People behind Twitter suit have history of questionable dealings

The principals of two financial firms that sued Twitter Inc. for $124 million in damages have a history of dealings with questionable companies and questionable partners.

Continental Advisors SA and Precedo Capital Group Inc. say Twitter thwarted their efforts last year to line up investors for a fund that would have acquired illiquid, restricted stock from the social-media company’s employees, contractors and other early shareholders.

Twitter is poised for an initial public offering that could value the company at more than $11 billion. Continental Advisors and Precedo Capital alleged in their suit that Twitter never intended to allow the private share deals to go forward. Instead, they claim, Twitter wanted to use the process to help determine a price for the IPO.


Continental Advisors, which is domiciled in Luxembourg, is headed by Andreea Porcelli and Mark Porcelli, a husband-and-wife team who previously worked as stock brokers in the United States.

Sharesleuth is very familiar with the couple’s prior activities. Andreea Porcelli once was a director of AccuPoll Holding Corp., a publicly traded company that marketed touch-screen voting machines. SEC filings show that its financial backers included the children and business associates of financial felon Sherman Mazur.

Continental Advisors also was the placement agent for AccuPoll for a series of convertible preferred stock sold in 2005.

Before that, she was a director of Junum Inc., another public company that had ties to Mazur and a second convicted felon, Regis M. Possino.  In addition, Continental Advisors was a placement agent for Material Technologies Inc. (later known as Matech Corp.), which had links to one or both of those men.

Shares of AccuPoll, Junum and Material Technologies were marketed to foreign investors in the late 1990s and early 2000s by unlicensed boiler-room style brokerages operating from Europe, Asia and other offshore locations. People who bought shares in the companies through those operations lost nearly all of their money.

Mazur and Possino both served prison time for fraud in the 1990s. They were indicted again last year in connection with an alleged securities “pump-and-dump’’ network that took more than $31 million from investors around the world.

The indictment identified Mazur and Possino as the ringleaders of two intertwined fraud rings.

The court documents did not mention Accupoll, which morphed into Rudy Nutrition Inc. in 2008 and was used as the vehicle for another pump-and-dump scheme that the SEC said netted more than $11 million in illicit profits.

Sharesleuth’s research also found that Andreea Porcelli was sued in 2009 by a stock promoter named Timothy T. Page, who has been the subject of at least two SEC regulatory proceedings.

Page alleged in the complaint that Porcelli sold 2.7 million shares of another company’s stock to foreign investors as part of placement agreement, but failed to forward the proceeds. Page alleged that Continental Advisors was to be the escrow agent for the share transactions.

According to the suit, the shares were originally owned by Canturio Funds LLC, an entity linked to Martin T. Cantu. The SEC brought charges against Page and Cantu in 2009 in connection with a fraud scheme involving shares of a company called Inc., which purported to have developed a real-time, online booking system for private jets.

The SEC said that no such system existed, and that ConnectAJet was part of a pump-and-dump scheme. Page and Cantu were found liable for securities violations and were ordered to pay nearly $3.8 million in disgorgement, penalties and interest.

Cantu also was indicted on criminal charges in connection with the ConnectAJet scheme.

The SEC also brought separate charges against Page in 2009 in connection with the unregistered sale of shares in two other companies. He settled without admitting or denying guilt, and agreed to a bar on virtually all activities involving penny stocks.

The judge hearing Page’s suit against Porcelli dismissed it without prejudice, on jurisdictional grounds. Porcelli had argued that since she and her husband lived in Italy rather than the United States, the U.S. District Court in California was the wrong venue.


Precedo Capital was incorporated in Delaware and operates from Arizona. Its managing partner, Timothy D. Moran, also is a former stock broker.

According to a Financial Industry Regulatory Authority document, Moran was terminated by FSC Securities Corp. in 2011 for referring clients to an unapproved investment fund without prior approval.

FINRA suspended Moran’s registration earlier this month for failing to comply with an arbitration award or failing to respond to the agency’s questions regarding that award.

FINRA also is investigating Moran’s activities in raising money for the investment fund, which turned out to be a fraud. According to the allegations in the FINRA document, Moran’s customers invested nearly $1.7 million in the investment fund. It says he failed to disclose that he had personally provided $150,000 to the fund or that he had received more than $200,000 in compensation for obtaining additional capital.

FINRA also alleged that Moran provided false information to its representatives. Although the regulatory authority did not identify the investment fund, other documents show that it was Hampton Capital Markets LLC.

