The Securities and Exchange Commission has settled charges against a Utah corporation, its principals, and two securities fraud recidivists for allegedly orchestrating two inter-related frauds resulting in approximately $11 million in investor losses.
According to the SEC’s complaint, Thomas Robbins and Daniel Merriman met while incarcerated for separate and unrelated securities fraud convictions. The complaint alleges that after they were released, the pair created a high-yield trading program, and that, beginning in 2016, solicited investor funds through a series of false representations.
These included claims that the Church of Jesus Christ of Latter-day Saints was a client; that they had consistently generated large returns for prior investors; and that investors could expect to earn profits of at least 20 percent per month.
The complaint further alleges that Robbins and Merriman misappropriated investor funds to pay personal expenses, as well as purported profits to earlier investors.
In 2017, the SEC alleges that, Robbins and Merriman, together with Clark Madsen and Mark Wiseman, devised a new scheme to fraudulently sell millions of shares of stock in ConTXT Inc., a company founded by Madsen, in unregistered transactions.
According to the SEC, since Robbins and Merriman were convicted felons, their involvement in ConTXT was actively concealed, and the private placement memorandum and other documentation provided to investors, falsely attributed their duties to a nominee.
The PPM allegedly also contained false and misleading information about ConTXT’s financial condition and profitability. The SEC alleges that Robbins, Merriman, and Wiseman lied about the use of investor funds, misrepresented ConTXT’s financial condition, and misappropriated investor funds for their personal benefit.
The pair are also accused of acting as unregistered brokers in the distribution of ConTXT stock and receiving commissions for their efforts. The defendants allegedly sold at least $942,800 of ConTXT stock in unregistered transactions and distributed millions of additional shares to satisfy prior debt obligations.
The SEC’s complaint filed in U.S. District Court for the District of Utah, charges all defendants with violations of the antifraud provisions of various securities laws. Without admitting or denying the allegations in the complaint, each of the defendants consented to a final judgment permanently enjoining him from violating the charged provisions and ordering him to pay disgorgement with prejudgment interest and/or a civil penalty.
Robbins was ordered to pay $828,600 in disgorgement plus $142,700 in prejudgment interest.
Merriman was ordered to pay $744,200 in disgorgement plus $121,900 in prejudgment interest, and a civil penalty of $192,800.
Madsen was ordered to pay disgorgement of $29,000 plus prejudgment interest of $3,500, and a civil penalty of $96,400;
Wiseman was ordered to pay disgorgement of $68,500 plus prejudgment interest of $8,300, and a civil penalty of $96,400.
ConTXT was ordered to pay disgorgement of $269,200 plus prejudgment interest of $32,800, and a civil penalty of $269,200.
Robbins and Merriman also agreed to a conduct-based injunction. The judgment remains subject to court approval.
In a parallel criminal action related to the trading program, Robbins pled guilty to securities fraud and money laundering and was sentenced to five years in prison and ordered to pay nearly $10.2 million in restitution.