SEC accuses California fund of running $26 million pump-and-dump scheme

The SEC has accused a California-based investment fund and its owners of running a $26 million pump-and-dump scheme involving a penny stock.

The regulator filed charges against RB Capital Partners, Inc., its owners Brett Rosen and Deborah Braun, and former Solar Integrated Roofing Corporation CEO David M. Massey in federal court in the Southern District of California on January 21.

According to the SEC, the defendants used social media to aggressively promote Solar stock while secretly unloading their own shares at massive profits from at least January 2021 through at least June 2024.

The scheme allegedly netted the defendants over $26 million in illicit profits.

RB Capital Partners, a La Jolla-based firm that describes itself as a private investment fund focused on small and microcap publicly traded companies, is owned and operated by Rosen and Braun, who are married. The fund had no employees during the relevant period, according to the SEC.

The regulator alleges that the RB Capital defendants entered into six convertible note agreements with Solar worth $11.3 million. The notes were supposed to allow them to receive Solar stock at fixed conversion rates of $3 per share and later $4.50 per share.

But Solar allegedly allowed the defendants to convert these notes at dramatically lower prices — as little as $0.00005 per share, or half a hundredth of a cent. The average conversion price was just $0.0045 per share, the SEC said.

Through this arrangement, the defendants allegedly acquired over 1.6 billion shares and sold over 1.4 billion to the public at prices ranging from $0.0001 to $2.60 per share, generating gross proceeds of over $33 million.

The SEC said Rosen used his Twitter account to promote Solar stock on dozens of occasions from February 2021 through at least March 2024, touting it as a good long-term investment while failing to disclose that he was simultaneously selling shares.

In one August 2022 tweet cited by the SEC, Rosen allegedly declared that RB Capital "will NOT be dumping any shares into the open market." That same day, the defendants sold at least 115,000 shares, the regulator said.

The SEC also accused Massey, while serving as Solar's CEO, of directing the company to issue a false press release in February 2023 claiming it had secured a $10 million revolving credit facility with a top four national bank. No such facility existed, according to the SEC.

The day after the announcement, Solar's stock price jumped 40 percent and trading volume surged approximately 500 percent.

The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains, civil monetary penalties, and a permanent ban on the defendants participating in any penny stock offerings. The regulator also wants to bar Massey from serving as an officer or director of any public company.

Solar, a Nevada corporation trading under the ticker SIRC on OTC Link, reported total assets of roughly $9 million against total liabilities exceeding $43 million in its most recent disclosure.

No final determination has been made in the case. The SEC has demanded a jury trial.