SEC Obtains Judgments Against Defendants in a Microcap Fraud Scheme

September 10, 2021/US SEC

The Securities and Exchange Commission announced that it obtained final judgment against defendant Nelson Gomes on September 9, 2021 and partial judgment against defendant Shane Schmidt on July 13, 2021, in a previously-filed action against 11 defendants alleging a fraudulent scheme that generated more than $25 million from illegal sales of multiple microcap companies’ stock. Gomes has been ordered to pay more than $1.5 million in total monetary relief under the final judgment, while the amount Schmidt will pay, if any, will be determined by the court at a later date.

According to the Commission’s complaint, filed in the United States District Court for the District of Massachusetts on June 9, 2020, Gomes, a Canadian citizen, began working with others around January 2018 to run a fraudulent business through which corporate control persons could conceal their identities while illegally dumping their companies’ stock into the market for purchase by unsuspecting investors. The complaint alleges that these illegal stock sales were often boosted by promotional campaigns that, in some instances, included false and misleading information designed fraudulently to capitalize on the COVID-19 pandemic, such as false claims that a company being promoted could produce medical quality facemasks. Schmidt allegedly participated in the fraudulent scheme by posing as the owner of a public company and facilitating the distribution of its shares to his associates who in turn sold the shares during a false and misleading promotional campaign.

Gomes, without admitting or denying the allegations in the SEC’s complaint, consented to the entry of a final judgment enjoining him from violating the securities registration and antifraud provisions of Sections 5(a), 5(c), 17(a)(1) and 17(a)(3) of the Securities Act of 1933 (“Securities Act”) and the antifraud and beneficial ownership reporting provisions of Sections 10(b) and 13(d) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5(a), 10b-5(c) and 13d-1 thereunder, and also imposing a conduct-based injunction restricting Gomes’s future trading in any stock, and ordering him to pay $1,153,058 in disgorgement and prejudgment interest and a civil penalty of $390,094. In addition, Gomes consented to a five-year penny stock bar.

Schmidt, without admitting or denying the allegations in the SEC’s complaint, consented to the entry of a partial judgment enjoining him from violating the antifraud provisions of Sections 17(a)(1) and 17(a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and 10b-5(c) thereunder, and imposing a permanent penny stock bar. Schmidt also consented to paying disgorgement and prejudgment interest, and a civil penalty, in amounts to be determined by the Court.

The SEC’s ongoing case against the remaining three defendants, Douglas Roe, Kelly Warawa and Atlantean Management Corporation, is being handled by Trevor Donelan, Eric Forni, Kathleen Shields, J. Lauchlan Wash, and Amy Gwiazda in the Boston Regional Office.

For additional information, see Litigation Release No. 24839 (June 18, 2020), Litigation Release No. 25100 (May 28, 2021) and Litigation Release No. 24979 (December 9, 2020).

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