The Securities and Exchange Commission (“SEC”) charged First Resource Group, LLC, a Fort Lauderdale, Florida based firm, and its founder, David H. Stern, with conducting a fraudulent boiler room scheme in which they hyped stocks in two thinly traded companies, while behind the scenes they allegedly sold the same stock themselves for illegal profits.
The SEC charged that from December 2008 to May 2010, First Resource signed contracts with two promoters to solicit investors to buy stock of TrinityCare Senior Living, Inc. and Cytta Corporation. In return, First Resource received shares of each company’s stock as compensation for soliciting investors. Stern and First Resource used telemarketers to contact investors. While the First Resource telemarketers were recommending that investors purchase TrinityCare and Cytta stock, Stern was selling the shares he received as compensation. Stern also allegedly manipulated the markets for the two stocks, purchasing small amounts of each stock at prices above the market to raise the market price and create the false appearance of legitimate trading activity. Furthermore, First Resource and Stern allegedly acted as unregistered broker-dealers. The SEC’s complaint alleged that First Resource Group and Stern violated Section 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities and Exchange Act of 1934 and Rule 10b-5.