SEC v. ADAM R. LONG; L2 CAPITAL, LLC; and OASIS CAPITAL, LLC, No. 1:23-cv-14260, Northern District of Illinois (Sept. 28, 2023) — Complaint

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

SECURITIES AND EXCHANGE    )
COMMISSION,     )
       )
   Plaintiff,   )
       )          Case No.
  v.     )
       )
ADAM R. LONG, L2 CAPITAL, LLC, and ) Jury Trial Demanded
OASIS CAPITAL, LLC,         )
       )
   Defendants.      )

COMPLAINT

 Plaintiff, Securities and Exchange Commission (“SEC”), alleges as follows:
Summary
1. Beginning in November 2018, Defendants Adam R. Long (“Long”), L2 Capital,
LLC (“L2”), and Oasis Capital, LLC (“Oasis”) (collectively the “Defendants”), violated Section
15(a)(1) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78o(a)(1).  More
specifically, Defendants Long, L2 and Oasis operated as securities dealers without registering
with the SEC.
2. While acting as unregistered dealers, Defendants regularly engaged in the
business of purchasing securities known as convertible promissory notes from small companies
that needed cash and issued penny stocks (“penny stock” companies) or other shares that trade at
very low prices (“microcap” companies).  Defendants then converted those notes into publicly
tradeable stock at a significant discount from prevailing market prices, and promptly sold those
newly-issued shares into the public markets.

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3. Utilizing this business model, Defendants engaged in at least 20 convertible note
transactions, involving at least 15 different companies issuing stock, and acquired and sold more
than 5.8 billion shares of stock into the public markets.  Defendants’ illegal activities generated
at least $20 million in profits, while diluting the value of shares held by other shareholders.
4. None of the Defendants were registered with the SEC as broker-dealers, were
associated with SEC-registered broker-dealers, or were otherwise exempt from registration with
the SEC during the course of their conduct.
5. Accordingly, each of the Defendants have violated Section 15(a)(1) of the
Exchange Act, 15 U.S.C. § 78o(a).  In the alternative, Long controlled L2 and Oasis during the
time period at issue and may be held liable for their violations under Section 20(a) of the
Exchange Act, 15 U.S.C. § 78t(a).
6. The SEC seeks a permanent injunction against each of the Defendants,
disgorgement of their ill-gotten gains on a joint and several basis, with prejudgment interest, a
substantial civil penalty against each Defendant, and an order barring Defendants from
participating in any future issuances of penny stocks.
Jurisdiction and Venue
7. The Commission brings this action pursuant to Section 21(d) of the Exchange
Act, 15 U.S.C. § 78u(d).  This Court has jurisdiction over this action pursuant to Section 27 of
the Exchange Act, 15 U.S.C. § 78aa, and 28 U.S.C. § 1331.
8. Venue is proper in this Court pursuant to Section 27(a) of the Exchange Act, 15
U.S.C. § 78aa, because Defendants transacted business in this district, and some of the acts,
practices, and courses of business constituting the securities violations alleged herein occurred
within this district.  Defendants retained two contractors who reside and performed work for

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Defendants within this District to assist them in the activities which constituted violations of the
securities laws.  There are also shareholder-victims who reside within this District.
Defendants
9. Adam R. Long is a resident of Puerto Rico.  He has substantial experience with,
and knowledge about, the securities industry.  At various times between 2003 and 2016, Long
was associated with several broker-dealers registered with the SEC.  Long previously held at
least eight securities licenses.
10. L2 Capital, LLC is a Kansas limited liability company with its principal place of
business in Dorado, Puerto Rico.  Long has solely owned and controlled L2 since December
2018.
11. Oasis Capital, LLC is a Puerto Rico limited liability company with its principal
place of business in Dorado, Puerto Rico.  Long has solely owned and controlled Oasis since its
formation in July 2018.
Factual Allegations
12. During the entire period of time at issue in this case, Long owned, controlled and
funded both L2 and Oasis.  In addition, Long made all investment and trading decisions on
behalf of both companies, including all of the transactions described below.
A. Defendants’ Convertible Note Strategy
13. Beginning in November of 2018, Defendants regularly acquired convertible notes,
which are a type of short-term debt security, from small companies that needed cash and issued
penny stocks (penny stock companies) or other low-value securities (microcap companies).
Because these issuers often had minimal assets, negative cash flows, and limited operating
histories, Defendants were able to negotiate highly favorable terms for the convertible notes.