The operator of the fund, Thomas L. Hampton, was hit with criminal charges last year in connection with the fund’s collapse. He pleaded guilty in April to a single count of fraud, admitting that he concealed millions in losses He was sentenced to 30 months in prison.

The Arizona Corporation Commission also brought proceedings against Moran, Hampton and Hampton Capital, alleging that they were offering or selling unregistered securities and were engaged in fraud in connection with the placement of those securities.


Continental Advisors and Precedo Capital filed their suit against Twitter in federal court in New York. They said in their complaint that they had teamed up with GSV Capital Corp. (Nasdaq: GSVC) to market a fund that would be called @GSV Fund LLP and would hold only Twitter stock.

GSV Capital is a California company that acquired a portfolio of pre-IPO shares in sought after Internet companies, including Twitter, Facebook Inc. (Nasdaq: FB) and Groupon Inc. (Nasdaq: GRPN). According to the suit, Twitter had authorized GSV Capital to facilitate a secondary market for its nontrading shares.

Continental Advisors and Precedo Capital said that they had found people willing to buy the equivalent of $278 million in Twitter stock through the @GSV Fund. They alleged that the failure of Twitter and GSV to go forward with the transactions cost them millions in expenses, commissions and other potential gains.

Twitter was quoted in news reports as saying that it had no dealings with Continental Advisors or Precedo Capital.

Big Rockwell Medical shareholder lets large block of warrants expire

One of Rockwell Medical Inc.’s (Nasdaq: RMTI) biggest long-term shareholders let warrants to buy more than 860,000 shares expire rather than pay $7.18 a share to exercise them.

David A. Hagelstein said in a Securities and Exchange Commission filing that a trust he controls did not exercise the warrants by their July 31 expiration date. Rockwell’s stock closed that day at $5.05.

Hagelstein had paid $1.9 million to acquire the warrants from their original holders.

Hagelstein disclosed in the same filing that he had purchased an additional 164,241 Rockwell shares on the open market, at prices ranging from $3.48 to $5.33. He said he owned 1.99 million Rockwell shares, through two trusts. That amounted to just under 5 percent of the company.

Rockwell’s stock closed Tuesday at $5.68, off 33 cents. Had Hagelstein exercised the warrants, the company would have received more than $6 million in additional capital.

Rockwell said in its proxy filing in April that Hagelstein controlled 2.67 million shares, including the warrants. That equaled a 12 percent stake, making him its third-largest shareholder after Chief Executive Robert L. Chioini and Richmond Brothers Inc.

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The curious touting of Kandi Technologies (and Renren … and Gevo… and Emerald Oil…)

The shares of Kandi Technologies Group Inc. (Nasdaq: KNDI) more than doubled last month, aided by an eye-popping surge in volume that followed a routine press release.

Kandi’s stock shot from $3.92 on June 4 to an all-time high of $8.50 on June 11, after the company announced that the Chinese government had approved the electric car it is developing with Geely Automotive Holdings Ltd. for sales and eventual subsidies.

Trading volume on the day that the release came out topped 18.7 million shares, an amount roughly equal to Kandi’s public float. Since then, an additional 82 million shares have changed hands.

Sharesleuth, which previously raised questions about Kandi and the people who helped bring it public, detected a spate of unusual activity on stock message boards and social media sites at the time the company’s shares were surging.

We identified a pattern of postings, on multiple sites under multiple user names, which suggested a coordinated effort to tout Kandi’s shares. Among other things, a group of new posters appeared on the Kandi message board at Yahoo Finance, issuing baseless price targets for the company’s stock, predicting an imminent short squeeze and even suggesting that Kandi was a buyout target.

We noted that several of the posters – “megsboats’’ and “stockticklers,” for instance — were touting three other companies on the Yahoo Finance boards at the same time they were touting Kandi. Those companies were Renren Inc. (NYSE: RENN), the National Bank of Greece (NYSE: NBG) and Tranzbyte Corp. (Pink Sheets: ERBB).

We also noted that at least six Twitter accounts began posting about Kandi, with a common set of messages. Like the posters on Yahoo Finance, the people behind the Twitter accounts touted Renren, National Bank of Greece and Tranzbyte, too.

Their tweets, combined with dozens of additional ones on accounts whose links led to stock-promotion sites, made it appear that Kandi had generated more buzz in social media circles than it actually had.

