SEC Charges Recidivist in $35 Million International Boileroom Scheme

SEC v. Nicholas Louis Geranio, et al., Case No. CV-12-4257-DMG (JCx) (C. D. Cal.).  On May 16, 2012, the SEC announced that it filed an action against SEC recidivist Nicholas Louis Geranio, Keith Michael Field, The Good One, Inc. and Kaleidoscope Real Estate, Inc. for their roles in a $35 million scheme to manipulate the market and to profit from the issuance and sale of certain U.S. companies’ (“issuers’”) stock through offshore boiler rooms.  According to the SEC, Geranio orchestrated the scheme as follows:

  1. Geranio located eight issuers to use as shell companies;
  2. Field prepared misleading business plans, marketing materials and website materials;
  3. Geranio installed management, including Field, for each issuer;
  4. Geranio provided guidance on manipulating the shares through matched orders to establish artificially high prices and to deceptively convey to the market the impression that legitimate transactions had created bona fide prices for the stock;
  5. Boiler rooms teams operating mostly from Spain raised approximately $35 million using high-pressure sales tactics and false statements;
  6. Money for the shares was sent to the U.S. and divided among the participants.

The SEC charged Geranio, Field, The Good One and Kaleidoscope with violating Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rules 10b-5(a) and (c) thereunder.  Field is also charged with violating Section 17(a)(2) of the Securities Act and aiding and abetting the issuers’ violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder.  Geranio also is charged with liability as a control person of The Good One and Kaleidoscope under Exchange Act Section 20(a).  Finally, in 2000, the U.S. District Court for the Central District of California enjoined Geranio from future violations of the antifraud and securities registration provisions of the federal securities laws as part of his settlement of an enforcement action that the SEC brought against him and California Laser Company.

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