CEO's protect their family and friend's investments in situations like this. What he did has done has been done 10's of thousands of times on the pinks, and the SEC will do nothing about it because they don't have the resources to police everything. They will simply tell you to invest in pinkies at your own risk, and they discourage it.
When it comes to pinkies I've learned that it is wiser to spread out your risk (diversify), and NEVER put all of your eggs in one basket.
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