SEC v. JEFFREY AUERBACH; JARED MITCHELL; and RICHARD BROWN, No. 1:19-cv-5631, Eastern District of New York (Feb. 6, 2024) — Complaint

MARC P. BERGER
REGIONAL DIRECTOR
Sanjay Wadhwa
Sheldon L. Pollock
John O. Enright
Tejal D. Shah
Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
Brookfield Place
200 Vesey Street, Suite 400
New York, New York 10281-1022
(212) 336-0121 (Shah)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE
COMMISSION,

                                             Plaintiff,

                        -against-

JEFFREY AUERBACH,
JARED MITCHELL, and
RICHARD BROWN,

                                             Defendants.

COMPLAINT

19 Civ. _____(       )

JURY TRIAL DEMANDED

Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against
Defendants Jeffrey Auerbach (“Auerbach”), Jared Mitchell (“Mitchell”), and Richard Brown
(“Brown”) (collectively, “Defendants”), alleges as follows:
SUMMARY OF THE ALLEGATIONS
1. From approximately July 2014 through October 2015 (the “Relevant Period”),
Auerbach, a former registered representative (i.e., a stockbroker) and purported investor-relations
professional; Mitchell, a purported investor-relations professional recently imprisoned for a
previous securities fraud conviction; Richard Brown, a then-registered stockbroker; and Gino M.

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Pereira (“Pereira”), the then-CEO of Nxt-ID, Inc. (“NXTD”), a “security technology” company
and public issuer with common stock traded on the Nasdaq Capital Market, defrauded investors
by knowingly or recklessly engaging in a stockbroker bribery scheme.
2. During the Relevant Period, Pereira caused NXTD to enter into purported
“consulting agreements” with investor-relations companies owned by Auerbach and Mitchell to
provide a pretense through which he could funnel bribes to Brown.  That is, Pereira wired
monies out of NXTD’s bank account to the entities’ bank accounts under the guise that the wires
were payments for legitimate investor-relations services, when Pereira, Mitchell, and Auerbach
knew that Mitchell and Auerbach would use at least some portion of the funds to bribe Brown to
buy NXTD stock in his customers’ accounts.
3. In sum, Pereira sent Mitchell and Auerbach at least $136,000, and Mitchell and
Auerbach paid Brown at least $20,000 in cash bribes, in exchange for Brown recommending and
buying more than $750,000 worth of NXTD common stock in his customers’ accounts, without
disclosing the fact or amount of the bribes he received to those customers.
VIOLATIONS
4. By virtue of the foregoing conduct and as alleged further herein, Defendants
violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C.
§ 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a) and (c)].
5. Unless Defendants are restrained and enjoined, they will engage in the acts,
practices, transactions, and courses of business set forth in this Complaint or in acts, practices,
transactions, and courses of business of similar type and object.

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NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
6. The Commission brings this action pursuant to the authority conferred upon it by
Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)].
7. The Commission seeks a final judgment: (a) permanently enjoining each
defendant from engaging in the acts, practices, and courses of business alleged here against him
and from committing future violations of the provisions of the federal securities laws he is
alleged to have violated; (b) ordering Defendants to disgorge the ill-gotten gains they received as
a result of the violations alleged here and to pay prejudgment interest thereon; (c) ordering
Defendants to pay civil money penalties pursuant to Section 21(d)(3) of the Exchange Act [15
U.S.C. § 78u(d)(3)]; (d) permanently prohibiting Mitchell and Brown from participating in any
offering of a penny stock, pursuant to Section 21(d)(6) of the Exchange Act [15 U.S.C.
§ 78u(d)(6)]; and (e) ordering any other and further relief the Court may deem just and proper.
JURISDICTION AND VENUE
8. This Court has jurisdiction over this action pursuant to Section 27 of the
Exchange Act [15 U.S.C. § 78aa].
9. Defendants, directly and indirectly, have made use of the means or
instrumentalities of interstate commerce or of the mails in connection with the transactions, acts,
practices, and courses of business alleged herein.
10. Venue lies in this District under Section 27 of the Exchange Act [15 U.S.C.
§ 78aa] because certain transactions, acts, practices, and courses of business constituting the
violations alleged herein occurred within the Eastern District of New York.  Among other things,
Brown communicated with the Defendants, communicated with his customers, and bought

