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31 Aug

Broker Chief Michael Morris Pleads Guilty in A.J. Discala Stock Manipulation Scheme

In a surprise turn of events the last co-conspirator in the A.J. Discala stock fraud case is changing his plea. Micheal T. Morris who owned and ran one of the New York broker dealers that helped the Discala crew execute pump and dumps schemes in multiple small cap stocks will be in Brooklyn federal court on September 6th to plead guilty. Morris was hit with a superseding indictment after the DiScala trial ended this spring with a jury finding DiScala guilty on multiple counts of securities fraud. On July 27 the EDNY DOJ added an obstruction of justice charge against Morris for lying to the Securities and Exchange Commission when they questioned him about Discala’s pump and dump trades at his brokerage firm Halcyon Cabot Partners. Lying to a federal agent carries a five year sentence. Morris is now facing a total of 10 felony counts ranging from wire fraud to securities fraud to conspiracy.

Morris and his wife Nancy are well known in their Long Island community and members of Pine Hollow Country Club. Nancy Morris signed off on putting their home at 12 Siverbirch Road Merrick, NY for collateral in November 2015 for her husband’s million dollar bail bond.

The original indictment accused Morris of not doing his job in supervising one of his bad actor brokers Craig Josphberg who was a lead player in helping Discala artificially support the price of the stocks he was manipulating and also has plead guilty to pushing main street clients into the bad stock to pump up the price. Morris has always claimed in his motions he didn’t know what Josphberg was doing. He said the same message to his pals at his Long Island Country Club. In fact Morris was also the only who got a separate trial so he wasn’t tried with AJ Discala and a lawyer charged in the scheme Kyleen Cane. It looked like for a while that the DOJ was going to settle with Morris and no jail time would be recommend after they lost their case against Attorney Cane this spring. But once this obstruction of justice charge against Morris came out the girls and guys at the Eastern District of New York were back on their war path.

One of the most telling parts of the case is outlined in the new Morris indictment that says:

On or about February 27, 2015, officers of the SEC took the sworn testimony of the defendant MICHAEL MORRIS in connection with the SEC’s continuing investigation into violations of securities laws and regulations with respect to CodeSmart. During that proceeding, MORRIS made false statements to the SEC in an effort to obstruct, influence and impede the SEC’s investigation. For example, MORRIS falsely stated that he purchased CodeSmart stock on August 21, 2013, solely because the stock looked like a good value, and denied that he had discussed said purchase with Abraxas J. Discala, when, in fact, MORRIS purchased CodeSmart stock at Discala’s request to help prevent the stock price from declining too severely upon Discala’s anticipated sale of CodeSmart shares from accounts Discala controlled.

Around the time Morris was arrested in late 2015 FINRA also brought down the hammer on Morris. They barred him and revoked his firms broker dealer license for taking a kickback in a private placement deal.

A total of ten men and women were arrested as part of the DiScala ring. Seven of them plead guilty as the case was preparing for trial. Discala, Cane, and Morris were the only ones to fight the DOJ since the arrest began in July 2014 and now we see the last hold out Morris has admitted defeat. DiScala was found guilty and Cane got off with a not guilty verdict. It’s unclear how many of the 10 counts Morris is pleading too. Additionally the DOJ hasn’t pushed for a sentencing date for Discala yet which is odd. That usually means they are trying to get him to give up more info on others or get others to give up more info on him to increase or decrease the amount of time they will request for prison.

Only one person who plead guilty a few years ago, Darren Goodrich, has been sentenced and he got a lot more prison time than I expected. On July 12 2018 United States District Judge Eric N. Vitaliano sentence Goodrich to 41 months’ imprisonment for one count of conspiracy to commit securities fraud for Goodrich’s participation in the manipulation of the price and trading volume of the stock of Cubed ($CRPT).

I was the only reporter to get an exclusive interview with Discala and see the evidence the DOJ had collected. I was also first to report at www.growthcapitalist.com it was Microcap attorney Adam Gottbetter who first tipped the FBI on to what Discala was doing after he was pissed at Discala for kicking him out of a deal and firing him as his attorney. Gottbetter was also arrested for his own scheme in mircocap stocks and spent 18 months in jail.

