Halitron agreed to permit Defendants to immediately convert the
debt into shares of Halitron common stock.
c. On July 6, 2016, Defendants converted the debt into 25,230,125 shares of
Halitron stock and deposited the shares into a brokerage account that
Defendants maintained at a third-party brokerage.
d. Between July 22, 2016 and August 8, 2016, Defendants sold all
25,230,125 Halitron shares into the market generating net proceeds of
$56,177.52 and a net profit of $35,993.42.
14. Between January 2013 and July 2016, Defendants entered into 57 other debt
purchase agreements via which they acquired more than $1.1 million in aged debt convertible
securities from 38 other microcap issuers. Defendants converted the securities into more than
8.9 billion shares of microcap stock, more than 7.4 billion of which they sold into the market,
reaping a gain of $1,474,901.63.
B. Defendants Violated the Federal Securities Laws by Acting as Unregistered
Dealers.
15. Any person engaged in the business of buying and selling securities for such
person’s own account (through a broker or otherwise) must register with the Securities and
Exchange Commission.
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16. Between January 2013 and July 2016, Defendants bought and sold securities for
their own account as part of a regular business in which they entered into 58 different debt
purchase transactions to purchase convertible debt securities of 39 different issuers of microcap
stock, exercised their conversion rights to obtain more than 8.9 billion shares of microcap stock,
and sold more than 7.4 billion shares of microcap stock into the market, reaping a gain of
$1,474,901.63.
17. Defendants used means or instrumentalities of interstate commerce to buy and sell
securities.
18. Between January 2013 and July 2016, neither Ibrahim Almagarby nor Microcap
Equity Group LLC were registered with the Securities Exchange Commission as dealers.
19. Between January 2013 and July 2016, neither Ibrahim Almagarby nor Microcap
Equity Group LLC were associated with individuals or entities that were registered with the
Securities Exchange Commission as dealers.
C. Defendants Bought and Sold Penny Stocks.
20. At least some of the 7.4 billion microcap shares that Defendants sold did not
meet any of the exceptions from the definition of a “penny stock,” as defined by Exchange Act
Section 3(a)(51) [15 U.S.C. § 78c(a)(51)] and Exchange Act Rule 3a51?1 [17 C.F.R. §
240.3a51?1].
21. Defendants therefore participated in the offering of penny stock by acting as
dealers engaged in the buying and selling of penny stocks.
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COUNT I
Violation of Section 15(a)(1) of the Exchange Act [15 U.S.C. § 78o(a)(1)]
(Against both Defendants)
22. The Commission re-alleges and incorporates by reference each and every
allegation in paragraphs 1-21, inclusive, as if they were fully set forth herein.
23. By engaging in the conduct described above, Defendants made use of the mails or
other means or instrumentalities of interstate commerce to effect transactions in, or to induce or
to attempt to induce the purchase or sale of securities while not registered with the Commission
as a dealer or when they were not associated with an entity registered with the Commission as a
dealer.
24. By reason of the foregoing, each of the Defendants violated Exchange Act
Section 15(a)(1) [15 U.S.C. § 78o(a)].
25. A violation of Section 15(a)(1) does not require proof of scienter.
COUNT II
Violation, as a Control Person, of Section 15(a)(1) of the Exchange Act
(Against Defendant Almagarby)
26. The Commission re-alleges and incorporates by reference each and every
allegation in paragraphs 1-25, inclusive, as if they were fully set forth herein.
27. During the relevant period, Ibrahim Almagarby was the sole person who owned
and controlled Microcap Equity Group LLC.
28. Under Exchange Act Section 20(a) [15 U.S.C. § 78t(a)], every person who,
directly or indirectly, controls any entity liable under any provision of the Exchange Act or of
any rule or regulation thereunder shall also be liable jointly and severally with and to the same
extent as such controlled entity to any person to whom such controlled person is liable (including
Case 0:17-cv-62255-XXXX Document 1 Entered on FLSD Docket 11/17/2017 Page 6 of 10
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the Commission), unless the controlling person acted in good faith and did not directly or
indirectly induce the act or acts constituting the violation or cause of action.
29. Ibrahim Almagarby did not act in good faith, and he directly induced the act or
acts constituting Microcap Equity Group LLC’s violations of the Exchange Act.
30. By reason of the foregoing, Ibrahim Almagarby violated Exchange Act Section
15(a)(1) through his control of Microcap Equity Group LLC.
RELIEF REQUESTED
WHEREFORE, the Commission respectfully requests that this Court enter a judgment:
I.
