Haleiwa man charged in $35M stock sales scheme

The Securities and Exchange Commission charged a Haleiwa man Wednesday with pocketing more than $2 million in a complex scheme that defrauded overseas investors of $35 million.

The SEC alleged that Nicholas Louis Geranio played a "critical role in a $35 million scheme to manipulate the market" and to profit from high-pressure sales of stock by telemarketers in offshore boiler rooms.

According to court documents, Geranio organized eight U.S. companies that raised funds by selling unregulated shares to offshore investors, mainly elderly people in the United Kingdom. The companies often had no employees, office space, sales or customers.

Geranio appointed friends or business associates as officers. At one company, Blu Vu, the former chief executive officer was someone Geranio met while kite-surfing in Malibu, Calif.

The company shares were sold as Regulation S stock, which is not regulated by the SEC because it is only offered to investors outside the U.S.

Geranio manipulated the price of the Regulation S shares by directing traders to engage in trades that would artificially raise the stock price of the companies, documents say.

Geranio also recruited teams of telemarketers who operated at call centers known as boiler rooms mainly in Spain, according to court documents. Each boiler room was run by an unregistered trader, who had his or her team of telemarketers compete with other teams to sell the Regulation S shares. The telemarketers used high-pressure tactics and lies to get investors to buy the stock.

The companies Geranio founded then received about 25 percent of the sales, documents say. Those companies then funneled $2.1 million as consulting fees to two "alter ego" companies Geranio set up. He allegedly used the money for personal expenses, including credit card payments, a mortgage, an automobile and a personal helicopter.

The scheme operated from April 2007 to September 2009, according to documents filed in U.S. District Court in the Central District of California.

Geranio, who worked with his longtime business partner and California resident Keith Field, could not be reached for comment.

"Geranio pulled the strings while Field scripted the show for the boiler rooms to bring a payday to everyone but the investors," Stephen L. Cohen, associate director in the SEC’s Division of Enforcement, said in a news release.

The SEC is seeking financial penalties, repayment of the ill-gotten gains and permanent injunctions against all of the defendants. The complaint also seeks repayment of investor funds from a Hawaii-based company, BWRE Holdings.

The SEC alleged that Geranio concealed his role from investors and the public by acting through the two consulting companies he set up to receive consulting funds — the Good One and Kaleidoscope Real Estate, both based in Nevada.

In addition to the consulting fees paid to the Good One and Kaleidoscope, Geranio allegedly diverted funds from investors to help buy property for a wedding planning company in Hawaii.

The court documents said about $240,000 was used as a down payment for a $2.7 million property in Hawaii in 2008. The buyer was the shell company, BWRE Holdings.

The property was leased to the wedding planning company controlled by an officer of one of Geranio’s companies. In 2009, the wedding planning company merged into Hawaiian Hospitality Group Inc., of which Geranio’s consulting companies were significant shareholders.