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NXTD stock in his customers’ accounts while working in his offices on Staten Island and Long
Island in the Eastern District of New York.
DEFENDANTS
11. Auerbach, age 49, resides in New York, New York.  During the Relevant Period,
Auerbach purported to provide investor-relations services to NXTD through two entities:
Excelsior Global Advisors (“Excelsior”), an entity for which he and Mitchell served as
principals, and World Wide Holdings LLC, an entity for which he served as the lone principal.
From approximately September 1993 to November 2013, Auerbach was a registered
representative associated with a series of broker-dealers registered with the Commission.  On
July 15, 2015, Auerbach consented to findings by the Financial Industry Regulatory Authority
(“FINRA”) that he had violated FINRA Rule 2010 by engaging in undisclosed private securities
transactions while working as a registered representative in 2008 and 2009.  Auerbach was fined
$15,000 and suspended from associating with any FINRA member firm for 90 days.  While
working as a registered representative, Auerbach was the subject of multiple customer
complaints alleging, among other things, unsuitability and breach of fiduciary duty.
12. Mitchell, age 37, was recently incarcerated at the U.S. Penitentiary in Lewisburg,
Pennsylvania.  Mitchell purported to provide investor-relations services to NXTD prior to the
Relevant Period while employed at another investor-relations firm and then during the Relevant
Period through Excelsior and Mitchell & Sullivan Holdings, LLC (“M&S Holdings”), an entity
for which he served as a principal.  In 2016, the Commission sued Mitchell and Brown, and a
grand jury in the Eastern District of New York indicted Mitchell and Brown, for their roles in
another fraudulent broker bribery scheme relating to the securities of ForceField Energy Inc.
Mitchell pleaded guilty in the criminal action and consented to a final judgment against him in

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the Commission’s action.  See United States v. Mitchell et al., 16 Cr. 234 (E.D.N.Y.) (Docket
Entry # 94) (hereinafter, “U.S. v. Mitchell”) and SEC v. St. Julien et al., 16-cv-2193 (E.D.N.Y.)
(Docket Entry # 46) (hereinafter, “SEC v. St. Julien”).
13. Brown, age 40, resides in North Bellmore, New York.  During the Relevant
Period, he was a registered representative associated with a Staten Island-based broker-dealer
(“Broker-Dealer-1”) who worked out of Broker-Dealer-1’s Long Island Office.  From
approximately November 1999 to May 2016, Brown was a registered representative associated
with a series of broker-dealers registered with the Commission.  Brown was the subject of
multiple customer complaints alleging, among other things, unsuitability and excessive trading.
In 2016, Brown was sued by the Commission in SEC v. St. Julien and indicted by a grand jury in
the Eastern District of New York in U.S. v. Mitchell.
FACTS
I.    THE FORCEFIELD ENERGY INC. CHARGES
14. On May 13, 2016, the Commission filed a civil injunctive action in this court
against Mitchell, Brown, and others for their roles in a broker bribery scheme relating to the
securities of ForceField Energy Inc.  See SEC v. St. Julien.  Brown and Mitchell were arrested
the same day and indicted by a grand jury in the Eastern District of New York for substantially
the same conduct alleged in the Commission’s complaint.  See U.S. v. Mitchell.  Mitchell pled
guilty to the criminal charges and consented to a final judgment against him in the Commission’s
action.  See U.S. v. Mitchell (Docket Entry # 94); SEC v. St. Julien (Docket Entry # 46).
II.   AUERBACH AND MITCHELL ACTED AS INTERMEDIARIES TO FUNNEL
BRIBES FROM PEREIRA TO BROWN TO PURCHASE NXTD STOCK

15. During the Relevant Period, Pereira retained firms run by Auerbach and/or
Mitchell for the purported purpose of providing investor-relations services to NXTD, with the

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understanding that Auerbach and Mitchell would use at least some portion of the fees that they
received to pay bribes to Brown to purchase NXTD stock in his customers’ accounts.
16. In sum, Pereira sent Mitchell and Auerbach at least $136,000, and Mitchell and
Auerbach paid Brown at least $20,000 in cash bribes, in exchange for Brown recommending and
buying more than $750,000 worth of NXTD common stock in his customers’ accounts.  Brown’s
customers were harmed because unbeknownst to them, Brown’s decision to invest their money
in NXTD was based on the fact that he was being bribed, rather than his view that the investment
was in their best interests.  Brown’s customers suffered losses of more than $100,000 as a result
of his purchases of NXTD’s stock in their accounts.
17. Auerbach, Mitchell, and Pereira frequently communicated about their scheme via
Wickr, an end-to-end encrypted and content-expiring messaging application, to conceal and
destroy their communications concerning the scheme.
A.   From July 2014 to November 2014, Pereira Paid Mitchell Approximately
$74,000, at Least in Part to Bribe Brown to Buy NXTD Stock in His
Customers’ Accounts

