SEC Charges Georgia Residents in Microcap Fraud Scheme
Litigation Release No. 25648 / February 24, 2023
Securities and Exchange Commission v. Michael K. Molen, Enviro Impact Resources, Inc., f/k/a Industry Source Consulting, Inc., Seth M. Molen, and Pixel Arcanum, Inc., No. 1:23-cv-00735-LMM (N.D. Ga., filed Feb. 16, 2023)
The Securities and Exchange Commission today announced charges alleging securities fraud and registration violations in a complaint filed against Enviro Impact Resources, Inc., formerly known as Industry Source Consulting, Inc. (OTC Pink: INSO) ("INSO"), a Georgia microcap company. The SEC's complaint further charges alleged fraud and registration violations by INSO's former CEO Michael Molen, his son Seth Molen, and Pixel Arcanum, Inc. ("Pixel"), a Georgia company that was controlled by both Michael and Seth Molen.
The complaint alleges that the defendants made numerous false and misleading statements and engaged in other deceptive conduct during the relevant period, largely for Michael Molen's financial benefit. According to the SEC's complaint, from at least 2014 to 2022, under Michael Molen's direction, INSO publicly posted false and misleading annual and quarterly disclosure reports, including false financial statements, and false and misleading attorney opinion letters relating to INSO's disclosure reports. The complaint also states that the defendants made false and misleading statements to third parties, including brokerage firms and INSO's transfer agent, and engaged in other deceptive conduct, including the creation and use of forged documents, to facilitate Pixel's fraudulent and unregistered transactions in INSO stock and convertible promissory notes.
The complaint, filed in the United States District Court for the Northern District of Georgia, charges Michael Molen, INSO, Seth Molen, and Pixel with violations of Sections 5 and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Without admitting or denying the allegations in the complaint, all four defendants have consented to permanent injunctions from violations of those provisions, and also to payments of disgorgement, prejudgment interest, and civil penalties in amounts to be determined by the court. Michael Molen and Seth Molen have also consented to the entry of officer and director bars and penny stock bars, and Pixel has consented to the entry of a penny stock bar. The settlements are subject to the approval of the district court.
The SEC's investigation, which is continuing, is being conducted by Lucy Graetz in the Atlanta Regional Office, and supervised by Natalie Brunson and Justin Jeffries, in coordination with the Enforcement Division's Microcap Fraud Task Force. William Hicks and Graham Loomis are leading the SEC's ongoing litigation.
https://www.sec.gov/litigation/litreleases/2023/lr25648.htm
https://www.sec.gov/litigation/complaints/2023/comp25648.pdf
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