The order claims that the companies, their owners, and their salespeople violated broker-dealer registration laws.
The SEC filed charges against Equity Acquisition Company Ltd. and Silver Edge Financial LLC. (EAC), the proprietors of both firms and Silver Edge Financial’s sales personnel engaging in unregistered broker-dealer conduct in connection with the selling of interests in shares of different pre-IPO companies.
A charge on Silver Edge Financial
Based on the evidence presented in the Orders, the SEC has determined that between January 2019 and April 2019, Silver Edge, Six salespeople and the company’s owner, Daniel J. Mackle, Sr., sold shares in two funds that were set up as series LLCs, each of which represented an interest in shares of a different pre-IPO company.
Interests in shares of companies that were forecast to conduct an initial public offering or another liquidity event within two to five years were the underlying assets in this series. According to the orders, Silver Edge, Mackle, and the salespeople illegally raised over $65 million from approved investors before registering as brokers with the Commission.
As per Securities and Exchange Commission’s orders, EAC and its founder, Carsten Klein, engaged in the business of procuring pre-IPO shares and selling them for sale to various pre-IPO funds, including the Silver Edge funds, while acting as unregistered dealers. According to the Orders, EAC spent over $140 million buying shares in pre-IPO businesses, including several highly anticipated offerings, and then selling them to various pre-IPO funds for over $13.4 million while retaining the rest of the shares in inventory.
Associate Director Carolyn M. Welshhans, of the Securities and Exchange Commission’s Enforcement Division, “The SEC’s registration requirements ensure that broker-dealers fulfil important responsibilities and regulatory obligations, such as submitting to regulatory inspections and maintaining appropriate books and records.” When selling securities backed by pre-IPO shares, “individuals and businesses in the pre-IPO market, including dealers, must comply with the SEC’s registration procedures and cannot escape critical regulatory monitoring.
According to the SEC’s orders, Klein, EAC, Mackle, Silver Edge, and the six salespeople, all broke the Securities Exchange Act of 1934’s Section 15(a). All respondents promised to refrain from further infractions without acknowledging or contesting the findings.
Both Silver Edge and Mackle settled for over $2.5 million in disgorgement and prejudgment interest, plus a civil penalty of $975,000. They also accepted industry and penny stock bans with the option to reapply in five years. Also, EAC and Klein settled for a civil penalty of $269,360, in addition to disgorgement and prejudgment interest totalling more than $3.6 million. To ensure a lawful and orderly distribution of pre-IPO interests, Silver Edge, Mackle, EAC, and Klein all agreed to take certain undertakings.
Scott Esposito, Richard Konopka, Robert Daniel Louis, Dave Nicolas, Joshua Simmons, and Daniel Esposito were the six salespeople who settled on industry and penny stock bans and civil penalties ranging from $61,000 to $124,320.
Liz Canizares and W. Bradley Ney, under the direction of David Becker and Ms Welshhans, led the SEC inquiry.