A Palm Beach Gardens-based securities broker and dealer is the latest entity pulled into the sweeping "Shell Factory" investigation, South Florida federal prosecutors said Thursday.
Delaney Equity Group LLC, prosecutors allege, sold penny stocks in the over-the-counter securities markets and conspired to sell shares of fraudulently registered companies that could then be used for "pump and dump" and other stock-manipulation schemes.
The company is corporately charged with one count of conspiracy to sell unregistered securities unlawfully. The defendant company faces a maximum sentence of five years of probation and a fine either of up to $500,000 or double the proceeds of the offense, the Miami U.S. Attorney's office said.
U.S. Attorney’s spokeswoman Sarah Schall said probation could include court supervision, enhanced compliance requirements and the court either restricting or even shutting down some activities.
According to court documents, Delaney Equity from October 2009 through at least June 2013, through certain employees including Ian C. Kass, sold shares of bogus microcap companies, knowing that they had straw-man officers and were secretly controlled by “Shell Factory” principals Steven Sanders, Daniel McKelvey and Alvin S. Mirman. Sanders lives in the Lake Worth area.
The men would fraudulently create public companies and "would sell the companies to criminal actors who would secretly obtain the control shares and the purported 'free trading' shares" without disclosing that sale either to the U.S. Securities and Exchange Commission or the investing public, the statement said. "This would allow the buyers to engage in stock manipulation schemes using the purported ‘free trading’ shares."
The statement said Delaney created nine such phony companies.
The U.S. Attorney said Kass, Sanders, and McKelvey are among 10 people already convicted in the “Shell Factory” fraud investigation. The others are John Ahearn, Andrew Wilson, Yelena Furman, David Lubin, Sheldon Rose, Alvin S. Mirman and Jeffrey Lamson.