Home Banking & Finance SEC owed $12M from penny stocks trader in Ossining

SEC owed $12M from penny stocks trader in Ossining

An Ossining attorney has to pay up to $12 million in ill-gotten gains from a penny stock operation.

Federal Judge Kenneth M. Karas granted summary judgment on March 27 to the Securities and Exchange Commission in its 2012 case against Edward J. Bronson and his companies, E-Lionheart Associates LLC and Fairhills Capital Inc.

The judge instructed the SEC to deduct Bronson’s transaction costs, such as brokerage commissions, but added a $875,000 penalty to deter future violations and barred Bronson from trading penny stocks.

Collecting the fines and fees could be problematic. Bronson has filed for bankruptcy, claiming only $17,250 in assets and $154.1 million in liabilities. And a lawyer for two former employees warned the bankruptcy court of Bronson’s pattern of “concealment of assets, violation of court orders and cunning manipulations of the litigation process.”

The SEC case is built on Bronson’s failure to register penny stocks and on depriving investors of basic financial information.

Bronson claimed in court filings that E-Lionheart was exempt from federal registration rules because it was a Delaware company operating under state laws. He relied on opinion letters written by a lawyer, Virginia Sourlis, stating that the stock offerings did not have to be registered.

Karas ruled that there was no actual connection to Delaware because the transactions took place in a White Plains office. He noted that Sourlis was not licensed to practice law in Delaware and she has been found in violation of securities laws and barred from participating in penny stock offerings.

What’s more, even if the securities could have been exempted, the SEC said, Bronson violated SEC rules by not holding them for at least 12 months. Instead, he often sold them within days of acquiring them.

E-Lionhart’s pattern was finding small companies in need of capital. Bronson would buy company securities at a steep discount and then quickly sell them at double the price at which they had been trading.

The SEC said Bronson illegally resold stock in about 100 companies and reaped more than $10 million in profits. From 2009 to 2011, for example, he sold 22.8 billion shares from 10 companies for $9.9 million and netted $4.8 million.

The business generated enormous profits, according to Mark Grober and Evan Solomon, who worked for Bronson from 2009 to 2011. In a seven-week period in 2009, for example, they said Bronson made a $1 million profit, paid himself $100,000 and used $345,430 to buy an Aston Martin and a Porsche.

The SEC says Bronson used a Fairhills Capital bank account to hold some of the quick profits. Fairhills held the titles of several luxury cars.

Grober and Solomon sued Bronson in 2011 for breach of contract and fraud, claiming he had promised them a percentage of profits but didn’t give them their share.

In 2010, Bronson brought his father, Larry Bronson, into the company after he was released from federal prison.

Larry Bronson was originally charged with racketeering conspiracy, for allegedly helping an associate of the Gambino crime family engage in witness intimidation, hosting meetings in his Manhattan law office for organized crime members who were barred from associating with one another, and disseminating information about individuals he believed were cooperating with the government on organized crime cases.

All but one of the charges were dropped. The elder Bronson pleaded guilty to structuring financial transactions to disguise the proceeds from an illegal drug operation and was sentenced to 16 months in prison.

Grober and Solomon said they were told to “meet with Larry” to discuss their unpaid compensation. They claim that Larry Bronson was intimidating and refused to honor their agreements.

Last year, state Supreme Court in Manhattan awarded Grober and Solomon $1.4 million. But Bronson, according to a declaration by the former employees’ attorney, Maranda Fritz, delayed settlement, transferred assets to his wife, drained his accounts and then filed for bankruptcy.

The bankruptcy petition shows no house, ownership of 11 companies all worth $0, clothing valued at $200, a $500 motorcycle, $500 in furniture and a Wilson Combat firearm worth $5,000.

Bronson claimed liabilities of $150 million to the AJW Offshore Funds in the Cayman Islands, $3 million to Grober and Solomon, $800,000 to attorneys and $300,000 to the IRS.

“There appear to be substantial questions,” Fritz said, “concerning the bona fides of Mr. Bronson’s bankruptcy filing.”

3 COMMENTS

  1. Grober and Solomon were only awarded 1.4million because of a default judgement. My research on Mark Grober tells me that he’s nothing more than a stool pigeon, and a front. Correct me if I’m wrong, but didn’t most of those deals in question originate from Mark and his connections? I don’t believe that Brunson would agreed to pay Grober and Solomon half the profits, but only on the upside, and that Bronson himself would be liable for the loses? Grober claims that they were 50/50 partners on every deal Lionhart did, then why weren’t they named in the SEC complaint? I think they should have to repay half the disgorgement if they were partners? If I was Bronson, I would move to implead them to the action?

    Bronson discovered that Grober had sent unauthorized wire. When Bronson confronted Grober, and questioned him about the “missing funds” Grober denied it, so Bronson took away his authority to wire funds. Bronson later found out that Grober had created fake notes to his friends. Grober and Solomon resigned, they sued Bronson and gave false documentation to the SEC. Grober and Solomon were only awarded because of a default judgement. They’re lucky the case never made it to discover.
    The wires Bronson questioned were sent to a Marcus T Wetz in Texas, a penny stock buddy of Grobers. Wetz was indicted in 2017 in connection with a penny stock manipulation scheme.

  2. My research on Mark Grober tells me that he’s nothing more than a stool pigeon, and a front. Correct me if I’m wrong, but didn’t most of those deals in question originate from Mark and his connections? I don’t believe that Brunson would agreed to pay Grober and Solomon half the profits, but only on the upside, and that Bronson himself would be liable for the loses? Grober claims that they were 50/50 partners on every deal Lionhart did, then why weren’t they named in the SEC complaint? I think they should have to repay half the disgorgement if they were partners? If I was Bronson, I would move to implead them to the action?

    Bronson discovered that Grober had sent unauthorized wire. When Bronson confronted Grober, and questioned him about the “missing funds” Grober denied it, so Bronson took away his authority to wire funds. Bronson later found out that Grober had created fake notes to his friends. Grober and Solomon resigned, they sued Bronson and gave false documentation to the SEC. Grober and Solomon were only awarded because of a default judgement. They’re lucky the case never made it to discovery.
    The wires Bronson questioned were sent to a Marcus T Wetz in Texas, a penny stock buddy of Grobers. Wetz was indicted in 2017 in connection with a penny stock manipulation scheme.

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