At the end of that week, just after Kandi’s shares hit new high in intraday trading, something unusual happened. Nearly all of those promotional posts about the company disappeared from the Yahoo boards, along with the posters. The messages promoting Kandi on the Twitter accounts we were watching also were deleted, as were some of the tweets touting Renren, Tranzbyte and the National Bank of Greece.

Although the people behind the tout campaign tried to make the messages disappear, some of their posts were preserved elsewhere, through Google’s caching system and the Nasdaq exchange’s own summary of social media posts about public companies.

Here, for example, is a tweet that was deleted from an account called @canadapetro:

CanadaPetro KNDI

Here is another that was deleted from an account called @LVhotels:

vegas SinCityLV KNDI

Here is a third message, from an account called @GoldMining:

goldsilvermining KNDI

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Stock promoter pleads guilty in $30 million pump-and-dump case

Federal prosecutors have reached a plea agreement with one of 15 people alleged to have participated in an international pump-and-dump ring that netted more than $30 million.

Court records show that Mark Harris, a stock promoter who lives in Arizona, pleaded guilty to conspiracy in one of two related criminal cases. According to a document submitted last week, Harris will not be sentenced until after the trials in those cases, which currently are set for next March and June, respectively.

It is unclear whether Harris has agreed to testify against the other defendants in the case. A filing spelling out the specifics of his plea deal was sealed by the judge.

Prosecutors have identified the architects of the two schemes as Regis M. Possino, a disbarred lawyer with convictions for drug dealing and fraud, and Sherman Mazur, a former real estate mogul who also has a prior conviction for fraud. They once operated from a shared office space in Santa Monica, Calif.

Possino and two other defendants, Edon Moyal and Colin Nix, were spotlighted in previous Sharesleuth investigations (see stories here and here ) .

The indictments announced earlier this year allege that Possino and Mazur headed two intertwined networks that fraudulently inflated the share prices of small public companies before dumping their holdings on unsuspecting investors.

The indictments said the participants in the schemes acquired a large percentage of the shares in those companies and distributed those shares to nominees to conceal their ownership. They boosted the share prices through manipulative trading and misleading press releases, then sold the shares.

Authorities said the schemes defrauded more than 20,000 investors in the United States and abroad. They said the participants in one set of alleged pump-and-dumps reaped more than $18 million, while those in the other made at least $13 million.

Harris, Possino, Moyal and Nix are defendants in both cases.

The public companies used as vehicles in the schemes included Sports Endurance Inc. (OTCBB: SENZ); GenMed Holding Corp. (OTCBB: GENM) and BioStem U.S. Corp. (OTCBB: HAIR).

According to an article in the Vancouver Sun, Harris made a fortune in the 1980s and 1990s working for offshore boiler rooms that used high-pressure sales tactics to sell shares of dubious companies to investors around the world.

Those activities were disclosed as part of a contentious divorce case. More recently, Harris has worked to promote the shares of penny-stock companies. Among other things, he paid others to conduct tout campaigns on behalf of those companies.


Florida jury convicts Mitchell J. Stein in Signalife fraud case

A jury in Florida has found Mitchell J. Stein guilty on all 14 counts related to a multimillion-dollar  manipulation scheme involving shares of Heart Tronics Inc. (Pink Sheets: HRTT), formerly known as Signalife Inc.

Signalife was featured in a Sharesleuth investigation in 2008. That story presented evidence that Stein, a lawyer who split his time between Florida and California, secretly controlled the company.

It also suggested that Stein and others had engaged in market manipulation with the help of consultants who got millions of dollars in stock.

Stein was arrested in December 2011 under an indictment charging him with securities fraud, mail fraud, money laundering, conspiracy to commit mail fraud and wire fraud, and conspiracy to obstruct justice.

The Securities and Exchange Commission also filed a civil case against Stein, the company and its co-chief executives, alleging that they falsified sales, issued misleading press releases and committed numerous other violations. That case is pending.

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Houston American Energy abandons heavily touted Colombian property

Houston American Energy Corp. (AMEX: HUSA) has given up its interest in a Colombian oil property that it once claimed held as many as 4 billion barrels of reserves.

Houston American said in a Securities and Exchange Commission filing that it transferred its 37.5 percent stake in the CPO-4 prospect to its partner, SK Innovation Co. Ltd., of Korea.

