SEC v. The Companies (TC), LLC et al., Case No. 2:12-cv-00765-DN (D. Utah). On August 7, 2012, the SEC announced the filing of a settled action against The Companies (TC) and its principals Kristoffer Krohn, Stephen Earl and Michael Krohn. The case concerns the fraudulent offer and sale of unregistered securities by the defendants. The Companies generally purchased distressed real estate for investment. To raise money, the defendants initiated four unregistered offerings of securities from January 2009 to June 2011. The four offerings raised about $11.9 million from approximately 169 investors. The Private Placement Memoranda used to raise money misstated the value of properties to be purchased claiming the current market value of certain properties was $15 million when, in fact, the market value was between $2.9 million and $12.2 million, depending on the valuation used. The offerings relied on the exemption to registration under Regulation D, Rule 506. However, the offerings did not qualify for the exemption because investors were solicited at meetings that were open to the public.
The defendants consented to entry of judgments against them without admitting or denying the allegations. They each consented to a judgment permanently enjoining them from violations of Sections 5(a), 5(c), and 17(a) of the Securities Act. In addition, The Companies agreed to tell investors about the final judgment, provide audited financial statements, and offer to refund money to investors who wish to return their securities to The Companies. The Krohns and Earl also agreed to pay civil monetary penalties of $75,000 each.