SEC v. Thomas Troy Brooks, No. 2:20-cv-00405, Southern District of Florida (Jan. 16, 2020) — Complaint

UNITED  ST A TES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 1:20-cv-20176
SECURITIES AND EXCHANGE
COMMISSION,
PLAINTIFF,
V.
THOMAS TROY BROOKS, an individual,
DEFENDANT.
COMPLAINT
Plaintiff, Securities and Exchange Commission (the "Commission"), alleges as follows:
SUMMARY OF THE ACTION
1.
From at least June 2016 through February 2018, Thomas Troy Brooks
("Defendant") solicited investors throughout the United States to purchase the securities of
numerous microcap companies whose shares traded on the over-the-counter ("OTC") market.
2.
While he engaged in these solicitations, Defendant was neither registered with the
Commission as a broker or dealer nor associated with a broker or dealer registered with the
Commission.
3.
Defendant earned transaction-based compensation for his solicitation activities.
4.
By engaging in this conduct, as further described herein, Defendant violated and,
unless restrained and enjoined by this Court, may continue to violate Section 15( a)( 1) of the
Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78o(a)(l )].
1

JURISDICTION AND VENUE
5. The Commission
brings
this action pursuant to Sections 21(d) and (e)
of
the
E
xchange Act [15 U.S.C. § 78u(d) and (e)] to
enjoin such
acts, practices, and courses
of
b
usiness, and to
obtain
disgorgement,
prejudgment interest, civil money penalties, and such other
and further relief as
this
Court may deem just and appropriate.
6. Defendant was involved in the
offer
and sale
of
the
common stock of numerous
microcap
companies,
which
are
each
a
"security" as that term
is
defined under Section 3(a)(10)
o
f
the Exchange Act [15 U.S.C. § 78c(a)(10)].
7. Defendant, directly or indirectly, made use of the mails
or
the means or
i
nstrumentalities
of
interstate commerce
in connection with the conduct alleged in this
Complaint.
8. This Court has subject
matter jurisdiction over
this action pursuant to Sections
21(d) and 27 of the Exchange
Act
[15 U.S.C. §§ 78u(d) and 78aa] and 28 U.S.C. § 1331.
9. Venue in
this District is
proper because Defendant is found, inhabits, and/or
t
ransacted business
in
the
Southern District of Florida and because one or more acts or
t
ransactions constituting the violations occurred
in
the
Southern
District
of Florida.
DEFENDANT
10. Thomas Troy Brooks, born in 1989, is last known to reside in
Miami Beach,
Florida.
FACTS
11. During
or around June 2016, Defendant, who was unemployed at the
time,
was
given
the phone number
of
D.W., who operated
several
investor
solicitation
call centers
in
s
outhern
California.
2

12.
Defendant was told that D.W. was hiring
individuals to engage in securities
solicitations.
1
3. Defendant, who
had
previously been
involved in the investment solicitation
business,
contacted D.W., and D.W. hired Defendant as an investment solicitor.
14. Defendant
worked
remotely for D.W.
out of Defendant's own office in
Florida.
1
5. D.W.'s investment solicitation
business worked as follows:
a.
D.W. entered into arrangements with certain
individuals, hereinafter
r
eferred to as the "selling
shareholders,"
who would obtain
large blocks of at least nominally
unrestricted shares of
microcap issuers.
b. The selling shareholders sought to profit quickly
by
selling their
shares
i
nto the market, but understood that selling large
amounts
of thinly
traded microcap stock
through standard
brokerage
sell
orders would take a long time (if using limit orders) and/or cause
a collapse in the
share price (if using market orders).
c.
To avoid these results, a selling shareholder
would hire
D.W.
to engage
his call
centers and his other remote hires like Defendant to
solicit investors to purchase the
selling
shareholders' shares.
d. The
solicitors,
like Defendant,
used purchased lead lists to call prospective
i
nvestors and inquired whether
the prospect had
an
active brokerage account with online order-
entry functionality.
e.
If
the prospective investor had such a
brokerage account, the solicitor
pitched
the promoted security—i.e., the one the selling shareholder
owned and wished to
l
iquidateto the prospect.
3

