BOSTON (CN) - The president of a metal detector company submitted a false list of company investors, including one dead person, to get SEC exemptions, the SEC claims in Federal Court. The SEC says Paradigm unloaded more than $1 million worth of shares after the exemptions and misleading press releases drove up company stock, and its president Daniel O'Riordan bagged $112,000 of it.
The SEC describes O'Riordan as a figurehead president of Delaware-based Paradigm Tactical Products, which sells FriskerPro handheld metal detectors to law enforcement and security companies.
Since the SEC gives certain regulatory exemptions to companies whose stock is held by a group of independent unaffiliated investors, O'Riordan filed a bogus Form D in 2005, according to the complaint.
The SEC says the Form D gave notice of a supposed private placement of Paradigm stock, along with backdated stock certificates and a fake list of independent, accredited investors, including one dead person.
The investors had never bought Paradigm stock, but the SEC says O'Riordan's deception helped him get the public market of his choice, Pink OTC Markets, to include a Paradigm stock quote.
"At the time the Form D was filed, O'Riordan knew, should have known, or was reckless in not knowing, that it contained false and misleading information," according to the complaint. "He also knew, should have known, or was reckless in not knowing, that Paradigm did not receive $500,000 from the purported offering, and that the vast majority of Paradigm's outstanding stock was ultimately controlled by Paradigm's founder, whose name was not listed in the Form D."
The SEC says O'Riordan also issued press releases with misleading information about Paradigm's sales revenue to drive up the price of its stock. Within a month of the issuance of the bogus press releases, Paradigm shares more than doubled in price, according to the complaint.
"Because of O'Riordan's, and others', actions, he and others received 'free trading' Paradigm stock certificates (without restrictive legends) that could be freely sold to the public," according to the complaint. (Parentheses in original.)
After the Pink Sheets began quoting Paradigm stock in 2005, the SEC says, Paradigm sold millions of shares of stock in the public market for more than $1 million by 2009. The commission adds that O'Riordan sold his shares in an unregistered public offering for $112,000.
The SEC seeks an injunction against O'Riordan for securities fraud. It is represented by Kathleen Shields.
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