'Not Worth the Paper They Were Printed On'
BROOKLYN (CN) - The CEO of a Florida-based stock transfer agency admitted he stole more than $3.3 million from investors, using "aggressive boiler room tactics" and fake investment firms that issued sham securities that were "not worth the paper they were printed on," the SEC said in court.
Cecil Franklin Speight, 53, pleaded guilty Wednesday to federal charges of conspiracy to commit mail fraud and securities fraud. Speight was the sole owner of co-defendant International Stock Transfer Inc.
He used "a web of fake investment firms and websites promising high rates of return and discounted stock prices," the SEC says in its complaint.
It continues: "After taking their money, the defendants issued the investors counterfeit securities that - although they had all the indicia of real securities, including real CUSIP numbers and IST's signature block - were in fact sham securities and not worth the paper they were printed on. Speight signed some of the certificates holding himself out as a director of the purported issuer, even though he was not. In other instances, IST issued certificates that included an illegible signature of a supposed company officer when, in fact, the company had not authorized IST to issue any shares. Many of the certificates did not even consistently identify the company's country of incorporation, identifying one country on the front of the certificate but a different country on the back of the certificate."
To conceal what was going on, Speight "enlisted two attorneys to receive investment funds into their own bank accounts," the SEC says. In return, the attorneys took 2 percent of the money, and sent the rest to IST, according to the lawsuit.
"Instead of making its way to any issuers, however, IST and Speight spent the investor money almost as quickly as it came in, including on personal expenses and expenses related to funding the ongoing scheme," the SEC says.
From May 2012 to June 2013, the SEC says, IST's "office manager," who was the "only other person besides Speight authorized to sign stock certificates on behalf of IST" was a local bartender Speight had hired. They corresponded with securities holders using a London address and phone number.
Beginning in April 2012, Speight paid for the creation of websites for three fake unregistered financial advisers: GNS Wealth Management, ACI Private Wealth and Mass Fidelity. He enlisted cold-callers to solicit and sell the sham securities to at least 70 unwitting investors, the SEC claims.
"Rather than transferring capital to issuers, the defendant used the investors' funds as his own, including financing his lifestyle in Florida," U.S. Attorney Lynch said in a statement announcing the guilty plea.
According to the FBI, Speight spent the money at Mercedes Benz, Nordstrom, Netflix, Groupon and elsewhere.
"Speight brazenly misused his transfer agent authority to commit fraud by creating fake certificates and acting as if he was authorized by issuers to do so," said Andrew M. Calamari, director of the SEC's New York Regional Office. "His promise of high-yield investment returns and his use of attorneys to receive investor money were simply lures to take advantage of unsuspecting investors."
Speight faces up to 5 years in prison, at least $3.3 million in restitution, and a fine equal to twice the amount of investors' losses.