Penny Stock Trader Slapped With SEC Judgment While Awaiting Criminal Sentencing

(CN) – The Securities and Exchange Commission obtained a $13.7 million penny-stock-fraud judgment against  trader and attorney Marcus Luna as he awaits sentencing in a parallel criminal case brought by federal prosecutors.

The SEC alleged in the civil case that Luna set up boiler rooms in Beverly Hills and Costa Mesa, California, to artificially inflate the stock price of dormant companies that Luna had purchased off the over-the-counter market.

The boiler rooms solicited investors by phone and misled them to believe that Luna’s Umax Group Corp. would be a leading nutraceutical company. In reality, Umax “had scant revenue and no real legitimate business prospects,” according to SEC filings.

When speaking with investors, the boiler room agents purportedly concealed that they were earning huge commissions on the penny stock sales. They peddled Luna-controlled stock from 2013 to 2014, and when they stopped, the trade volume and price of the stock dropped off a cliff, the SEC said.

A judge in the Central District of California issued the $13.7 million disgorgement order against Luna on Oct. 5. The court granted a motion for default filed by the SEC on the grounds that Luna failed to respond to regulators’ allegations in the civil case.

Luna pleaded guilty in April to criminal wire fraud in connection with the penny stock dealings. His Oct. 16 sentencing hearing in the criminal case was postponed until next January, according to court documents.

The California Bar has suspended his license to practice law.

Luna’s associates Norrell Walker, Paul Gomez and Dustin Smith – who allegedly set up and ran the boiler rooms – entered into settlements with the SEC earlier this year and agreed to a permanent bar prohibiting them from participating in penny stock offerings.

Gomez pleaded guilty to criminal wire fraud in May for his participation in the scheme, and is likewise awaiting sentencing, according to court documents.

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