SEC v. River North Equity, et al.

Violations Charged

Sections 5(a), 5(c), 17(a), Section 9(a), Section 10(b), Rule 10b-5, Section 15(a)

Case Overview

From February 2014 through October 2016, David Foley, the founder of NanoTech Entertainment (NTEK) and NanoTech Gaming (NTGL), converted promissory notes he had issued to himself into more than a billion shares of the two penny stocks and sold them to River North Equity, a Chicago securities trading company, in a series of unregistered transactions. River North and its president, Edward Liceaga, then sold the shares to the public, and River North employee Michael Chavez acted as an unregistered broker for the sales.

Foley hired a stock promoter, Bennie Blankenship, who touted the companies on Twitter and YouTube, and Foley prepared false quarterly financial statements that were posted for investors. Foley continued to direct the scheme after he began serving a prison sentence in two unrelated cases, with his wife Lisa Foley completing more than half of the sales and his brother Jeffrey Foley, the companies' CEO, assisting. River North paid about $12.5 million for the shares and sold them for more than $17 million, and the Foleys made personal profits of about $4.9 million.

Joe's Role

The SEC's litigation release names Joe among the staff who conducted the investigation.

Outcome

The SEC announced the charges on March 11, 2019 against nine individuals and companies. The complaint sought injunctions, disgorgement with prejudgment interest, civil penalties, penny-stock bars, and an officer-and-director bar against David Foley.