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Thursday, May 09, 2024 10:16:52 AM
SEC filed this case in 2017!!! Appeal lost February 15, 2024
By Alison Frankel
February 15, 2024
Feb 15 (Reuters) - The SEC on Wednesday won an appeal against a penny-stock firm accused of acting as an unregistered securities dealer, fending off investment industry warnings that its expansive definition of a dealer would rope in an array of advisors, pension funds and even insurers.
The 11th U.S. Circuit Court of Appeals ruled that Ibrahim Almagarby was acting as an unregistered securities dealer in a series of transactions in which he acquired debt from penny-stock companies, converted the debt to stock and then quickly sold off the new shares. Almagarby and his company, Microcap Equity Group, made nearly $900,000 from the transactions. The SEC alleged that investors who bought the stock were victimized by the so-called “death spiral” dilution of share value as Almagarby flooded the market with newly converted shares.
The Almagarby case was part of a sweep of recent SEC enforcement actions against firms with similar business models in the penny stock market. The SEC’s overarching theory is that the firms – which profited from buying convertible debt at a steep discount and selling newly converted shares at market price -- were operating as unregistered securities dealers when they swamped the market with the new shares.
https://www.reuters.com/legal/government/column-us-regulator-wins-key-appeal-challenging-definition-securities-dealers-2024-02-15/
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23992 / November 20, 2017
Securities and Exchange Commission v. Ibrahim Almagarby and Microcap Equity Group LLC, No. 17-cv-62255 (S.D. Fla. November 17, 2017)
SEC Charges Individual and His Company with Operating an Unregistered Dealer Business
The Securities and Exchange Commission charged a Florida-based individual and his company with acting as unregistered dealers in the sale of billions of shares of numerous penny stock issuers.
The SEC's complaint, filed in federal district court in south Florida, alleges that, beginning in January 2013, Ibrahim Almagarby and his company, Microcap Equity Group LLC (MEG), engaged in a business that purchased aged penny stock issuer debts. After converting the debts into equity, they sold the resultant shares into the market. At the time of this conduct, the complaint alleges that neither Almagarby nor MEG were registered with the SEC as a dealer and Almagarby was not associated with a registered broker or dealer. Through these activities, Almagarby and MEG purchased over $1.1 million of aged debts of 39 microcap issuers and sold into the market over 7.4 billion shares generating over $1.4 million in ill-gotten gains.
https://www.sec.gov/litigation/litreleases/lr-23992
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