SEC Charges Convertible Note Dealer and Its Owner for Failure to Register

The Securities and Exchange Commission (SEC) revealed that charges have been settled against BHP Capital NY, Inc., a dealer of convertible notes, and its managing member, Bryan Pantofel. The charges were based on their failure to register as securities dealers with the SEC. Pantofel and BHP Capital have agreed to a settlement, which includes a payment of over $2.5 million in monetary damages and the relinquishing of securities obtained through their unregistered dealer activities by BHP Capital.

The complaint lodged by the SEC was presented in the U.S. District Court for the Southern District of Florida. The case alleges that BHP Capital acquired more than 100 convertible notes and associated warrants from 47 microcap issuers between December 2017 and mid-2022. The firm allegedly converted these notes into approximately four billion new shares of stock, sold at a significant discount compared to the market price. These shares were then supposedly resold at a considerable profit. Neither BHP Capital nor Pantofel, as the complaint details, were registered with the SEC as dealers or affiliated with a registered dealer, a requirement for their operations.

Without either admitting or denying the allegations, both BHP Capital and Pantofel have consented to be permanently restrained from further violations of Section 15(a)(1) of the Securities Exchange Act of 1934. They agreed to pay $2,353,073.44 in disgorgement and prejudgment interest, a civil fine of $200,000, and accept a five-year ban on penny stocks. BHP Capital has additionally agreed to forfeit all conversion rights in its currently held convertible notes and relinquish for cancellation all unexercised warrants it obtained with convertible notes, as well as any shares it holds acquired through converting notes or exercising associated warrants. The settlement is pending court approval.

The SEC’s inquiry was carried out by Cecilia B. Connor and Matthew B. Homberger from the Philadelphia Regional Office, with assistance from Robert Nesbitt, and overseen by Kingdon Kase and Scott A. Thompson. The litigation will be guided by Karen M. Klotz and overseen by Gregory R. Bockin.