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14. Defendants typically purchased convertible promissory notes with market-
adjustable pricing, which allowed them to convert those notes into shares of stock of the issuing
penny stock or microcap company at a discounted price that was a fraction of the lowest volume-
weighted average share price within a given period (“Variable Convertible Note Transactions”).
Those discounts generally ranged from 10 to 50 percent less than the lowest trading price of the
stock in the 15 to 30 days preceding each conversion.
15. Defendants also obtained an original issuer’s discount (“OID”) when L2 and/or
Oasis purchased a note.  The amount of the OID varied, but typically was approximately 10
percent of the total note amount.
16. The face value of the notes Defendants obtained in the Variable Convertible Note
Transactions ranged from a low of around $78,000 to a high of about $5 million.  In addition, the
penny stock and microcap companies often paid L2 or Oasis a fee of between $8,000 and
$25,000, in each transaction, ostensibly to cover their transaction costs.
17. Defendants pursued Variable Convertible Note Transactions with companies that
had high trading volumes in order to facilitate the Defendants’ rapid sale of shares after
conversion.  For this same reason, Defendants also sought out penny stock and microcap
companies that were current in their required SEC filings.
18. In most cases, the penny stock and microcap companies with whom L2 and Oasis
entered into Variable Convertible Note Transactions did not make the required payments under
the notes.  So L2 and/or Oasis exercised the right to convert the amount due under the notes into
newly-issued shares, and then sold the shares into the public market.

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19.  Defendants often converted debt to shares in small amounts, because the notes
typically restricted Defendants’ stock ownership to less than 5 percent or 10 percent of the
issuer’s outstanding shares.
20. Typically, Defendants began selling the converted company shares within three
trading days after the shares were deposited into their brokerage accounts.  But Defendants
frequently sold shares on the same day, or the very next day, after the shares were deposited.
21. Once the newly-issued shares were deposited into Defendants’ brokerage
accounts, they often began selling immediately and sold on consecutive trading days until all the
newly-issued shares were sold.
22. Defendants also aimed to limit their sales to a certain percentage of the daily
trading volume in a company’s stock, which generally was between 10 percent and 20 percent.
23. Because the Defendants usually sold the converted shares promptly after
conversion, the majority of Defendants’ profits from the Variable Convertible Note Transactions
did not result from any appreciation of the stock prices.  Instead, Defendants profited through the
sale of shares they acquired at discounted prices upon conversation of the notes, as well as
through the OID.
 24. Defendants’ repeated conversions of notes into stock, and their subsequent sales
of newly-issued and freely-trading shares, significantly increased the amount of publicly-issued
stock for each company that had issued the notes to Defendants.  As a result, Defendants’ sales
diluted the value of the shares held by existing shareholders and frequently depressed the issuing
companies’ stock prices.

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B. Defendants Represented Themselves as Securities Dealers
25. Defendants held themselves out to the public as dealers who were willing to buy
convertible notes as part of their regular business operations, including through their websites,
email and phone solicitations, and industry conference appearances.  Long also relied upon a
network of investment bankers, brokers and attorneys to find deals for L2 and Oasis.
26. Between November 2018 and January 2019, L2 and Oasis solicited issuers to
participate in Variable Convertible Note Transactions via email.  Thereafter, L2 and Oasis
primarily relied on Long’s contacts in the financial industry to locate potential Variable
Convertible Note Transactions.
27. From early 2019 through September 2019, L2’s website described the company as
a private investment firm that engaged in convertible debt, preferred equity and discounted
equity transactions.  This website had an investment inquiry form and an email address that
potential counterparties could use to contact L2.  After September 2019, L2’s website merely
showed its logo, and later Oasis’ logo, with no description of the businesses.
28. Long also attended approximately 20 financial industry conferences during which
he met with multiple penny stock and microcap issuers and marketed Defendants’ interest in
purchasing convertible notes.  For example, on February 20, 2020, Long sent an email to
representatives of an issuer, which stated: “Good seeing you guys this week.  I hope you enjoyed
the conference.  Attached is a convertible note proposal.”
29. Long retained at least five independent contractors to help him identify potential
Variable Convertible Note Transactions for L2 and Oasis.  Long also retained two contractors,
who lived and worked in the Northwest suburbs of Chicago, Illinois, to provide essential back-

