The U.S. Securities and Exchange Commission (SEC) Secures Final Judgment Against Canadian Individual in Microcap Fraud Scheme

The U.S. District Court for the Southern District of New York issued a final judgment against Canadian resident George Stubos. In June 2022, the SEC filed charges against Stubos for his involvement in a deceptive scheme revolving around multiple microcap companies. As part of the judgment, Stubos has been ordered to pay in excess of $6 million.

The SEC’s case alleges that Stubos covertly took control of several thinly traded microcap companies with stocks publicly traded in U.S. securities markets. He hired stock promoters to artificially increase demand for his stocks, ultimately generating substantial unlawful profits by selling these stocks to unsuspecting investors. Stubos allegedly concealed his majority control of the publicly traded companies and misled investors, brokers, and transfer agents (entities responsible for stock ownership records) to make them believe that his stock shares were eligible for trading in public markets. In reality, he failed to register his stock sales with the SEC and provided inaccurate information about his control over these companies. Stubos also engaged in manipulative trading practices to create the illusion of active market trading, further boosting investor interest in the stocks. The final judgment was entered against Stubos by consent. Without admitting or denying the SEC’s allegations, Stubos agreed to a final judgment permanently enjoining him from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, as well as the market manipulation provisions of Section 9(a) of the Exchange Act. The judgment mandates that Stubos pay disgorgement totaling $5,367,926, along with prejudgment interest of $806,108, and includes a penny stock bar. Additionally, it enforces a conduct-based injunction preventing Stubos from participating in the issuance, purchase, offer, or sale of any security, except for his personal accounts. The SEC’s action against Dori-Ann Stubos, George Stubos’ wife, who allegedly received illicit proceeds from his fraudulent scheme, is ongoing.

The SEC’s case is being managed by Kathleen Shields, Alfred Day, and Ryan Murphy of the Boston Regional Office.

As per the SEC’s complaint, SharkDreams and Nukarapu engaged in fraudulent activities, raising approximately $2.7 million from over 20 investors through securities offerings from January 2018 to November 2019. They made several false and misleading statements to both existing and potential investors. These misleading claims included assertions that prior investors had doubled their investments within a year, SharkDreams was valued at $7 million to $30 million, the company had customer orders for its LIVIT products, and a large investor would buy all remaining SharkDreams shares to inject capital. However, these claims were allegedly untrue. The complaint further alleges that SharkDreams never generated revenue from LIVIT product sales, there was no factual basis for the claimed valuation, and no genuine offer was made to purchase SharkDreams shares.

Furthermore, in 2019 and 2020, D Dollar raised at least $650,000 from investors, purportedly for a subsidiary. However, Nukarapu misappropriated approximately $595,000 of investor funds to support SharkDreams’ operations and for personal use.

The SEC’s complaint, filed in the U.S. District Court for the Eastern District of North Carolina, charges Nukarapu and SharkDreams with multiple violations, including Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5. Nukarapu is also charged as a control person for violations of Section 10(b) of the Exchange Act and Rule 10b-5 by SharkDreams and D Dollar under Section 20(a) of the Exchange Act. D Dollar is charged with various violations, including Sections 17(a)(1) and (3) of the Securities Act, Section 10(b) of the Exchange Act, and Rules 10b-5(a) and (c). The SEC’s complaint seeks permanent injunctive relief, conduct-based injunctions, disgorgement with prejudgment interest, civil penalties, and an officer and director bar for Nukarapu.