f.
Once a
prospective investor had been persuaded to' purchase the
promoted
security
and determined how much money he
or
she would like to
invest, the solicitor would tell
the investor that a "market maker"
needed
to
be contacted to determine the appropriate share
p
uce.
g. Instead of contacting a market
maker,
the
solicitor would pass this
information on to D.W., who would contact
the selling shareholder.
h.
The
selling shareholder would then
check
the
current level II quotation
(which shows the offers on the
ask
and
bid) for the subject security and provide
D.W. with
a
limit order price.
i. D.W.
would
communicate that price to the
solicitor,
who
would pass the
information
along
to the investor.
The solicitor would
instruct the investor to enter a purchase limit order
o
nline in the
investor's
brokerage account at the
coordinated price. At the same time, the selling
s
hareholder would
place a
sell limit order for the same amount
of
shares
at the same price.
k. Through these means, the investor's buy order and the
selling
shareholder's
sell
order were
likely
to
match, thus enabling the selling
shareholder
to liquidate
his or her position in the subject security
piecemeal into a market with ready purchasers.
1.  D.W. and the selling
shareholder would discuss how many shares of the
investor's order were "captured" (i.e., matched
between the investor and the
s
elling shareholder), and the
selling
shareholder would pay
D.W. a
c
ommission
that was
generally between 25%and 50% of the invested funds.
m. D.W. then paid a
portion of these commissions to the
solicitor
who was
responsible for the trade.
4

16.
Defendant engaged in this conduct as a solicitor from at least June 2016 until at
least February 2018.
17.
Defendant also hired several individuals to work under him as securities
solicitors.
18.During this timeframe, D.W. paid Defendant gross commissions totaling
$603,237.09, a portion of which Defendant used to pay the solicitors working under him.
CLAIM FOR RELIEF
Violations of Section 15(a)(l) of the Exchange Act [15 U.S.C. § 78o(a)(l)]
19.
The Commission re-alleges and incorporates by reference each and every
allegation in paragraphs 1-18, inclusive, as if they were fully set forth herein.
20.
By engaging in the conduct described above, Defendant:
a.
engaged in the business of effecting transactions in securities for the
account of others; and
b.
directly or indirectly, made use of the mails or the means or
instrumentalities of interstate commerce to effect transactions in, or to induce or attempt to
induce the purchase or sale of, securities without being registered as a broker or dealer with the
Commission or associated with a broker or dealer registered with the Commission.
21.By reason of the foregoing, Defendant violated and, unless enjoined, will continue to
v
iolate Sections 15(a)(l) of the Exchange Act [15 U.S.C. § 78o(a)(l)].
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court enter a final
judgment:
I.
s

Permanently
restraining and
enjoining Defendant from, directly or indirectly, engaging
in
conduct in violation of Section 15(a)(1) of the Exchange Act [15 U.S.C. §
78o(a)(1)];
II.
Permanently restraining
and
enjoining Defendant from directly or indirectly, including,
but not limited to, through any entity owned or controlled by him,
soliciting
any
person or
entity
to purchase
or
sell any security;
III.
O
rdering
Defendant to disgorge
all ill-gotten
gains
or unjust enrichment derived from the
activities set forth in this Complaint, together with prejudgment interest thereon;
IV.
O
rdering
Defendant to pay a civil
penalty pursuant
to
Section 21(d)(3) of the Exchange
Act [15 U.S.C. § 78u(d)(3)];
V.
Retaining 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 maybe entered, or to
entertain any suitable application or motion for additional
relief within the jurisdiction of this Court; and,
VI.
G
ranting such other
and
further relief as this Court may deem just, equitable, or necessary
in
connection
with
the enforcement
of the federal securities laws and for the protection of
investors.
C~

DATED January 15, 2020
Respectfully submitted,
By:
U~ .   .
David
D. Whipp e
Florida
Special Bar No. A5502589
Direct Dial: (801)
524-4112
Email: whippleda(a,sec.gov
Lead Attorney
Attorney
To Be Noticed
Amy
J.
Oliver
Florida
Special Bar
No.
A5502307
Direct
Dial: (801) 524-6748
E
mail: olivera(a,sec.~ov
Attorney To Be
Noticed
A
TTORNEYS FOR
PLAINTIFF
S
ECURITIES
AND EXCHANGE
COMMISSION
351 South West
Temple, Suite 6.100
Salt
Lake City, Utah 84101-1950
Tel.: (801) 524-5796
Fax:
(801)
524-3558

UNITED ST A TES DISTRICT COURT 

SOUTHERN DISTRICT OF FLORIDA 

Case No. 1:20-cv-20176

SECURITIES AND EXCHANGE 

COMMISSION, 

PLAINTIFF, 

V. 

