Ryan Gilbertson, a Minnesota man previously accused by the SEC of orchestrating a scheme to siphon millions of dollars from Dakota Plains Holdings Inc. which operates an oil-shipping rail facility in North Dakota, was convicted on 21 counts of wire fraud, securities fraud, and conspiracy to commit securities fraud. Gilbertson founded the company with his associate Michael Reger.
Douglas Hoskins, who was also named in the SEC’s complaint, was convicted on 6 counts of wire fraud, securities fraud, and conspiracy to commit securities fraud.
According to the SEC, Gilbertson and Reger installed their fathers as figurehead executives so they could “secretly wield control of the company and issue millions of shares of stock to themselves, family, and friends.”
They allegedly caused the company to enter into an agreement to borrow money from them under terms that included extra bonus payments to themselves and other lenders based on the price of Dakota Plains stock after 20 days of trading following a reverse merger into a company with publicly-traded shares.
According to the SEC’s complaint, Gilbertson enlisted friends and associates, including Hoskins, to allegedly choreograph extensive sales and purchases of Dakota Plains stock which caused the price to skyrocket from 30 cents to more than $12 per share during that 20-day period.
The inflated stock price obligated Dakota Plains to make bonus payments totaling $32 million to Gilbertson, Reger, and others. After meeting his target to receive the bonus payments, Gilbertson ceased his alleged manipulation efforts. The stock price then steadily declined to pennies per share and was eventually delisted.
Reger previously consented to an SEC order finding that he obtained illicit payments and skirted public disclosure requirements by spreading his Dakota Plains stock holdings among 10 accounts in different names to conceal that he owned more than one-fifth of the company’s shares and reaped millions of dollars in bonus payments. Without admitting or denying the findings, he previously agreed to pay $6.5 million in disgorgement, $669,000 in interest, and a $750,000 penalty.
Sentencing has been scheduled for November 13, 2018 for Gilbertson and November 15, 2018 for Hoskins.