Coronavirus-Linked Stock Scheme Leads to SEC, DOJ Enforcement

A stock scheme that allegedly involved capitalizing on the coronavirus crisis has drawn SEC and DOJ attention to five Canadian citizens, with criminal charges filed against one, according to Massachusetts federal court filings.

Shane Schmidt participated in a pump-and-dump scheme centered on Sandy Steele Unlimited Inc. stock, the Justice Department’s Wednesday criminal complaint in the U.S. District Court for the District of Massachusetts said.

Nelson Gomes, Michael Luckhoo-Bouche, Douglas Roe, and Kelly Warawa also took part in the scheme, the Securities and Exchange Commission told the same court in a complaint unsealed Thursday.

The Secuities Exchange Commission secured a temporary restraining order and asset freeze to halt the alleged scheme June 9.

The group arranged to illegally dump shares of Sandy Steele in a scheme that began as early as January 2018, the SEC said. They allegedly increased demand for Sandy Steele securities through “false and misleading stock promotional activities.”

The promotions included false claims in March that Sandy Steele could produce face masks of medical quality for use during the coronavirus pandemic, the SEC complaint said. The agency halted trading in Sandy Steele securities April 3 over concerns about the veracity of those claims.

Schmidt allegedly pretended to be “John Scott,” a fictitious person the group claimed was Sandy Steele’s sole officer and director. He used a fake passport with Scott’s name and his picture to further the ruse, the DOJ complaint said.

Entities related to Gomes named as defendants in the SEC suit are FFS Capital Ltd., Paifang Trading Ltd., Atlantean Management Corp., Artefactor Ltd., Meadow Asia Ltd., and Thyme International Ltd.

Vancouver-based attorney Michael Klein, who represents Schmidt, declined to comment June 11. An attorney believed to represent Luckhoo-Bouche didn’t immediately respond to a request for comment. Attorneys for the other defendants weren’t listed on the civil docket and couldn’t be identified for comment.

The cases are United States v. Schmidt, D. Mass., No. 20-mj-06415, unsealed 6/10/20 and SEC v. Gomes, D. Mass., No. 20-cv-11092, complaint unsealed 6/11/20.