Pennystock Kickback Scheme Gets In Last Kicks at SEC

These proceedings arise out of a fraudulent scheme in which insiders of publicly-traded penny stock companies paid kickbacks to a purported hedge fund manager, who was in fact an undercover agent with the Federal Bureau of Investigation ("Fund Manager"), in exchange for the Fund Manager's purchase of restricted stock of the penny stock companies on behalf of his purported hedge fund ("the Fund"), which did not actually exist.

Respondent 

1. Aboukhater, age 44, a resident of Haymarket, Virginia, was in the business of assisting public companies in finding sources of funding. Many of the publicly traded companies Aboukhater assisted were penny stock companies whose common stock was publicly quoted on OTC Link. During the period January 2011 through May 10, 2011, Aboukhater participated in offerings of at least six penny stocks. On February 27, 2014, Aboukhater was charged by criminal information with one count of wire fraud, and he pleaded guilty to that charge on March 25, 2014 in U.S. v. Aboukhater, 14-CR-10057-DJC (D. Mass.). On January 26, 2015, the Court ordered Aboukhater to serve two years' probation, pay a fine of $10,000 and a special assessment of $100, and forfeit $12,425. 

These proceedings arise out of a fraudulent scheme in which insiders of publicly traded penny stock companies paid secret kickbacks to a purported corrupt hedge fund manager, who was in fact an undercover agent with the Federal Bureau of Investigation ("Fund Manager"), in exchange for the Fund Manager's purchase of restricted stock of the penny stock companies on behalf of his purported hedge fund ("the Fund"), which did not actually exist. 

Respondent 

1. Respondent, age 49, a resident of Chino, California, was the President and Chief Executive Officer ("CEO") of SOHM, Inc. ("SOHM"), a publicly traded company that manufactures and distributes generic pharmaceuticals in emerging markets in Asia, Africa, and Latin America. Shah was also the President and CEO of Costas, Inc. ("Costas"), a publicly traded company that provided digital media consulting and other services. Respondent participated in offerings of SOHM and Costas stock, which are penny stocks. Respondent was charged by criminal information with two counts each of mail fraud and wire fraud on May 8, 2014 and pleaded guilty to all counts on July 18, 2014 in U.S. v. Shah, 14-CR-10136-RGS (D. Mass.). On June 23, 2015, Shah was sentenced to 18 months' probation and, on June 25, 2015, was ordered to forfeit $37,500

1. Respondent, age 41, is a resident of Chino, California. He was in the business of promoting penny stocks and assisting public companies in finding sources of funding. Respondent participated in offerings of the common stock of SOHM, Inc. ("SOHM"), Costas, Inc. ("Costas"), and a third company ("Company A"), each of which is a penny stock. During the relevant period from at least March 10, 2011 through at least May 12, 2011, Respondent was a consultant to Company A. On May 8, 2014, Respondent was indicted on nine counts of wire fraud in U.S. v. Shah, 14-CR-10135- NMG (D. Mass.). On May 15, 2015, a jury found him guilty of nine counts of wire fraud. On August 25, 2015, he was ordered to forfeit $40,000 and, on September 11, 2015, was sentenced to 27 months' imprisonment to be followed by 2 years' supervised release, and was ordered to pay a $9,000 fine. 

• OIP
• SEC
• Pennystock
• FBI
• Undercover
• Undercover Agent
• Hedge Fund
• Mail Fraud
• Wire Fraud
• BrokeAndBroker
• Bill Singer