18. In or about July 2014, Mitchell introduced Pereira to Brown.  After the meeting,
Mitchell told Pereira that Brown was interested in purchasing NXTD stock in his customers’
accounts at his employer, Broker-Dealer-1, a Staten Island-based registered broker dealer, but
needed a “financial incentive” to do so.
19. On July 8, 2014, Pereira caused NXTD to enter into a two-month “consulting
agreement” with M&S Holdings (“Purported M&S Consulting Agreement”), which Mitchell
controlled.  Under the terms of that agreement, NXTD agreed to pay M&S Holdings a total of
$42,000 in exchange for “investor relations services” that included “advising NXT[D]’s
management concerning marketing ideas, investor profile information, methods of expanding

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NXT[D]’s investor support and increasing investor awareness of NXT[D].”  Mitchell and Pereira
knew, however, that the true purpose of the agreement was to provide a guise through which
NXTD could pay bribes to Brown through M&S Holdings.
20. On July 9, 2014, Brown began purchasing NXTD stock for his customers.
21. Shortly thereafter, Pereira visited Broker-Dealer-1’s office on Long Island where
Brown worked to talk to Brown and other brokers about NXTD.  Following the meeting, Brown
began purchasing more NXTD stock in his customers’ accounts.
22. From July 15, 2014 to September 3, 2014, Pereira caused NXTD to send four
wire transfers totaling $44,000 to M&S Holdings’ bank account, from which Mitchell knowingly
withdrew cash to pay Brown.  In accordance with Pereira and Mitchell’s agreement concerning
the Purported M&S Consulting Agreement, Mitchell used those funds to pay Brown a cash bribe
of at least $5,000.
23. On September 9, 2014, NXTD announced that it had closed on an underwritten
public offering of its common stock and warrants, which caused its stock price to drop.  Brown
complained about this development to Mitchell, who arranged a meeting with Pereira on
September 13, 2014.
24. At the meeting, Brown and Pereira formally agreed that, going forward, Pereira
would pay Brown, in cash and through Mitchell, 10% of the value of NXTD stock that Brown
purchased in his customers’ accounts.
25. Accordingly, from September 24, 2014 to November 20, 2014, Pereira caused
NXTD to send M&S Holdings three additional wires totaling $30,000, and Mitchell withdrew
cash from the account to pay Brown.  For example, in or about October 2014, Brown again met
with Mitchell in Manhattan, where Mitchell paid him a $10,000 cash bribe on behalf of Pereira.

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26. In sum, between July 2014 and November 2014, Pereira paid Mitchell
approximately $74,000, and Mitchell paid Brown at least $15,000 in cash bribes.
27. From July 9, 2014 to December 1, 2014, Brown purchased a total of 231,253
shares of NXTD in his customers’ accounts at a gross cost of more than $566,079.  Brown
knowingly or recklessly failed to tell any of his customers that he was buying NXTD stock in
their accounts because he was being paid bribes by Pereira through Mitchell.
B.    In 2015, Pereira Paid Auerbach and Mitchell Over $62,000, at Least in Part
to Bribe Brown to Buy NXTD Stock in His Customers’ Accounts

28. On January 15, 2015, Pereira caused NXTD to enter into a “Consulting
Agreement” with Excelsior similar to the agreement NXTD had entered into with M&S Holdings
(“Purported Excelsior Consulting Agreement”).
29. Under the terms of this agreement, Excelsior, the investor-relations firm run by
Mitchell and Auerbach, agreed to “[a]ssist [NXTD] in introductions to investor relations
companies, media outlets, analysts or broker dealers” and “conduct meetings in person or by
telephone, with prospective brokers or the investment public.”  In exchange, NXTD agreed to pay
Excelsior a monthly fee of $5,000 and 5,000 shares of common stock.  The agreement also
provided that NXTD would reimburse Excelsior for any expenses that NXTD incurred.  Like the
Purported M&S Consulting Agreement, the Purported Excelsior Consulting Agreement provided
a guise through which Pereira could pay Auerbach and Mitchell to funnel bribes to Brown.
30. On March 3, 2015, Pereira emailed Auerbach asking, “Can we get some support
today?,” indicating that he wanted Auerbach to drive up the volume and price of NXTD stock,
including through paying Brown to purchase the stock in his customers’ accounts.  That day,
Brown purchased 14,000 shares of NXTD stock in two customer accounts, with the trades

