Proposed judgment with a "master strategist" in a "lucrative market manipulation" of $ 27 million

The Securities and Exchange Commission on Monday filed a draft judgment against Florida businessman Barry Honig in a civil case involving allegations of manipulation of three micro-cap actions.

The SEC has also filed a draft judgment against GRQ Consultants, a Florida-based company owned and operated by Honig, according to court documents released Monday.

Neither Honig nor the GRQ accepts or denies the allegations of the SEC, according to the proposed judgments.

Honig signed the two proposed judgments. In each of them, he agreed that civil penalties would be decided later, being barred from offering shares quoted in cents and holding more than 4.99% of the shares listed in cents, among other restrictions.

Michael Osnato, Honig's attorney who signed the proposed judgments, did not immediately respond to CNBC's request for comment. The other lawyers in Honig also did not respond immediately.

The SEC declined to comment beyond the court filings.

In April, the SEC filed a petition stating that it had reached an agreement in principle on the settlement with Honig. However, subsequent court documents suggested that there may not have been a settlement.

In September, the SEC said it had indicted a group of 10 people and 10 badociated entities, including Honig, as well as John O. Rourke, former CEO of Riot Blockchain, a cryptocurrency company from a survey by CNBC last year. . The case has no connection with Riot Blockchain.

O & # Rourke left Riot as a result of the allegations.

According to a press release, the SEC said the project had generated more than 27 million US dollars from allegedly illegal stock sales. Honig and its badociates, also based in South Florida, manipulated the shares of three companies in "pumping" programs, where they allegedly acquired shares at reduced prices and artificially raised prices before selling, according to the press release. Riot Blockchain was not one of the companies.

"Honig was the main strategist, inviting other defendants to buy or sell shares, to organize the issuance of shares, to negotiate transactions and / or to engage in promotional activities" as part of of a $ 27 million program, according to the SEC amended complaint, filed in March.

The agency has already settled in whole or in part with nine defendants, including billionaire of biotechnology in Miami, Phillip Frost, according to documents filed by the court.

The SEC case is a civil case, but criminal prosecution could be initiated. According to a transcript of the May hearing in the SEC case, the US Attorney's Office in San Francisco opened a parallel investigation that could include O & # 39; Rourke. No other details are publicly known.

"My understanding is that they [the U.S. Attorney’s Office] now have a cooperating witness and things have slowed down, "said O'Rourke's attorney, Gregory Morvillo, at a hearing in May, according to the trial transcript.

The witness, he said, is "among the accused in this group, I believe, [who] began to cooperate, and a criminal case could soon be engaged, "according to the transcript.

Morvillo and his co-counsel for O. Rourke did not respond to CNBC's request for comment.

A spokesman for the US Attorney's Office could not "confirm the existence or non-existence in this district of an investigation into these parts or issues".

The judgments proposed by Honig and others in the signed case read: "… this consent only resolves claims against the defendant in this civil proceeding." The respondent acknowledges that no promise or representation has been made made by the Commission … with regard to the criminal liability that may have arisen or could arise from the facts underlying this action … ", according to court documents.

An investigation by CNBC in February 2018 revealed a number of alarm signals at Riot Blockchain, including last minute postponed annual meetings, stock sales by insiders shortly after the change of ownership. name of the company, dilutive issuance of shares on favorable terms for large investors, confusion between SEC files and evidence that a significant shareholder was selling shares while all others were buying. The SEC's case is not related to Riot.

While the price of bitcoin reached record highs at the end of December 2017, Riot made the news daily. Shares of the company have exploded from $ 8 to over $ 40, while investors have continued the craze for crypto.

CNBC visited the offices of GRQ Consultants in early 2018 during the investigation to interview Honig, but found O 'Rourke in the office.

O & # Rourke declined an interview for the initial investigation but agreed to answer questions via e-mail. One of CNBC's first questions was whether he was working in the same office as Honig, which could raise eyebrows.

"I have my own office in a separate place," said Rourke in an e-mail sent by his lawyer, Nick Morgan, a partner of Paul Hastings, in February 2018. "I have good relationship with Mr. Honig and speaks to us often. "

"John O 'Rourke is not working at my office," said Honig during an interview in February 2018. "John O'Rourke has his own office … at one point, John O & R Rourke had room in my office … we talk often. "

The securities attorneys told CNBC that if a CEO was using the office of a major investor, this could raise concerns about the exchange of information.

"You simply can not imagine that the CEO and the investor will create an appropriate wall between them, in which they will not engage in discussions or discussions about what is appropriate for the company on a daily basis or in the future, "Richard Birns, a partner with Gibson, Dunn & Crutcher LLP, told CNBC in his initial investigation.