On January 15, 2013, the SEC charged what they called a “shell packaging firm” and several others involved in a reverse merger penny stock scheme which, as happens in many public shell reverse merger schemes, also involved packaging and reselling purportedly unrestricted shares in the public markets.
The names of the people and entities involved are not really relevant but were at one time was a well known and respected brokerage firm.
So big surprise: The scheme involved fabricated and backdated documents used to convince a transfer agent and an attorney writing an opinion letter to issue free-trading shares in such a way that unknowing investors ended up purchasing fraudulently issued shares without the protections afforded by the securities laws.
Oh yes, another big surprise. The use of fraudulently created non-existent convertible notes which are then used to allegedly comply with Rule 144 when this “debt” is converted into stock that is represented to be free trading.
“Shell packagers who buy and sell public companies for use by fraudsters have no rightful place in our markets,” said David Rosenfeld, Associate Director of the SEC’s New York Regional Office. I couldn’t have said it better myself.
So here’s a little lesson: If you are really going to go public with a public shell reverse merger despite all of the issues already pointed out on this site, then if you are told the transaction is really great for you because you will get lots of free trading stock because there’s all this “aged debt,” you need to be extremely skeptical.
And then of course the famous promise: We’ll help you use this stock or use our sources to help you raise all the money you need after the reverse merger closes. In this case it appears the only people who really made any big money were the people behind the scheme.
Don’t get me wrong: There are some legitimate public shell reverse merger transactions. And there are some times when a reverse merger is really the best alternative.
How do you know? You can certainly contact us and we’ll help you sort this all out before you get sucked into a transaction you may later greatly regret.