Misappropriation, Conflicts And Illegal Stock Sales

Conflicts of interests and sham transactions are a key consideration when dealing with issues involving the federal securities laws. Many of the cases initiated by the Commission center on conflicts such as those that can arise when a controlling shareholder borrows funds from a company. The Commission’s latest case involving these kind of transactions is SEC v. Igwealor, Civil Action No. 2:24-cv-09941 (C.D. Cal. Filed Nov. 18, 2024),

Defendants in the action are: Frank Igwealor, an attorney, CPA, investment adviser and the controller of many of the entities involved here; Patience Ogbozor, wife of Frank Igwealor; Alpharidge Capital, LLC; American Community Capital, LP; Givemepower, Inc.; Kid Castle Educational Corp.; Los Angeles Community Capital; and Video River Networks, Inc.

Beginning June 2021 Defendant Igwealor and his wife misappropriated over $2.2 million from Defendant Alpharidge, a subsidiary of GiveMePower, a publicly traded defendant Mr. Igwealor and his wife controlled. The funds were used to purchase a residence for Defendant Igwealor and his wife. Under the terms of the mortgage put on the property, no payments were due before 2031.

Subsequently, Defendants Kid Castle and other controlled entities, entered into a transaction designed to conceal transactions involving the home. Specifically, the mortgage was not disclosed by Defendant GiveMePower in its annual report filed with the Commission. Indeed, the purpose of the mortgage was to shroud the original misappropriation and conflicts and avoid repayment.

Finally, over a period of months, beginning in July 2021, Defendant Igwealor sold millions of shares of three penny stocks he owned. The size of the transactions violated the limitations for such sales in the federal securities laws. The complaint alleges violations of Securities Act Sections 5(a), 5(c), and each subsection of 17(a), and Exchange Act Sections 10(b), Rule 10b-5 and aiding and abetting violations of Sections 13(a) and 13(k). See Lit. Rel. No. 26171 (Nov. 19, 2024).