US regulatory agency sues Cayman Island bank

New York (CMC) — The United States regulatory agency, the Securities and Exchange Commission (SEC) has sued the Cayman Islands-based Caledonian Bank and four other companies, claiming that they took more than US$75 million from unregistered sales of “virtually worthless” penny stocks.

The SEC sued Caledonian Bank, Caledonian Securities, Clear Water Securities, Legacy Global Markets, and Verdmont Capital, in US federal district court in Manhattan.

The Caledonian defendants are based in the Cayman Islands. Clearwater and Legacy are based in Belize, and Verdmont in Panama.

All of the allegations were the same, the SEC said in its 39-page complaint.

First, they filed “bogus registration statements” with the SEC, purporting to register securities to public shareholders, though there were no such sales and the securities stayed in the control of the issuers and their affiliates.

”In the sham offerings, the issuers pretended to sell securities to shareholders in such places as Serbia, Mexico, Ireland, Norway, Panama and Jamaica,” said the SEC in the court filing.

It alleged that the restricted securities were then “passed off” as free-trading stocks in the United States and sold to the public.

The agency claims the defendants operated as affiliates, dealers, sales outlets and underwriters, in connection with four shell companies: Swingplane Ventures, Goff Corp., Nostra Energy and Xuamnii Inc.

“These violations occurred simultaneously with aggressive and extensive promotion campaigns for the penny stocks of those shell companies,” the SEC said.

The defendants’ unregistered sales of securities generated more than $75 million in proceeds on penny stocks that were virtually worthless and whose prices fell to their former token levels within months of the defendants’ sales.”.

The SEC is seeking disgorgement, restitution, penalties and an injunction, according to the court papers filed.