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executing at 3:56:21 p.m. and 3:59:28 p.m.  The next day Brown purchased 4,500 shares of
NXTD for a third customer, with the trade executing at 3:51:19 p.m.
31. On September 17, 2015, Mitchell emailed Pereira an invoice addressed to NXTD
and in the amount of $12,000 for a purported “Investor Relations event for brokers and investors.”
Pursuant to the Purported Excelsior Consulting Agreement, NXTD was obligated to reimburse
Excelsior for the expense.
32. The September 17, 2015 invoice was, in reality and as Mitchell knew, not for an
“Investor Relations event for brokers and investors.”  Rather, Mitchell knew the invoice was
being used to disguise the payment of a cash bribe from Pereira to Brown that would be paid
through Mitchell or Auerbach.
33. On September 24, 2015, Pereira caused NXTD to wire $12,000 to a bank account
in the name of Excelsior that Mitchell and Auerbach controlled.
34. Auerbach and Mitchell did not withdraw cash from the Excelsior account to pay a
cash bribe to Brown because they were concerned that a large cash withdrawal might draw
scrutiny from the bank.
35. Instead, Auerbach pawned a Rolex watch he owned, and paid Brown with the
cash he received for the watch.  On September 28, 2015, Auerbach left $5,000 in cash—the
proceeds from the sale of the watch—in an envelope with the doorman at Auerbach’s Manhattan
apartment building.
36. Brown drove to Manhattan that day and picked up the envelope.
37. Brown then texted Auerbach, “Thank you.”
38. Auerbach replied to Brown by text message, saying, “All good.  [The pawn shop
employee] says thanks for the watch.”

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39. Auerbach knew or was reckless in not knowing that he made this payment to
Brown in exchange for Brown’s purchases of NXTD stock in his customers’ accounts.
40. On September 29, 2015, Mitchell disbursed the $12,000 that Pereira had sent to
Excelsior’s bank account five days earlier by issuing a $3,000 check to himself and a $9,000
check to Auerbach.
41. These payments represented compensation for Auerbach’s and Mitchell’s roles in
arranging the bribes to Brown, and in the case of Auerbach, additional compensation to reimburse
him for the value of his Rolex watch.
42. In sum, between January 2015 and October 2015, Pereira caused NXTD to wire
Excelsior a total of $62,689.00, and Auerbach and Mitchell paid Brown at least $5,000 in cash
bribes.
43. During this time period, Brown, operating out of Broker-Dealer-1’s Long Island
office, bought a total of 107,640 additional shares of NXTD stock for his customers at a gross
cost of $235,584.  Brown knowingly or recklessly failed to tell any of his customers that he was
buying NXTD stock in their accounts because he was being paid cash bribes by Pereira through
Mitchell and Auerbach.
CLAIM FOR RELIEF

Violations of Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) Thereunder
(Against All Defendants)

44. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 43.
45. Defendants, by use of the means or instruments of interstate commerce, or of the
mails, or the facility of a national securities exchange, in connection with the purchase or sale of
securities, and with knowledge or recklessness, (1) employed devices, schemes, and artifices to

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defraud; and/or (2) engaged in acts, practices, or courses of business which operates or would
operate as a fraud or deceit upon any person.
46. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert,
have violated and, unless enjoined, will again violate Section 10(b) of the Exchange Act [15
U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a) and (c)].
PRAYER FOR RELIEF
 WHEREFORE, the Commission respectfully requests that the Court enter a Final
Judgment:
I.
Permanently enjoining Defendants and their agents, servants, employees, and attorneys
and all persons in active concert or participation with any of them from violating, directly or
indirectly, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c)
thereunder [17 C.F.R. §§ 240.10b-5(a) and (c)];
II.
Ordering Defendants to disgorge all ill-gotten gains they received directly or indirectly,
with pre-judgment interest thereon, as a result of the alleged violations;
III.
Ordering Defendants to pay civil monetary penalties under Section 21(d)(3) of the
Exchange Act [15 U.S.C. § 78u(d)(3)];

Permanently prohibiting
Mitchell
and
Brown from participating in
any offering of a
p
enny stock, including engaging in activities
with a broker,
dealer, or issuer for purposes of
issuing, trading, or
inducing or attempting to induce the purchase
or
sale
of any penny stock,
u
nder Section 21(d)(6) of the Exchange Act
[15 U.S.C. § 78u(d)(6)]; and
V.
Granting any
other and further relief this Court may
deem just and
proper.
Dated: New York, New
York
October 4, 2019
MARL P. BERGER
R
EGIONAL DIRECTOR
Sanjay
Wadhwa
S
heldon L. Pollock
J
ohn O. Enright
Tejal D. Shah
Attorneys
for
Plaintiff
S
ECURITIES AND EXCHANGE COMMISSION
N
ew
York Regional Office
200 Vesey Street, Suite 400
New
York,
New
York 10281-1022
(212) 336-0121 (Shah)
s
hahte(a,sec.gov
12

MARC P. BERGER  
REGIONAL DIRECTOR 
Sanjay Wadhwa 
Sheldon L. Pollock 
John O. Enright 
Tejal D. Shah 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
Brookfield Place  
200 Vesey Street, Suite 400 
New York, New York 10281-1022 
(212) 336-0121 (Shah) 
 
UNITED STATES DISTRICT COURT 
EASTERN DISTRICT OF NEW YORK 

 
SECURITIES AND EXCHANGE 
COMMISSION, 
 
                                             Plaintiff, 
 
                        -against- 
 
JEFFREY AUERBACH, 
JARED MITCHELL, and 
RICHARD BROWN,    
  
                                             Defendants. 
 