The last leg of this saga will be to see how much Discala and the 7 others waiting sentencing get in jail time. For A.J. Discala I’d except that will be a long time.

27 Comments
29 Aug

Kesner’s Out: Why is Barry Honig’s Securities Lawyer Retiring

UPDATE 9.5.18 – Harvey Kesner’s law firm has removed his name from the firm today. According to a member of the law firm this a clear signal that his fellow partners don’t want to be associated with him or his ties to his biggest client Barry Honig. You can see here the firm is now named Sichenzia Ross Ference LLP. This dramatic move happen the same week Barry Honig resigns from the board of the microcap company he is a 42.6% owner in called Pershing Gold ($PGLC). This means Honig is currently not on the board of any public companies. These actions could signal an SEC charge or settlement coming in the near future for both men. Remember if you are deemed a bad actor by the SEC you can’t serve on the board of a public company. Kesner and Honig have been unusually silent in recent weeks refusing to answer any questions about why the changes are happening now. And Honig recently put his water front Florida home on the market for $8.9 million. Kesner was the securities transaction lawyer for ($RIOT) Riot Blockchain and MabVax ($MBVX) which have both disclosed they are under SEC investigation. This publication was first to break news about Kesner leaving his law firm.

Original Text 8.29.18
Barry Honig’s securities lawyer, Harvey J. Kesner, is apparently hanging up his shingle. According to a person familiar with his law firm on September 5th Attorney Kesner will retire. Sichenzia Ross Ference and Kesner LLP made Kesner a named partner two years ago after long time partner Richard Friedman left the firm to join Sheppard Mullin LLP. The move comes as public scrutiny over the investing of one of his long time clients, Barry Honig, has come under-fire, which includes multiple SEC investigations into the companies Honig invest in.

Kesner has advised on the small cap stock industry for years and often shows up as counsel for issuers after Honig has invested with the company. A move that has gone unquestioned by the Securities and Exchange Commission even though a conflict of interest could come up by representing the company and an investor who often holds a debt note against the company.

In the last two years Kesner has also made an apparent move to claim Florida as his home state. Voting records for Kesner started to show up back in December 2016 with an address of a 2 bedroom waterfront condo in Fort Lauderdale, FL. Florida often becomes a home for people with judgments or government fines lobed on them because it is a ‘homestead state’. This means in the case of bankruptcy or say an SEC fine they can’t come and take your home. Kesner will be 61 years old on the planned date of retirement so he still has a few years before any investment pensions can kick in for him. It’s unclear if Honig will keep his business with Kesner’s firm upon retiring or if the law firm will keep Kesner’s name. Why is he retiring now is an unknown and no one at the law firm has responded with comment.

The law isn’t the only thing attorney Kesner makes his money from. There is the stock he he gets on some of the Honig deals. But what’s been a black hole is if a stock transfer company called Equity Stock Transfer benefits him and Honig.

I have previously reported on Harvey’s wife Renee having a 50 percent ownership in the company in 2014 along with a firm called Paradox Capital Partners giving Equity Stock Transfer a loan when it first registered with the Securities and Exchange Commission. EST started in 2011 according to SEC filings called TA-1 and TA-2 reports. In those reports you see Paradox is owned by Kesner and he list himself as its manager. A company called CMBS Document Solutions is also manged by Kesner and listed as maybe providing working capital for the stock transfer company. Additionally in an amended TA-1/A filing from June 6, 2014 it states that Paradox Capital Partners and CMBS Document Solutions could “directly or indirectly, through agreement or otherwise exercise or have the power to exercise control over the management or policies” of the company.

The registered address in Florida for Kesner’s Paradox Capital Partners just happens to be in the same Boca Raton building as Barry Honig uses in his 13g share ownership of Riot Blockchain ($RIOT).

In recent filings we see Kesner put in writing that he doesn’t have control over the firm but only lends the firm money. Equity Stock Transfer’s listed CEO is Mohit Bhansali. Chris Carry at Sharesleuth recently reported on Equity Stock Transfer in his excellent story on Barry Honig and friends ability to make millions on small cap stocks that seem to have questionable rise and falls in their stock. Sharesleuth pointed out that Equity Stock Transfer just happen to be the transfer agent in some these questionable stocks. And as I have reported multiple times Honig is being investigated for a lack of timely disclosure of when he owns a stock and what his true % of ownership is in the stock. Additionally I believe there could be issues of unregistered shares being sold or restricted shares being released when they should be held in restriction. It’s hard to get restricted stock to the DTC for free trading unless you have a friendly transfer agent not doing due diligence on if the shares are legal to trade in the first place.

