[ by Howard Haykin ] The SEC Thursday charged a New Jersey businessman with running a stock-lending scheme that defrauded public company officials and brought restricted stock to the market.  Ayuda Equity Funding, LLC and AmeriFund Capital Holdings, LLC, and owner Manuel Bello, agreed to settle the SEC’s complaint without admitting or denying the allegations. The case is the 2nd the SEC has brought this year involving stock lending.  In March, the SEC charged 2 executives and their California-based firm with defrauding corporate officials in an $8 million stock-lending scheme.

“We are continuing to clamp down on misconduct in the opaque stock-collateralized lending industry.  Firms cannot induce borrowers to transfer stock to them as purported collateral for loans but then turn right around and sell the borrowers’ stock into the market to fund their operations." -- Scott Friestad, Assoc. Director - Enforcement Division.

SEC Findings and Allegations. Ayuda and AmeriFund allegedly reaped more than $3.2 million of illegal gains on loans to public company officers and directors who put up stock as collateral.  Although some borrowers received written and oral assurances that the stock would not be sold as long as they did not default on their loan payments, Ayuda and AmeriFund allegedly sold the shares before or soon after making the loans. In at least 35 loan transactions, Ayuda and AmeriFund allegedly sold the borrowers’ restricted shares into the market without registering the transactions.  Neither the firms nor Bello were registered with the SEC as brokers or dealers. Without admitting or denying the SEC’s allegations, Ayuda, AmeriFund, and Bello consented to a final judgment permanently enjoining them from violating federal anti-fraud, broker-dealer registration, and securities registration laws. In a separate administrative proceeding, ... Howard Blum is alleged to have brokered numerous transactions for Ayuda without being registered as a broker or dealer. SEC Sanctions. Bello and the firms jointly agreed to return $3.2mn of allegedly ill-gotten gains, plus interest.  Bello, also agreed to pay a $500K penalty and be permanently barred from the securities industry.   The settlement is subject to court approval.   Blum also settled by agreeing to pay over $1mn in disgorgement of allegedly ill-gotten gains, plus interest, plus a $50K penalty, and be suspended from the securities industry for twelve months. For additional information, go to:  [SEC PR 12-117, 6/21/12]   [SEC Complaint]   [SEC Order Against Howard Blum].