The Securities and Exchange Commission today announced the unsealing of fraud charges against a defendant who stole at least $400,000 from investors through the sale of non-existent pre-IPO shares of stock. The SEC also obtained emergency relief, including an asset freeze and a temporary restraining order to halt the offering.
The SEC’s complaint alleges that Keenan Gracey sold investors purported pre-IPO shares in Perspecta, Inc., a new company that will be formed as a result of the merger of three other companies. Although the merger is planned, Gracey’s claims of ownership of pre-IPO shares in Perspecta were false. As alleged in the SEC’s complaint, Gracey has no interest in the not-yet-formed company and no IPO is planned for its stock. The SEC alleges that Gracey used publicly available information about the merger and false claims about his supposed connections with the companies involved to convince investors that they would recover sixty times their investment if they purchased pre-IPO shares from him.
The SEC’s complaint filed under seal in federal court in U.S. District Court for the Central District of California on May 9, 2018 and unsealed today, charges Gracey with violations of Section 10(b) of the Securities and Exchange Act of 1934, and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933. The Court granted the SEC’s request for an asset freeze and a temporary restraining order against Gracey from further violations of the federal securities laws, as well as other emergency relief. The SEC complaint also seeks preliminary and permanent injunctions, return of any ill-gotten gains with interest, and civil penalties.
The SEC’s investigation was conducted by Alec Johnson and was supervised by Marc Blau. The SEC’s litigation will be led by Don Searles and supervised by Amy Longo.
The SEC encourages investors to be wary of any offer of pre-IPO shares, as further detailed in this investor alert.