The Sharesleuth story missed one important point though. While Harvey Kesner has told me through his attorney that he is NOT a control person at Equity Stock Transfer he does have a known relationship with its CEO Bhansali. You see Kesner and Bhansali worked together at Kesner’s previous law firm Haynes and Boone LLP. According to his Linkedin profile Bhansali was at the law firm from 07-09 and list his job as a ‘corporate securities specialist’. I have no idea what that job even means but he is not a lawyer. You also see Bhansali and Kesner serving on a board of a public company Honig invests in called PolarityTE known by its ticker $COOL. The Sharesleuth story did an analysis on the sudden rise and fall of $COOL stock price and Citron Research has published a report calling the company a fraud. Sharesleuth reported:

“He [Bhansali] was a director of Majesco Entertainment until March 2017, the month before it completed its merger with PolarityTE. He also was one of the investors who bought shares and warrants in Riot Blockchain through a private placements last April, when it was still known as Bioptix.”

RIOT Blockchain has admitted it is under SEC investigation after CNBC did a rare investigation into Honig’s investment in the company.

Kesner and Honig have never admitted any control over Bhansali in his role as CEO of Equity Stock Transfer and I’m sure they’d deny it if a regulator asked them but my reporter’s gut feeling thinks it’s very likely Bhansali is a puppet CEO. That issue is hopefully something the SEC or FINRA is currently looking at but then I have also never seen Kesner’s name show up in an SEC subpoena that related to Honig.

I have emailed Kesner asking if he will take an active role in Equity Stock Transfer upon retiring from his law firm and as of press time have not gotten a response. After I originally reported on Equity Stock Transfer in 2016 this publication was hacked and only my story mentioning Kesner, Honig and Equity Stock Transfer was taken down and I lost the reporting. I did hear from a lawyer Kenser hired when the story first came out that went on and on about Kesner not being a control person of this company. They also explained that Kesner’s wife Renee only held a 50% ownership in Equity Stock Transfer for 4 months in 2014 from April 1st to July 3rd.

Editors Note: Donations are needed and very appreciated as stories like these often need to be hosted on a private server with good security so the site doesn’t crash or is not hacked. Good reporting need good donations.

8 Comments
16 Feb

CNBC Investigates Barry Honig trading in Bitcoin Company $RIOT

We witnessed somewhat of a reporting miracle today! CNBC TV journalist Michelle Caruso-Cabrera and her producer Scott Zamost took on an on-the-ground investigation into the questionable activities of micrcocap investor Barry C. Honig and got out from behind the desk to do some real reporting.

In 2016, I was first to expose that Honig and a fellow investor John O’Rourke were named in an SEC investigative subpoena regarding trading in MGT Capital. My reporting at trade publication Growth Capitalist explained the SEC could be looking at how a group of investors, including Honig, trade as a group without disclosing their affiliation. The investigation appeared to also be looking at stock promotion and how it was disclosed along with the timing of public announcements as to who owns how much of the stock. Today we see CNBC try to take on reporting with a similar fact pattern through Honig’s investing in a company called Riot Blockchain ($RIOT).

Riot made the rounds of financial news when its stock flew up in December from $8 to over $40 after a simple name change to a company in the Bitcoin business. CNBC reports “Until October, its name was Bioptix, and it was known for having a veterinary products patent and developing new ways to test for disease.” SEC filings show that Honig was considered an insider in the company because he owned more than 10 percent of the stock. John O’Rourke was gifted shares when he suddenly became the company CEO after Honig pulled an activist move that magically put O’Rourke in charge of the company and axed previous board members. Honig does a bridge loan, gets cheap cashless warrants and boom sells the stock on its high while retail investors pile in. Then the stock tanks. This type of investing is a rinse and repeat move for Team Honig and mirrors what we saw in MGT Capital.

