A shell company that was started by a former Canadian trucker to market assistive devices for amputees was secretly taken over and used in a US$45-million investment fraud, U.S. regulators allege.
The U.S. Securities and Exchange Commission (SEC) filed charges against seven people alleging that they secretly took control of a shell company, known as Ample-Tee Inc., and then hyped the stock and ultimately defrauded investors.
According to the SEC’s complaint, Ample-Tee was founded by two Canadians in 2011 to pursue a patent for a crutch for below-knee amputees. The company also planned to sell hard-to-find assistive devices for the disabled.
In 2014, the company was registered to trade on the over-the-counter bulletin board (OTCBB). In 2015, the defendant, Kalistratos “Kelly” Kabilafkas (aka Mark McKinney), initiated a scheme to secretly take control of the shell company, which then changed its name to Airborne Wireless Network and shifted its focus to “developing a high-speed wireless network by linking commercial aircraft in flight,” the SEC said.
The SEC alleged that “Kabilafkas secretly purchased essentially all the outstanding stock of the shell company now known as Airborne, then distributed millions of shares among himself and his associates.”
The regulator also alleged that the defendants then deceived the company’s transfer agent and broker dealers, to have the shares cleared for sale to the public. It added that Kabilafkas installed defendant, Jack Daniels, as the company’s CEO, and that they engaged in a promotional scheme, raising more than US$22 million from investors — “much of which was kicked back to benefit the Kabilafkas family,” the SEC said.
The SEC alleged that the company then raised another $22.8 million dollars, all “from unsuspecting investors through public and private offerings while materially false and misleading statements about the company were publicly available.”
The allegations have not been proven.
One of the defendants agreed to settle with the SEC, without admitting or denying the allegations. The proposed settlement, which is subject to court approval, includes a penny stock ban and a US$125,000 civil penalty.
The SEC is seeking civil penalties, disgorgement and other relief against the remaining defendants.
“As alleged in the complaint, Kelly Kabilafkas orchestrated a wide-ranging scheme to deceive gatekeepers, conceal from investors the true ownership of a public company, and then manipulate the company’s stock,” said Jennifer Leete, associate director of the SEC’s enforcement division, in a release.