The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Bahamian broker/dealer and its principal have submitted eight defenses to allegations by US regulators that they participated in an “illegal unregistered offering and sale” of securities that netted $11.4 million for clients.

Gibraltar Global Securities and Warren Davis, in an April 24, 2014, filing with the southern New York district court, countered the Securities & Exchange Commission’s (SEC) claims over the offering of 10 million-plus Magnum d’Or shares by saying they “acted in good faith at all times”.

The SEC, in one of two lawsuits filed against Mr Davis and his former company, is alleging that they violated two US laws - by acting as an unregistered broker in soliciting US clients, and by facilitating the sale of Magnum d’Or’s unregistered securities.

However, in their defense filing, the two Bahamian defendants are arguing that they are “exempt” from both the US Exchange Act registration requirements and the US Securities Act’s “restrictions on sales of unregistered securities”.

Messrs Davis and Gibraltar also argued that they “were not substantial participants” in any of the claimed Magnum d’Or violations, while Mr Davis was “not a culpable participant” in the alleged breaches of US law.

The Bahamian defendants used their defence to deny all the SEC allegations made against them, while acknowledging that Gibraltar executed securities transactions for customers, including US clients.

Mr Davis and Gibraltar did, though, admit to executing trades involving 10 million Magnum d’Or shares for proceeds of $11 million. They acknowledged that the Bahamian company “performed brokers’ transactions executed upon customers’ orders involving shares of Magnum d’Or in the approximate amounts alleged”.

They also admitted transferring the Magnum d’Or proceeds to Gibraltar’s accounts at the Royal Bank of Canada (RBC) in Nassau, and charging “customers usual and customary broker’s commissions”.

“Gibraltar performed brokers’ transactions executed upon customers’ orders, including transferring proceeds from its account at the Royal Bank of Canada to Magnum d’Or,” the broker/dealer’s defence said.

“The Gibraltar defendants also admit that some shares were re-registered in its name ‘fbo’ the relevant customer.”

And, while admitting that Gibraltar did not register with the SEC, the legal papers said the broker/dealer had been registered with the Securities Commission of the Bahamas since March 2005.

The SEC had Mr Davis and his company with soliciting US clients via Gibraltar’s website, but the Bahamian defendants denied this in their April 24, 2014, defense filing, and rejected the website traffic statistics cited by the SEC.

In previous court filings, they had alleged that the SEC could identify no specific American investor who had come to them through this route.

And they alleged that the SEC’s claim that Gibraltar’s website attracted 2,200 hits per day, with 21 per cent of traffic coming from the US, was based on “completely unreliable” data from website analysers.

Mr Davis and Gibraltar have countered that the SEC is charging them with “guilt by association”. They argued that they were not “knowing participants” in the Magnum d’Or scheme, and that the perpetrators had deceived others - including a large US law firm.

Mr Davis and Gibraltar have previously alleged of the two lawsuits against them: “In both cases the SEC attempts to portray Gibraltar as an unscrupulous ‘offshore’ broker/dealer that flagrantly flouts SEC registration requirements and helps penny stock scammers perpetrate their ‘pump and dump’ schemes.

“In both cases, however, removing the SEC’s conclusory allegations reveals Gibraltar and Mr Davis to be, at most, bit players that the SEC seeks to hold liable for failing to uncover elaborate and carefully concealed schemes. On this basis alone, both complaints should be dismissed.”