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office, accounting and trading services.  These two contractors, and Long, received all emails
sent to L2’s and Oasis’ general email addresses.
30. These back-office contractors were also responsible for communicating with
transfer agents, broker-dealers and issuers (all of whom were subject to SEC registration
requirements) and ensuring that L2 and Oasis acquired the shares converted from the Variable
Convertible Note Transactions and were able to sell the shares into the public securities market.
They tracked L2’s and Oasis’ ability to convert debt to shares, issued conversion notices, ensured
that  restrictions on the sale of shares were removed, and provided the information needed to
ensure that free-trading shares were deposited into L2’s and Oasis’ accounts held at SEC-
registered broker-dealers.
31. Long personally negotiated with the companies which issued penny stock and
microcap stock for the purchase of the notes in the Variable Convertible Note Transactions.
Long signed all of the corresponding agreements on behalf of L2 and Oasis.
C. Long Transitioned His Business from L2 to Oasis
32. In the middle of 2019, Long began to wind down L2’s business operations as part
of a plan to use Oasis for any future Variable Convertible Note Transactions.  Long began this
wind down after the SEC filed a lawsuit against Individual 1, who was his former business
partner in L2.  In fact, by December of 2018, Long had become aware that the SEC might file
suit against Individual 1.
33. That lawsuit was SEC v. River North Equity, LLC, et. al., Case No. 19-cv-1711,
filed in April 2019 in the U.S. District Court for the Northern District of Illinois.  Among other
things, the SEC’s complaint in River North alleged that Individual 1 and a company operated by
Individual 1 had acted as unregistered securities dealers by purchasing convertible debt at a

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discount from prevailing market prices and then selling millions of shares of stock to the public
at market prices.
34. L2 continued to convert debt due under the convertible notes it owned into
publicly-tradeable shares, and then sold the shares into the market to investors living throughout
the United States, including in this District.  L2 also assigned some convertible notes and shares
converted through Variable Convertible Note Transactions to Oasis.
35. In late 2020 and early 2021, Defendants transitioned from trading primarily penny
stocks and began targeting microcap issuers with stock trading on the Nasdaq stock market
(“Nasdaq”).
D. Defendants’ Activities As Unregistered Dealers Yielded Significant Profits
36. Defendants engaged in at least 20 Variable Convertible Note Transactions with at
least 15 microcap or penny stock companies between November 2018 and August 2021.
Defendants have converted and sold more than 5.8 billion shares of stock through Variable
Convertible Note Transactions, nearly all of which were penny stocks.
37. Initially, Defendants mainly entered Variable Convertible Note Transactions with
issuers of penny stocks trading on the Over-the-Counter (“OTC”) market.    In total, Defendants
sold more than 5.75 billion shares of penny stocks.
38. Defendants often reaped significant profits on their Variable Convertible Note
Transactions within a short period of time.  For example, on December 2, 2019, Oasis acquired a
Variable Convertible Note from Issuer 1 for up to $575,682.  Oasis’ purchase price for the Issuer
1 note was only $500,000, after deducting $68,182 for the OID and $7,500 for Oasis’
transactional expenses.

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39. However, according to Defendants’ transaction records, Oasis made only an
initial payment of $125,000 to Issuer 1 to obtain the note and did not pay the remainder of the
purchase price.  The 300,000 shares from the first conversion of debt were deposited into Oasis’
brokerage account on August 31, 2020.  Oasis began selling the shares the next day and sold all
of the shares from that first conversion into the open market within ten days.
40. Oasis converted additional shares of stock from the Issuer 1 note on four more
occasions through January 29, 2021.  Each time Oasis converted more shares, it did so at a 25
percent discount from the lowest trading price in the 30 days before the conversion.  In total,
Oasis acquired and sold 5,161,851 shares from the Issuer 1 note and received net proceeds of
$1,247,028.
41. Defendants’ Variable Convertible Note Transactions generated at least $20
million in profits for L2 and Oasis.  Defendants also significantly increased the amount of
publicly-issued stock for each company that issued notes to Defendants, diluted the value of
shares held by other shareholders, and frequently lowered those companies’ stock prices.
42. As described above, Defendants acted as securities dealers because they regularly
purchased and sold securities as part of a regular business.  Defendants did not qualify for any
statutory exemption from registration, and should have registered as dealers with the SEC.
43. By failing to register with the SEC as dealers under the Exchange Act, Defendants
evaded important protections to investors and the markets, including obligations that promote
market stability.  Defendants also avoided complying with important regulatory requirements,
including the obligation to disclose material information regarding business ownership and
conflicts of interest, follow financial responsibility rules, maintain required books and records
and join a national security exchange or self-regulatory organization (“SRO”).

