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9/12/2018 Laidlaw Execs helped Barry Honig Execute Stock Manipulation Scheme

TERI BUHL
(http://www.teribuhl.com/)
SMASHMOUTH INVESTIGATIVE JOURNALISM
 

Laidlaw Execs helped Barry Honig Execute Stock 12


Sep
Manipulation Scheme

Last week’s Securities and Exchange Commission suit (https://www.sec.gov/litigation/complaints/2018/comp24262.pdf) against


high-profile small-cap equity investors Barry Honig and Phillip Frost appears to be the first moves in a much broader
crackdown against a network of brokers, promoters and even attorneys that worked with them on numerous transactions,
according to internal documents and private communications I’ve obtained. Creatively named llcs, like Pump Pump Loss Loss
Partners, were created to hide what appears to be kickbacks paid for pushing unsuspecting retail clients into Team Honig’s
deals when it was time to dump the stock.

As the SEC went to lengths to note in their claim (https://www.sec.gov/litigation/complaints/2018/comp24262.pdf), a large


chunk of Honig’s alleged profits came from heavily trading shares prior to the release of “favorable and materially misleading
articles” that suggested there was growing investor interest in these stocks.

While the pre-release trading was mostly Honig, Frost and their associates, once the articles were released, a broker-dealer with
a decent-sized investor network was integral to sustaining these alleged promotions. Based on a series of interviews, as well as
documents I have either obtained or seen — including emails, texts and internal memorandums — London-based Laidlaw &
Company (https://laidlawltd.com/) is Honig’s preferred broker.

Within Laidlaw, two penny stock veterans, Matt Eitner and James Ahern (both of whom are in their 30’s and who had worked
together at Aegis Capital) are Honig’s lieutenants in executing “the dump” portion of the purported stock manipulation
scheme. Eitner and Ahern’s path to running Laidlaw (https://brokercheck.finra.org/firm/summary/119037) is typical of many
boiler rooms — they were put in charge after FINRA expelled the firm’s original owners, Martin and Steven Sands of Sands
Brothers Asset Management. (According to a former Laidlaw executive who knows both Ahern and Eitner, Ahern runs the
firm’s daily operations but he can’t hold the chief executive title because he failed his series 24 — FINRA’s supervisory test —
twice. Thus Eitner, who did pass his series 24 (https://files.brokercheck.finra.org/individual/individual_3267261.pdf), is listed as
the CEO.)

Unsurprisingly, Ahern’s record has a few potholes. Starting out at as a retail broker at Casimier Capital (where he worked under
Richard Sands, another member of the Sands family) and Aegis Capital before he joined Laidlaw in 2010. The four customer
complaints (https://brokercheck.finra.org/individual/summary/4656189) against Ahern, the first from 2005, all claim either their
accounts where ‘churned’ or that the trading volume exceeded agreed upon limits. Ahern strongly denied any wrongdoing in
each of the four customer complaints, an example of which can be found here.

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9/12/2018 Laidlaw Execs helped Barry Honig Execute Stock Manipulation Scheme

By way of contrast, Eitner’s record, which mirrors Ahern’s with stops at Casimier Capital, Aegis Capital before arriving at Laidlaw
in 2010, is cleaner, with only two complaints (https://brokercheck.finra.org/individual/summary/3267261).

According to several brokers who worked directly with Eitner and Ahern, their strategy for accommodating clients like Honig
was more 1994 than it was 2018. For example, if Laidlaw couldn’t sell the agreed upon amount in a secondary offering, they had
a simple solution: they would “stuff” shares into the accounts of retail investors.

In another instance, according to documents I reviewed with former Laidlaw insiders, unsold shares were left in the firm’s
principle account. When Sterne Agee, Laidlaw’s clearing firm called and sought answers about the stock, they were told there
was a clerical error and Laidlaw was given the day to get the shares sold through the syndicate deal out of the firm’s principle
account and into customer accounts. The problem was clients hadn’t really bought all those shares yet so they had to come up
with a place to put the shares or Sterne Agee could sound off the alarm bells to FINRA about net capital violations.

Additionally, to give the appearance of a fully subscribed offering, Eitner and Ahern directed Laidlaw’s brokers to park stocks
and violate the T-2 settlement rules, according to two people directly reporting to them, one of whom has provided FINRA
sworn testimony about these actions. According to this individual, the offerings discussed in the session with investigators
were
MabVax Therapeutics, Spherix, Relmada, Meddvex, Pershing Gold, PolerityTE Inc, Protea and most recently CoolTech.
CoolTech ticker was recently changed to $AWSM.

All of the transactions above were led by Laidlaw and all featured Barry Honig and colleagues as an early-stage investor.

Per the SEC, here’s how it worked: Honig and his colleagues would acquire large equity positions in exchange for financing a
development-stage company’s debt, at which point LaidLaw would come in to do a secondary Regulation D offering to
accredited investors or structure a Private Investment in a Public Company (PIPE) deal.

Where it gets interesting is how Ahern and Eitner structured the sales process.

Taking a page from Jordan Belfort’s “The Wolf of Wall Street,” interviews, emails and texts I’ve reviewed show Eitner and Ahern
aggressively driving Laidlaw’s 100 plus broker sales force to sell these deals through the use of coercion or even dismissal.