 
 
COMPLAINT 

   
19 Civ. _____(       ) 

 
   

JURY TRIAL DEMANDED 
  

           
          

 
Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against 

Defendants Jeffrey Auerbach (“Auerbach”), Jared Mitchell (“Mitchell”), and Richard Brown 

(“Brown”) (collectively, “Defendants”), alleges as follows: 

SUMMARY OF THE ALLEGATIONS 

1. From approximately July 2014 through October 2015 (the “Relevant Period”), 

Auerbach, a former registered representative (i.e., a stockbroker) and purported investor-relations 

professional; Mitchell, a purported investor-relations professional recently imprisoned for a 

previous securities fraud conviction; Richard Brown, a then-registered stockbroker; and Gino M. 

Case 2:19-cv-05631   Document 1   Filed 10/04/19   Page 1 of 12 PageID #: 1



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Pereira (“Pereira”), the then-CEO of Nxt-ID, Inc. (“NXTD”), a “security technology” company 

and public issuer with common stock traded on the Nasdaq Capital Market, defrauded investors 

by knowingly or recklessly engaging in a stockbroker bribery scheme.   

2. During the Relevant Period, Pereira caused NXTD to enter into purported 

“consulting agreements” with investor-relations companies owned by Auerbach and Mitchell to 

provide a pretense through which he could funnel bribes to Brown.  That is, Pereira wired 

monies out of NXTD’s bank account to the entities’ bank accounts under the guise that the wires 

were payments for legitimate investor-relations services, when Pereira, Mitchell, and Auerbach 

knew that Mitchell and Auerbach would use at least some portion of the funds to bribe Brown to 

buy NXTD stock in his customers’ accounts.   

3. In sum, Pereira sent Mitchell and Auerbach at least $136,000, and Mitchell and 

Auerbach paid Brown at least $20,000 in cash bribes, in exchange for Brown recommending and 

buying more than $750,000 worth of NXTD common stock in his customers’ accounts, without 

disclosing the fact or amount of the bribes he received to those customers.   

VIOLATIONS 

4. By virtue of the foregoing conduct and as alleged further herein, Defendants 

violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C.       

§ 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a) and (c)]. 

5. Unless Defendants are restrained and enjoined, they will engage in the acts, 

practices, transactions, and courses of business set forth in this Complaint or in acts, practices, 

transactions, and courses of business of similar type and object. 

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NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 

6. The Commission brings this action pursuant to the authority conferred upon it by 

Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)]. 

7. The Commission seeks a final judgment: (a) permanently enjoining each 

defendant from engaging in the acts, practices, and courses of business alleged here against him 

and from committing future violations of the provisions of the federal securities laws he is 

alleged to have violated; (b) ordering Defendants to disgorge the ill-gotten gains they received as 

a result of the violations alleged here and to pay prejudgment interest thereon; (c) ordering 

Defendants to pay civil money penalties pursuant to Section 21(d)(3) of the Exchange Act [15 

U.S.C. § 78u(d)(3)]; (d) permanently prohibiting Mitchell and Brown from participating in any 

offering of a penny stock, pursuant to Section 21(d)(6) of the Exchange Act [15 U.S.C. 

§ 78u(d)(6)]; and (e) ordering any other and further relief the Court may deem just and proper. 

JURISDICTION AND VENUE 

8. This Court has jurisdiction over this action pursuant to Section 27 of the 

Exchange Act [15 U.S.C. § 78aa]. 

9. Defendants, directly and indirectly, have made use of the means or 

instrumentalities of interstate commerce or of the mails in connection with the transactions, acts, 

practices, and courses of business alleged herein. 

10. Venue lies in this District under Section 27 of the Exchange Act [15 U.S.C. 

§ 78aa] because certain transactions, acts, practices, and courses of business constituting the 

violations alleged herein occurred within the Eastern District of New York.  Among other things, 

Brown communicated with the Defendants, communicated with his customers, and bought 

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NXTD stock in his customers’ accounts while working in his offices on Staten Island and Long 

Island in the Eastern District of New York.   

DEFENDANTS 

11. Auerbach, age 49, resides in New York, New York.  During the Relevant Period, 

Auerbach purported to provide investor-relations services to NXTD through two entities:  

Excelsior Global Advisors (“Excelsior”), an entity for which he and Mitchell served as 

principals, and World Wide Holdings LLC, an entity for which he served as the lone principal. 