Permanent Injunction
Permanently restraining and enjoining Ibrahim Almagarby and Microcap Equity Group
LLC and their agents, servants, employees, attorneys, and all persons in active concert or
participation with Ibrahim Almagarby and Microcap Equity Group LLC who receive notice of
the injunction by personal service or otherwise, from acting as an unregistered dealer in violation
of Exchange Act Section 15(a)(1) [15 U.S.C. § 78o(a)(1)] by using any means or instrumentality
of interstate commerce, or of the mails, or of any facility of any national securities exchange, to
effect transactions in, or induce or attempt to induce the purchase or sale of, securities while not
registered with the Commission as a dealer or while not associated with an entity registered with
the Commission as a dealer;
II.
Penny Stock Bar
Permanently restraining and enjoining Ibrahim Almagarby and Microcap Equity Group
LLC from participating in the offering of any penny stock, including engaging in activities with a
Case 0:17-cv-62255-XXXX Document 1 Entered on FLSD Docket 11/17/2017 Page 7 of 10
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broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the
purchase or sale of any penny stock, under Exchange Act Section 21(d)(6) [15 U.S.C. §
78u(d)(6)];
III.
Civil Penalties
Ordering Ibrahim Almagarby and Microcap Equity Group LLC, jointly and severally, to
pay an appropriate civil penalty under Exchange Act Section 21(d)(3) [15 U.S.C. § 78u(d)(3)];
IV.
Disgorgement
Ordering Ibrahim Almagarby and Microcap Equity Group LLC, jointly and severally, to
disgorge, with prejudgment interest, all ill-gotten gains derived from the activities set forth in
this Complaint;
V.
Cancellation and Surrender
Ordering Defendant Microcap Equity Group LLC to surrender for cancellation its
remaining shares of stock of, and surrender its remaining conversion rights under the convertible
securities issued by the following issuers: Aluf Holdings, Inc., Axxess Pharma, Inc., Bulova
Technologies Group, Inc., CD International Enterprises, Inc., CUBA Beverage Company,
Daniels Corporate Advisory Company, Inc., Dewmar International BMC, Inc., East Coast
Diversified Corp., Elray Resources, Inc., Energy Revenue America, Inc., Eyes on the Go, Inc.,
Gold & Silver Mining of Nevada, Inc., Gold and GemStone Mining Inc., Green Energy
Enterprises, Inc., Greenfield Farms Food, Inc., Grid Petroleum Corp./ Simlatus Corporation,
Halberd Corporation, Halitron, Inc., Healthnostics, Inc., Healthy & Tasty Brands Corporation
Case 0:17-cv-62255-XXXX Document 1 Entered on FLSD Docket 11/17/2017 Page 8 of 10
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(a/k/a GRILLiT, Inc.), Hybrid Coating Technologies, Inc., In Ovations Holdings, Inc., Indo
Global Exchange(s) Pte, Ltd., InoLife Technologies, Inc., InternetArray, Inc., Las Vegas
Railway Express, Inc., LIG Assets, Inc., Medical Care Technologies Inc., Mining Global, Inc.,
MyECheck, Inc., Next Galaxy Corp., North American Cannabis Holdings, Inc., PM&E, Inc.,
PotNetwork Holdings Inc., PPJ Healthcare Enterprises, Inc., Quasar Aerospace Industries, Inc.,
Sanomedics, Inc., Seven Arts Entertainment, Inc., and Urban Ag Corp.
VI.
Retention of Jurisdiction
Retaining jurisdiction of this action in accordance with the principles of equity and the
Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and
decrees that may be entered, or to entertain any suitable application or motion for additional
relief within the jurisdiction of this Court; and,
VII.
Further Relief
Granting such other and further relief as this Court may deem just, equitable, or necessary
in connection with the enforcement of the federal securities laws and for the protection of
investors.
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DATED November 17, 2017 Respectfully submitted,
By:
____________
Amy J. Oliver
Trial Counsel
Florida Special Bar No. A5502307
Direct Dial: (801) 524-6748
E-mail: olivera@sec.gov
Lead Attorney
Attorney To Be Noticed
Daniel J. Wadley
Trial Counsel
Florida Special Bar No. A5502306
Direct Dial: (801) 524-3422
wadleyd@sec.gov
Lead Attorney
Attorney To Be Noticed
ATTORNEYS FOR PLAINTIFF
SECURITIES AND EXCHANGE COMMISSION
351 South West Temple, Suite 6.100
Salt Lake City, Utah 84101-1950
LIB* looks like no bid soon as well.
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