SEC v. Philip Verges; James D. Tilton, Jr.; Robert F. Malin; Linda Malin; and Blue Citi, LLC, No. 1:06-cv-01274, Eastern District of New York (Sept. 26, 2023) — Complaint

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

        §
SECURITIES AND EXCHANGE COMMISSION, §
        §
Plaintiff,     §
        §
v.        § Case No.: 3:23:cv-02146
        §
PHILIP VERGES, JAMES D. TILTON, JR.,  §
ROBERT F. MALIN, LINDA MALIN, and   §
BLUE CITI, LLC,         §
        §
  Defendants,        §
        §
SMEA2Z, LLC, 143 PARTNERS LLC, WEST     §
CUCHARRAS, LLC, and JDT TRADING, LLC,  §
        §
Relief Defendants.        §
        §

COMPLAINT

Plaintiff Securities and Exchange Commission (the “Commission” or “Plaintiff”) files this
Complaint against Defendants Philip Verges (“Verges”), James D. Tilton, Jr. (“Tilton”), Robert F.
Malin  (“R.  Malin”),  Linda  Malin  (“L.  Malin”),  and  Blue  Citi,  LLC  (“Blue  Citi”)  ( collectively,
“Defendants”), and  Relief  Defendants  SMEA2Z,  LLC  (“SMEA2Z”),  143  Partners  LLC  (“143
Partners”),   West   Cucharras,   LLC   (“West   Cucharras”),   and   JDT   Trading,   LLC   (“JDT”)
(collectively, “Relief Defendants”), and alleges as follows:
I.
SUMMARY
1. From at least June 2017 to June 2022, Defendants—led by Verges—perpetrated a
scheme to pump and dump into the market more than $112 million of stock in certain penny
stock companies.  Verges designed the scheme so that Blue Citi (owned by R. Malin and L.

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Malin), Tilton (in his individual capacity), JDT (owned by Tilton), and other accomplices that
Verges nominated (the “Other Nominees”; collectively with Blue Citi, Tilton, and JDT, the
“Nominees”) received heavily discounted shares in five penny stock companies:  Alternet
Systems, Inc. (“ALYI”), Priority Aviation, Inc. (“PJET”), Puration, Inc. (“PURA”),
Vaycaychella, Inc. (“VAYK”), and WaterPure International, Inc. (“WPUR”) (collectively, the
“PSCs” and individually, a “PSC”).  The Nominees ultimately received at least 5.2 billion shares
of stock in the PSCs at an 86.64% discount and then proceeded to dump those shares into the
market.  Blue Citi, Tilton, and JDT alone generated more than $52 million in trading proceeds.
2. Defendants carried out Verges’s scheme in multiple phases.  First, Verges
obtained de facto control over the PSCs, which he concealed by installing figurehead CEOs for
each PSC.  Verges then caused the PSCs to issue convertible promissory notes and debt
settlements (together “debt instruments”) in exchange for, among other things, payments on
sham consulting service contracts that Verges and his companies entered into with the PSCs.
Next, Verges sold the debt instruments to the Nominees and then directed the PSCs to issue
illicitly obtained and significantly discounted unrestricted shares of PSC stock to the N ominees
to satisfy their conversions of their debt instruments.  R. Malin and L. Malin (collectively, the
“Malins”) through Blue Citi, and Tilton, individually and through JDT, proceeded to offload the
discounted shares and collectively received more than $52 million in trading proceeds.  Finally,
the Malins, Tilton, and the Nominees kicked back a significant portion of those trading proceeds
to Verges-controlled companies: SMEA2Z, 143 Partners, and West Cucharras (collectively, the
“Verges Companies”).  As a result of the scheme, t he Verges Companies received more than $19
million from the Nominees, including at least $12.5 million from Blue Citi and $475,000 from
Tilton and JDT.

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3. In order to effect the scheme, Verges needed to ensure that there was sufficient
trading volume in the market for the Nominees to sell the PSCs shares.  Therefore, Verges
directed Tilton to prepare and publish materially misleading OTC Disclosure Statements and
Financial Reports that omitted or concealed the PSCs’ promissory notes, stock issuances to the
Nominees, the PSCs’ true financial conditions, and Verges’s control of the PSCs.  Verges also
authored and posted more than 1,400 press releases promoting the PSCs in an attempt to
increase the trading volume in their stock.  The daily trading volume in each PSC was
significantly higher on days when Verges posted press releases.  Furthermore, some ALYI press
releases that Verges authored were false and misleading because, inter alia, they announced
fictitious business partnerships between ALYI and companies controlled by Verges.
4. By committing the acts alleged in this Complaint, Verges directly or indirectly
engaged in, and unless restrained and enjoined by the Court will continue to engage in, acts,
transactions, practices, and/or courses of business that violate the antifraud provisions of the
federal securities laws; specifically, Section 17(a) of the Securities Act of 1933 (“Securities
Act”) [15 U.S.C. § 77q(a)], and Section 10(b) of the Securities Exchange Act of 1934
(“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
5. By committing the acts alleged in this Complaint, Tilton, R. Malin, L. Malin, and
Blue Citi directly or indirectly engaged in, and unless restrained and enjoined by the Court will
continue to engage in, acts, transactions, practices, and/or courses of business that violate (or aid
and abet violations of) the antifraud provisions of the federal securities laws; specifically,
Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §§ 77q(a)(1), (3)], and Section 10(b) of
the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§
240.10b-5(a), (c)].  Furthermore, pursuant to Section 20(a) of the Exchange Act [15 U.S.C. §

