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The U.S. Securities and Exchange Commission (SEC) recently charged a former microcap company CEO and a boiler-room operator with defrauding seniors and others. Investors were pressured to buy in to a pair of penny stock companies and promised lucrative profits.

The agency is alleging that Craig Sizer founded Sanomedics and Fun Cool Free, which were purportedly in the business of selling non-contact infrared thermometers and software applications respectively. Sizer hired Miguel “Michael” Mesa to help him attract and defraud investors in both companies.

Sizer allegedly provided Mesa with a list of pitch points for use by boiler-room agents hired by Mesa to sell shares of the stocks based on misrepresentations that investor funds would be used for research and development and no sales commissions would be paid out of investor funds.

According to the SEC’s complaint, Sizer and Mesa misappropriated roughly 90% of the funds raised from investors, gaining a massive profit and paying sales commissions to the boiler-room agents. Several hundred investors nationwide were allegedly defrauded out of a total of about $20 million.

In a parallel action, the U.S. Attorney’s Office for the Southern District of Florida has announced criminal charges.

Sizer and Mesa have agreed to partial settlements of the SEC’s charges without admitting or denying the allegations. At the same time, they have both agreed to be barred from future penny stock offerings, and Sizer agreed to be barred from serving as an officer or director of a public company. Financial sanctions will be decided by the court at a later date.

Eric I. Bustillo, director of the SEC’s Miami Regional Office, commented:

We allege that Sizer and Mesa fraudulently touted Sanomedics and Fun Cool Free stocks as profitable investments while in fact only Sizer and Mesa and the sales agents were profiting at the expense of investors, many of whom were seniors.