In a high-stakes poker game, the Securities and Exchange Commission, or SEC, has come out on top. They have announced settled charges against BHP NY, Inc. a convertible notes dealer, and Bryan Pantofel as its managing director. The pair had been working in the shadows and failed to register their business with the SEC, as required by law. The result? A large fine and the forfeiture of illegal gains. But what does it mean for the securities world? Let’s take a look.
Unregistered Activities Come to Light
Imagine yourself at a high stakes poker game. You’ve got all your chips, your cards and your poker face. You’re not registered to play. BHP and Bryan Pantofel were in this situation. BHP bought convertible notes from 47 microcap companies between December 2017 to mid-2022. They converted the notes into four billion new shares. It wasn’t just shares. These shares were bought at a substantial discount from their market value, resulting in significant profits. The catch is that neither BHP Capital or Pantofel had been registered as dealers with the SEC, nor were they associated with one. It is clear that the rules were broken.
What happens if you are caught playing a video game that you haven’t registered for? BHP Capital, Pantofel and other companies were subject to a severe penalty. They agreed, without admitting or disputing the allegations that they had made, to be permanently banned from violating Section 15(a).1 of the Securities Exchange Act of 1933. In addition, they will pay disgorgement of $2.353,073.44 as well as prejudgment interest and a $200,000. civil penalty. Not only that, but they will also be subject to a five-year penny stock ban. The penny stock bar will be in place for five years.
- BHP Capital has agreed that it will surrender all of its current convertible notes
- The company will return for cancellation any warrants that have not been exercised in connection with convertible note
- The cancellation of any shares that are acquired through the conversion of notes or exercised warrants is also applicable to those shares.
However, this settlement is subject to approval by the court.
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Every successful operation is backed by a dedicated team. Cecilia B. Connor led the SEC’s probe in this case. Matthew B. Homberger assisted Robert Nesbitt. Kingdon Kase, Scott A. Thompson and Robert Nesbitt provided supervision. Karen M. Klotz, who will be leading the litigation, and Gregory R. Bockin overseeing it.
The BHP Capital/Pantofel story serves as a reminder to all participants in the securities markets to play by the rules or face the consequences.