SEC Charges Seven Individuals for $45 Million Fraudulent Scheme
The Securities and Exchange Commission today charged seven individuals and a technology company in connection with a fraudulent scheme to gain control of Airborne Wireless Network, promote its stock, and defraud investors.
According to the SEC’s complaint, Kalistratos “Kelly” 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, including defendants Timoleon “Tim” Kabilafkas, Panagiotis Bolovis, Eric Scheffey, Chrysilios Chrysiliou, and Moshe Rabin. As alleged, Kelly Kabilafkas and his associates deceived Airborne’s transfer agent and broker dealers in order to have the shares transferred into their names, deposited in brokerage accounts, and cleared for sale to the public. The complaint alleges that Kelly Kabilafkas, through defendant Jack Edward Daniels, Airborne, and other third parties, spent millions of dollars on advertisements that concealed that Airborne was a vehicle for Kabilafkas’s fraudulent scheme. The complaint further alleges that, while the promotional campaign was underway, Kelly Kabilafkas and his associates sold approximately 11.8 million Airborne shares for proceeds of more than $22 million, much of which was kicked back to benefit the Kabilafkas family. As alleged, Airborne raised another approximately $22.8 million dollars from unsuspecting investors through public and private offerings while materially false and misleading statements about the company were publicly available. In total, the complaint alleges, the scheme raised nearly $45 million.
The complaint, filed in the U.S. District Court for the Southern District of New York, charges the defendants with violations of the antifraud provisions of the federal securities laws and related rules. The SEC seeks civil penalties, disgorgement of ill-gotten gains plus interest, and injunctive relief. Rabin has offered to consent, without admitting or denying the allegations in the SEC’s complaint, to the entry of a final judgment ordering injunctive relief, a $125,000 civil penalty, and a penny stock bar. The proposed settlement with Rabin is subject to court approval.
“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 S. Leete, Associate Director of the SEC’s Enforcement Division. “The SEC is committed to unraveling frauds to protect investors.”
The SEC’s investigation, which is continuing, is being conducted by Jennie B. Krasner, Paul J. Bohr, Drew Dorman, Jeffrey Anderson, and Robert Nesbitt, with the assistance of the Enforcement Division’s IT Forensics Lab, and supervised by Peter Rosario and George Bagnall. The litigation is being led by Daniel Maher and David Misler, and is being supervised by Stephan Schlegelmilch. The SEC appreciates the assistance of the Financial Industry Regulatory Authority, British Columbia Securities Commission, Ontario Securities Commission, Thailand Securities and Exchange Commission, Cayman Islands Monetary Authority, Québec Autorité des Marchés Financiers, Netherlands Authority for the Financial Markets, Hellenic Capital Market Commission, and United Kingdom Financial Conduct Authority.