Richard Dale Sterritt Jr., also known as “Richard Richman” and a known prior offender, along with Deanna Looney, Robert Magness Jr., Katie Mathews, James Christopher Pittman, Mark Ross, and Michael Greer, stand charged by the Securities and Exchange Commission (SEC) for a fraud perpetrated on over 300 investors.
The defendants are charged with violation of the registration and antifraud provisions of federal securities laws, in the complaint filed by SEC in New York’s U.S. District Court for the Eastern District. In addition to disgorgement of their ill-gotten gains, with applicable interest, civil penalties, as well as injunctive relief, have also been sought by the SEC.
Criminal charges against Sterritt and four others were announced, almost at the same time, by the US Attorney’s Office for the district.
The vehicle of the fraud was a $16 million offering of oil and gas in the form of an unregistered private placement of Dallas-based Zona Energy Inc., along with a market manipulation scheme. These events pertain to the period from March 2018 to November 2020.
The money was raised on the basis of false and misleading statements, development of mineral rights on a cattle ranch in West Texas being one, and Zona not having any debt obligations being another, considering that it owed millions to Sterritt-controlled companies. The raised funds were siphoned off and used for paying for travel expenses, luxury goods, like a Bentley, rental apartments, and to make cash payments to friends, family members, and even Sterritt’s girlfriends. Zona never got a whiff of the raised money.
Charges of manipulating trading in OrgHarvest Inc., a Sterritt-owned cannabis production business have also been levied against Sterritt, Ross, and Magness. They are accused of attempting to inflate the share price so that they could offload their holdings for a profit. It appears that Sterritt and Magness deposited close to 5.3 million of OrgHarvest shares with a brokerage form, after which they, along with Ross and another individual, were hoping to carry out a series of matched trades prior to a ‘pump and dump’ based exit.
The complaint states that an individual, introduced as the leader of corrupt stockbrokers, was introduced to Sterritt and co. This individual, it was apparently arranged, would pick up the stock being sold in the open market on account of his customers, and would get a 35 percent kickback as reward for the transaction.
What they did not know was that this individual was an undercover FBI agent and that all their discussions and exchanges on emails and texts were being recorded even as the schemes were being hatched.
As the identity of the individual was not known to them, every day from 19th May 2020 to 29th May 2020, Sterritt, Magness, and Ross discussed the number of shares to be traded and their pricing. Over this period, they sold 20400 shares through their pre-arranged matched trading.
However, their plans came to a grinding halt when the SEC suspended trading in the stock of OrgHarvest for a period of ten days starting 1st June 2020.
Not to be outdone, it appears that Sterritt immediately started planning with the same individual, the leader of corrupt stockbrokers, a similar manipulation of the stock of ERF Wireless Inc., a microcap issuer controlled by him. Once again, SEC suspended trading of the scrip on 4th February 2020 for 10 business days.
Richard R. Best, SEC’s New York Regional Office Director, issued the mandatory cautionary message, “Investors should be wary of individuals using aggressive sales tactics to pitch unregistered offerings that promise high investment returns with little or no risk. As alleged, Sterritt and his accomplices defrauded and victimized investors by inducing them to invest using false statements and then misappropriating their funds.”