THOMAS TROY BROOKS, an individual, 

DEFENDANT. 

COMPLAINT 

Plaintiff, Securities and Exchange Commission (the "Commission"), alleges as follows: 

SUMMARY OF THE ACTION 

1. From at least June 2016 through February 2018, Thomas Troy Brooks

("Defendant") solicited investors throughout the United States to purchase the securities of 

numerous microcap companies whose shares traded on the over-the-counter ("OTC") market. 

2. While he engaged in these solicitations, Defendant was neither registered with the

Commission as a broker or dealer nor associated with a broker or dealer registered with the 

Commission. 

3. Defendant earned transaction-based compensation for his solicitation activities.

4. By engaging in this conduct, as further described herein, Defendant violated and,

unless restrained and enjoined by this Court, may continue to violate Section 15( a)( 1) of the 

Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78o(a)(l )]. 

1 

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JURISDICTION AND VENUE

5. The Commission brings this action pursuant to Sections 21(d) and (e) of the

Exchange Act [15 U.S.C. § 78u(d) and (e)] to enjoin such acts, practices, and courses of

business, and to obtain disgorgement, prejudgment interest, civil money penalties, and such other

and further relief as this Court may deem just and appropriate.

6. Defendant was involved in the offer and sale of the common stock of numerous

microcap companies, which are each a "security" as that term is defined under Section 3(a)(10)

of the Exchange Act [15 U.S.C. § 78c(a)(10)].

7. Defendant, directly or indirectly, made use of the mails or the means or

instrumentalities of interstate commerce in connection with the conduct alleged in this

Complaint.

8. This Court has subject matter jurisdiction over this action pursuant to Sections

21(d) and 27 of the Exchange Act [15 U.S.C. §§ 78u(d) and 78aa] and 28 U.S.C. § 1331.

9. Venue in this District is proper because Defendant is found, inhabits, and/or

transacted business in the Southern District of Florida and because one or more acts or

transactions constituting the violations occurred in the Southern District of Florida.

DEFENDANT

10. Thomas Troy Brooks, born in 1989, is last known to reside in Miami Beach,

Florida.

FACTS

11. During or around June 2016, Defendant, who was unemployed at the time, was

given the phone number of D.W., who operated several investor solicitation call centers in

southern California.

2

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12. Defendant was told that D.W. was hiring individuals to engage in securities

solicitations.

13. Defendant, who had previously been involved in the investment solicitation

business, contacted D.W., and D.W. hired Defendant as an investment solicitor.

14. Defendant worked remotely for D.W. out of Defendant's own office in Florida.

15. D.W.'s investment solicitation business worked as follows:

a. D.W. entered into arrangements with certain individuals, hereinafter

referred to as the "selling shareholders," who would obtain large blocks of at least nominally

unrestricted shares of microcap issuers.

b. The selling shareholders sought to profit quickly by selling their shares

into the market, but understood that selling large amounts of thinly traded microcap stock

through standard brokerage sell orders would take a long time (if using limit orders) and/or cause

a collapse in the share price (if using market orders).

c. To avoid these results, a selling shareholder would hire D.W. to engage

his call centers and his other remote hires like Defendant to solicit investors to purchase the

selling shareholders' shares.

d. The solicitors, like Defendant, used purchased lead lists to call prospective

investors and inquired whether the prospect had an active brokerage account with online order-

entry functionality.

e. If the prospective investor had such a brokerage account, the solicitor

pitched the promoted security—i.e., the one the selling shareholder owned and wished to

liquidate to the prospect.

3

Case 1:20-cv-20176-XXXX   Document 1   Entered on FLSD Docket 01/15/2020   Page 3 of 7



f. Once a prospective investor had been persuaded to' purchase the promoted

security and determined how much money he or she would like to invest, the solicitor would tell

the investor that a "market maker" needed to be contacted to determine the appropriate share

puce.

g. Instead of contacting a market maker, the solicitor would pass this

information on to D.W., who would contact the selling shareholder.

h. The selling shareholder would then check the current level II quotation

(which shows the offers on the ask and bid) for the subject security and provide D.W. with a

limit order price.

i. D.W. would communicate that price to the solicitor, who would pass the

information along to the investor.

