The Securities and Change Fee has introduced that it has filed fees towards Florida-based Xtreme Preventing Championships, Inc. (Xtreme Preventing) and its CEO, Steve A. Smith, Jr., for allegedly participating in a fraudulent scheme to illegally promote massive quantities of Xtreme Preventing inventory to the investing public.
The criticism alleges that the inventory gross sales had been unlawful as a result of Smith and Xtreme Preventing’s in-house counsel, who has since died, managed the inventory and offered it in transactions that had been neither registered with the Fee nor exempt from registration. Smith and the in-house counsel allegedly hid their management of the inventory to keep away from authorized limits on gross sales by insiders. Between roughly January 2020 by way of a minimum of April 2022, Smith and Xtreme Preventing’s scheme allegedly generated over $5 million in unlawful proceeds, of which Xtreme Preventing acquired a minimum of $436,000.
Smith and the in-house counsel allegedly organized for Xtreme Preventing to concern the inventory to entities purportedly unaffiliated with Xtreme Preventing however, in actuality, managed by Smith and/or the in-house counsel. The criticism alleges that this created a false look that the inventory was exempt from registration and eligible for public resale. On the in-house counsel’s path, the entities allegedly offered the inventory within the public market and despatched a minimum of some proceeds to Xtreme Preventing. The unlawful inventory gross sales allegedly happened whereas Xtreme Preventing was actively selling its model by way of a collection of press releases, together with bulletins of upcoming blended martial arts fights and offers to broadcast fights on well-known tv networks.
The criticism alleges that to additional the scheme, in April 2022, Smith and Xtreme Preventing publicly filed an annual report on Fee Type 10-Okay falsely stating that Xtreme Preventing’s monetary statements had been audited by an unbiased registered public accounting agency. Smith allegedly made the false submitting as a result of Xtreme Preventing’s annual report had been delinquent, which had brought on its inventory to maneuver to a extra restricted portion of the over-the-counter securities market. Regardless of warnings from Xtreme Preventing’s auditing agency that the audited monetary statements weren’t full or near being full, Smith allegedly proceeded with submitting the Type 10-Okay with the aim and impact of eradicating Xtreme Preventing inventory from the extra restrictive space of the market. Smith allegedly additionally issued two social media posts concerning the submitting during which he falsely mentioned that Xtreme Preventing’s monetary statements had been audited.
The SEC’s criticism, filed within the U.S. District Court docket for the Southern District of Florida, fees Smith and Xtreme Preventing with violating the antifraud provisions of Sections 17(a)(1) and (a)(3) of the Securities Act of 1933 and Part 10(b) of the Securities Change Act of 1934 and Rule 10b-5 hereunder and with violating the securities registration provisions of Sections 5(a) and (c) of the Securities Act. Xtreme Preventing can also be charged with violating Part 17(a)(2) of the Securities Act, and Smith is charged with aiding and abetting that violation. The criticism seeks civil penalties, disgorgement of ill-gotten positive factors plus prejudgment curiosity, in addition to everlasting injunctive aid, together with orders barring Smith from serving as an officer or director of a public firm, collaborating within the providing of a penny inventory, and/or collaborating within the issuance, buy, provide, or sale of any safety, apart from for his personal private accounts.
