Ironridge Global Partners has settled a two-year-old enforcement action with the Securities and Exchange Commission over its use of a previously obscure cause of the bankruptcy code to provide equity financing to distressed microcaps. Without admitting guilt, the fund managers agreed to one count of failing to register as a broker-dealer, and will pay $4.4 million in disgorgement penalties.
In June 2015 the SEC sued Ironridge for Section 15(a) and 20(b) violations aimed at the large volume of deals Ironridge had closed over the past three years using the so-called Section 3(a)(10) exemption. The regulator’s lawsuit was centered on a finance scheme pioneered by Ironridge that converted unpaid debt and claims into immediately registered stock which bypassed the usual requirement of SEC review before trading. The SEC claimed the fund manager was acting as an unregistered underwriter.
In 2015, more than a half-dozen microcap finance firms used the exemption, a part of the federal bankruptcy code intended to help bankrupt companies settle claims with creditors, to buy trade claims from creditors of microcap issuers and then get court approval to convert them to equity through a fairness hearing. The issuers would then pay firms like Ironridge in unrestricted stock to settle the claims, as provided for by the exemption, which could be traded immediately in the open market.
Since the SEC litigation against Ironridge began, 3(a)(10) deals have nearly ceased to exist, even though there have been no new rules or laws created to prohibit the practice. CLICK HEADLINE FOR MORE>>
A fast casual dining restaurant chain plans to be the first issuer to offer a dividend as a means to sell investors on its Regulation A+ public offering. FAT Brands, which owns the FAT Burger and Buffalo’s Cafe casual restaurant franchises, announced on August 3 it is working exclusively with Tripoint Global Securities to qualify a Tier 2 offering with the hopes of raising $20 million.
Former supermodel turned home goods design magnate Kathy Ireland has teamed up with a fashion and beauty company, Level Brands, that is preparing to file to go public via a Regulation A offering. Level Brands had previously filed a confidential S-I filing for a traditional IPO, but switched to Reg A in late July.
An equity crowdfunding offering by a food truck franchiser has been withdrawn after federal authorities arrested 14 individuals who are accused of being part of a sophisticated ring that manipulated the company’s stock when it traded on the OTCQB from 2014 to 2015. The Reg CF offering by The Grilled Cheese Truck was listed on FlashFunders, owned by Boustead Securities of Irvine, Calif.