(Reuters) – A penny stock financier based in Long Island, New York, and his companies agreed to pay $1.46 million to settle U.S. Securities and Exchange Commission charges that they sold more than 3 billion shares in two microcap companies at a profit without first registering the shares.
The SEC announced the settlement with Curt Kramer, Mazuma Corp and two affiliates on Monday. It is among the first settlements involving the regulator’s Microcap Fraud Task Force.
Kramer and Mazuma neither admitted nor denied wrongdoing in agreeing to settle the charges.
The SEC created the task force in July to target alleged abuses involving microcaps, which often do not regularly report their financial results to the public. Microcaps are smaller companies with low market capitalizations and tend to have low share prices.
According to the SEC, Kramer and Mazuma from 2006 to 2010 improperly relied on a registration exemption when they bought more than 2 billion shares of Laidlaw Energy Group Inc and sold them to investors.
Registration statements are designed to provide investors with financial information and to prohibit deceit and misrepresentations in the sale of securities.
The SEC also said Kramer and Mazuma in 2009 and 2010 bought and sold over 1 billion unregistered shares of Bederra Corp that had been misappropriated by that company’s transfer agent.
It said the defendants acquired their shares at significant discounts, making it highly likely that they could quickly resell them to the public for a short-term profit.
“Unless there is a valid exemption, shares can’t be sold publicly without a registration statement that provides investors with the level of detail they deserve about the investment opportunity being offered,” Michael Paley, co-chair of the SEC enforcement division’s microcap fraud task force, said in a statement.
Kramer and Mazuma agreed to give up $1.06 million of profit plus $129,000 of interest, and pay $273,000 of penalties.
Mazuma is based in Great Neck, New York, and Kramer lives in nearby Glen Head, the SEC said.
A lawyer for the defendants did not immediately respond to requests for comment.
The SEC said the microcap task force differed from a working group set up in 2010 because it had a staff dedicated to investigating microcap cases.
In a speech last month, SEC Chairman Mary Jo White said abuses in the microcap area can come largely at the expense of less sophisticated investors.
(Reporting by Jonathan Stempel in New York- Editing by Leslie Adler)
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