SEC Obtains Final Judgments Against Two Lawyers in a Stock Manipulation Scheme
Litigation Release No. 24858 / July 29, 2020
Securities and Exchange Commission v. Mustafa David Sayid, No. 17-cv-2630 (S.D.N.Y. filed Apr. 12, 2017)
On July 23, 2020, the U.S. District Court for the Southern District of New York entered final judgments against Mustafa David Sayid, a New York-based securities lawyer, and Norman Reynolds, a Texas-based securities lawyer, in connection with their roles in the manipulation of two microcap stocks.
The SEC's complaint, filed on April 12, 2017, charged Sayid with taking control of two microcap companies, Nouveau Holdings, Ltd. and Striper Energy, Inc., and causing them to issue convertible debt to him that could be redeemed for company stock, purportedly as payment for legal fees owed to him. Sayid then sold the convertible debt to a pair of stock manipulators for a profit. According to the complaint, Sayid hired Reynolds to issue false opinion letters. The letters, which Reynolds based on fabricated documentation from Sayid, persuaded Nouveau's transfer agent to remove restrictive legends from millions of shares of Nouveau. Reynolds drafted the letters while negotiating for payment from the anticipated proceeds of a pump and dump of Nouveau's stock by the stock manipulators who had purchased the stock from Sayid.
On November 25, 2019, the court granted summary judgment on all of the SEC's claims against Sayid and Reynolds.
The final judgments enjoin Sayid and Reynolds from violating the registration provisions of Section 5 of the Securities Act of 1933 and the antifraud provisions of Section 17 of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment against Sayid orders him to pay disgorgement of $25,000, prejudgment interest of $6,899, and a civil penalty of $160,000, while the judgment against Reynolds orders him to pay disgorgement of $700, prejudgment interest of $193, and a civil penalty of $75,000. Sayid and Reynolds are both barred from participating in an offering of penny stocks, and from preparing or issuing opinion letters in connection with the offer or sale of securities. Sayid is also barred from acting as an officer or director of any issuer with a class of securities registered with the SEC.
The SEC's action was handled by Richard Harper, Michael Vito, Dahlia Rin, John McCann, J. Lauchlan Wash, and Celia Moore in the Boston Regional Office. https://www.sec.gov/litigation/litreleases/2020/lr24858.htm