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44. Defendants sold stock from small public companies that traded at less than five
dollars per share and did not meet any of the exceptions from the definition of a “penny stock,”
as defined by Section 3(a)(51) of the Exchange Act and Rule 3a51-1 thereunder.  15 U.S.C. §
78c(a)(51); 17 C.F.R. § 240.3a51-1.

Count I
Violations of Section 15(a)(1) of the Exchange Act
(Against All Defendants)

45. The SEC incorporates and realleges paragraphs 1 through 44 as if fully set forth
herein.
46. By engaging in the conduct described above, Defendants, acting as securities
dealers, made use of the mails or means and instrumentalities of interstate commerce to affect
transactions in, or induce or attempt to induce the purchase or sale of a security, without being
registered with the SEC.
47. By reason of the foregoing, Defendants violated Section 15(a) of the Exchange
Act, 15 U.S.C. § 78o(a).

Count II
Violations of Section 15(a)(1) of the Exchange Act
In the Alternative Under Section 20(a) of the Exchange Act
(Against Long as a Control Person of L2 and Oasis)

48. The SEC incorporates and realleges paragraphs 1 through  44 as if fully set forth
herein.
49. As alleged above, defendants L2 and Oasis violated Section 15(a)(1) of the
Exchange Act, 15 U.S.C. § 78o(a)(1).

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50. At all relevant times, defendant Long was a control person of defendants L2 and
Oasis for purposes of Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a).
51. At all relevant times, defendant Long exercised power and control over
defendants L2 and Oasis, including by managing and directing those entities, and by directing
and participating in the acts constituting L2’s and Oasis’ violations of the securities laws.
52. By reason of the foregoing, defendant Long is liable as a control person under
Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), for defendants L2’s    and Oasis’ violations
of the Section 15(a) of the Exchange Act, 15 U.S.C. § 78o(a)(1).

Relief Requested
 WHEREFORE, the SEC respectfully requests that this Court:
I.
 Issue findings of fact and conclusions of law that Defendants committed the violations
charged and alleged herein.
II.
 Issue a permanent injunction restraining and enjoining Defendants, their officers, agents,
servants, employees, attorneys and those persons in active concert or participation with
Defendants who receive actual notice of the Order, by personal service or otherwise, and each of
them from, directly or indirectly, engaging in the transactions, acts, practices or courses of
business described above, or in conduct of similar purport and object, in violation of Section
15(a)(1) of the Exchange Act, 15 U.S.C. § 78o(a)(1).
III.
Issue an order precluding each of the Defendants from participating, directly or

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indirectly, including but not limited to through any entity they control, in any offering of penny
stocks.
IV.
 Enter an Order requiring Defendants to disgorge, on a joint and several basis, the ill-
gotten gains that they received, directly or indirectly, from the violations alleged herein,
including prejudgment interest, pursuant to Sections 21(d)(3), (5) and (7) of the Exchange Act,
15 U.S.C. §§ 78u(d)(3), (5), (7).
V.
Order Defendants to pay civil penalties pursuant to Section 21(d)(3) of the Exchange Act,
15 U.S.C. § 78u(d)(3).
VI.
 Retain jurisdiction of this action in accordance with the principles of equity and the
Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and
decrees that may be entered or to entertain any suitable application or motion for additional relief
within the jurisdiction of this Court.
VII.
 Grant such other relief as this Court deems appropriate.

JURY DEMAND

 Pursuant to Rule 38 of the Federal Rules of Civil Procedure, the SEC hereby requests a
trial by jury.

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      UNITED STATES SECURITIES
       AND EXCHANGE COMMISSION

      By: /s/Robert M. Moye______________
      Robert M. Moye ([email protected])
      Regina LaMonica ([email protected])
       U.S. Securities and Exchange Commission
      Chicago Regional Office
      175 West Jackson Blvd., Suite 1450
      Chicago, IL 60604
           (312) 353-1051

Attorneys for Plaintiff, Securities and Exchange
Commission

UNITED STATES DISTRICT COURT 
NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 
 
SECURITIES AND EXCHANGE    ) 
COMMISSION,     ) 
       )    
   Plaintiff,   ) 
       )          Case No.   
  v.     )  
       )  
ADAM R. LONG, L2 CAPITAL, LLC, and ) Jury Trial Demanded 
OASIS CAPITAL, LLC,     )     
       ) 
   Defendants.   )   
 

COMPLAINT 
 

 Plaintiff, Securities and Exchange Commission (“SEC”), alleges as follows:   

Summary 

1. Beginning in November 2018, Defendants Adam R. Long (“Long”), L2 Capital, 

LLC (“L2”), and Oasis Capital, LLC (“Oasis”) (collectively the “Defendants”), violated Section 

15(a)(1) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78o(a)(1).  More 

specifically, Defendants Long, L2 and Oasis operated as securities dealers without registering 

with the SEC.   

