SEC Cracks Down on CEO of Xtreme Fighting Championships, Inc. for Fraudulent Scheme
The Securities and Exchange Commission has announced that it has filed charges against Florida-based Xtreme Fighting Championships, Inc. (Xtreme Fighting) and its CEO, Steve A. Smith, Jr., for allegedly engaging in a fraudulent scheme to illegally sell large amounts of Xtreme Fighting stock to the investing public.
The complaint alleges that the stock sales were illegal because Smith and Xtreme Fighting’s in-house counsel, who has since died, controlled the stock and sold it in transactions that were neither registered with the Commission nor exempt from registration. Smith and the in-house counsel allegedly hid their control of the stock to avoid legal limits on sales by insiders. Between approximately January 2020 through at least April 2022, Smith and Xtreme Fighting’s scheme allegedly generated over $5 million in illegal proceeds, of which Xtreme Fighting received at least $436,000.
Smith and the in-house counsel allegedly arranged for Xtreme Fighting to issue the stock to entities purportedly unaffiliated with Xtreme Fighting but, in reality, controlled by Smith and/or the in-house counsel. The complaint alleges that this created a false appearance that the stock was exempt from registration and eligible for public resale. At the in-house counsel’s direction, the entities allegedly sold the stock in the public market and sent at least some proceeds to Xtreme Fighting. The illegal stock sales allegedly took place while Xtreme Fighting was actively promoting its brand through a series of press releases, including announcements of upcoming mixed martial arts fights and deals to broadcast fights on well-known television networks.
The complaint alleges that to further the scheme, in April 2022, Smith and Xtreme Fighting publicly filed an annual report on Commission Form 10-K falsely stating that Xtreme Fighting’s financial statements were audited by an independent registered public accounting firm. Smith allegedly made the false filing because Xtreme Fighting’s annual report had been delinquent, which had caused its stock to move to a more restricted portion of the over-the-counter securities market. Despite warnings from Xtreme Fighting’s auditing firm that the audited financial statements were not complete or close to being complete, Smith allegedly proceeded with filing the Form 10-K with the purpose and effect of removing Xtreme Fighting stock from the more restrictive area of the market. Smith allegedly also issued two social media posts about the filing in which he falsely said that Xtreme Fighting’s financial statements had been audited.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, charges Smith and Xtreme Fighting with violating the antifraud provisions of Sections 17(a)(1) and (a)(3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 hereunder and with violating the securities registration provisions of Sections 5(a) and (c) of the Securities Act. Xtreme Fighting is also charged with violating Section 17(a)(2) of the Securities Act, and Smith is charged with aiding and abetting that violation. The complaint seeks civil penalties, disgorgement of ill-gotten gains plus prejudgment interest, as well as permanent injunctive relief, including orders barring Smith from serving as an officer or director of a public company, participating in the offering of a penny stock, and/or participating in the issuance, purchase, offer, or sale of any security, other than for his own personal accounts.