The solicitor would instruct the investor to enter a purchase limit order

online in the investor's brokerage account at the coordinated price. At the same time, the selling

shareholder would place a sell limit order for the same amount of shares at the same price.

k. Through these means, the investor's buy order and the selling

shareholder's sell order were likely to match, thus enabling the selling shareholder to liquidate

his or her position in the subject security piecemeal into a market with ready purchasers.

1. D.W. and the selling shareholder would discuss how many shares of the

investor's order were "captured" (i.e., matched between the investor and the

selling shareholder), and the selling shareholder would pay D.W. a

commission that was generally between 25%and 50% of the invested funds.

m. D.W. then paid a portion of these commissions to the solicitor who was

responsible for the trade.

4

Case 1:20-cv-20176-XXXX   Document 1   Entered on FLSD Docket 01/15/2020   Page 4 of 7



16. Defendant engaged in this conduct as a solicitor from at least June 2016 until at

least February 2018. 

17. Defendant also hired several individuals to work under him as securities

solicitors. 

18. During this timeframe, D.W. paid Defendant gross commissions totaling

$603,237.09, a portion of which Defendant used to pay the solicitors working under him. 

CLAIM FOR RELIEF 
Violations of Section 15(a)(l) of the Exchange Act [15 U.S.C. § 78o(a)(l)] 

19. The Commission re-alleges and incorporates by reference each and every

allegation in paragraphs 1-18, inclusive, as if they were fully set forth herein. 

20. By engaging in the conduct described above, Defendant:

a. engaged in the business of effecting transactions in securities for the

account of others; and 

b. directly or indirectly, made use of the mails or the means or

instrumentalities of interstate commerce to effect transactions in, or to induce or attempt to 

induce the purchase or sale of, securities without being registered as a broker or dealer with the 

Commission or associated with a broker or dealer registered with the Commission. 

21. By reason of the foregoing, Defendant violated and, unless enjoined, will continue to

violate Sections 15(a)(l) of the Exchange Act [15 U.S.C. § 78o(a)(l)].

PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that this Court enter a final 

judgment: 

I. 

s 

Case 1:20-cv-20176-XXXX   Document 1   Entered on FLSD Docket 01/15/2020   Page 5 of 7



Permanently restraining and enjoining Defendant from, directly or indirectly, engaging in

conduct in violation of Section 15(a)(1) of the Exchange Act [15 U.S.C. § 78o(a)(1)];

II.

Permanently restraining and enjoining Defendant from directly or indirectly, including,

but not limited to, through any entity owned or controlled by him, soliciting any person or entity

to purchase or sell any security;

III.

Ordering Defendant to disgorge all ill-gotten gains or unjust enrichment derived from the

activities set forth in this Complaint, together with prejudgment interest thereon;

IV.

Ordering Defendant to pay a civil penalty pursuant to Section 21(d)(3) of the Exchange

Act [15 U.S.C. § 78u(d)(3)];

V.

Retaining 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 maybe entered, or to entertain any suitable application or motion for additional

relief within the jurisdiction of this Court; and,

VI.

Granting such other and further relief as this Court may deem just, equitable, or necessary

in connection with the enforcement of the federal securities laws and for the protection of

investors.

C~

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DATED January 15, 2020 Respectfully submitted,

By:

U~ . .
David D. Whipp e
Florida Special Bar No. A5502589
Direct Dial: (801) 524-4112
Email: whippleda(a,sec.gov
Lead Attorney
Attorney To Be Noticed

Amy J. Oliver
Florida Special Bar No. A5502307
Direct Dial: (801) 524-6748
Email: olivera(a,sec.~ov
Attorney To Be Noticed
ATTORNEYS FOR PLAINTIFF
SECURITIES AND EXCHANGE COMMISSION
351 South West Temple, Suite 6.100
Salt Lake City, Utah 84101-1950
Tel.: (801) 524-5796
Fax: (801) 524-3558

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