The US Securities and Exchange Commission has filed an administrative case against Windsor Street Capital and John D. Telfer, its ex-anti-money laundering officer. The regulator’s enforcement division claims that the New York-based broker dealer did not file Suspicious Activity Reports for $24.8M of suspect transactions, including those connected to an alleged pump-and-dump scam.
The regulator claims that Windsor Street Capital, at the time known as Meyers Associates LP, and Telfer should have been aware of the suspect circumstances involving a lot of these transactions and conducted a probe—in particular, into transactions involving William Goode and Raymond Barton. These men are microcap stock financiers accused of running a multi-million dollar pump-and=dump scam.
The SEC has filed separate charges against them, as well as against Kenneth Manzo, Matthew Briggs, and Justin Sindelman. The five of them are accused of acquiring shares of dormant shell companies that were supposed to be part of the dietary supplement industry, falsely marketing products and news related to the company, and then dumping the shares onto the market for investors to buy at inflated rates.
Goode, Briggs, and Barton settled the SEC charges against them by agreeing to pay penalties and interest of over $8.7M collectively. They did not, however, deny or admit to the allegations. Manzo, who admitted wrongdoing, will pay over $95K to resolve the SEC charges.
As to how this relates to the SEC securities case against the former Meyers Associates, Goode and Barton allegedly deposited penny stock blocks in their accounts with the broker-dealer, liquidated them, and then moved the proceeds out of the firm. The SEC alleges that these shares couldn’t be sold legally because there was no registration statement or registration exemption. However, instead of conducting a probe into the deposits, the firm is accused of accepting Goode and Barton’s claims that they had required the needed registration exemptions.
In a pump-and-dump scheme, those holding a stock wait seek to inflate the price of stock, often through false or misleading statements or other announcements. After investors rush to buy the stock based on this information, the instigators of the scam dump the stock. This causes the stock’s price to drop and investors who bought the stock during the rush end up losing money.