CNBC actually did some good question-asking-reporting here although they didn’t get a lot of truthful detailed answers. Caruso-Cabrera went to Honig’s Boca Raton office at 555 S. Federal Highway Suite 450 after she couldn’t get anyone at the company to do an interview. We see Caruso-Cabrera enter Honig’s office and find none other than John O’Rourke there. O’Rourke comically runs away from her and almost slams her fingers in the door but then comes back out to promise an ‘off camera’ interview. Honig and O’Rourke both deny that they “work together” but then Honig later admits O’Rourke did at one time have an office in his office. If the CEO of the company had his office in a major shareholders office that claims not to control the company that doesn’t look good. You can read CNBC’s print story and see on-camera footage here.

A lot of the CNBC coverage focuses on if O’Rourke currently works out of Honig’s office. Their reporting indirectly tries to point out both of these men could be lying. If CNBC wanted to drive home this point they also could have done some SEC filing research, like I did. where John O’Rourke office address is Honig’s office address in this filing from December 2016.

I have previously reported O’Rourke has worked out of Honig’s office after I interviewed a person who saw him working there. Which is just odd he goes and denies it to CNBC. I reached out to O’Rourke’s attorney Nick Morgan at Paul Hasting this morning to ask what CNBC didn’t clarify. When did O’Rourke stop working out of Honig’s office and what is his new office address? Attorney Morgan said he would get back to me but as of press time I have no answer. Honig was also contacted through his Attorney Charles Harder and asked when O’Rourke stopped working out of his office. At press time Attorney Harder did not respond.

While we really enjoyed the gotcha moments Caruso-Cabrera captured on camera, it was disappointing not to see CNBC mention the elephant in the room. Honig and O’Rourke are named in an SEC subpoena for their role trading and investing in MGT Capital. On January 31st the WSJ did a similar story on Riot looking at Honig and his role in the company which included their reporter Ianthe Dugan asking Honig flat out about the SEC subpoena. The WSJ reported “Mr. Honig said that he hasn’t been contacted by the SEC and doesn’t believe he is a target. “I am 120% not worried,” he said.” A government agency investigating securities violations usually doesn’t knock on the subjects door and let them know they are gathering evidence against them until they have a case built. So Honig’s public denial doesn’t carry much weight in my book.

There is also something else alarming in the CNBC story. Honig’s longtime deal attorney Harvey Kesner, who is now a named partner at Sichenzia Ross Ference Kesner LLP, was reached on the phone by CNBC and said “he didn’t know anything about Riot Blockchain and Barry Honig.” And then he hung up on them. What??? Kesner is the named deal lawyer on multiple Honig investments. He is the attorney I have called multiple times, and has responded for Honig on deal questions and his law firm is on SEC filings for Riot. On top of all that CNBC figured out Kesner also owns an investing company called Paradox Capital Partners, which I previously reported on, who also owns RIOT stock. I emailed Kesner this morning to give him a chance to clarify his comment but so far he is radio silent.

I have to wonder if Kesner is trying to finally distance him self from Honig because of questions about the timing of Honig’s self reporting of RIOT stock ownership. You see since Honig went above owning 10% of the stock (he reported he owned 11%) ,and then sold to own about 2%. if he did that selling within 6 months he is subject to the rules that prevent sell-then purchase or vice versa within six months. Honig should have filed a Form 3 which I can’t seem to find in SEC filings. And all of this could be a section 16(b) violation of the Exchange Act. Which creates the opportunity for the company (RIOT) to sue Honig for any profits he made from a short swing and the profits go back to the company. But I guess if your friend John O’Rourke is running the company he is not going to file that lawsuit! And we don’t know when Honig officially sold because of his lack of timely reporting. Something we saw him also do with MGT Capital.

Here is an example of a lawsuit for a 16(b) violation with a company called WPCS. A stock Honig and O’Rourke also invested in.

John O’Rourke told Benzinga after the first CNBC video aired that their coverage was Garbage and a Hit Piece. That means Michelle Caruso-Cabrera is on the right track. Riot saw a $5 drop in its stock price today which is about a 34% decrease since the CNBC story aired. Ambulance chasing securities lawyers have also announced that they plan file a class action lawsuit for securities violations against RIOT.

Editor’s Note: Honig previously sued me for reporting he was named in an SEC subpoena. He dropped that litigation against me in January and I am here reporting again. Lawsuits are a pain and risk me having to disclose sources but they will never deter me from staying on the story. Donations to this free publication are greatly appreciated and always needed. Tips can be sent to teribuhl@gmail.com .

