SEC Obtains Judgments Against Three Defendants in a Microcap Fraud Scheme

Laws, Litigation and Enforcement News

Litigation Release No. 25563 / October 21, 2022

Securities and Exchange Commission v. Gomes et al.;, ivil Action No. 1:20-cv-11092 (D. Mass. filed June 9, 2020)

The Securities and Exchange Commission announced today that it obtained final judgments against three defendants, Douglas Roe and an entity Roe controlled named Atlantean Management Corp., as well as Kelly Warawa, in a previously-filed action against 11 defendants alleging a fraudulent scheme that generated more than $25 million from illegal sales of multiple microcap companies’ stock.

According to the Commission’s complaint, filed in the United States District Court for the District of Massachusetts, Roe and Atlantean, along with defendants Warawa and Shane Schmidt, engaged in a fraudulent scheme to dump the securities of a microcap company, Sandy Steele Unlimited, Inc. Roe, Warawa and Schmidt allegedly used Atlantean and other defendant entities to secretly hold their shares of Sandy Steele and the other entities to sell the shares through a fraudulent business, operated by defendant Nelson Gomes, which concealed their identities while illegally dumping their stock into the public market. The complaint alleges that these illegal sales of Sandy Steele’s stock were boosted by promotional campaigns that, in some instances, included false and misleading information designed fraudulently to capitalize on the COVID-19 pandemic, such as false claims that Sandy Steele could produce medical quality facemasks.

On October 20, 2022, the Court ordered Roe to pay a civil penalty of $248,435 and Atlantean to pay a civil penalty of $300,000. Previously, Roe, Atlantean and Warawa consented to the entry of final judgments on March 30, 2022, enjoining each of them from violations of Sections 5(a), 5(c) and 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. The judgment against Warawa also imposed a five year penny stock bar and ordered her to pay disgorgement in the amount of $9,190 plus prejudgment interest in the amount of $362, and a civil penalty of $9,190. Further, on March 30, 2022, the Court ordered: (i) Roe to pay $548,435 in disgorgement plus prejudgment interest in the amount of $32,971 (of which $545,974 is joint and several with Atlantean); and (ii) Atlantean to pay disgorgement and prejudgment interest of $545,974, which is joint and several with Roe. The judgment against Atlantean also imposed a five year penny stock bar.

On July 13, 2021, the court entered a partial judgment by consent against the one remaining defendant, Shane Schmidt, which required him to pay disgorgement and prejudgment interest. Upon the Commission’s motion, the Court may also impose a civil penalty, with all monetary amounts against Schmidt to be determined at a later date by the Court, at which time the SEC’s case will be complete. The litigation is being handled by Trevor Donelan, Kathleen Shields, J. Lauchlan Wash, and Amy Gwiazda in the Boston Regional Office.

For additional information, see Litigation Release No. 24839 (June 18, 2020), Litigation Release No. 24979 (December 9, 2020), Litigation Release No. 25100 (May 28, 2021) and Litigation Release No. 25200 (September 10, 2021).

Click Here to Follow SEC Alerts

Related Articles