By NEIL HARTNELL
Tribune Business Editor
The owner of a Bahamas-based brokerage has reached “a settlement in principle” with US federal regulators over allegations that he played a key role in a $17 million financial fraud.
The Securities & Exchange Commission (SEC), in a March 24, 2016 letter to the New Jersey federal court, said it expected to approve the deal with Guy Gentile, principal of Swiss-American Securities, by June 15, 2016, at latest.
That is one day after Mr Gentile and US federal prosecutors are due to appear before the same court over criminal charges filed against the Swiss-American Securities principal in relation to those activities.
Mr Gentile is facing both civil and criminal charges over an alleged ‘pump and dump’ scheme, which took place between 2007-2008, and the June 14, 2016, date for the latter was agreed “to allow the parties sufficient time to exchange discovery and engage in plea negotiations”.
Acknowledging the enormous volume of financial records involved Judge Jose Linares wrote in is April 4, 2016, Order agreed by all parties: “Plea negotiations have begun, and the parties seek additional time to explore whether the case can be resolved through a plea agreement, which would make a trial unnecessary.”
As for the SEC’s civil case, its trial attorney, Nancy Brown, wrote to Judge Linares one day after its action against Mr Gentile was filed, informing him that a settlement had been reached.
“We write to alert the court that the Commission staff and the defendant have reached a settlement in principle of all the Commission’s claims, subject to approval by the full court,” Ms Brown wrote.
“We expect to have a determination from the Commission in approximately eight weeks. Accordingly, by June 15, 2016, we expect to provide the court with a full settlement of the Commission’s claims.”
Mr Gentile, who is on bail on a $500,000 bond, secured by property in Miami, has been permitted to continue travelling to the Bahamas while both cases remain outstanding, according to documents obtained by Tribune Business.
The events forming the basis of the US federal/SEC allegations occurred three-four years before Mr Gentile established his Swiss-American Securities business in September 2011, which is located in the Elizabeth on Bay plaza on downtown’s Bay Street.
Mr Gentile is a well-known figure on Nassau’s social and restaurant scene, and his Bahamian business interests are not involved in the two cases filed against him.
However, documents seen by Tribune Business reveal that two Canadian stock promoters, Mike Taxon and Itamar Cohen, who were charged in relation to the same scheme, both pleaded guilty to US criminal charges last year.
The SEC has also charged an American attorney, Adam Gottbetter, for his role in attempting to manipulate one of the two stocks Mr Gentile is alleged to have been involved with.
The claims relate to two thinly-traded, illiquid microcap stocks, Raven Gold Corporation and Kentucky USA Energy.
Mr Gentile and the others are alleged by both federal prosecutors and the SEC to have disguised their ownership of large blocks of shares in both companies, then artificially inflated their stock prices via manipulative trading techniques and the use of misleading promotional materials to drive investor interest.
“After pumping the stocks, Gentile and his conspirators ‘dumped’ them, selling large volumes of the stock to investors. The companies’ stock prices then dropped, causing the victims of the scheme to suffer losses,” the US attorney’s office for New Jersey said in a statement.
“The alleged stock manipulation scheme generated approximately $17.2 million in gross trading proceeds.”
It added: “The conspiracy count with which Gentile is charged carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gain or loss from the offense. The securities fraud count carries a maximum potential penalty of 20 years in prison and a $5 million fine.”
The SEC and federal prosecutors have been cracking down on trading in illiquid, penny stocks in recent years.
Such activities by clients, and their alleged involvement in fraudulent schemes, saw the now-defunct Bahamian broker/dealer, Gibraltar Global Securities, and its principal, Warren Davis, hit by two SEC actions.
And Bahamians Kelvin Leach and Rohn Knowles have seen the closure of their Belizean brokerage, Titan Securities, as a result of US federal prosecutors bringing charges against them that remain outstanding.