SEC Slams Lawyer, Three Others for Manipulating Stock Using Reverse Merger Scheme
The Securities and Exchange Commission (SEC) has charged lawyer Marcus Luna and three “sham” accredited investors with four counts of securities laws violations after having found orchestrating a reverse merger scheme between Axis Technologies Inc. and an allegedly Pink Sheets-quoted company.
Axis Technologies was referred to Luna in 2006 for its operations expansion, leading to its reverse merger with Riverside Entertainment, earning $6.88 million for the lawyer and three other purported accredited investors, Nathan Montgomery, Adam Daskivich, and David Murtha, whom Luna has hired to act as co-principals of the company.
According to SEC, the companies St. Paul Venture Fund, Minnesota Venture Capital, Real Estate of Minnesota and Matrix Venture Capital, which the three investors represented, were not accredited.
“None of the Defendant Entities conducted any legitimate business operations. Luna created them simply to serve as straw men,” SEC stated in its suit.
After the reverse merger set-up, Luna made out the companies to buy shares from Axis at $300,000 for 15 million shares and made payments billed to his law firm’s account, SEC said. The suit added that Luna sent a false opinion letter to a transfer agent of Axis saying that the “15,000,000 Axis Group shares may be issued as ‘free trading’ and without a restrictive legend.”
Stock of Axis increased after the investors have submitted their quotes, the SEC added.
Being successful with their reverse merger fraud scheme, Luna earned $1.6 million from the sales of the shares plus $1.7 million in kickbacks from the sham investors, $1.4 million went to Montgomery, $2.4 million to Daskivich, and $1.3 million to Murtha.
Luna and three others would be disgorged with their ill-gotten profit, fined with civil penalties, and would be prohibited from offering penny stock. Luna would be banned from providing legal services in the future.