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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23576 / June 21, 2016

Securities and Exchange Commission v. Michael Affa, et al., No. 14-cv-12959 (D. Mass. filed July 11, 2014)

United States v. Mitchell Brown, Nos. 1:14-cr-10221 and 1:14-cr-10297 (D. Mass.)

Massachusetts Federal Court Sentences Defendant in SEC Microcap Manipulation Case to 42 Months Imprisonment

The Securities and Exchange Commission announced that on June 20, 2016, a federal court in Boston, Massachusetts sentenced Mitchell H. Brown, of Long Branch, New Jersey, to 42 months in prison and 3 years of supervised release, and ordered him to pay a fine of $1 million in two separate criminal cases. Brown also was ordered to pay restitution of $ 420,643. Brown pleaded guilty in September 2015 to conspiracy, securities fraud and wire fraud for his participation with four other defendants in a pump-and-dump scheme in the securities of Boston-based Amogear Inc. and in December 2015 for his participation in another pump-and-dump scheme.

The criminal case was announced the same day as SEC fraud charges against Brown and the other four defendants for attempting to manipulate shares of Amogear that was caught by an FBI undercover operation. According to the SEC's complaint filed in federal court in Boston, the defendants knew that Amogear was a shell company without any real operations but schemed to boost its price and profit by selling their own shares. What the defendants did not know was that the FBI controlled Amogear and used it to obtain evidence of attempted stock manipulation. To protect investors, the SEC suspended trading in Amogear's securities on February 10, 2014 as the attempted stock manipulation was underway.

In March 2016, the federal court in the SEC's case entered judgments by consent against all five defendants, enjoining them from violating Section 17(a)(1) and (3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder, and prohibiting them from participating in any offering of penny stock, pursuant to Section 21(d)(6) of the Exchange Act.

Michael A. Affa, one of Brown's co-defendants, also was charged criminally and was sentenced in February 2016 to 33 months in prison and ordered to pay a fine of $1 million; the other defendants await sentencing.

For further information, see Litigation Release Nos. 23495 (Mar. 23, 2016), 23469 (Feb. 17, 2016), Press Release No. 2014-135 (July 11, 2014), and Exchange Act Release No. 71514 (Feb. 10, 2014).

 

http://www.sec.gov/litigation/litreleases/2016/lr23576.htm


Modified: 06/21/2016