The SEC Now Charges A Firm For Illegal Securities Dealing

November 26, 2024

The SEC now charges a firm for illegal securities dealing after the company and its owner failed to do business without registering with the agency.

The Securities and Exchange Commission (SEC) has reached a settlement with Mammoth West Corporation, a company based in Illinois, along with its president and owner, Brad Hare.

The SEC charged them with operating as securities dealers without proper registration. As part of the settlement, Hare and Mammoth Corporation have agreed to pay over $3.9 million and to cancel certain securities they obtained through their unregistered activities.

The SEC’s complaint, filed in the U.S. District Court for the Northern District of Illinois, claims that Mammoth Corporation was known for lending to small, lesser-known companies, often referred to as microcap issuers.

From April 2018 to early 2024, the company, under Hare’s direction, purchased at least 47 convertible notes—financial instruments that can be converted into shares of stock.

They also submitted nearly 100 requests to convert these notes and turned the notes from 19 different microcap companies into more than 11 billion new shares of stock, which they bought at a steep discount compared to the market price.

After converting these notes, Mammoth Corporation and Hare allegedly sold the newly issued shares, making a profit of more than $2.5 million.

However, the SEC stated that neither the company nor Hare was registered as a dealer with the SEC, which is a requirement for their kind of business activity.

In the settlement, Mammoth Corporation and Hare did not admit to or deny the allegations but agreed to several outcomes.

These include:

A court order preventing them from violating securities laws in the future.
Payment of $2,734,810 in disgorgement (returning ill-gotten gains) and $409,825 in prejudgment interest by Mammoth Corporation, along with $438,932 in disgorgement and $70,006 in prejudgment interest by Hare.
Payment of civil penalties of $276,700 by Mammoth Corporation and $43,890 by Hare.
Cancellation of all remaining shares and rights to convert notes that they acquired through their unregistered activities.
A five-year ban from trading penny stocks for both Mammoth Corporation and Hare.

This settlement is still pending approval from the court.

The SEC’s investigation was led by Andrew Elliott, with oversight from Amy L. Friedman and Mark Cave. The litigation will be managed by P. Davis Oliver under the supervision of James Carlson.

This case highlights the importance of registration and compliance in the securities industry, emphasizing that companies must adhere to regulations to protect investors and ensure fair market practices.

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Also Read: JPMorgan Has Now Paid A Whopping $40bn In Violations