MGT Capital was subject to a subpoena sent by a lawyer at the Securities and Exchange Commission named Katherine Bromberg who is senior counsel in the New York office of the division of enforcement. The Subpoena demanded a response by September 28, 2016. MGT’s stock had been on a soar after it was announced the company was going to merge with John McAfee’s private security company. MGT CEO Rob Ladd was forced to announce the receipt of the subpoena by the exchange the company listed on, the NYSE, and the stock started a slide. The NYSE latter delisted the company without explaining in writing what their reasons were and did not allow the issuance of millions of new shares that the company approved in a board of directors vote.
The company is now on the OTC pink sheets waiting for the top-tier of the OTC markets to approve their listing. John McAfee was eventually made a director of the company but the merger of his security assets isn’t completed yet. The company website says “MGT Capital Investments, Inc. is in the process of acquiring a diverse portfolio of cyber security technologies. With cyber security industry pioneer, John McAfee, at its helm…”
In September MGT CEO, Rob Ladd, who signs all SEC filings, said in a press release the company didn’t think the SEC subpoena questions were focused on ‘the company’. Latter that month I was first to report on some of the people named in the SEC subpoena for the trade publication I report for Growth Capitalist. I reported Barry Honig, Michael Brauser and Josh Silverman’s hedge fund as being subjects of the subpoena questions. I had interviewed an executive at the company who said they thought “the focus of the SEC subpoena was about Barry Honig and the people he invested with.” I then wrote an opinion piece at teribuhl.com that Honig and friends were the subject of this subpoena.
Below is the subpoena for the reader to see and formulate their own opinions. This is the first time it is being made public. The name of the companies on page 7 are all owned by the names of the people on page 7-8. I was told by a person at the company all of these people invested with MGT Capital and you need a flow chart to show their interconnectedness. I have also researched other public filings and found these people have invested in the same equities in the past. Most of these people say they are passive investors and don’t know each other or don’t ‘invest together’. It’s my belief after a decade of proven investigative reporting and based on knowing how to read a SEC subpoena, along with interviews with people involved in the transaction and past investing transaction of Barry Honig, that the regulator is looking for evidence that these people traded as a group and therefore became beneficial owners of the stock. If you have beneficial ownership of a stock it affects when and how much you can sell your stock so investors, like the group here, often try to keep their public ownership of the stock below 10%. I think the regulator also wants to know if any of the investors, who except for Josh Silverman were not on the board of the company, had any influence in the McAfee merger or the paid stock promotion by Stock Beast. But the most interesting question is number 10.
All Documents and Communication concerning MGT’s acquisition of certain technology and assets of D-Vasive, as stated in MGT’s Form 8-K filed on May 9, 2016.
MGT had announced in its August proxy statement on page 23 that D-Vasive had had gotten a $850,000 bridge loan with convertible debt but didn’t disclose who did the bridge loan. John McAfee owns D-Vasive. I was told by a person at MGT that some of the names on the SEC subpoena had also done the bridge loan. If the merger had been approved, these people would have likely had D-Vasive stock warrants that would have became MGT stock and while the stock was flying high would have made a killing if they were able to sell. There are a lot of unanswered questions about that transaction and since D-Vasive is private they don’t have to answer them. Well unless a regulator asks. Like the timing of the warrants being issued, share registration, and who is holding the shares for the required 6 month period.
These people are sophisticated investors with expensive lawyers who help structure transactions designed to protect them form violating any securities laws like trading as a group without disclosing it. That type of SEC violation is hard to prove and I don’t know if the regulator will get the evidence to prove it but it is good to see them asking the questions. I want to hear from readers and market participants on what you think some of these SEC questions are trying to get at. Use the comment section or email me at teribuhl.com with your thoughts.
MGT says it has answered the SEC subpoena.
SEC Subpoena MGT Capital September 2016 by Teri Buhl on Scribd
UPDATE January 2018: On September 15, 2016, MGT Capital received a subpoena from the Securities and Exchange Commission. The subpoena requested documents and communications between MGT and Barry Honig. It also sought documents and communications between MGT and eight other individuals and eleven entities associated with the individuals.
I have not confirmed with the SEC that Barry Honig is in fact the subject or target of any SEC investigation. No person at the SEC has ever informed me that the SEC is investigating Mr. Honig. The SEC, when called for comment, told me that they do not comment on ongoing investigations.
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