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78t(a)], the Malins are liable as control persons for Blue Citi’s violations of Section 10(b) of the
Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-
5(a), (c)].
6. In the interest of protecting the public from any further fraudulent activity and
harm, the Commission brings this action against Defendants seeking: (a) permanent injunctive
relief; (b) disgorgement of ill-gotten gains; (c) accrued prejudgment interest on those ill-gotten
gains; (d) civil penalties; and (e) all other equitable and ancillary relief to which the Court
determines that the Commission is entitled.  The Commission also brings this action to recover
the Relief Defendants’ ill-gotten gains along with prejudgment interest thereon.
II.
JURISDICTION AND VENUE
7. The Commission brings this action under Section 20(b) of the Securities Act [15
U.S.C. § 77t(b)] and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], seeking to
permanently restrain and enjoin the Defendants from engaging in the acts and practices alleged
herein.
8. The Court has jurisdiction over this action under Sections 20(d) and 22(a) of the
Securities Act [15 U.S.C. §§ 77t(d) and 77v(a)] and Sections 21(d), 21(e), and 27 of the
Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].
9. Venue is proper because the Dallas Division of the Northern District of Texas is
where Verges resides and where a substantial part of the acts, omissions, transactions, practices,
and/or courses of business giving rise to the claims occurred.
10. Defendants, directly and indirectly, made use of the mails or of the means and
instrumentalities of interstate commerce in connection with the acts, omissions, transactions,
practices, and/or courses of business described in this complaint.

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11. Defendants engaged in the acts, omissions, transactions, practices, and/or courses
of business described in this complaint in connection with the offer, purchase, and/or sale of
securities.
III.
DEFENDANTS AND RELIEF DEFENDANTS
A. Defendants
12. Verges, age 58, resides in Dallas, Texas.  Verges maintained undisclosed control
over each of the five PSCs.  Verges is also the owner and control person of each of the Verges
Companies.  As discussed below, at times, Verges used the aliases Tom Faye and Mike Murphy
in furtherance of his scheme.
13. Tilton, age 62, resides in Tampa, Florida.  Tilton owns and controls JDT, an entity
that he has used to liquidate his stock holdings.  Tilton participated in Verges's scheme as
discussed herein in his individual capacity and through JDT upon its formation in 2019.
14. R. Malin, age 58, resides in San Juan, Puerto Rico and New York, New York.  R.
Malin is a managing member and control person of Blue Citi.  In October 2010, the Commission
obtained a final judgment against R. Malin for his role in a fraudulent “front running” scheme.
See SEC v. A.B. Watley Group, Inc., et al., No. 1:06-cv-01274-ILG-SMG (E.D.N.Y. 2006).  The
final judgment in that matter enjoined R. Malin from future violations of various federal
securities laws and imposed an officer-and-director bar against him.  See id. at Final J. as to Def.
Robert F. Malin [Dkt. No. 98] dated Oct. 5, 2010.
15. L. Malin, age 62, resides in Southampton, New York and is R. Malin’s sister.  L.
Malin is a managing member and control person of Blue Citi.  L. Malin has been licensed to
practice law in the state of New York since 1987.
16. Blue Citi is a New York limited liability company (“LLC”) founded in 2013 with

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its principal place of business in New York, New York.  Blue Citi is primarily in the business of
buying and selling convertible promissory notes of penny stock companies.  The Malins are
managing members and control persons of Blue Citi.
B. Relief Defendants
17. SMEA2Z is a Wyoming LLC formed in 2018 with its principal place of business
in Dallas, Texas.  SMEA2Z purportedly provides consulting services to microcap issuers.
SMEA2Z was administratively dissolved on July 9, 2023, due to delinquent taxes.  Verges is the
sole member, owner, and control person of SMEA2Z.
18. 143 Partners is a Wyoming LLC formed in 2016 with its principal place of
business in Dallas, Texas.  143 Partners purportedly provides consulting services regarding sales,
marketing, and merger and acquisition fundraising, among other services,  to microcap
companies.  143 Partners was administratively dissolved on July 9, 2023, due to delinquent
taxes.  Verges is the sole member, owner, and control person of 143 Partners.
19. West Cucharras is a Wyoming LLC formed in 2017 with its principal place of
business in Dallas, Texas.  West purportedly provides consulting services to companies related to
purchasing distressed debt.  West was administratively dissolved on October 9, 2019, due to its
failure to file a required annual report with the Wyoming Secretary of State.  Verges is the sole
member, owner, and control person of West.
20. JDT is a Wyoming LLC formed in 2019 with its principal place of business in
Babcock Ranch, Florida.  JDT is the entity that Tilton used to liquidate the stock of penny stock
companies, including, but not limited to, ALYI, PURA, and VAYK.  Tilton is the sole member,
owner, and control person of JDT.

