Legal
SEC

SEC Calls John Thomas Funds, “Independent” Agent on the Carpet

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Regulators have accused the manager of two John Thomas Bridge and Opportunity Fund (JTCM) units active in microcap finance, and affiliated PIPE placement agent John Thomas Financial (JTF), of overcharging clients, improperly paying stock promoters with fund cash, and furnishing misleading statements to clients. The Securities and Exchange Commission administrative action alleges that John Thomas fund manager George Jarkesy also yielded to unreasonable fee demands from Anastasios Belesis, CEO of JTF, which the commission says did not live up to claims that it was independent from Jarkesy’s funds. The commission alleges that Belesis often got involved in fund business and rudely demanded unyielding obedience from Jarkesy. “Numerous emails reflect Jarkesy’s subservience to Belesis and efforts to please him by offering him benefits from the Funds’ investment activities, including cash, fees and securities,” the commission says. “Nobody gets access to Tommy [Belesis] until they make us money!!!!!,” Jarkesy allegedly wrote in one communication.

Legal
SEC

SEC Says Corrupt Touter Raked in $16M

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Regulators accused a stock promoter of fraudulently touting stocks in bogus research publications, according to a civil suit that alleges Canadian promoter Colin McCabe made baseless claims about ten companies including Guinness Exploration and PIPE-financed Global Health Ventures (GHLV). Global Health is now Kedem Pharmaceuticals (KDMP). The allegedly improper touting of Global Health shares took place in a period when the company engaged in several equity-linked financings that took its share price up to a reverse split-adjusted $208, only to fall to less than a penny once the pump ended. McCabe allegedly received $16 million in payments from issuers for extolling their stocks in publications that did not disclose that he was being paid to prepare the "research" marketed from 2008 through 2011, according to a suit filed by the Securities and Exchange Commission. The action was filed in the Salt Lake City U.S. District Court.

Legal
SEC

Virgin Islands Advisor Faces Fraud Charges in Microcap Finance Scheme Linked to Jason Galanis

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Regulators initiated proceedings against investment advisor James Tagliaferri on Feb. 21, and he was soon arrested on criminal charges involving claims that he defrauded investors through several types of financial chicanery. Tagliaferri stands accused of manipulating his two TAG Virgin Island funds in a manner that was both detrimental to their investors and beneficial to him and an associate who was sanctioned in 2007 for engaging in an alleged scheme to inflate the revenues of Penthouse Inc.

The indictments seek the forfeiture of $4.3 million in fees paid directly by clients and another $3.35 in undisclosed compensation. Tagliaferri entered a not guilty plea to the criminal charges on Feb. 27 in a U.S. District Court in New York.

Legal
PUDA

Court Bars ‘Monty Python’ Defense for Puda Coal Directors

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While a suit filed by regulators against Puda Coal (PUDA) management is going nowhere, a Delaware Judge refused to dismiss a shareholder action against independent directors who walked away after learning of wrongdoing at the company. "I'm not sure that the Monty Python response -- and I refer to the scene involving the words 'run away'" is adequate, Delaware Chancery Court Chancellor Leo Strine said in court earlier this month. Strine's reference derives from a scene in the movie "Monty Python and the Holy Grail" where knights flee a rabbit armed with impressive death-dealing powers. The situation holds few laughs for Puda Coal's directors or its shareholders. Puda went public through a reverse merger and subsequently raised over $120 million in PIPE transactions, ostensibly to fund operations of its PRC subsidiary Shanxi Puda Coal Group Co.