My principle concern is that Canbiola gave investors the impression they were no longer affiliated with Carl Dilley, nor Island Stock Transfer. The truth is, they still are.
To me, that’s the most concerning piece of information because of the charges brought against Carl Dilley and the allegations against his business conduct.
Here is an excerpt from allegations brought against him:
“3. This action involves Defendants’ roles in one or two separate fraudulent schemes from approximately December 2009 through August 2014 to manufacture at least 19 public companies for sale fundamentally premised on a deceptive public float of purportedly “free-trading” securities: 14 by Alvin Mirman and Sheldon Rose (the “Mirman/Rose Companies,” identified in paragraph 30 below) and five by Michael Daniels, Andy Fan, and Diane Harrison (the “Daniels Companies,” identified in paragraph 102 below).
4. The fraudulent schemes depended on misrepresentations and omissions to, among others, the Commission, the Financial Industry Regulatory Authority (“FINRA”), and the Depository Trust Company (“DTC”) that the Mirman/Rose and Daniels Companies were legitimate small businesses with independent management and shareholders. In reality, both the management and shareholders were nothing more than nominees for control persons who always intended merely to sell all the securities of the companies privately in bulk for their own benefit. The essential value of these securities (each bulk sale realized proceeds of hundreds of thousands of dollars) was their false designation as “free-trading” with the ability to be sold immediately on the public market. If the truth had been known to the public, the securities would have been restricted from such sales and would have had little value.
5. Dilley and Eldred knew or were reckless in not knowing from the onset that the Mirman/Rose Companies and Daniels Companies, respectively, were pursuing their stated plans under false pretenses and instead being packaged for sale as public vehicles, and that the shareholders were mere nominees for the control persons. Nonetheless, Defendants took critical steps to advance the frauds.
6. Dilley schemed with Mirman and Rose, and Eldred schemed with Daniels, Fan and Harrison, to defraud the public that the Mirman/Rose Companies and Daniels Companies were operating businesses with independent management and shareholders, rather than undisclosed “blank check” companies (sometimes referred to as “shells” or “vehicles”) for sale. In furtherance of the Mirman/Rose scheme, Dilley signed false Form 211 applications submitted to FINRA, contributed to false DTC applications, found potential shell buyers, signed an escrow agreement and false attestation letters for shell buyers, and effectuated the bulk transfer of the entire deceptive public float of Mirman/Rose Companies to shell buyers. Eldred similarly schemed with Daniels, Fan and Harrison by filing false Forms 211 with FINRA, signing false securities deposit forms and executing trades in Spartan Securities’ proprietary account, all in support of the manufacture of undisclosed public vehicles – one of which Eldred expressly proposed to acquire himself while its Form 211 was pending.
7. A necessary step in both fraudulent schemes was for the issuer’s stock to be eligible for public quotation, which requires a broker-dealer to file a Form 211 application with FINRA to demonstrate compliance with Rule 15c2-11 under the Securities Exchange Act of 1934 (“Exchange Act”). FINRA typically raises specific concerns or seeks further information from the broker-dealer in one or more deficiency letters before clearing the application. Meanwhile, transfer agents perform a number of roles for issuers pertaining to their securities and shareholders, including recording changes of ownership, maintaining the issuer’s security holder records, canceling and issuing certificates, and resolving problems arising from lost, destroyed or stolen certificates.
8. Spartan Securities and Island Stock Transfer acted in tandem to provide these various services which were critical to the Mirman/Rose and Daniels/Fan/Harrison shell factories. For example, Spartan Securities filed the Form 211 application with FINRA in order for the securities of these 19 issuers to be publicly quoted. Spartan Securities, Dilley, and Eldred made materially false statements and omissions to FINRA regarding the purpose, management and shareholders of the Mirman/Rose Companies and Daniels Companies. Spartan Securities and its principals also had information that undermined any reasonable basis that the information required by Rule 15c2-11 was materially accurate and from a reliable source. Spartan Securities then initiated unpriced quotations for all the Mirman/Rose Companies and Daniels Companies (except PurpleReal) upon FINRA’s clearance of the Form 211.”
The big problem is that it appears Canbiola is still using Island Stock Transfer under the guise of a new company, Transhare Corporation.
If that’s true, Carl Dilley is likely still involved to some extent here, and he has a documented history of using investor money to line his own pockets. The man intentionally defrauded investors, lied to the Financial Industry Regulatory Authority (FINRA), lies to the Depository Trust Company (DTC), and lied to he U.S Securities and Exchange Commission (SEC).
Although I loved Canbiola, and I want to see them succeed, I’m not willing to let my money end up in his pockets. I’ll be sitting this one out.
