SEC Charges Two Men with Fraud and Unregistered Broker Activity

November 4, 2019/US SEC

The Securities and Exchange Commission has charged Richard Eden and Dale Pearlman for engaging in fraud, acting as unregistered brokers, and participating in an unregistered offering in connection with the sale of microcap securities. The SEC also charged Christopher Neumann for acting as an unregistered broker in connection with his work with Eden.

According to the SEC’s complaints, beginning in at least September 2014, Eden and Pearlman solicited investors to purchase shares of a microcap issuer, Intertech Solutions, Inc. (“ITEC”). Eden and Pearlman allegedly called prospective investors and convinced them to purchase shares of ITEC in their own brokerage accounts at prices and volumes that were coordinated by Eden, Pearlman, and ITEC’s undisclosed control person. ITEC’s undisclosed control person simultaneously entered sell orders at the coordinated price and volume, making it highly likely that his sell orders and the solicited investors’ buy orders would match. Through this matched trading, ITEC’s undisclosed control person was able to offload his shares into a ready market. The Commission previously charged ITEC and its control person for fraud and registration violations. Eden allegedly engaged in similar conduct involving other securities and Neumann allegedly assisted Eden’s solicitation efforts while earning transaction-based compensation.

The SEC’s complaints, filed in the U.S. District Court for the Central District of California, charge Eden and Pearlman with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and the offering registration provisions of Section 5 of the Securities Act. The complaints further charge all defendants with violating the broker-dealer registration provisions of Section 15(a)(1) of the Securities Exchange Act of 1934.

Without admitting or denying the SEC’s allegations, the defendants have consented to the entry of judgments that include injunctive relief, disgorgement of ill-gotten gains, and civil monetary penalties in the following amounts:

  • Richard Eden: disgorgement of $777,272, with prejudgment interest of $55,147, and a civil penalty of $125,000;
  • Dale Pearlman: disgorgement of $115,000, with prejudgment interest of $13,393, and a civil penalty of $50,000; and
  • Christopher Neumann: disgorgement of $124,100, with prejudgment interest of $14,876, and a civil penalty of $50,000.

The settlements are subject to court approval. The SEC’s investigation was conducted by James Thibodeau and Laurie Abbott, was assisted by Amy Oliver and David Whipple, and was supervised by Daniel Wadley, Regional Director of the SEC’s Salt Lake Regional Office.

The SEC’s Office of Investor Education and Advocacy has issued an Investor Alert to encourage investors to check the background of anyone selling or offering them an investment using the free and simple search tool on Investor.gov.

Leave a Comment

Your email address will not be published. Required fields are marked *

*