6 Comments
19 Mar

Banned by SEC: Steven Muehler starts another advance fee scheme

A Southern California man named Steven J. Muehler is blatantly ignoring a ban from the equity crowding funding industry lobbed by the Securities and Exchange Commission last year. I am reporting exclusively for Growth Capitalist that Muehler is once again behind a scheme to bilk start-up CEOs out of their much needed cash with promises of helping them launch a successful mini-ipo offer and secure millions in investments. A promise now proven to be a fistful of lies.

Here is sample of my reporting at trade publication Growth Capitalist. It’s free to register to read the articles.

A California securities offering promoter who was the subject of the very first SEC enforcement action taken against a participant in the newly reformed Reg A market has been linked to a group of websites claiming to offer capital-hungry companies and their investors a soup-to-nuts money raising experience in exchange for cash fees and shares, despite lacking the necessary securities licenses to do so legally, and in seeming defiance of a recent ban imposed by the agency.

Steven J. Muehler, 41, a Marina Del Rey, Calif.-based financial consultant with a history of federal and state securities law violations that led him to be banned from the industry last June, has reconstituted his now four-year old scheme to create an “alternative securities market” for Reg A companies with a full suite of services including deal advisory, offering marketing and securities brokerage, proprietary investment by self-managed venture funds, and a listing market for secondary sales, an investigation by Growth Capitalist has found.

My editor and I took a month to investigate Muehler’s new scheme through painstaking document searches of corporate records and regulator filings to prove this fraud. Muehler’s new company is called Alta Vista Capital Markets or Alta Vista Private Client. He even started a fake alternative trading system called NanoCap Market that has claimed to be registered with the SEC but isn’t. This time around Muehler used his wife Claudia’s name on legal documents and convinced a LA man, who once was a registered investment adviser, Koorosh “Danny’ Rahimi to be the named CEO of his new company. Our reporting at Growth Capitalist shows how Muehler was controlling the company behind the scenes. To the point of even using Koorosh’s company email to speak with potential and existing clients.

After Muehler heard from some of his CEO clients that I was asking questions about the legitimacy of his business we saw him change the company website and take down claims of being registered or working on a broker dealer license. It took finding issuers he had sold his up-front fee scheme, to go on the record to prove how much Muehler was truly involved in the business. The phone interviews I had to make involved being first to tell excited CEOs that the Regulation A offering (mini-ipo) they had submitted to the SEC, which was supposed to help their business raise millions in needed capital, was done with a bad actor and there likely were not millions of dollars in AltaVista Venture Funds to invest in their offering. It was a sad reality for CEOs to hear the $10k they had given AltaVista was wasted.

AltaVista had even gone as far as filing initial Form D’s with the SEC to show potential clients there was a real fund but then didn’t list raising any money in the RegD offering. I was told by one CEO, after our reporting came out two weeks ago, that Muehler wasn’t that worried about his scheme being exposed by Growth Capitalist because the reporting is behind a paywall!

The SEC is fully aware of Muehler’s new scheme. I reported a whistleblower and an attorney, who works in the equity crowdfunding space, have altered the regulator. The regulator also acknowledged they read our 3-part investigative reporting. But with a new Trump regime of lax regulation it’s unclear how long the securities regulator will take to stop Muehler again. Given he hasn’t paid the $400k fine from the last enforcement action it appears it will take a criminal charge to curb this bad boy.

Which is why it is even more important for investigative journalist to be supported with your donations and subscriptions. If you think this reporting is informative please donate today. Because it’s doubtful we can count on our government agencies warning the market about fraud…that now falls mainly to financial journalist. Additionally, since it’s free to register now at Growth Capitalist I encourage you to do so right away. You will have a chance to read good insight into the equity crowdfunding and mini-ipo market.

13 Comments
9 Feb

Here it is: that MGT Capital SEC Subpoena

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.

3 Comments
9 Feb

California DOJ investigating Honig and The Frost Group

Original Text

The Northern California DOJ has been sniffing around asking tough question about the investing and trading activities of a billionaire Philip Frost, a former boxer turned penny stock investor Barry Honig, and a man Honig has done investing deals with Michael Brauser.

