Dive Brief:
- The Securities and Exchange Commission charged a former CEO with allegedly giving millions of shares of stock to family members and veiling the transactions behind a false claim that they provided services to the company.
- David Reichman, the former CEO of Global Tech Industries Group Inc., also allegedly issued 940,000 shares to an individual as compensation for services to the company. “Individual E,” who had not provided services, then sold the shares and transferred 90% of the proceeds — worth about $1.4 million — to Reichman, the SEC alleged in an Oct. 2 complaint.
- Reichman’s actions “harmed Global Tech investors by significantly diluting the value of pre-existing shareholders’ shares,” the SEC said. Reichman, when reached by telephone, declined comment.
Dive Insight:
During the period encompassing the SEC allegations — from 2016 until June 2024 — Global Tech generated little revenue, engaged in “no significant operations” and employed only two people: Reichman and the former company president, the SEC said.
“Global Tech does not appear to have maintained headquarters; its address was a UPS box in New York, N.Y.,” the agency said.
In its annual 10-K financial statement filed with the SEC in 2023, Global Tech said the goal of its business was “to increase shareholder value through the acquisition of companies with significant growth potential,” the agency said.
Yet from June 2016 until June 2024, Global Tech, whose stock was traded on OTC Link ATS, acquired and briefly held just one company, the SEC said.
Reichman from March 2016 until December 2019 issued more than 32 million shares to his daughter, ex-wife, girlfriend, an affiliated entity and others, claiming they provided services to Global Tech, the SEC alleged.
“In fact, as Reichman knew or recklessly disregarded, the share recipients did not provide any services,” the SEC alleged. He also failed to disclose his own sales of Global Tech stock, the SEC said.
“Reichman’s fraudulent scheme was lucrative for him and his daughter,” the agency alleged.
When the Global Tech stock price surged in 2021 and 2022, Reichman’s daughter and “Individual E” sold shares fraudulently issued to them, generating proceeds of about $1 million for Reichman and about $8 million for his daughter, the SEC alleged.
Nevada state court in September 2024, responding to a suit brought by Global Tech shareholders, appointed a receiver for the company that removed the company’s management team, the SEC said.
The agency said it seeks permanent injunctive relief, civil penalties, disgorgement of ill-gotten gains with prejudgment interest and an officer-and-director bar against Reichman.
