SEC and DOJ Charge Individuals in Bribery Scheme

The SEC charged the former CEO and president of a Nasdaq-traded security technology company and charged three other individuals in a fraudulent broker bribery scheme.

According to the complaints filed in the U.S. District Court for the Eastern District of New York, the CEO entered into "consulting agreements" with investor relations companies owned by two of the individuals, both former registered stockbrokers. The consulting agreements allegedly served as a mechanism to "funnel bribes" to the broker-dealer to purchase securities of the technology company through his customers' accounts. According to the SEC, the CEO knew that the intermediary companies would use some of the money to bribe the broker-dealer.

The SEC requested that the CEO and the three other individuals (i) be permanently enjoined from further violating certain SEC regulations, (ii) disgorge any ill-gotten gains with pre-judgment interest, (iii) pay a civil monetary penalty under the Exchange Act and (iv) be barred from participating in any offering of a penny stock. The SEC also requested that the CEO be prohibited from acting as a director or officer for any company that has a class of securities.

In a parallel action, the DOJ filed charges against one of the individuals, a former registered stockbroker, for defrauding investors by concealing payments made to the broker-dealer.

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