From: RegTech Analyst
The US’ top financial market regulator has filed a complaint in federal court for the Eastern District of New York, accusing a New Yorker of conducting a $2.1m fraud out of at least two boiler rooms over six months in 2018 and 2019.
Boiler room refers to high-pressure call centres where the salespeople try to convince potential investors to buy into schemes, stocks and securities even though the process is often fraudulent.
That is what the US Securities and Exchange Commission (SEC) is accusing the New York resident Mark Alan Lisser of. In the complaint, the regulator alleges that Lisser used two boiler rooms in New York and in Florida to raise roughly $2.1m from at least 71 retail investors and that he then misappropriated more than $900,000 of their funds.
The fraud should, according to the SEC, have taken place between October 2018 to March 2019.
In that time, Lisser and the salespeople in his employment are accused of having solicited investors for Knightsbridge Capital Partners, an unregistered fund manager he operated, by misrepresenting that the Knightsbridge-managed funds had purchased pre-IPO shares in three well-known companies directly from employees of the companies.
However, the SEC claims that Knightsbridge never owned any shares in those companies at the time it reached out to investors and that it subsequently purchased shares or interests in shares of the companies from third parties, not employees.
Moreover, the market watchdog is accusing the Lisser and his colleagues to have never owned enough shares to cover the sales it had made to investors.
The complaint further alleges that Lisser and his salespeople falsely claimed to investors that Knightsbridge only charged investors a fee based on the profits after the pre-IPO companies went public, such that Knightsbridge and the investors were on the “same side of the trade,” despite significantly marking up sales and charging commissions.
“As alleged in the complaint, Lisser victimised dozens of retail investors through high pressure sales tactics, misrepresentations and misappropriation of their funds,” said Richard R. Best, director of the SEC’s New York Regional Office.
“This case demonstrates our continuing commitment to hold accountable those who operate old-fashioned boiler rooms to solicit investors’ hard-earned savings.”
The SEC’s complaint charges Lisser with violations of the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934, and seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.
In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York has filed criminal charges against Lisser.
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