A person who took investments from this trio and ask for anonymity for fear of retribution told this reporter,”The FBI told me in our interview they were investigating Honig, Brauser, and Frost.”

A term sheet filed in a legal battle in Northern California court shows all three men invested together in a company called Biozone. The case, which alleged the Frost Group was involved in a pump and dump, made it pass a motion to dismiss and then settled. A person familiar with the settlement said the plaintiff got $2 million although it’s unclear if the Frost group actually paid the settlement in full.

Three years latter the FBI investigation into Biozone is still open. This reporter has seen a letter from the FBI that states this person is a potential victim of securities fraud. A check in the FBI’s victim notification system, seen by this reporter at press time, show the investigation is still active but doesn’t list specifically who the investigation is about. Biozone is the only company the person interviewed by the FBI held stock in.

The Biozone investor also said they had been interviewed by the Securities and Exchange Commission about their dealings with Barry Honig, his deal lawyer Harvey Kesner, and others the regulator thinks invest with Honig.

Attorney Kessner has been representing Honig in his microcap investing deals for years and often ends up as counsel for the companies Honig invest in. He recently became a named partner at a New York law firm that is very active in the microcap stock market called Sichenzia Ross Friedman Ference LLP. Kesner replaced partner Richard Friedman who suddenly announced he was leaving with his team to join another firm Sheppard Mullin in October. The firm is now called Sichenzia Ross Ference Kesner.

Kessner through his attorney told this reporter he thinks Freidman’s departure from the firm he had been with for a long time wasn’t sudden but contemplated for months but we haven’t heard directly from Friedman on why he switched law firms.

Rumors have been swirling around the microcap space for a while now that attorney Kesner’s work with Honig could place him in the hot seat with the SEC but the Biozone investor is the first person I’ve interviewed who said the SEC probed him about Kesner’s role with Honig. Kesner has not been publicly named in any SEC enforcement actions. Kesner was fired from big law Haynes and Boone, where he worked before joining SRFF. He then sued the firm for breach of contract and defamation in 2010 but it’s unclear if anything came out of that reaction to being fired. Haynes and Boone said the suit was meritless. Kesner withdrew the suit voluntarily a month after it was filed and there was a statement the parties had settled without any details.

EDITOR NOTE: This story was hacked and taken down from the publication on February 7 2017. It originally ran on November 8th 2016. Barry Honig sued me for libel for multiple stories I reported on and then suddenly dropped the suit two days before our motion to dismiss was to be filled with back up documents sourcing the reporting and a copy of a SEC subpoena that names him and others who invested in MGT Capital. Honig had originally demanded I apologize for my reporting and denies he is under SEC investigation. The reporting stands and I never apologize for informing the public on a matter of public interest. I would like to thank my attorneys Chuck Tobin and Christine Walz at Holland and Knight for their excellent legal work that helped protect sources and support accurate truthful reporting and opinion.

UPDATE 1-2019: Since publication of this article, I learned that Daniel Fisher, the plaintiff in the Biozone lawsuit reference below, submitted a letter to the SEC, through his attorney, withdrawing the SEC whistle-blower complaint that Mr. Fisher filed against Barry Honig, Michael Brauser and The Frost Group. In a separate letter from his attorney to the FBI, Mr. Fisher also withdrew any direct connection to the FBI investigation referenced below. Mr. Fisher sent the letters pursuant to a voluntary settlement agreement in the Biozone lawsuit and an Order enforcing that settlement by Judge Laurel Beeler of the Northern District of California which stated: “The court orders [Daniel Fisher] to withdraw his FBI and SEC grievances against [Honig, Brauser and The Frost Group]….which fall[s] within the scope of his commitment under the settlement.”

In a separate letter to Judge Beeler enclosing Mr. Fisher’s withdrawal letters, his attorney stated: “[Mr. Fisher] does not believe this SEC notice has any impact on the existing SEC investigation into [Biozone’s successor] Cocrystal.” In an SEC filing made earlier this year, Cocrystal Discovery disclosed that it had received a subpoena from the SEC in 2015 and that it was the subject of an ongoing SEC investigation.