2. While acting as unregistered dealers, Defendants regularly engaged in the 

business of purchasing securities known as convertible promissory notes from small companies 

that needed cash and issued penny stocks (“penny stock” companies) or other shares that trade at 

very low prices (“microcap” companies).  Defendants then converted those notes into publicly 

tradeable stock at a significant discount from prevailing market prices, and promptly sold those 

newly-issued shares into the public markets.   

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3. Utilizing this business model, Defendants engaged in at least 20 convertible note 

transactions, involving at least 15 different companies issuing stock, and acquired and sold more 

than 5.8 billion shares of stock into the public markets.  Defendants’ illegal activities generated 

at least $20 million in profits, while diluting the value of shares held by other shareholders.   

4. None of the Defendants were registered with the SEC as broker-dealers, were 

associated with SEC-registered broker-dealers, or were otherwise exempt from registration with 

the SEC during the course of their conduct.   

5. Accordingly, each of the Defendants have violated Section 15(a)(1) of the 

Exchange Act, 15 U.S.C. § 78o(a).  In the alternative, Long controlled L2 and Oasis during the 

time period at issue and may be held liable for their violations under Section 20(a) of the 

Exchange Act, 15 U.S.C. § 78t(a).   

6. The SEC seeks a permanent injunction against each of the Defendants, 

disgorgement of their ill-gotten gains on a joint and several basis, with prejudgment interest, a 

substantial civil penalty against each Defendant, and an order barring Defendants from 

participating in any future issuances of penny stocks.   

Jurisdiction and Venue 

7. The Commission brings this action pursuant to Section 21(d) of the Exchange 

Act, 15 U.S.C. § 78u(d).  This Court has jurisdiction over this action pursuant to Section 27 of 

the Exchange Act, 15 U.S.C. § 78aa, and 28 U.S.C. § 1331.  

8. Venue is proper in this Court pursuant to Section 27(a) of the Exchange Act, 15 

U.S.C. § 78aa, because Defendants transacted business in this district, and some of the acts, 

practices, and courses of business constituting the securities violations alleged herein occurred 

within this district.  Defendants retained two contractors who reside and performed work for 

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3 
 

Defendants within this District to assist them in the activities which constituted violations of the 

securities laws.  There are also shareholder-victims who reside within this District. 

Defendants 

9. Adam R. Long is a resident of Puerto Rico.  He has substantial experience with, 

and knowledge about, the securities industry.  At various times between 2003 and 2016, Long 

was associated with several broker-dealers registered with the SEC.  Long previously held at 

least eight securities licenses. 

10. L2 Capital, LLC is a Kansas limited liability company with its principal place of 

business in Dorado, Puerto Rico.  Long has solely owned and controlled L2 since December 

2018. 

11. Oasis Capital, LLC is a Puerto Rico limited liability company with its principal 

place of business in Dorado, Puerto Rico.  Long has solely owned and controlled Oasis since its 

formation in July 2018.    

Factual Allegations 

12. During the entire period of time at issue in this case, Long owned, controlled and 

funded both L2 and Oasis.  In addition, Long made all investment and trading decisions on 

behalf of both companies, including all of the transactions described below. 

A. Defendants’ Convertible Note Strategy   

13. Beginning in November of 2018, Defendants regularly acquired convertible notes, 

which are a type of short-term debt security, from small companies that needed cash and issued 

penny stocks (penny stock companies) or other low-value securities (microcap companies).  

Because these issuers often had minimal assets, negative cash flows, and limited operating 

histories, Defendants were able to negotiate highly favorable terms for the convertible notes. 

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4 
 

14. Defendants typically purchased convertible promissory notes with market-

adjustable pricing, which allowed them to convert those notes into shares of stock of the issuing 

penny stock or microcap company at a discounted price that was a fraction of the lowest volume-

weighted average share price within a given period (“Variable Convertible Note Transactions”).  

