A defunct securities firm in Nassau is facing legal action from the U.S. Securities and Exchange Commission for its involvement in an alleged "pump and dump" scheme. According to documents filed in the United States District Court in New York, Gibraltar Global Securities in The Bahamas played a key role in the "dump" portion of the scheme by providing misleading representations in September 2009 and April 2010 that served to conceal shareholders in two publicly traded U.S. companies.
Tradeshow and Pacific Blue, controlled by Canadian stock promoters John Kirk, Ben Kirk, Dylan Boyle and James Hinton, allegedly "pumped" up the stock with "false and misleading" promotions based on "independent" research. The investors sent out email blasts from two stock-touting websites - Skymark Research and Emerging Stock Report - and hired a "boiler room" of individuals to promote the stock to U.S. investors, according to the court document. U.S.-based attorneys Luis Carrillo and Wade Huettel allegedly helped the promoters acquire a shell company, draft misleading public filings and legal opinions and funnel sales proceeds through their firm's attorney-client trust account.
"The Kirks, Boyle and Hinton made at least $11 million by 'scalping', or by secretly selling Pacific Blue and Tradeshow shares while simultaneously promoting the stocks and encouraging others to buy," the document read. "They sold these shares, in part, through accounts at Gibraltar in The Bahamas and a broker-dealer in the Turks and Caicos. By doing so, contrary to their recommendations to other investors, their recommendations were misleading and fraudulent." The allegations claim Gibraltar provided false affidavits and misleading representations to brokerage firms in the U.S.
that concealed the shares' true beneficial ownership. That allowed Ben Kirk, the document said, to secretly sell those shores into the artificially increased demand. Warren Davis, the president of Gibraltar, told Guardian Business that he "categorically denies" that the firm ever knowingly participated in the scheme. He said any affidavits were vetted and approved by U.S. attorneys and the firm was never complicit with the sale of unregistered securities.
"As a matter of fact, GGSI assisted both local and international regulators in this matter. In light of this, it is surprising to me that these allegations have been brought against GGSI or myself," he said. "I will continue to follow the rule of the law and our legal duties and responsibilities." The filing by the SEC is the second bout of legal troubles for the Nassau firm. Last year, Gibraltar was found guilty of trading and advising in securities without a license by the British Columbia Securities Commission (BCSC). Davis has strongly denied any wrongdoing in these matters, arguing the firm is part of a "witch hunt" against offshore institutions.
In February, he decided to close down operations due to repetitional damage, putting 15 Bahamians out of work. In this most recent scandal, the SEC claims the promoters sold millions of shares in Tradeshow and Pacific Blue through Scottsdale Capital Advisors, a registered broker in the U.S., and Gibraltar in The Bahamas. The documents allege Gibraltar's primary business consists of "liquidating low-priced, thinly-traded stocks on behalf of its clients, often during periods of suspicious promotion".
The stock promotes opened accounts in Scottsdale and Gibraltar in the name of fake nominee entries, the court alleged, under no apparent purpose other than to conceal the identity. The documents went on to detail two separate incidents in September 2009 and April 2010 when Gibraltar allegedly released affidavits stating it held securities for the sole benefit of nominee entities. Ben Kirk was allegedly the beneficial owner. The SEC now seeks to the court to enter judgements permanently enjoining defendants from violating the securities laws. It would require disgorgement of "ill-gotten gains" and prejudgement interest thereon, as well as "civil monitory penalties" and barring defendants from participating in future penny stock offerings.
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