From approximately September 1993 to November 2013, Auerbach was a registered 

representative associated with a series of broker-dealers registered with the Commission.  On 

July 15, 2015, Auerbach consented to findings by the Financial Industry Regulatory Authority 

(“FINRA”) that he had violated FINRA Rule 2010 by engaging in undisclosed private securities 

transactions while working as a registered representative in 2008 and 2009.  Auerbach was fined 

$15,000 and suspended from associating with any FINRA member firm for 90 days.  While 

working as a registered representative, Auerbach was the subject of multiple customer 

complaints alleging, among other things, unsuitability and breach of fiduciary duty.   

12. Mitchell, age 37, was recently incarcerated at the U.S. Penitentiary in Lewisburg, 

Pennsylvania.  Mitchell purported to provide investor-relations services to NXTD prior to the 

Relevant Period while employed at another investor-relations firm and then during the Relevant 

Period through Excelsior and Mitchell & Sullivan Holdings, LLC (“M&S Holdings”), an entity 

for which he served as a principal.  In 2016, the Commission sued Mitchell and Brown, and a 

grand jury in the Eastern District of New York indicted Mitchell and Brown, for their roles in 

another fraudulent broker bribery scheme relating to the securities of ForceField Energy Inc.  

Mitchell pleaded guilty in the criminal action and consented to a final judgment against him in 

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the Commission’s action.  See United States v. Mitchell et al., 16 Cr. 234 (E.D.N.Y.) (Docket 

Entry # 94) (hereinafter, “U.S. v. Mitchell”) and SEC v. St. Julien et al., 16-cv-2193 (E.D.N.Y.) 

(Docket Entry # 46) (hereinafter, “SEC v. St. Julien”).   

13. Brown, age 40, resides in North Bellmore, New York.  During the Relevant 

Period, he was a registered representative associated with a Staten Island-based broker-dealer 

(“Broker-Dealer-1”) who worked out of Broker-Dealer-1’s Long Island Office.  From 

approximately November 1999 to May 2016, Brown was a registered representative associated 

with a series of broker-dealers registered with the Commission.  Brown was the subject of 

multiple customer complaints alleging, among other things, unsuitability and excessive trading.   

In 2016, Brown was sued by the Commission in SEC v. St. Julien and indicted by a grand jury in 

the Eastern District of New York in U.S. v. Mitchell.  

FACTS 

I. THE FORCEFIELD ENERGY INC. CHARGES 

14. On May 13, 2016, the Commission filed a civil injunctive action in this court 

against Mitchell, Brown, and others for their roles in a broker bribery scheme relating to the 

securities of ForceField Energy Inc.  See SEC v. St. Julien.  Brown and Mitchell were arrested 

the same day and indicted by a grand jury in the Eastern District of New York for substantially 

the same conduct alleged in the Commission’s complaint.  See U.S. v. Mitchell.  Mitchell pled 

guilty to the criminal charges and consented to a final judgment against him in the Commission’s 

action.  See U.S. v. Mitchell (Docket Entry # 94); SEC v. St. Julien (Docket Entry # 46).   

II. AUERBACH AND MITCHELL ACTED AS INTERMEDIARIES TO FUNNEL 
BRIBES FROM PEREIRA TO BROWN TO PURCHASE NXTD STOCK  

 
15. During the Relevant Period, Pereira retained firms run by Auerbach and/or 

Mitchell for the purported purpose of providing investor-relations services to NXTD, with the 

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6 
 

understanding that Auerbach and Mitchell would use at least some portion of the fees that they 

received to pay bribes to Brown to purchase NXTD stock in his customers’ accounts.   

16. In sum, Pereira sent Mitchell and Auerbach at least $136,000, and Mitchell and 

Auerbach paid Brown at least $20,000 in cash bribes, in exchange for Brown recommending and 

buying more than $750,000 worth of NXTD common stock in his customers’ accounts.  Brown’s 

customers were harmed because unbeknownst to them, Brown’s decision to invest their money 

in NXTD was based on the fact that he was being bribed, rather than his view that the investment 

was in their best interests.  Brown’s customers suffered losses of more than $100,000 as a result 

of his purchases of NXTD’s stock in their accounts. 

17. Auerbach, Mitchell, and Pereira frequently communicated about their scheme via 

Wickr, an end-to-end encrypted and content-expiring messaging application, to conceal and 

destroy their communications concerning the scheme. 