Those discounts generally ranged from 10 to 50 percent less than the lowest trading price of the 

stock in the 15 to 30 days preceding each conversion.   

15. Defendants also obtained an original issuer’s discount (“OID”) when L2 and/or 

Oasis purchased a note.  The amount of the OID varied, but typically was approximately 10 

percent of the total note amount. 

16. The face value of the notes Defendants obtained in the Variable Convertible Note 

Transactions ranged from a low of around $78,000 to a high of about $5 million.  In addition, the 

penny stock and microcap companies often paid L2 or Oasis a fee of between $8,000 and 

$25,000, in each transaction, ostensibly to cover their transaction costs.   

17. Defendants pursued Variable Convertible Note Transactions with companies that 

had high trading volumes in order to facilitate the Defendants’ rapid sale of shares after 

conversion.  For this same reason, Defendants also sought out penny stock and microcap 

companies that were current in their required SEC filings.   

18. In most cases, the penny stock and microcap companies with whom L2 and Oasis 

entered into Variable Convertible Note Transactions did not make the required payments under 

the notes.  So L2 and/or Oasis exercised the right to convert the amount due under the notes into 

newly-issued shares, and then sold the shares into the public market.   

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19.  Defendants often converted debt to shares in small amounts, because the notes 

typically restricted Defendants’ stock ownership to less than 5 percent or 10 percent of the 

issuer’s outstanding shares.   

20. Typically, Defendants began selling the converted company shares within three 

trading days after the shares were deposited into their brokerage accounts.  But Defendants 

frequently sold shares on the same day, or the very next day, after the shares were deposited.   

21. Once the newly-issued shares were deposited into Defendants’ brokerage 

accounts, they often began selling immediately and sold on consecutive trading days until all the 

newly-issued shares were sold.   

22. Defendants also aimed to limit their sales to a certain percentage of the daily 

trading volume in a company’s stock, which generally was between 10 percent and 20 percent. 

23. Because the Defendants usually sold the converted shares promptly after 

conversion, the majority of Defendants’ profits from the Variable Convertible Note Transactions 

did not result from any appreciation of the stock prices.  Instead, Defendants profited through the 

sale of shares they acquired at discounted prices upon conversation of the notes, as well as 

through the OID.   

 24. Defendants’ repeated conversions of notes into stock, and their subsequent sales 

of newly-issued and freely-trading shares, significantly increased the amount of publicly-issued 

stock for each company that had issued the notes to Defendants.  As a result, Defendants’ sales 

diluted the value of the shares held by existing shareholders and frequently depressed the issuing 

companies’ stock prices.    

 

 

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B. Defendants Represented Themselves as Securities Dealers 

25. Defendants held themselves out to the public as dealers who were willing to buy 

convertible notes as part of their regular business operations, including through their websites, 

email and phone solicitations, and industry conference appearances.  Long also relied upon a 

network of investment bankers, brokers and attorneys to find deals for L2 and Oasis.   

26. Between November 2018 and January 2019, L2 and Oasis solicited issuers to 

participate in Variable Convertible Note Transactions via email.  Thereafter, L2 and Oasis 

primarily relied on Long’s contacts in the financial industry to locate potential Variable 

Convertible Note Transactions.    

27. From early 2019 through September 2019, L2’s website described the company as 

a private investment firm that engaged in convertible debt, preferred equity and discounted 

equity transactions.  This website had an investment inquiry form and an email address that 

potential counterparties could use to contact L2.  After September 2019, L2’s website merely 

showed its logo, and later Oasis’ logo, with no description of the businesses.   

28. Long also attended approximately 20 financial industry conferences during which 

he met with multiple penny stock and microcap issuers and marketed Defendants’ interest in 

purchasing convertible notes.  For example, on February 20, 2020, Long sent an email to 

representatives of an issuer, which stated: “Good seeing you guys this week.  I hope you enjoyed 

the conference.  Attached is a convertible note proposal.”   

29. Long retained at least five independent contractors to help him identify potential 

Variable Convertible Note Transactions for L2 and Oasis.  Long also retained two contractors, 

who lived and worked in the Northwest suburbs of Chicago, Illinois, to provide essential back-

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7 
 

office, accounting and trading services.  These two contractors, and Long, received all emails 

sent to L2’s and Oasis’ general email addresses.   