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9/12/2018 Laidlaw Execs helped Barry Honig Execute Stock Manipulation Scheme

We’re Pretty Good At This group instructions

Laidlaw brokers I spoke to said they often questioned their bosses about why they had to pitch their clients investments with
worthless balance sheets and few real assets. They also told me that Laidlaw clients would always lose money long term on
these deals. Brokers at the firm were allowed to buy stock in these deals with no limits but when a client called to sell there was
often a restriction placed on their order system. They had to call executives to get approval for a sale order which could take
days. Instead of telling clients about this internal hold, a move that appears to be design to prop up the stock, these brokers
would talk their clients into holding on a few more days or not inform them at all. Another way to solve the issue would be to
do a cross-book order. These means shares would be transferred from one clients account to another Laidlaw client without
putting the order into the system for market makers to see trading volume.

“WPGAT Deals” in Eitner’s text is describing an LLC set up and co owned by Eitner (https://www.zoominfo.com/p/Matthew-
Eitner/2153221688) and Ahern (http://getfilings.com/sec-filings/170825/Protea-Biosciences-Group-Inc_8-K/v474090_ex3-4.htm)
that stands for : We are pretty good at this.

When Ahern talks about it he calls it “We Are Pretty Fucking Good At This”. WPGAT is listed as a managing director of PPLL
Partners (https://www.sec.gov/Archives/edgar/data/1736379/000121390018004044/xslFormDX01/primary_doc.xml) LLC, which
stands for Pump Pump Loss Loss. These two entities are seen on multiple issuer offerings
(https://seekingalpha.com/filing/3676237) as getting ‘consulting fees’ from $10k a month to $30k. (Link to Protea or Spherix SEC
filing here) It is not uncommon to see consulting fees in small cap offerings. But securities laws say Eitner and Ahern have to
direct their brokers to inform the retail clients that senior leadership at the firm is also earning money on the side. And that the
money raised in the secondary offers from these retail clients to going back to pay the Eitner-Ahern llcs.

“A broker dealer’s failure to disclose a conflict of interest is a material violation of the securities laws. The BD has an obligation
to investors to disclose side payments received from the issuer for on boarding investors. I would strongly recommend the BD
get counsel to advise them on these violations. Today’s strict SEC enforcement environment will lead to adverse actions against
a BD hiding the ball from investors,” SEC defense attorney Richard Gora of Connecticut-based Gora Law LLP
(http://goralaw.com/) told this reporter.
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9/12/2018 Ahern and Eitner would reward brokers who sold
Laidlaw well
Execs on their
helped Honig
Barry backed
Honig deals
Execute by Manipulation
Stock getting paid Scheme
out of WPGAT LLC money.
They were known in the firm as the WPGAT group. WPGAT is believed to be funded through consulting fees or possible cash
kickbacks. According to internal documents seen by this reporter and interviews with Laidlaw staff here are some of the
brokers in that group: Richard Michlski, Kevin Wilson, Brian Robertson, Michael Murray, Luke Kottke, Daniel Kuhar, Henry
McCormack, Christopher Oppito.

To give these brokers a sense that everything at Laidlaw was being done on the up and up SRFK LLP attorney and named
partner (http://srfkllp.com/michael-h-ference/) Mike Ference would conduct the broker’s annual compliance meeting where
he presented a slideshow and answered broker questions about compliance rules at the end. Brokers where also directed to
speak with SRFK attorneys Ross Carmel and John Hitchings. Honig’s deal attorney Harvey Kesner, who I recently reported
(http://www.teribuhl.com/2018/08/29/kesners-out-why-is-barry-honigs-securities-lawyer-retiring/) was removed from this law
firm’s name, also answered questions about deal legitimacy and communicated directly about sales volume on deals with
Honig, Ahern and Eitner according to emails seen by this reporter. Ross D. Carmel has since left SRFK and is a named partner at
a new New York based law firm. Attorney Ference did not respond for comment.

On Tuesday MabVax, who is Victim company C (http://www.teribuhl.com/2018/09/08/unnamed-stocks-in-sec-fraud-suit-


against-barry-honig-revealed/)in the SEC complaint against Honig, sued (https://www.mabvax.com/news-media/press-
releases/detail/138/mabvax-therapeutics-files-suit-against-sichenzia-ross) the law firm Honig recommends issuers use for
outside counsel when he invest in their company. That firm is SRFK LLP (http://srfkllp.com/). MabVax is blaming Kesner and
other attorneys at the firm on bad legal advice for how they disclosed and structured capital raising deals for the company.

Laidlaw’s outside counsel Richard Friedman. a former SRFK named partner who is now at Sheppard Mullin, was called to
respond to this story. As of press time there was no response. Barry Honig did not respond to an email for comment about his
relationship with Laidlaw. Matt Eitner did not respond to an email or return phone calls to his secretary asking for a response to
the evidence I gathered for this story.

Stay tuned for part two of this saga as I dive into details on how the money moved in specific Honig backed stocks at Laidlaw. If
you are a broker or client at Laidlaw you can contact me at teribuhl@gmail.com to have a confidential conversation about your
experience.

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