The Securities and Exchange Commission announced that on January 6, 2023, it filed an emergency action in U.S. District Court for the Eastern District of Texas, alleging that Clyde Cameron Cravey and Kenneth Wiedrich, through two entities they controlled, Reliable One Resources, Inc. and Quantum Filtration, Inc., were actively engaged in a fraudulent, unregistered offering that had raised approximately $34 million from over 500 investors. On January 9, 2023, the Court issued orders temporarily restraining the defendants’ ongoing offering, temporarily freezing the defendants’ assets, appointing a temporary receiver, and granting other emergency relief.
The SEC’s complaint alleges, among other things, that the defendants sought to exploit the COVID-19 pandemic by promoting false claims that Quantum Filtration was using a cutting-edge technology to produce and sell an N-95 certified facemask. In reality, the mask had no N-95 certification. The complaint further alleges that the defendants falsely claimed that Reliable One imminently expected the U.S. Food and Drug Administration to approve the facemask for sale, even though the defendants never submitted the necessary application to the FDA. The complaint also alleges that the defendants touted business deals that did not exist, misled investors about Reliable One’s use of investor funds, and failed to disclose Cravey’s involvement in the companies to prevent investors from discovering negative information about his past, including that, in 2012, a Texas court entered an $8 million judgment against him for his role in a fraudulent securities offering.
The SEC’s complaint charges Cravey, Wiedrich, Reliable One Resources, and Quantum Filtration with violating the antifraud and securities-registration provisions of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The complaint seeks injunctions, civil penalties, and disgorgement of ill-gotten gains (with prejudgment interest) against each defendant, and officer-and-director and penny stock bars against Wiedrich and Cravey.
Following the filing of the complaint and the entry of the Court’s January 9, 2023 orders, Wiedrich and Cravey agreed to partially settle the SEC’s claims against them without admitting or denying the allegations. On February 8, 2023, the Court entered a judgment reflecting those settlements. The judgment permanently enjoins Wiedrich and Cravey from further violations of the antifraud and registration provisions of the federal securities laws and imposes an officer-and-director bar, a penny stock bar, and a conduct-based injunction against each of them. The judgment provides that the Court will resolve the SEC’s claims for disgorgement, prejudgment interest, and civil penalties upon later motion by the SEC. Separately on February 8, 2023, the Court entered an unopposed order freezing the defendants’ assets and appointing a receiver that will remain in place until further order of the Court. The Court also entered an unopposed preliminary injunction against Reliable One Resources and Quantum Filtration.
The SEC’s investigation was conducted by Catherine Floyd and Jody Z. Moore of the SEC’s Fort Worth Regional Office, under the supervision of Timothy S. McCole and Eric R. Werner. The litigation is being led by David Reece and supervised by B. David Fraser.