Two securities lawyers have been charged with playing a “crucial role” in a microcap fraud scheme that involved passing off shell companies manufactured for sale by reverse merger as startups with legitimate business plans.

James M. Schneider of Hillsboro Beach, Fla., and Andrew H. Wilson of Nevada City, Calif., join nine other individuals who have been charged in connection with the alleged fraudulent registration of at least 22 undisclosed blank check companies.

According to the U.S. Securities and Exchange Commission, the attorneys contributed to the scheme by, among other things, providing legal opinion letters falsely stating that the companies’ shares were validly issued or free to be resold publicly.

The SEC said in civil complaints that the companies were secretly controlled by three men already convicted in the scheme and that 18 of the entities were sold in reverse mergers for at least $6 million. Schneider has also been indicted on related criminal charges.

“Lawyers are critical gatekeepers when it comes to protecting the integrity of our capital markets,” Eric I. Bustillo, director of the SEC’s Miami Regional Office, said in a news release. “Schneider and Wilson failed as gatekeepers and, as our complaints allege, played a crucial role in facilitating a wide-ranging microcap fraud.”

Shell companies have no operations, making them attractive targets for those seeking to use reverse mergers in “pump-and-dump” schemes.

According to the SEC, Schneider, who has practiced securities law for more than 45 years, submitted opinion letters in support of the S-1 registration forms for the blank check companies that, among other things, falsely stated the companies’ shares were unrestricted.

The letters were “critical to making the securities of the blank check companies eligible for deposit with broker-dealers, for settlement and clearance through [the Depository Trust Company], and otherwise for public trading,” the SEC said.

Schneider “knew, or was reckless in not knowing, that the offerings pursuant to the Forms S-1 were shams,” the commission alleged.

Wilson, a securities lawyer for more than 40 years, is accused of falsely stating in five opinion letters that the shares of three blank check companies were unrestricted.

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