U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23226 / March 31, 2015
Securities and Exchange Commission v. StratoComm Corporation, et al., Civil Action No. 1:11-CV-1188
SEC Obtains Judgment for Over $5 Million in Penny Stock Fraud Case
On March 26, 2015, the United States District Court for the Northern District of New York entered an amended judgment in a penny stock fraud case against StratoComm Corporation; its CEO Roger D. Shearer; and its former Director of Investor Relations, Craig Danzig. The judgment orders payment of more than $5 million collectively and imposes permanent injunctions and bars.
The judgment follows the Court's earlier decision granting the SEC's motion for summary judgment on liability against the defendants on all charges against them, including violations of the antifraud provisions and certain registration requirements under the federal securities laws.
The SEC alleged that StratoComm, acting at Shearer's direction and with Danzig's assistance, issued and distributed public statements falsely portraying the penny stock company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries. In reality, StratoComm had no product and no revenue. The SEC argued that StratoComm, Shearer and Danzig sold investors more than $4 million worth of StratoComm stock in unregistered transactions.
The judgment orders StratoComm and Shearer to pay a total of $4,968,709.68 in disgorgement and prejudgment interest. It also orders Stratocomm to pay $100,000 as a civil penalty, and orders Shearer and Danzig to pay a civil penalty in the amount of $50,000 and $25,000, respectively. The judgment permanently enjoins all defendants from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 5 of the Securities Act of 1933. The judgment also permanently enjoins StratoComm and Danzig from violating Section 17(a) of the Securities Act and permanently enjoins Danzig from violating Section 15(a)(1) of the Exchange Act. The judgment imposes permanent penny stock bars against Shearer and Danzig and a permanent officer and director bar against Shearer.