Houston American – which was the subject of a Sharesleuth investigation in 2010 — did not receive any payment. But it added that the move released it from any claims for past, present or future capital calls related to the joint operating agreement with SK Innovation.

Houston American, SK Energy and a third partner, Gulf United Energy Corp. (Pink Sheets: GLFE), have drilled three wells on the Colombian property. All three were unsuccessful, and were plugged and abandoned.

Houston American’s shares traded for more than $20 as recently as July 2011, just before drilling began on the initial well. The company’s stock closed Tuesday at 21 cents.

Houston American had said in SEC filings and investor presentations that the CPO-4 prospect, in Colombia’s Llanos Basin, was estimated to hold anywhere from 1 billion to 4 billion barrels of recoverable reserves.

It announced in late 2011 that it encountered “strong shows of hydrocarbons” at the first well, Tamandua #1. But it later said that the well was being abandoned, in part because of damage to the formation during the drilling process.

Houston American said last April that it had received three subpoenas from the SEC as part of a formal investigation into the company. It has since disclosed that the investigation appears to be focused on claims about the resource potential of the CPO-4 prospect.

Houston American said in the announcing regarding the relinquishment of its interest in CP0-4 that it still had roughly $10 million to finance exploration activities elsewhere in Colombia.

Houston American has a 12.5 percent stake in a prospect known as Serrania. One of its partners there is Canacol Energy Ltd. (TSX Venture Exchange: CNE). Canacol acquired a 37.5 percent interest when it absorbed Shona Energy Co. last year.

The other partner at Serrania is Hupecol Operating Company LLC. Houston American has been involved with Hupecol on several earlier projects that were more successful than CPO-4.

Houston American has said that it expects the first well to be drilled at Serrania this year.


Judge sides with Rockwell Medical in wrongful-termination case

A federal judge has issued a tentative ruling in favor of Rockwell Medical Inc. (Nasdaq: RMTI) in a wrongful-termination suit brought by its former head of drug development, who was fired in September 2011..

Dr. Richard C. Yocum said in his suit that he was fired because he repeatedly complained to Chief Executive Officer Robert L. Chioini about possible violations of Securities and Exchange Commission and Food and Drug Administration rules.

The judge hearing the case did not rule on whether Rockwell Medical had, in fact, committed any violations. Instead, he considered the more narrow issue of whether the company was within its legal rights to fire Yocum.

Rockwell Medical, which makes and distributes dialysis products, is based in Wixom, Mich. The company had argued that Michigan is an “employment at will’’ state, which means that businesses can fire workers for any reason, or no reason. One of the exceptions to that rule is if an employee is fired in retaliation for reporting improper activity, either to management or outside bodies, such as regulatory agencies.

Yocum worked from his home in California, which also is an employment at will state. The law there does not require a worker to report improper activity to an outside agency to qualify for whistleblower protection.

The judge, Gonzalo P. Curiel, said in his tentative ruling that there was an “absence of evidence’’ linking Yocum’s firing to any protected activity. Curiel also said he was prepared to rule against Yocum on his claim that the firing constituted the intentional infliction of emotional distress. Rockwell Medical had noted in court filings that Yocum was soon hired by another medical company, at a higher annual salary.

Finally, Curiel said that Yocum had not presented evidence demonstrating that Rockwell Medical owed him any unpaid wages. According to the court docket, the judge is preparing a final written order in the case.

Curiel still must issue a written order reaffirming Rockwell Medical’s request for summary judgment for the ruling to become official.

Yocum’s suit against Rockwell Medical was the subject of a Sharesleuth story last year.

Yocum said in his complaint that press releases the company put out in 2010 and 2011 made it appear that the clinical trials for a new product called Soluble Ferric Pyrophosphate (SFP) were going better than they actually were.

Yocum was Rockwell Medical’s vice president of drug development and medical affairs, and had primary responsibility for the SFP development program.

He said in his suit that Chioini not only ignored his concerns about the trials but caused Rockwell Medical to issue press releases that included statements directly contradicting what Yocum had told him.

Yocum also said that, based on the nature of the questions he received from analysts or investors, it appears that Rockwell Medical engaged in selective disclosure regarding details of those trials.

Among other things, Yocum alleged that Rockwell Medical:

–falsely claimed that the results of its earlier Phase IIb studies of SFP were positive, despite the fact that they failed to demonstrate that the treatment was effective.

–falsely claimed that the Phase IIb trials produced clear dosing data.

