Of couse the reason Seth Kramer was made president of KBM was to get around the restrictions placed on his brothe Curt. FINRA blacklisted Curt Kramer.
In November 2013, the Securities and Exchange Commission (“SEC”) charged Curt Kramer and his Mazuma companies with violating federal securities laws; Kramer settled the charges for $1.4 million.
Consistent with the SEC’s recent action against Kramer, FINRA did not hesitate to identify Kramer as a bad actor, which disqualifies him from some types of market participation.
By virtue of FINRA Rule 6490(d)(3)(3), if the regulator has “actual knowledge that … promoters or other persons connected to the issuer … are the subject of a pending, adjudicated or settled regulatory action or investigation by a federal, state or foreign regulatory agency, or a self-regulatory organization; or a civil or criminal action related to fraud or securities laws violations,” it can reject corporate action requests.
In this case against Curt Kramer, FINRA specifically stated that it:
“has actual knowledge of a November 25, 2013 Securities and Exchange Commission (“SEC”) Cease-and-Desist Order (Administrative Proceeding File No. 3-15621) (“SEC Order”) involving Curt Kramer (“Kramer”), President of Asher Enterprises, a convertible note holder of ECOS. The SEC’s investigation found that Kramer and his firms Mazuma Corporation, Mazuma Funding Corporation, and Mazuma Holding Corporation (“his Mazuma firms”), obtained unregistered shares in penny stock issuers Laidlaw Energy Group (“Laidlaw”) and Bederra Corporation (“Bederra”). According to the SEC Order Kramer and his Mazuma firms purchased two billion Laidlaw shares, which amounted to 80% of Laidlaw’s outstanding shares at the time. They purchased these shares at a significant discount from prevailing market prices. Kramer and his Mazuma firms purchased the shares in 35 tranches with no six-month gaps, thus quantifying the transactions as a single integrated offering through which Laidlaw exceeded the $1 million limit under Rule 504 by raising a total of $1,259,550. No registration statement was filed for any shares that Laidlaw offered and sold to Kramer and his Mazuma firms, nor was any registration statement filed for any shares that Kramer and his Mazuma firms subsequently re-sold into the public market. Despite exceeding the $1 million limit, Kramer and his Mazuma firms continued to acquire and sell additional Laidlaw shares and profited by $126,963 from these transactions.
Further, according to the SEC Order, Kramer and Mazuma Holdings Corporation acquired more than one billion shares of Bederra in 2009 and 2010 through 21 separate transactions from the principal of Bederra’s transfer agent, who had misappropriated the Bederra share certificates. Again they purchased the shares at a significant discount from prevailing market prices and re-sold the misappropriated Bederra shares to the public without any registration statement for profit of $934,404.
In the settlement, Kramer and his Mazuma firms agreed to pay disgorgement totaling $1,061,367 plus prejudgment interest of $128,611 and penalties totaling $273,000. Without admitting or denying the SEC’s findings, Kramer and his Mazuma firms consented to the entry of an order finding that they violated Sections 5(a) and 5(c) of the Securities Act of 1933. The order required them to cease and desist from committing violations of Sections 5(a) and 5(c) and not participate in any Rule 504 offerings. Entry of the order also constituted a disqualifying event for Kramer and his Mazuma firms under the recently enacted bad actor disqualification provisions of Rule 506.
In SEC Press Release 2013-249 “Penny Stock Financier Agrees to Pay $1.4 Million to Settle SEC Charges,” dated November 25, 2013, the co-chair of the SEC Enforcement Division’s Microcap Fraud Task Force stated that “illions of shares were not vetted through the registration process yet became publicly traded as a result of the violations by Kramer and his Mazuma firms, and the SEC will continue to punish non-compliance with the registration provisions of the securities laws to ensure the investing public is protected in these types of transactions.”
FINRA pointed out that while Asher does not appear on the current ECOS shareholder list, other documents the issuer provide reflect Asher has transferred 640,474,489 shares into Cede & Co., the Depository Trust & Clearing Corporation’s (DTCC) nominee name. Further, on October 21, 2013, Asher was issued an 8% Convertible Promissory Note in exchange for a $32,500 loan with a conversion date of January 2015. Once converted, Asher has the potential to become a beneficial shareholder of the company holding approximately 10% of ECOS’ outstanding shares which Asher has the option to convert in its entirety, as stipulated in the July 14, 2014 Amendment to Convertible Promissory Note.
FINRA noted the above activity raised concerns for the protection of investors and the transparency to the marketplace as it relates to the proposed corporate action request. As such, the Department has deemed ECOS’s corporate action submission to be deficient under FINRA Rule 6490(d)(3)(3).
FINRA notified ECOS of its right to appeal and of the required fee of $4,000.00 made payable to FINRA. Payment must be submitted in the following manner within seven (7) calendar days of its notice.
Failure by ECOS to file a written request for an appeal within seven (7) calendar days after service of FINRA’s notice, along with the required fee, will cause FINRA’s determination to become final.
FINRA’s action in the Ecolocap case could have far-reaching effects.
