SEC Obtains Final Judgments Against Former Public Company Chairman and Two Others in Fraudulent Filings and Pump-And-Dump Scheme

The U.S. District Court for the Southern District of New York has entered a final judgment on consent against Andrew DeFrancesco, the former Chairman of Cool Holdings, Inc., in relation to a scheme involving false statements and omissions in filings with the SEC, as well as a fraudulent pump-and-dump scheme involving Cool Holdings’ stock. Two other defendants in the case, Nikola Faukovic and Catherine DeFrancesco, also had final judgments entered against them on June 16, 2023.

According to the SEC’s complaint filed on January 6, 2023, Andrew DeFrancesco played a central role in the scheme by orchestrating false filings that concealed Cool Holdings’ precarious financial state and future prospects. These filings included misstatements and omissions regarding a critical business relationship. The complaint further alleges that Andrew DeFrancesco secretly funded the publication of fraudulent promotional articles about Cool Holdings. Additionally, with the assistance of Faukovic, Andrew DeFrancesco sold hundreds of thousands of Cool Holdings shares, which were held under nominee entities. The ownership of Cool Holdings shares by Andrew DeFrancesco was allegedly concealed, including through the submission of false beneficial ownership reports to the SEC, with the involvement of his ex-wife Catherine DeFrancesco.

As part of the settlement, Andrew DeFrancesco consented to a final judgment that permanently enjoins him from violating various securities laws, including Sections 5 and 17(a) of the Securities Act of 1933, and Sections 10(b), 13(d), and 16(a) of the Securities Exchange Act of 1934, along with related rules. The judgment requires Andrew DeFrancesco to pay disgorgement and prejudgment interest totaling $1,276,070.49, as well as a civil penalty of $1,737,224.52. He is also prohibited from serving as an officer or director of a public company.

Faukovic consented to a final judgment that permanently enjoins her from violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, along with Rule 10b-5. She is ordered to pay disgorgement and prejudgment interest amounting to $14,350.32, as well as a civil penalty of $111,614. Catherine DeFrancesco consented to a final judgment that permanently enjoins her from violating Section 13(d) of the Exchange Act and Rule 13d-1(a). She is required to pay a civil penalty of $122,782.

The SEC’s litigation against defendants Marlio Mauricio Diaz Cardona and Carlos Felipe Rezk is still ongoing and is being conducted by various members of the SEC, including David Stoelting, Alexander Levine, Mao Yu Lin, Melissa Coppola, Jason Schall, Katherine Bromberg, and Danielle Srour.