–falsely claimed that the company had an agreement with the FDA on the design of its Phase III clinical trials.

– announced an unrealistic date for bringing SFP to market, disregarding Yocum’s much longer timetable.

Rockwell Medical announced in February that one of its clinical trials for SFP showed that regular use reduced the need for erythropoietin stimulating agents (ESAs) by as much as 37 percent. The company has said that such a reduction could mean big savings for dialysis providers and their patients.

Rockwell Medical expects to announce the results of its other trials later this year. Those are intended to show that SFP is safe and effective.


Ex-Rockwell Medical consultant implicated in new fraud scheme

A former financial consultant to Rockwell Medical Inc. (Nasdaq: RMTI) has been implicated in a second securities fraud case, this one involving an alleged pump-and-dump ring that netted at least $13 million.

The consultant, Michael J. Xirinachs, was not one of the nine people charged in the case, nor was he identified by name in the court documents.

But Sharesleuth’s review of the federal indictment unsealed last week found that another of the alleged participants in the scheme — “Unindicted Co-Conspirator 2” — was identified as a hedge fund manager who controlled Emerald Asset Advisors LLC, based in Cold Spring Harbor, N.Y.

Xirinachs is the sole manager and shareholder of Emerald Asset Advisors. He also is one of the co-founders of Rockwell Medical, a Michigan-based company that makes and distributes dialysis products.

The indictment alleges that Xirinachs worked with some of the defendants to artificially boost the stock price of a company called Genmed Holding Corp. (OTCBB: GENM), so that they could profit by dumping their shares on unsuspecting investors.  It says that during the promotion and manipulation campaign, campaign, Xirinachs sold at least 2.2 million shares of Genmed stock he got from the defendants.

It also says that he and some of the defendants bought shares on the open market in advance of the campaign, to create the appearance of investor demand.


The Securities and Exchange Commission previously brought charges against Xirinachs and Emerald Asset Advisors in connection with their role in a massive fraud scheme involving a now-defunct company called Universal Express Inc. (formerly OTCBB: USXP).

A federal judge found Xirinachs and Emerald Asset Advisors liable for selling billions of unregistered shares of Univeral Express. They were ordered last year to pay more than $10 million in disgorgement, interest and fines. Another person charged in the Universal Express case, a stock promoter named Tarun Mendiratta, was among those indicted last week.

Xirinachs’ alleged involvement in the Genmed case came after his contract with Rockwell Medical had expired, but while he was still holding warrants equal to more than 3 percent of the company’s common stock.

(Disclosure: Mark Cuban, the majority owner of LLC, has a short position in Rockwell Medical’s shares. Chris Carey, the editor of Sharesleuth, does not invest in individual stocks and has no position in Rockwell Medical’s shares).


Xirinachs, a former stock broker and investment banker, helped bring Rockwell Medical public in 1997. At that time, he owned more than 15 percent of its shares. He also had a consulting contract that paid him $300,000 the first year and $240,000 the second year.

Rockwell Medical signed Xirinachs and Emerald Asset Advisors to another consulting contract in November 2008. Its stock more than doubled in the 15 days following the signing of the agreement, which called for Emerald Asset Advisors to introduce the company to licensing partners, acquisition candidates, analysts, brokers and institutional investors. Rockwell Medical’s shares surged at a time when the overall stock market was slumping because of the global financial crisis.

Emerald Asset Advisors got 700,000 warrants as compensation, exercisable at prices ranging from $1.99 to $ 7 a share. Sharesleuth calculated last year that those warrants likely were exercised at a profit of somewhere between $2.5 million and $3.2 million.

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Fifteen charged in connection with international stock-manipulation scheme

A federal grand jury has indicted 15 people, including three who were spotlighted in Sharesleuth investigations, alleging that they participated in a series of “pump-and-dump” schemes that netted more than $30 million.

The defendants include Regis Possino, a disbarred lawyer with convictions for drug dealing and fraud; Sherman Mazur, a onetime real estate mogul with a prior fraud conviction; and Edon Moyal, the former chief executive of Who’s Your Daddy Inc., a publicly traded energy-drink company. He is currently awaiting sentencing in an unrelated criminal case.

The FBI said in a press release that its investigation included a series of wiretaps that resulted in the interception of more than 60,000 phone calls and 24,000 text messages.

