The United States Securities and Exchange Commission (SEC) has taken ConTXT, Inc., Thomas J. Robbins, Daniel J. Merriman, Mark W. Wiseman, and Clark J. Madsen to Court over alleged securities fraud.

The SEC’s complaint, seen by FX News Group, was filed on January 7, 2021 with the Utah District Court.

This case involves two inter-related offering frauds orchestrated by securities fraud recidivists, Robbins and Merriman, in which they obtained approximately $11 million from at least 80 investors in the form of a purported high-yield algorithmic trading program and through the fraudulent unregistered sale of stock. Robbins and Merriman met while incarcerated and upon release, created a high-yield trading program based on an algorithm Robbins purportedly obtained in a spiritual revelation.

Beginning in 2016, Robbins and Merriman solicited investor funds through a series of false and misleading representations including:

• that the Church of Jesus Christ of Latter-day Saints was a client;
• that they consistently generated large returns for prior trading program investors; and
• that investors could expect to earn profits of at least 20% per month.

Robbins and Merriman misappropriated investor funds both to pay purported profits to earlier investors and to pay for their personal expenses. Funds that were invested in the trading program never generated profits for investors.

In 2017, Robbins and Merriman devised a new scheme with Madsen and Wiseman to fraudulently sell millions of shares of stock in ConTXT, a small company founded by Madsen in unregistered transactions.

By the time this scheme commenced in late 2017, Madsen and Wiseman knew that Robbins and Merriman were convicted felons and owed millions to their trading program investors. Nonetheless, Madsen and Wiseman needed funds for ConTXT and Robbins and Merriman agreed to fund ConTXT by selling its stock or by using funds from their trading program.

Madsen, through a board resolution, granted Robbins and Merriman financial control of ConTXT and authorized them to sell ConTXT stock and take any additional steps to take ConTXT public. However, because Robbins and Merriman were convicted felons, their involvement in ConTXT was actively concealed.

The Private Placement Memorandum (“PPM”) and other documentation provided to investors falsely attributed the duties performed by Robbins and Merriman to a nominee. The defendants knowingly distributed a PPM that contained false and misleading information about ConTXT’s financial condition and profitability.

According to the SEC’s complaint, Robbins, Merriman and Wiseman also lied about the use of investor funds, misrepresented ConTXT’s financial condition and misappropriated investor funds for their personal benefit.

Robbins and Merriman acted as unregistered brokers, participating at all key points in the distribution of ConTXT stock and received commissions for their efforts.

The SEC alleges that the defendants fraudulently sold at least $942,800 of ConTXT stock in unregistered transactions and distributed millions of additional shares to satisfy prior debt obligations.

In this action, the SEC seeks, among other things, entry of an order directing the defendants to pay civil money penalties and disgorgement of all ill-gotten gains received during the period of violative conduct.