Markets Wired

The Securities and Exchange Commission today charged penny stock issuer Efuel EFN Corp., its CEO, Ljubica Stefanovic, and its CFO, Slavoljub Stefanovic, for fraudulently misrepresenting that the company owned California gold mine interests worth $500 million.

The SEC’s complaint, filed in U.S. District Court for the Middle District of Florida, alleges that, in its first quarter through third quarter reports for 2017 and in its 2017 annual report, Efuel stated that it owned $500 million in assets comprised of “land, minerals and gold deposit,” and that such financial reports were prepared in accordance with generally accepted accounting principles (“GAAP”). In addition, the complaint alleges the defendants issued numerous press releases over the course of over a year that claimed that the mines contained “substantial mineral, gold, silver and other precious gems and minerals” worth $500 million, that the mines could reap as much as $2-$3 billion in mineral deposits, that the company’s valuation claims were supported by geologic and scientific studies, and that a recent scientific study proved that there was more than $5 billion worth of gold in the mines. The complaint further alleges that the defendants told the public that it had scientists conducting detailed studies on the gold mines, and that exploratory and development efforts were ongoing.

The SEC alleges that, in reality, the defendants had simply acquired the right to lease the land for six years, allowing the company to explore for and extract minerals, after which it had the option to purchase the land for the price of $750,000. The complaint further alleges that defendants had no basis to claim that these mining interests were worth $500 million, nor did they take any steps to determine the appropriate manner to account for the transaction in accordance with GAAP. Furthermore, the complaint alleges that, contrary to what the defendants told the public, they had not begun any exploratory or development efforts on the land.

The SEC’s complaint charges the defendants with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  The complaint seeks permanent injunctions, disgorgement plus prejudgment interest, penalties, as well as officer-and-director and penny stock bars against the individual defendants.

The SEC’s investigation was conducted by Tuongvy T. Le, Christopher J. Dunnigan, John O. Enright, and Sheldon L. Pollock. The litigation will be led by Mr. Dunnigan and Ms. Le.  The case is being supervised by Sanjay Wadhwa.