4 Comments
8 Nov

Hacked By XwoLfTn

Hacked By XwoLfTn – Tunisian Hacker

UPDATE 2.7.17 6pm – Well it looks like someone hacked my publishing platform and took down a story in the last 24 hours. Luckily I have a paper copy of the story and will be re-reporting the original story within the week.

Hacking a business site and trying to steal my assets (the reporting) is a federal crime. I have reported it to the FBI office in NYC and have a security company looking into the IP addresses that entered the site.

I’m asking readers for $300 in donations to help pay for a private server to host this site and extra firewall protection. The reporting that was hacked was about Barry Honig and his deal lawyer’s financial interest in a stock transfer company. I need your help to keep the reporting visible for everyone to read. You can donate via the Paypal button on the top right of the homepage. Thanks in advance for your support.

4 Comments
23 Sep

MGT Capital Receives SEC Subpoena Seeking Information about Barry Honig and Eight Other Individuals

Microcap investor Barry C. Honig is a subject of an SEC subpoena related to his role in trading and investing in shares of MGT Capital ($MGT). MGT Capital is trying to complete a reverse merger with famed tech entrepreneur John McAfee. I am reporting exclusive news today for Growth Capitalist on what’s inside the Securities and Exchange Commission subpoena MGT Capital announced was lobbed against them late last week.

News of the SEC formal demand for answers from the company delighted short sellers to the tune of a 40% drop in MGT’s stock. The company, currently run by CEO Robert Ladd, says it does not believe the SEC is targeting any of the company executives. But shareholders have expressed doubt this week given the lack of details the company was allowed to disclose about the regulatory investigation. On top that the NYSE, where MGT trades, announced it wouldn’t accept the new shares that are set to be issued in the reverse merger with John McAfee’s cyber security companies. The national stock exchange was kind of a jerk about it because they didn’t offer up a reason for the share issuance halt. Unfortunately, it’s a big clusterf–k of unknowns for the company and shareholders right now.

But one thing that my reporting makes very clear is the SEC wants to make sure Barry Honig isn’t’ doing anything shady (or out right illegal) with this company. According to insiders who saw the SEC subpoena, a large portion of the regulator’s questions are about Honig, his company GRQ Consultants, and people who invest with him. I can also confirm Honig has been calling SEC enforcement defense lawyers this week looking for representation. I first reported on Honig’s alleged illegal actions in my “Attorney Gregg Jaclin blew up his life and got busted for creating a shell factory scheme” story this Spring. The central theme of alleged bad behavior is Barry uses other people to run a company he is secretly controlling and indirectly pays stock pumpers to tout the company without disclosure.

You can see here in a DOJ plea deal made by one of Honig’s alleged puppet CEOs how Honig allegedly runs things behind the scene. This plea deal was first reported and unearthed by me in a story for Growth Capitalist in May.

The SEC has never been able to pin anything on Honig. We do see a FINRA action settled against him as a young trader in 2000 when he was working for a questionable PIPE financing firm called Ramius Capital (or Ramius Securities). On June 14, 2000 FINRA said Honig had acted as an affiliate trading with others and hid it by running the trade through two people instead of one.

Barry Charles Honig (CRD #2362713, Registered Representative, New York, New York) submitted a Letter of Acceptance, Waiver, and Consent in which he was fined $25,000 and suspended from association with any NASD member in any capacity for 10 business days. Without admitting or denying the allegations, Honig consented to the described sanctions and to the entry of findings that he sought to inappropriately coordinate a trade report to ACT with another market participant as two separate trades instead of one.

Honig has a SEC deal lawyer, Harvey Kesner at www.srff.com , who apparently has been able to keep the SEC at bay in tons of questionable pump and dump deals Honig invested in. I know from interviewing MGT’s executives and reviewing Honig’s financing transactions that he wasn’t a control person at MGT. CEO Rob Ladd, who used to run a hedge fund, put blockers in Barry’s finance deal that don’t allow him to own a certain percent of the company. What we don’t know is whether Barry teamed up with his favorite investing partner Michael Brauser and acted as an affiliate in trading MGT stock, which blew up to a 700% gain when news of a John McAfee merger was announced in May. Affiliate trading without disclosure is a big SEC no-no, which I explain my story today at www.growthcapitlist.com. Honig through his attorney did not return a request for comment.

