(STL.News) On January 15, 2021, the Securities and Exchange Commission charged the CEO of a Texas-based microcap issuer with fraud for making material misstatements in numerous press releases and for misappropriating investor funds raised in an unlawful securities offering.
According to the SEC’s complaint, during the relevant period, Preston Corp. (a/k/a Preston Royalty Corp.), a now-defunct microcap issuer, purported to be a financial services provider specializing in royalty financing for mining operations, but in reality had no actual operations. The complaint alleges that the defendant, William Andrew Stack, Esq., a licensed lawyer who had no experience in the mining industry, served as Preston Corp.’s nominal CEO at the behest of the company’s undisclosed control person, William S. Marshall, who had previously been charged by the SEC in another, similar fraud. According to the complaint, Stack admitted his figurehead CEO status in an email to Marshall, saying that unless he was paid more money, he would no longer take on the legal risks of acting as Preston’s CEO in name only.
The SEC’s complaint alleges that while serving as the company’s figurehead CEO, Stack issued four press releases that materially misled investors, falsely claiming, among other things, that Preston Corp. had entered into a royalty agreement with a third party, and that it had entered into a “gold mine agreement” with a third party. Preston Corp. allegedly publicized these press releases while Preston Corp. and Stack conducted an unregistered distribution of its common stock to retail investors. Stack allegedly misappropriated the proceeds of the offering, diverting the money largely to himself and to Marshall.
The SEC’s complaint, filed in federal court in the Western District of Texas, charges Stack with violations of the antifraud and registration provisions of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder. The complaint also charges Stack with aiding and abetting the same violations by Preston Corp. The SEC seeks a permanent injunction from violating the charged provisions, disgorgement, civil penalties, a conduct-based injunction enjoining Stack from providing legal services to anyone in connection with a securities offering pursuant to an exemption from the securities laws’ registration requirements, a penny stock bar, and an officer and director bar.
The SEC’s investigation was conducted by David H. Tutor, Matthew Lambert, and John O. Enright, and the litigation will be led by Alexander M. Vasilescu and Mr. Tutor. The case is being supervised by Sanjay Wadhwa.