The Securities and Exchange Commission seal in Washington DC. (Photo...

The Securities and Exchange Commission seal in Washington DC. (Photo by Chip Somodevilla/Getty Images) Credit: Getty Images/Chip Somodevilla

Two Long Island brothers have reached a settlement worth more than $9 million with the Securities and Exchange Commission, the federal agency announced.

The agency had charged brothers Soheil and Sepas Ahdoot of Great Neck and their jointly owned Manhattan-based business, Crown Bridge Partners LLC, with failing to register as securities dealers.

The SEC complaint, filed in U.S. District Court in Manhattan, charged that Crown Bridge bought convertible notes from 150 issuers of tiny publicly traded companies known as microcaps. The notes were converted into 35 billion new shares of the stocks at a below-market price. Those shares were then sold for a higher price on the public markets, providing an instant profit, the complaint said.

Convertible securities are bonds or preferred stocks that give shareholders dividends or coupon payments, but can be exchanged for common stock at a preset conversion price.

The brothers were the sole employees of Crown Bridge when the transactions took place, from Jan. 1, 2016 through Dec. 31, 2020, the complaint said. During that period, the brothers and Crown Bridge were neither registered as dealers with the SEC nor associated with a dealer who was registered as required to conduct those transactions involving convertible notes.

A call seeking comment from Christopher Louis Garcia of Weil, Gotshal & Manges, an attorney who represents the Ahdoots, was not immediately returned.

"When Crown Bridge and the Ahdoots allegedly failed to register with the SEC, they skirted important regulatory safeguards that support the integrity of our markets by, among other things, subjecting securities dealers to inspections and oversight," Mark Cave, associate director in the SEC's division of enforcement, said in a statement. 

Under the settlement, the Ahdoots and Crown Bridge did not admit or deny the accusations. The brothers agreed to pay $8.4 million in disgorged profits with interest and a civil penalty of $810,307. They also agreed to be barred from penny-stock activity for five years.

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