For now it’s a wait and see as MGT scrambles to get the SEC to clarify to stock exchanges that the reverse merger deal is clean. And market participants sit on the side line to see if the SEC can get the goods to finally charge Barry Honig.

Clarification 9.23.16: Barry Honig is pulling out the big legal guns apparently worried about anyone reporting on what’s inside that SEC subpoena. As of 5:30pm I was contacted by a California attorney, Charles Harder (who repped Hulk Hogan), for Honig demanding to have the story taken down and to write an apology. I refused and stand by the sourcing in this story. I have spoken with people who have seen the subpoena again and clarified a sentence in the story that relates to a large portion of the SEC’s questions are centered on Barry Honig, his company and people he invest with. The original sentence said “90% of the SEC questions are about Barry Honig.” Additionally, Honig had two days to respond to questions about the subpoena before the story ran and refused to return a call and email for comment.

Update 10.7.16: One of the sentences in this story that Barry Honig has denied through his attorney Charles Harder is that he invest with Michael Brauser. Harder wrote in item #9 in his demand letter they sent me to get the story taken down:
“Implication that Mr. Honig “teamed up with his favorite investing partner Michael Brauser”. False; the two have not teamed up.”

I’d like to take the chance to remind readers of this 2012-2013 litigation against Barry Honig, Michael Brauser, and the Brauser Honig Frost Group for their role in Biozone Pharmaceuticals, Inc. It was filed by the company’s former founder Daniel Fisher. This is from Fisher’s amended complaint filed in Northern California District Court on 11.22.12 . Case number 3:12-cv-03716-WHA

“In January 2011, Plaintiff Fisher met with a group of investors, the Defendant representing
itself as Brauser Honig Frost Group (“BHFG”). Over the course of the following six months, this
group of investors misled Plaintiff Fisher through an investment scheme designed to divest
Plaintiff of all of the economic rights and goodwill he had built through his company over the
course of the previous 22 years.”

After Fisher beat their motion to dismiss and the case moved into discovery we see the case was settled with the defendants paying Daniel Fisher half a million dollars.

And that’s just one reason why I stand behind my reporting, opinion, and sourcing in this or any story of mine on Barry Honig!

UPDATE 11.4.16 : I have filed a letter to the federal judge in Honig’s lawsuit against me that you can read here. Honig used a process server who lied in an affidavit that he served me. I have video to prove he is lying. Additional, I informed the judge Honig asked MGT Capital CEO Rob Ladd to call me and set up a private ‘off books’ meeting. A move that is pretty much a no-no legal tactic given he sued me. His lawyers are supposed to be the ones to contact me. I obviously said no to the meeting and told Rob Ladd if Mr. Honig wants to speak to me and comment on any of my reporting he can call me through his attorneys – he has enough of them. This secret meeting tactic is something I have learned he has used in other litigation…it feels like the purpose is to try and figure out if I am going to give up names of my story sourcing.

I still need a pro bono lawyer to go up against Hulk Hogan’s attorney Charles Harder. Honig apparently tried to hire Harder (an expensive lawyer who has been in the news for his anti-journalism legal work) to scare me into stoping reporting and it didn’t work. If you are interested in this easy to win suit please email me at teribuhl@gmail.com. I’ve been told NY laws make it favorable to sue back for attorney fees in NY court and this is an easy case to win given my sourcing and the fact a lot of what I wrote here is opinion. Donations are also helpfully now in case I have to defend my self pro se.

UPDATE 1-10-17: I’ve secured a top first amendment lawyer to represent me pro-bono. Chuck Tobin of Holland & Knight filed last week in Manhattan Federal Court to be lead counsel. We have till February 10th to file a response to Honig’s claim. I would like to thank Holland & Knight for stepping up and defending the rights of a freelance journalist.

UPDATE 2-21-17:Barry Honig voluntarily withdrew his lawsuit against me on February 8th. This was two days before my attorneys were due to file our motion to dismiss and we were given no warning or notice of why the suit was being dropped. I thought the litigation was over but now it looks like Honig and his attorney Charles Harder were just making a move to judge shop because today I got a repeat retraction letter asking again to take down my reporting and apologize. It’s my expectation that team Honig will just refile their suit in another court or another state which means the bullying of this journalist for reporting on a matter of public concern continues.

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 communication 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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