More Charges Coming for Barry Honig P&D Ring Defendants $MGTI

A defendant in the Barry Honig pump and dump securities fraud case disclosed last week the Securities and Exchange Commission is planing on filing additional charges. On Dec 5, 2019 Robert Ladd, CEO of MGT Capital ($MGTI) received a Wells Notice from the Regulator, which stated the new charges related to disclosure issues in public filings and trading volume.

Senior reporter Bill Meagher also reported on the coming SEC lawsuit for The Deal today. The Deal highlighted the SEC’s recent activity dolling out multiple subpoena’s to the adult sons of Honig’s right hand guy Michael Brauser. Barry Honig plead guilty last year and agreed to a ban on penny stock investing but three members of his crew are still fighting the SEC case along with Ladd the CEO of one of the companies Team Honig invested in and allegedly manipulated. Remaining defendants Michael Brauser, John Stetson, and John O’Rourke were all placed as executives in the manipulated stocks and held controlling board seats, according the SEC. Their control positions gave them the opportunity to force the company to use lawyers, promoters, and transfer agents who are alleged to be in the pocket of Barry Honig. The SEC labeled Honig the ring leader of the scheme in their complaint and Honig’s plead deal says he can not deny their charges publicly.

The Deal‘s story also covers the fact that the new SEC subpoena names individuals who have not been charged by the regulator —yet. This includes Honig’s long time securities transaction lawyer Harvey Kesner and at least four lawyers who worked with him at New York-based Sichenzia Ross Ferance LLP. I was first to report attorney Kesner was leaving the firm, where he was a named partner, just weeks before the SEC charged his client in September 2018.

Letters to the New York federal judge covering the case filed by the SEC and hearings over discovery have disclosed the Regulator also plans to bring another pump and dump case against some of the defendants in a new stock where securities violations occurred after the defendants were charged by the SEC in September 2018. But at a hearing I attended this fall, only Judge Ramos was informed which company it is. This upset defendant Michael Brauser, who through his counsel, argued that the SEC was playing fast and loose with his reputation and wasn’t practicing ethical judicial standards by not disclosing the name of the new stock the SEC was investigating. Judge Ramos ruled at this point the SEC doesn’t have to disclose the company to the defendants.

But a glimpse of who the SEC is focusing on can be seen in a recent subpoena sent to Brauser’s son Ben Brauser. The SEC list 33 companies, which includes Red Violet ($RDVT) and Fluent ($FLNT), that it wants private documented information on. Red Violet and Flint have both seen extreme swings in their stock price in the last year. Ben Brauser filed a motion in South Florid Federal Court to squash the subpoena in November. This was the first time the investing public learned Ben was also working as a securities lawyer for his dad Michael since 2010. Ben, who invested in some of the stocks at the heart of the SEC case, is now trying to say he doesn’t have to turn over everything the SEC is demanding, which includes trading records and emails to stock promoters because he conveniently has attorney client privilege. The lead SEC attorney on the case, Nancy Brown, has fought back and filed a five page letter to the judge arguing why Ben Brauser shouldn’t have attorney client privilege and could have aided his father in his scheme.

Attorney Brown also delivered a one two punch disclosing the names of two other promoters the Regulator was focusing on which includeds: Drew Ciccarelli and David Zazoff along with stock investment advice and promotion companies TSX Ventures, RedChip Investor Relations, Mission IR, Third Coast Media, SmallCap IR, and Stockbeast.

I was first to report for trade publication Growth Capitalist in 2016 that promoter David Zazoff was named in a plea deal statement in a Northern California DOJ criminal case tied to Joe Noel the CEO of YesDTC for taking kickbacks. Noel said it was Barry Honig who directed him to pay Zazoff to run stock promotions without disclosing it.

Recent SEC subpoenas also named 64 people it wanted information on; many of which were not charged in the original September 2018 case. Given the fact that defendants in the SEC case have also admitted in open court to signing tolling agreements with the Dept of Justice, the investing public has been anxiously waiting for the Northern California DOJ to bring their criminal case. Individuals who have already plead guilty in DOJ securities fraud cases and allegedly worked with Team Honig are: Joe Noel, microcap attorney Gregg Jaclin, and promoter Jeff Auerbach who just plead guilty on January 10th. All of these individuals have made plea deals and are assumed to be cooperating with the DOJ in other cases.

It’s also unclear which of the defendants in the original SEC case against Team Honig that have made plea deals with the SEC are now cooperating with the DOJ. Barry Honig, Philip Frost and Mark Groussman could all be singing to the Feds in a move to get less criminal charges or deferred charges.

The coming second amended SEC case could also name new defendants.

Editor Note: Honig attorney Harvey Kesner has sued me and Bill Alpert at Barron’s for our individual reporting on his alleged role in the Honig pump and dump case. I have continued to report on Kesner since he brought his suit and have seen his name come up in a new SEC subpoena since he brought the lawsuit. We are waiting for a federal judge to decided on a motion to dismiss. I stand by all of my reporting on Harvey Kesner. Harvey Kesner has not yet been charged by the SEC but he is being sued for malpractice by one of the companies, MabVax, in the SEC complaint


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