SEC Obtains Final Judgment Against Middleman in Fraudulent Securities Offerings Scheme
The U.S. Securities and Exchange Commission obtained a final judgment against Christian Fernandez, also known as Christian Crockwell, who the SEC previously charged for his involvement in a fraudulent scheme to conceal paid promotion for securities offerings between at least 2019 and 2021.
The SEC’s original complaint was filed in late September 2022 in federal court in the U.S. District Court in Los Angeles, Calif., and alleged that Fernandez acted as a middleman for the promotional scheme.
At the center of the scheme was defendant Jonathan William Mikula, a recidivist violator of the federal securities laws. Mikula, acting with various middlemen, including Fernandez and Amit Raj Beri, promoted securities offerings to subscribers of the Palm Beach Venture newsletter for which Mikula was an author and chief analyst. While Mikula’s articles purported to be based on his independent analysis and claimed that no one associated with the Palm Beach Venture received compensation for the promotion, Mikula secretly received compensation from the issuers of the promoted securities.
They carried out this scheme with respect to the securities offerings of at least four issuers: Elegance Brands, Emerald Health, Cloudastructure Inc., and Hightimes Holding Corporation. These four offerings were conducted (or purported to be conducted) pursuant to Regulation A, which exempts certain qualified public securities offerings from registration provisions of the Securities Act of 1933.
Despite claiming that the promotions were not paid for, Mikula and the others received millions of dollars in compensation in exchange for promoting the issuers’ Reg A offerings. Mikula, acting with associates Fernandez and Beri, took extensive steps to deceive investors.
Fernandez was responsible for collecting and disbursing illicit funds related to the promotions and negotiating Mikula’s share of the proceeds with issuers and/or middlemen. The complaint also alleged that Fernandez tried to disguise his receipt of payments from the issuers by submitting invoices for fake consulting services and by funneling payments through offshore accounts.
During this time, investors purchased more than $80 million in the securities of these companies.
Fernandez consented to the entry of a judgment that permanently enjoined Fernandez from: violating the antifraud provisions of Sections 17(a)(1), 17(a)(3), and 17(b) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c)thereunder; and directly or indirectly, including, but not limited to, through any entity he owns or controls, assisting with, facilitating, or receiving compensation in any form for a promotional campaign related to any security.
Fernandez was also ordered to pay disgorgement of approximately $458,000, representing net profits gained as a result of the conduct alleged in the complaint, together with prejudgment interest thereon in the amount of just more than $41,500. Based on Fernandez’s cooperation in the SEC investigation and related enforcement action, Fernandez was not ordered to pay a civil penalty.
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