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SEC Sues Former Global Tech CEO Over Alleged Stock Scheme
The Securities and Exchange Commission has sued David Reichman, the former chairman and CEO of Global Tech Industries Group Inc., alleging that he orchestrated a yearslong scheme in which the company issued tens of millions of shares to family members, friends and associates under the false claim that the recipients had provided services.
The SEC filed its complaint in federal court in New York.
The agency alleges that Reichman caused Global Tech to issue shares to people who had not performed services for the company and concealed the beneficial ownership of some of the stock.
The SEC is seeking permanent injunctions, civil penalties, disgorgement and an officer-and-director bar against Reichman.
One transaction involved the issuance of 940,000 Global Tech shares to an individual identified in the complaint as “Individual E” in July 2016.
Global Tech's filings allegedly stated that the shares were issued for services, although the SEC says no such services were provided.
According to the complaint, Individual E later sold the shares after Global Tech's stock price rose sharply. The SEC alleges that about 90% of the proceeds, approximately $1.4 million, was transferred to an entity controlled by Reichman.
The individual kept about 10% of the proceeds.
The SEC also alleges that Individual E subsequently sold another approximately 860,000 Global Tech shares and transferred about $1.7 million of those proceeds to Reichman.
The SEC said the alleged scheme harmed existing Global Tech shareholders by diluting their ownership interests.
During much of the period covered by the allegations, the company generated little revenue, had no significant operations and had only two employees, according to the SEC's complaint.
Reichman has denied neither the allegations nor commented publicly in the SEC release. The SEC's allegations have not been proven in court.