30. These back-office contractors were also responsible for communicating with 

transfer agents, broker-dealers and issuers (all of whom were subject to SEC registration 

requirements) and ensuring that L2 and Oasis acquired the shares converted from the Variable 

Convertible Note Transactions and were able to sell the shares into the public securities market.  

They tracked L2’s and Oasis’ ability to convert debt to shares, issued conversion notices, ensured 

that  restrictions on the sale of shares were removed, and provided the information needed to 

ensure that free-trading shares were deposited into L2’s and Oasis’ accounts held at SEC-

registered broker-dealers.   

31. Long personally negotiated with the companies which issued penny stock and 

microcap stock for the purchase of the notes in the Variable Convertible Note Transactions.  

Long signed all of the corresponding agreements on behalf of L2 and Oasis.   

C. Long Transitioned His Business from L2 to Oasis 

32. In the middle of 2019, Long began to wind down L2’s business operations as part 

of a plan to use Oasis for any future Variable Convertible Note Transactions.  Long began this 

wind down after the SEC filed a lawsuit against Individual 1, who was his former business 

partner in L2.  In fact, by December of 2018, Long had become aware that the SEC might file 

suit against Individual 1. 

33. That lawsuit was SEC v. River North Equity, LLC, et. al., Case No. 19-cv-1711, 

filed in April 2019 in the U.S. District Court for the Northern District of Illinois.  Among other 

things, the SEC’s complaint in River North alleged that Individual 1 and a company operated by 

Individual 1 had acted as unregistered securities dealers by purchasing convertible debt at a 

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8 
 

discount from prevailing market prices and then selling millions of shares of stock to the public 

at market prices.  

34. L2 continued to convert debt due under the convertible notes it owned into 

publicly-tradeable shares, and then sold the shares into the market to investors living throughout 

the United States, including in this District.  L2 also assigned some convertible notes and shares 

converted through Variable Convertible Note Transactions to Oasis.   

35. In late 2020 and early 2021, Defendants transitioned from trading primarily penny 

stocks and began targeting microcap issuers with stock trading on the Nasdaq stock market 

(“Nasdaq”).  

D. Defendants’ Activities As Unregistered Dealers Yielded Significant Profits 

36. Defendants engaged in at least 20 Variable Convertible Note Transactions with at 

least 15 microcap or penny stock companies between November 2018 and August 2021.  

Defendants have converted and sold more than 5.8 billion shares of stock through Variable 

Convertible Note Transactions, nearly all of which were penny stocks.    

37. Initially, Defendants mainly entered Variable Convertible Note Transactions with 

issuers of penny stocks trading on the Over-the-Counter (“OTC”) market.    In total, Defendants 

sold more than 5.75 billion shares of penny stocks.   

38. Defendants often reaped significant profits on their Variable Convertible Note 

Transactions within a short period of time.  For example, on December 2, 2019, Oasis acquired a 

Variable Convertible Note from Issuer 1 for up to $575,682.  Oasis’ purchase price for the Issuer 

1 note was only $500,000, after deducting $68,182 for the OID and $7,500 for Oasis’ 

transactional expenses. 

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39. However, according to Defendants’ transaction records, Oasis made only an 

initial payment of $125,000 to Issuer 1 to obtain the note and did not pay the remainder of the 

purchase price.  The 300,000 shares from the first conversion of debt were deposited into Oasis’ 

brokerage account on August 31, 2020.  Oasis began selling the shares the next day and sold all 

of the shares from that first conversion into the open market within ten days.   

40. Oasis converted additional shares of stock from the Issuer 1 note on four more 

occasions through January 29, 2021.  Each time Oasis converted more shares, it did so at a 25 

percent discount from the lowest trading price in the 30 days before the conversion.  In total, 

Oasis acquired and sold 5,161,851 shares from the Issuer 1 note and received net proceeds of 

$1,247,028. 

41. Defendants’ Variable Convertible Note Transactions generated at least $20 

million in profits for L2 and Oasis.  Defendants also significantly increased the amount of 

publicly-issued stock for each company that issued notes to Defendants, diluted the value of 

shares held by other shareholders, and frequently lowered those companies’ stock prices. 

42. As described above, Defendants acted as securities dealers because they regularly 

purchased and sold securities as part of a regular business.  Defendants did not qualify for any 

statutory exemption from registration, and should have registered as dealers with the SEC. 

