SEC v. Almagarby, et al.

Violations Charged

Section 15(a), Section 20 control-person liability

Case Overview

Ibrahim Almagarby and his firm, Microcap Equity Group, bought aged debt owed by penny-stock companies and converted it into shares of those companies' stock at a discount, then sold the shares into the market. Buying and selling securities for your own account as a regular business makes you a dealer, and dealers must register with the SEC. Almagarby had not registered.

Joe's involvement came at the remedies phase. The defendants argued that the investors who bought their discounted shares could not be identified, so disgorgement could not be calculated. The court denied the motion to strike Joe's rebuttal declaration and granted the SEC's motion for remedies.

What Joe Did

Joe was not the investigator on this matter. He filed a rebuttal declaration at the remedies phase, describing, from personal knowledge of the SEC's systems, how the Commission identifies the counterparties to microcap trades. Defendants moved to strike the declaration, and the Magistrate Judge denied the motion, ruling it proper rebuttal fact testimony that required no expert disclosure.

Outcome

The court granted the SEC's motion for remedies. The amended final judgment ordered $885,126.30 in disgorgement, $182,150.69 in prejudgment interest, an $80,000 civil penalty, and a permanent injunction.