SEC reaches $4.5-million (U.S.) deal with Genovese
2019-07-05 19:55 ET - Street Wire
Also Street Wire (C-LSL) Liberty Silver Corp
by Mike Caswell
Ontario's Bobby Genovese has agreed to a permanent penny stock ban and to pay $4.5-million to settle civil charges that he faces from the U.S. Securities and Exchange Commission for the manipulation of Liberty Silver Corp. (All figures are in U.S. dollars.) The SEC had cited him for touting the stock while failing to disclose the sale of millions of shares. According to the regulator, he unloaded $17.5-million worth of stock, generating an $8-million profit.
The settlement with Mr. Genovese is contained in a judgment filed on July 1, 2019, in federal court in New York. Mr. Genovese has agreed to disgorge $3.8-million in gains, plus interest, and to pay a $300,000 civil penalty. He has also accepted a permanent penny stock ban. In accepting the sanctions, Mr. Genovese did not admit to any wrongdoing. The disgorgement portion of the settlement applies to Mr. Genovese and to his private company, BG Capital Group Ltd.
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The settlement comes about one year after Mr. Genovese unsuccessfully attempted to have the case dismissed. He said that there was nothing to indicate that he had misled anybody when he sold his Liberty Silver shares. He claimed that he had repeatedly disclosed his interest in the company. He also questioned whether any rational investor would stay away simply because Mr. Genovese was looking to sell his shares at a profit. Unfortunately for Mr. Genovese, the judge rejected his request, finding that the case was strong enough to go to trial.
For the SEC, the deal comes almost two years after it initially charged Mr. Genovese. The regulator set out its case against him in a civil complaint that it filed on Aug. 1, 2017, in the Southern District of New York. The regulator cited him for the 2012 manipulation of Liberty Silver, a purported exploration company that traded on the Toronto Stock Exchange and on the OTC Bulletin Board. (It has since rolled back 1:15 and is now known as Bunker Hill Mining Corp. The company is not a defendant in the case.)
According to the SEC, Mr. Genovese was behind an effort to tout the stock through newsletters and through presentations to brokers. He allegedly told a group of brokers in New York that he expected Liberty Silver to go to $7. What he failed to disclose, at least according to the SEC, was that he was a substantial shareholder and that he planned to sell his shares. Around the same time, Mr. Genovese was arranging to have newsletter writers publish promotional pieces about Liberty Silver, the SEC claimed. One unidentified Canadian newsletter writer received a $30,000 set of speakers for his efforts, according to the complaint.
In addition, the SEC cited Mr. Genovese for executing a series of wash trades in support of the scheme. The trades, which began on Oct. 3, 2012, boosted the stock by 10 cents to $1.43, the SEC claimed. Two days later, on Oct. 5, 2012, the SEC ended the scheme by imposing a trading halt on Liberty Silver. By then, Mr. Genovese had sold $17.5-million worth of shares, generating an $8-million profit, according to the complaint.
As part of the complaint, the SEC identified an offshore brokerage that Mr. Genovese had used, Vancouver-linked Verdmont Capital SA. He held an account there in the name of a Panamanian entity, Outlook Investments. (Verdmont is no longer in business. The firm, which was run by two former Vancouver brokers, ceased operations after the SEC charged it for share sales unrelated to Liberty Silver. Verdmont denied any wrongdoing, but in early 2016 it went out of business and later stopped defending the case. The SEC won a $38.5-million sanction by default. The B.C. Securities Commission also began an administrative case against Verdmont and its two founders, former Vancouver brokers Glynn Fisher and Taylor Housser. To settle that case, Verdmont agreed to pay $350,000 (Canadian). The BCSC dropped the case against Mr. Fisher and Mr. Housser.)
In addition to Mr. Genovese, the SEC cited a New York broker, Abraham "Avi" Mirman, for the scheme. The SEC said that Mr. Mirman sold shares for Mr. Genovese without making any reasonable inquiry. Mr. Mirman denies any wrongdoing and awaits trial.
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