Order finds entities, principals, and salespeople violated broker-dealer registration requirements
The Securities and Exchange Commission today charged Silver Edge Financial LLC, Equity Acquisition Company Ltd. (EAC), the owners of both companies, and sales staff of Silver Edge Financial with unregistered broker-dealer activity relating to their sales of interests in shares of various pre-IPO companies.
The SEC’s Orders find that, since January 2019, Silver Edge, its owner Daniel J. Mackle, Sr., and six salespeople sold interests in two funds that were set up as series LLCs, with each series representing an interest in shares of a single pre-IPO company. The underlying assets in these series were interests in shares of companies that were expected to undertake an initial public offering or other liquidity event within two-to-five years. The Orders find that Silver Edge, Mackle, and the salespeople solicited accredited investors and raised more than $65 million while failing to register as brokers with the Commission, as required.
The SEC’s Orders also find that EAC and its founder, Carsten Klein, acted as unregistered dealers in connection with their business of obtaining pre-IPO shares and offering them for sale to various pre-IPO funds, including the Silver Edge funds. The Orders find that EAC purchased more than 14 million shares of pre-IPO companies, including a number of highly-anticipated offerings, and sold more than $13.4 million in shares to various pre-IPO funds, while keeping the remaining shares in inventory.
“The SEC’s registration requirements ensure that broker-dealers fulfill important responsibilities and regulatory obligations, such as submitting to regulatory inspections and maintaining appropriate books and records,” said Carolyn M. Welshhans, Associate Director of the SEC’s Enforcement Division. “Individuals and entities in the pre-IPO space, including dealers, must comply with the SEC’s registration provisions when selling securities backed by pre-IPO shares and cannot avoid essential regulatory oversight.”
The SEC’s Orders find that Klein, EAC, Mackle, Silver Edge, and the six salespeople violated Section 15(a) of the Securities Exchange Act of 1934. Without admitting or denying the findings, all respondents agreed to cease and desist from future violations. Silver Edge and Mackle agreed to pay disgorgement and prejudgment interest of more than $2.5 million and a civil penalty of $975,000, and they agreed to industry and penny stock bars with the right to reapply after five years. EAC and Klein agreed to pay disgorgement and prejudgment interest of more than $3.6 million and a civil penalty of $269,360. Silver Edge, Mackle, EAC, and Klein also agreed to undertakings that will help ensure the legal and orderly distribution of pre-IPO interests. The six salespeople – Scott Esposito, Richard Konopka, Robert Daniel Louis, Dave Nicolas, Joshua Simmons, and Daniel Esposito – agreed to pay civil penalties ranging from $61,000 to $124,320 and to industry and penny stock bars.
The SEC’s investigation was conducted by Liz Canizares and W. Bradley Ney and was supervised by David Becker and Ms. Welshhans.