Who’s Your Daddy was the subject of a Sharesleuth story three years ago. Entities connected with Possino provided early funding  in exchange for notes that could be converted to large amounts of stock.

Who’s Your Daddy now is called Fitt Highway Products Inc. (OTCBB: FHWY).

Companies tied to Possino and another of the defendants, Grover Henry Colin Nix, also provided to financing to Pure Play Music Ltd. (Pink Sheets: PPML) and got millions of shares of stock. Sharesleuth detailed those connections in a pair of stories in 2009.

The indictments unsealed this week allege that Possino, Mazur, Moyal and Nix were part of two networks that fraudulently inflated the share prices of small public companies before dumping their holdings on unsuspecting investors.

The indictments said the participants in the schemes acquired a large percentage of the shares in those companies, distributed those shares to nominees to conceal their ownership, boosted the share prices though manipulative trading and misleading press releases, then sold the shares.

Authorities said the schemes defrauded more than 20,000 investors in the United States and other countries.

The indictments (see details here and here ) identified five public companies whose shares were manipulated. They were:

–Sport Endurance Inc. (OTCBB: SENZ)

–GenMed Holding Corp. (OTCBB: GENM)

–BioStem U.S. Corp. (OTCBB: HAIR)

–FrogAds Inc., previously known as Imobilis Inc. (Pink Sheets: FROG)

–Empire Post Media Inc. (Pink Sheets: EMPM)

It appears from certain details in the court documents — such as the reported proceeds from the schemes involving those five stocks and the overall profits of the purported “pump-and-dump’’ network — that even more public companies were involved.

The indictments against Possino, Mazur, Moyal, Nix and the other defendants were issued last year, as part of ongoing investigations being conducted by the FBI and the Internal Revenue Service’s criminal division.

The indictments were unsealed Wednesday after 14 of the 15 people charged in the cases were arrested. The other, who authorities said operated from Switzerland and Dubai, remains at large.

Possino, Moyal, Nix and a stock promoter named Mark Harris were charged in both indictments. Mazur was charged in one. Those documents identified Possino and Mazur as the leaders of the schemes.

The other people who were indicted include Julian Spitari, the chief executive officer of FrogAds, and Dwight Brunoehler, the chief executive of Biostem. The FBI said four of the defendants allegedly participated in the schemes while on pretrial release in other criminal cases.

That group included Moyal, who was convicted last year of conspiracy to distribute marijuana. The new indictments allege that Moyal used another of his companies, 8 Sounds Inc., to pay promoters for touting the stocks used in the manipulation schemes. They say he also received a cut of the proceeds.

Another of the defendants, Tarun Mendiratta, pleaded guilty in 2009 to conspiracy and tax evasion charges in connection with a fraud scheme at a public company called American Fire Retardant Corp. According to the indictment, Mendiratta boasted of grossing more than $75 million from stock-manipulation schemes over the past decade.

The Justice Department has asked that Possino be held without bond, adding that he has considerable assets overseas and is a flight risk.


Alabama gold company’s tout campaign has a familiar look and familiar players

A financial felon who owned millions of shares in an energy company whose stock soared and then plummeted now is one of the funders of a heavily touted gold-mining venture.

Samuel DelPresto — a former brokerage executive who pleaded guilty to conspiracy charges in connection with a 1990s fraud scheme — has provided more than $500,000 to Southern USA Resources Inc. (OTCBB: SUSA).

Southern USA Resources went public through a reverse merger last April. It says it is developing a gold mine in Alabama, a state that has had no commercial gold production for decades.

Southern USA Resources is the focus of a promotional campaign that began earlier this month and has a budget of at least $900,000.

Our investigation found that the amount being spent to tout the company is seven times greater than the amount of cash and other current assets it listed in its latest quarterly financial report. It also is only slightly lower than the carrying value of all of the company’s assets, including its land, minerals and mining equipment.

Securities and Exchange Commission filings show that DelPresto and four other funders are bankrolling Southern USA Resources in return for notes that can be converted to stock at a fraction of the current market price.

Southern USA Resources’ stock closed Monday at $1.50 a share. At that price, the company had a market capitalization of nearly $45 million.

The shares underlying the $2.6 million in convertible notes that Southern USA Resources has issued to DelPresto and the other funders since the reverse merger would be worth an additional $20 million.

Although the SEC barred Del Presto in 2002 from associating with any broker or dealer, the order did not prohibit him from financing or promoting public companies.

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