SEC charges two N.J. firms with stock-lending scheme
WASHINGTON (Legal Newsline) - The Securities and Exchange Commission on Thursday charged a New Jersey businessman with running a stock-lending scheme.
Ayuda Equity Funding and AmeriFund Capital Holdings, both located in North Butler, N.J., and owner Manuel M. Bello allegedly defrauded public company officials and brought restricted stock to the market.
According to the SEC's complaint, Ayuda and AmeriFund reaped more than $3.2 million of illegal gains on loans to public company officers and directors who put up stock as collateral. Although some borrowers allegedly received written and oral assurances that the stock would not be sold as long as they did not default on their loan payments, Ayuda and AmeriFund sold the shares before or soon after making the loans, the SEC alleged.
The SEC also alleged that in at least 35 loan transactions, Ayuda and AmeriFund sold the borrowers' restricted shares into the market without registering the transactions. Ayuda and AmeriFund allegedly attracted potential borrowers, among other ways, through their network of brokers.
The defendants agreed to settle with the SEC but did not admit or deny the allegations. They will return the $3.2 million of allegedly ill-gotten gains, plus interest. The case is the second the SEC has brought this year involving stock lending.
"We are continuing to clampdown on misconduct in the opaque stock-collateralized lending industry," said Scott W. Friestad, associate director of the SEC's Division of Enforcement.
"Firms cannot induce borrowers to transfer stock to them as purported collateral for loans but then turn right around and sell the borrowers' stock into the market to fund their operations."
The settlement is subject to court approval.