SEC Scores Default Judgment Against Banned Trader and Rogue Firm

(CN) – The U.S. Securities and Exchange Commission won a final default judgment against a long-banned trader and a company he used to fraudulently sell securities after he failed to defend himself in court.

According to the ruling from the U.S. District Court for the District of Columbia, Douglas Murdock was permanently barred from trading in securities and acting as a director or officer of any issuer by the Ontario Securities Commission since 2002. However, that didn’t stop him from covertly controlling a Canada-based company called Analytica Bio-Energy Corp. and filing misleading statements with the SEC.

Now defunct but still trading shares, Analytica was a water purification company managed by co-defendant Luis Brasil, but Brasil was president in name only as he “ceded control to Murdock, who acted as a de facto officer of Analytica from at least July 2013 through October 2014,” selling unregistered shares in the public market.

The ruling states that Murdock caused Analytica to file 18 periodic reports with the SEC between September 2013 and October 2014 claiming that Brasil had an active management role with the company which he did not. Murdock used his control to obtain 1.5 million Analytica shares for his own companies, again erroneously claiming the shares were due for work his companies performed, and fleeced another 1.15 million shares by removing the restrictive legend on the shares by falsely claiming that he was not affiliated with Analytica.

“Due to this fraud, the unregistered shares were provided without a restrictive legend warning that they could not be resold on the public market,” the ruling by U.S. District Judge John D. Bates states. Murdock caused more than half a million shares to be sold to the public between June and August 2014, pocketing more than $340,000 of the proceeds.

On Feb. 28, 2018, the SEC filed suit against Murdock and Analytica for violations of the Securities Exchange Act and the Securities Act. Murdock consented to waiving findings of fact, and Analytica did not respond to the complaint so the SEC filed a motion for default judgment against the company and monetary relief against Murdock.

Justice Bates found that Murdock “knowingly misled investors regarding Brasil’s control of Analytica and Murdock’s own role managing the company, deceiving investors as to the stability of the company and their investment,” while selling over half a million unregistered shares to the public. The court ordered Murdock disgorge $340, 369.57, and pay the maximum penalty of $160,000, and prejudgment interest of $49,000. For its part, the court permanently enjoined Analytica from further Exchange Act violations due to a likelihood of future contraventions.

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