A. From July 2014 to November 2014, Pereira Paid Mitchell Approximately 
$74,000, at Least in Part to Bribe Brown to Buy NXTD Stock in His 
Customers’ Accounts  

 
18. In or about July 2014, Mitchell introduced Pereira to Brown.  After the meeting, 

Mitchell told Pereira that Brown was interested in purchasing NXTD stock in his customers’ 

accounts at his employer, Broker-Dealer-1, a Staten Island-based registered broker dealer, but 

needed a “financial incentive” to do so. 

19. On July 8, 2014, Pereira caused NXTD to enter into a two-month “consulting 

agreement” with M&S Holdings (“Purported M&S Consulting Agreement”), which Mitchell 

controlled.  Under the terms of that agreement, NXTD agreed to pay M&S Holdings a total of 

$42,000 in exchange for “investor relations services” that included “advising NXT[D]’s 

management concerning marketing ideas, investor profile information, methods of expanding 

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NXT[D]’s investor support and increasing investor awareness of NXT[D].”  Mitchell and Pereira 

knew, however, that the true purpose of the agreement was to provide a guise through which 

NXTD could pay bribes to Brown through M&S Holdings. 

20. On July 9, 2014, Brown began purchasing NXTD stock for his customers.   

21. Shortly thereafter, Pereira visited Broker-Dealer-1’s office on Long Island where 

Brown worked to talk to Brown and other brokers about NXTD.  Following the meeting, Brown 

began purchasing more NXTD stock in his customers’ accounts.   

22. From July 15, 2014 to September 3, 2014, Pereira caused NXTD to send four 

wire transfers totaling $44,000 to M&S Holdings’ bank account, from which Mitchell knowingly 

withdrew cash to pay Brown.  In accordance with Pereira and Mitchell’s agreement concerning 

the Purported M&S Consulting Agreement, Mitchell used those funds to pay Brown a cash bribe 

of at least $5,000.  

23. On September 9, 2014, NXTD announced that it had closed on an underwritten 

public offering of its common stock and warrants, which caused its stock price to drop.  Brown 

complained about this development to Mitchell, who arranged a meeting with Pereira on 

September 13, 2014.   

24. At the meeting, Brown and Pereira formally agreed that, going forward, Pereira 

would pay Brown, in cash and through Mitchell, 10% of the value of NXTD stock that Brown 

purchased in his customers’ accounts.   

25. Accordingly, from September 24, 2014 to November 20, 2014, Pereira caused 

NXTD to send M&S Holdings three additional wires totaling $30,000, and Mitchell withdrew 

cash from the account to pay Brown.  For example, in or about October 2014, Brown again met 

with Mitchell in Manhattan, where Mitchell paid him a $10,000 cash bribe on behalf of Pereira.   

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26. In sum, between July 2014 and November 2014, Pereira paid Mitchell 

approximately $74,000, and Mitchell paid Brown at least $15,000 in cash bribes.   

27. From July 9, 2014 to December 1, 2014, Brown purchased a total of 231,253 

shares of NXTD in his customers’ accounts at a gross cost of more than $566,079.  Brown 

knowingly or recklessly failed to tell any of his customers that he was buying NXTD stock in 

their accounts because he was being paid bribes by Pereira through Mitchell.   

B. In 2015, Pereira Paid Auerbach and Mitchell Over $62,000, at Least in Part 
to Bribe Brown to Buy NXTD Stock in His Customers’ Accounts 

 
28. On January 15, 2015, Pereira caused NXTD to enter into a “Consulting 

Agreement” with Excelsior similar to the agreement NXTD had entered into with M&S Holdings 

(“Purported Excelsior Consulting Agreement”).   

29. Under the terms of this agreement, Excelsior, the investor-relations firm run by 

Mitchell and Auerbach, agreed to “[a]ssist [NXTD] in introductions to investor relations 

companies, media outlets, analysts or broker dealers” and “conduct meetings in person or by 

telephone, with prospective brokers or the investment public.”  In exchange, NXTD agreed to pay 

Excelsior a monthly fee of $5,000 and 5,000 shares of common stock.  The agreement also 

provided that NXTD would reimburse Excelsior for any expenses that NXTD incurred.  Like the 

Purported M&S Consulting Agreement, the Purported Excelsior Consulting Agreement provided 

a guise through which Pereira could pay Auerbach and Mitchell to funnel bribes to Brown. 

30. On March 3, 2015, Pereira emailed Auerbach asking, “Can we get some support 

today?,” indicating that he wanted Auerbach to drive up the volume and price of NXTD stock, 

including through paying Brown to purchase the stock in his customers’ accounts.  That day, 

Brown purchased 14,000 shares of NXTD stock in two customer accounts, with the trades 

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executing at 3:56:21 p.m. and 3:59:28 p.m.  The next day Brown purchased 4,500 shares of 

NXTD for a third customer, with the trade executing at 3:51:19 p.m.   

