SEC Charges Another Company with Offering Fraud
Recently the Securities Exchange Commission (SEC) initiated enforcement action against Petro-Suisse Ltd., and its counsel, charging them with offering fraud. This enforcement action caught our attention because we have been retained by clients in the past to investigate companies where there investment failed, and there was clear evidence the proceeds raised were not used as stated; basically offering fraud. It is also amazing how simple the complaint filed in court by the SEC was.
The complaint basically says that the company did not use the money raised as it said it would, and therefore it committed fraud. In committing fraud the company, and its legal counsel violated Section 17(a) of the Securities Act, as well as Section 10-b and Rule 10b-5 of the Exchange Act.
By all indications this type of fraud is extremely easy to prosecute, and the company or its legal counsel did not even bother to defend themselves, as they consented to an entry of judgment. Evidently they did not see any viable defense for themselves.
We think that enforcement actions such as this send a clear message to companies that are raising capital that they need to use the capital they raise as they state they will in their Use of Proceeds statements contained within their offering documents. However based upon the simplicity of the complaint filed in court, we have to wonder why the SEC files so few of these enforcement actions.
A copy of the SEC’s complaint can be found at: http://www.sec.gov/litigation/litreleases/2012/lr22448.htm
A copy of the complaint filed by the SEC can be found at: http://www.sec.gov/litigation/complaints/2012/comp22448.pdf
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Coral Capital Partners, Inc. provides services to Investment Banks, Private Equity Funds, investors, and both privately held and publicly traded companies, as well as various stakeholders in those organizations. This has included international public companies with operations on three (3) continents to smaller privately held domestic companies.
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We do applaud the SEC ‘s efforts to police this type of activities.