43. By failing to register with the SEC as dealers under the Exchange Act, Defendants 

evaded important protections to investors and the markets, including obligations that promote 

market stability.  Defendants also avoided complying with important regulatory requirements, 

including the obligation to disclose material information regarding business ownership and 

conflicts of interest, follow financial responsibility rules, maintain required books and records 

and join a national security exchange or self-regulatory organization (“SRO”).     

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44. Defendants sold stock from small public companies that traded at less than five 

dollars per share and did not meet any of the exceptions from the definition of a “penny stock,” 

as defined by Section 3(a)(51) of the Exchange Act and Rule 3a51-1 thereunder.  15 U.S.C. § 

78c(a)(51); 17 C.F.R. § 240.3a51-1. 

 

Count I 
Violations of Section 15(a)(1) of the Exchange Act 

(Against All Defendants) 
 

45. The SEC incorporates and realleges paragraphs 1 through 44 as if fully set forth 

herein. 

46. By engaging in the conduct described above, Defendants, acting as securities 

dealers, made use of the mails or means and instrumentalities of interstate commerce to affect 

transactions in, or induce or attempt to induce the purchase or sale of a security, without being 

registered with the SEC.   

47. By reason of the foregoing, Defendants violated Section 15(a) of the Exchange 

Act, 15 U.S.C. § 78o(a).   

 

Count II 
Violations of Section 15(a)(1) of the Exchange Act 

In the Alternative Under Section 20(a) of the Exchange Act 
(Against Long as a Control Person of L2 and Oasis) 

 
48. The SEC incorporates and realleges paragraphs 1 through  44 as if fully set forth 

herein.   

49. As alleged above, defendants L2 and Oasis violated Section 15(a)(1) of the 

Exchange Act, 15 U.S.C. § 78o(a)(1).   

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50. At all relevant times, defendant Long was a control person of defendants L2 and 

Oasis for purposes of Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). 

51. At all relevant times, defendant Long exercised power and control over 

defendants L2 and Oasis, including by managing and directing those entities, and by directing 

and participating in the acts constituting L2’s and Oasis’ violations of the securities laws.   

52. By reason of the foregoing, defendant Long is liable as a control person under 

Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), for defendants L2’s and Oasis’ violations 

of the Section 15(a) of the Exchange Act, 15 U.S.C. § 78o(a)(1).   

 

Relief Requested 

 WHEREFORE, the SEC respectfully requests that this Court: 

I.  

 Issue findings of fact and conclusions of law that Defendants committed the violations 

charged and alleged herein. 

II.  

 Issue a permanent injunction restraining and enjoining Defendants, their officers, agents, 

servants, employees, attorneys and those persons in active concert or participation with 

Defendants who receive actual notice of the Order, by personal service or otherwise, and each of 

them from, directly or indirectly, engaging in the transactions, acts, practices or courses of 

business described above, or in conduct of similar purport and object, in violation of Section 

15(a)(1) of the Exchange Act, 15 U.S.C. § 78o(a)(1). 

III. 

Issue an order precluding each of the Defendants from participating, directly or 

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indirectly, including but not limited to through any entity they control, in any offering of penny 

stocks.   

IV. 

 Enter an Order requiring Defendants to disgorge, on a joint and several basis, the ill-

gotten gains that they received, directly or indirectly, from the violations alleged herein, 

including prejudgment interest, pursuant to Sections 21(d)(3), (5) and (7) of the Exchange Act, 

15 U.S.C. §§ 78u(d)(3), (5), (7). 

V. 

Order Defendants to pay civil penalties pursuant to Section 21(d)(3) of the Exchange Act, 

15 U.S.C. § 78u(d)(3). 

VI. 

 Retain jurisdiction of this action in accordance with the principles of equity and the 

Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and 

decrees that may be entered or to entertain any suitable application or motion for additional relief 

within the jurisdiction of this Court. 

VII. 

 Grant such other relief as this Court deems appropriate. 

 

 
JURY DEMAND 

 
 Pursuant to Rule 38 of the Federal Rules of Civil Procedure, the SEC hereby requests a 

trial by jury.  

  

  

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      UNITED STATES SECURITIES 
       AND EXCHANGE COMMISSION 

 
 
      By: /s/Robert M. Moye______________ 
      Robert M. Moye ([email protected]) 
      Regina LaMonica ([email protected])  
       U.S. Securities and Exchange Commission 
      Chicago Regional Office 
      175 West Jackson Blvd., Suite 1450 
      Chicago, IL 60604 
       (312) 353-1051 
 

Attorneys for Plaintiff, Securities and Exchange 
Commission 

 

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