31. On September 17, 2015, Mitchell emailed Pereira an invoice addressed to NXTD 

and in the amount of $12,000 for a purported “Investor Relations event for brokers and investors.”  

Pursuant to the Purported Excelsior Consulting Agreement, NXTD was obligated to reimburse 

Excelsior for the expense. 

32. The September 17, 2015 invoice was, in reality and as Mitchell knew, not for an 

“Investor Relations event for brokers and investors.”  Rather, Mitchell knew the invoice was 

being used to disguise the payment of a cash bribe from Pereira to Brown that would be paid 

through Mitchell or Auerbach.   

33. On September 24, 2015, Pereira caused NXTD to wire $12,000 to a bank account 

in the name of Excelsior that Mitchell and Auerbach controlled.   

34. Auerbach and Mitchell did not withdraw cash from the Excelsior account to pay a 

cash bribe to Brown because they were concerned that a large cash withdrawal might draw 

scrutiny from the bank. 

35. Instead, Auerbach pawned a Rolex watch he owned, and paid Brown with the 

cash he received for the watch.  On September 28, 2015, Auerbach left $5,000 in cash—the 

proceeds from the sale of the watch—in an envelope with the doorman at Auerbach’s Manhattan 

apartment building.   

36. Brown drove to Manhattan that day and picked up the envelope.   

37. Brown then texted Auerbach, “Thank you.”  

38. Auerbach replied to Brown by text message, saying, “All good.  [The pawn shop 

employee] says thanks for the watch.”   

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39. Auerbach knew or was reckless in not knowing that he made this payment to 

Brown in exchange for Brown’s purchases of NXTD stock in his customers’ accounts.   

40. On September 29, 2015, Mitchell disbursed the $12,000 that Pereira had sent to 

Excelsior’s bank account five days earlier by issuing a $3,000 check to himself and a $9,000 

check to Auerbach.   

41. These payments represented compensation for Auerbach’s and Mitchell’s roles in 

arranging the bribes to Brown, and in the case of Auerbach, additional compensation to reimburse 

him for the value of his Rolex watch. 

42. In sum, between January 2015 and October 2015, Pereira caused NXTD to wire 

Excelsior a total of $62,689.00, and Auerbach and Mitchell paid Brown at least $5,000 in cash 

bribes.   

43. During this time period, Brown, operating out of Broker-Dealer-1’s Long Island 

office, bought a total of 107,640 additional shares of NXTD stock for his customers at a gross 

cost of $235,584.  Brown knowingly or recklessly failed to tell any of his customers that he was 

buying NXTD stock in their accounts because he was being paid cash bribes by Pereira through 

Mitchell and Auerbach.   

CLAIM FOR RELIEF 
 

Violations of Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) Thereunder 
(Against All Defendants) 

 
44. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 43. 

45. Defendants, by use of the means or instruments of interstate commerce, or of the 

mails, or the facility of a national securities exchange, in connection with the purchase or sale of 

securities, and with knowledge or recklessness, (1) employed devices, schemes, and artifices to 

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defraud; and/or (2) engaged in acts, practices, or courses of business which operates or would 

operate as a fraud or deceit upon any person. 

46. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert, 

have violated and, unless enjoined, will again violate Section 10(b) of the Exchange Act [15 

U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a) and (c)]. 

PRAYER FOR RELIEF 

 WHEREFORE, the Commission respectfully requests that the Court enter a Final 

Judgment: 

I. 

Permanently enjoining Defendants and their agents, servants, employees, and attorneys 

and all persons in active concert or participation with any of them from violating, directly or 

indirectly, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) 

thereunder [17 C.F.R. §§ 240.10b-5(a) and (c)];  

II. 

Ordering Defendants to disgorge all ill-gotten gains they received directly or indirectly, 

with pre-judgment interest thereon, as a result of the alleged violations; 

III. 

Ordering Defendants to pay civil monetary penalties under Section 21(d)(3) of the 

Exchange Act [15 U.S.C. § 78u(d)(3)];  

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Permanently prohibiting Mitchell and Brown from participating in any offering of a

penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of

issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock,

under Section 21(d)(6) of the Exchange Act [15 U.S.C. § 78u(d)(6)]; and

V.

Granting any other and further relief this Court may deem just and proper.

Dated: New York, New York
October 4, 2019

MARL P. BERGER
REGIONAL DIRECTOR
Sanjay Wadhwa
Sheldon L. Pollock
John O. Enright
Tejal D. Shah
Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
200 Vesey Street, Suite 400
New York, New York 10281-1022
(212) 336-0121 (Shah)
shahte(a,sec.gov

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