BizAdviser, Relative Beat SEC's Investment Fraud Claims
By Brian Dowling
Law360 (January 27, 2025, 2:56 PM EST) -- A Boston federal judge rejected the U.S. Securities and Exchange Commission's claims that a business adviser and his brother-in-law traded penny stocks to further a $2.3 million fraud scheme.
U.S. District Judge Richard G. Stearns, who oversaw a four-day bench trial in October, concluded in a Friday order that investor Roger Bendelac and his relative Thomas Capellini were not part of an alleged scheme run by reverse-merger broker Trends Investments and its president, Clinton Greyling.
Greyling settled with the SEC and pled guilty in a separate criminal case to helping an unregistered broker sell securities. Trends Investments, Greyling's father Leslie Greyling, and Brandon Rossetti defaulted in the SEC case after they did not enter appearances.
The SEC claimed Bendelac and Capellini engaged in a pump-and-dump scheme by trading shares of Token Communities Ltd. The scheme failed when a planned merger fell apart, however, according to the suit.
Trades between Bendelac and, at times, Capellini or Greyling involving Token stock were designed to "build a chart" and show that interest was building in the stock through high trading volume, hoping to pique the interest of retail investors, according to the SEC.
But Judge Stearns said that the commission had failed to adequately show that Bendelac knew the trades were being used to drum up investor interest in Token.
The judge pointed to evidence that Bendelac had never met Rossetti, a Trends Investment contractor hired to market Token to outside investors. Also, the court credited an alternate and "perhaps sketchy" explanation for the series of trades between Bendelac and Capellini.
The pair had been working together on a joint business venture that had owed $35,000 to $40,000 in expenses, but neither of them had the cash on hand to pay up, according to the ruling. So Capellini moved $100,000 from his 401k retirement account to a separate retirement account that could trade individual stocks, including penny stocks like Token, the judge said.
Capellini then bought Token shares from Bendelac through arranged trades, essentially transferring funds from his retirement account to pay the expense without triggering a tax penalty for the withdrawal, according to the order.
The court wrote in a footnote that "the legality of this scheme as a matter of law is not currently before the court."
Other trades Bendelac made of Token stock were done at Greyling's request to show that the stock had been trading regularly to fulfill a requirement for listing with the quasi-governmental Depository Trust Co., the court said.
Bendelac's attorney, Aaron Katz of Aaron Katz Law LLC, told Law360 on Monday that he joined the case months before trial, after Bendelac had defended himself pro se for much of the litigation.
"This is one of those cases where when you look at my client's conduct, it did look like he did
something wrong — until you start unpacking it," Katz said. "When the case first came to me, I had to think long and hard about whether this is how I wanted to spend my scarce time."
But piecing through the details, Katz said the government's case was an illusion.
"It is just one of these cases that reminds you that you got to dig," Katz said, "because once you dig, you start to see whether the allegations really hold up, and here it just didn't."
Capellini's attorney, Michael B. Homer of Dynamis LLP, also cheered the ruling.
"The SEC got it wrong here, and their case collapsed when tested at trial," Homer said. "We are thrilled for Tom and Roger, and grateful that they trusted us to help clear their names."
An SEC spokesperson declined to comment.
The SEC is represented by its own David M. Scheffler, Nita K. Klunder and David H. London.
Bendelac is represented by Aaron M. Katz and Keira Zirngibl of Aaron Katz Law LLC.
Capellini is represented by Michael B. Homer and Constantine P. Economides of Dynamis LLP.
The case is SEC v. Trends Investments Inc., case number 1:22-cv-10889, in the U.S. District Court for the District of Massachusetts.
--Editing by Patrick Reagan.
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