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IV.
STATEMENT OF FACTS
A. Overview of Verges’s Scheme.
21. Verges controlled all five PSCs, who by and large had no actual or substantial
business operations, no employees, and little or no revenue.  He concealed his control of the
PSCs by installing figurehead CEOs and purportedly providing “consulting services” to them
through the Verges Companies.  These figurehead CEOs were mostly Verges’s trusted friends—
none of whom had any experience managing or running a publicly traded company.  From at
least January 2017 through June 2022, Verges orchestrated a multi-faceted scheme to enrich
himself by fraudulently directing the PSCs to issue free-trading shares of stock in the PSCs to
Blue Citi, Tilton, JDT, and the Other Nominees.  At Verges’s direction, the Nominees
subsequently sold the shares into the market or to other purchasers and then kicked back a
portion of the trading proceeds to Verges.
22. As part of the scheme, the Verges Companies obtained debt instruments issued by
the PSCs as: (a) purported compensation on sham consulting agreements between the PSCs and
the Verges Companies; and (b) reimbursements to the Verges Companies for purportedly
fronting some of the PSCs’ expenses.  Verges then had the N ominees—particularly Blue Citi—
purchase interests in these debt instruments.  The Nominees also obtained these convertible debt
instruments by purchasing them from third parties, exchanging them for consulting work, and
exchanging them for purported investments in the PSCs.  Verges then allowed the N ominees to
convert their interests in the convertible debt instruments to stock in the PSCs at prices far below
market value.
23. From at least June 2017 to June 2022, Verges directed the issuance of
approximately 5.2 billion shares of stock in the PSCs to the N ominees at an aggregate conversion

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price of approximately $15 million.  These shares had an aggregate market value of over $112
million at the time of issuance.  Once the Nominees obtained stock in the PSCs, Verges
facilitated transactions for the N ominees to transfer their shares to third parties for sale into the
market.  Those open-market sales occurred at prices substantially higher than their acquisition
costs, in part, because of the conversion discounts that Verges provided.  Verges also ensured
that the N ominees could dump their shares into the market, and sustained market interest and
trading volume in PSCs’ stocks, by posting more than 1,400 press releases that he drafted,
including some that were false and misleading.  In return, Verges, through the Verges
Companies, received more than $19 million in payments and kickbacks for his efforts.
24. In addition, Verges surreptitiously executed the aforementioned debt instruments.
Verges used Tilton to hide his control of the PSCs and his involvement in the promissory note
conversions, and to simultaneously manipulate the market to increase the trading volume of the
PSCs’ stocks.  At Verges’s direction and with his approval, Tilton drafted and published OTC
Disclosure Statements that Tilton knew concealed: (1) Verges’s role in converting the notes and
transferring the shares to the N ominees; (2) Verges’s use of the aliases “Mike Murphy” and
“Tim Faye” in communications with transfer agents to facilitate the transfer of PSC stock to the
Nominees; (3) Verges’s role in preparing portions of the PSCs’ OTC Financial Reports; and (4)
the accurate number of outstanding PSC convertible promissory notes.
25. The N ominees sold their PSC shares at a substantial profit.  Blue Citi, Tilton, and
JDT alone received more than $52 million in trading proceeds from their sales of stock in the
PSCs beginning in at least December 2017.  The N ominees paid Verges more than $19 million,
which included payments for the initial debt instruments and kickbacks from the trading
proceeds.

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B. Verges Used Sham Consulting Agreements to Facilitate Issuances of PSC Stock to the
Nominees and Scheme Participants
26. Verges directed the PSCs—through the figurehead CEOs that he installed—to
enter into sham consulting agreements with the Verges Companies for amounts that exceeded the
yearly revenues that the PSCs earned (if any).  These were sham agreements because Verges
knew that the PSCs could not afford to pay his companies’ purported consulting fees.  Moreover,
by and large, the PSCs had no actual or substantial business operations, no employees beyond
figurehead CEOs, and little or no revenue.  Verges and the PSCs’ CEOs executed these
agreements—at Verges’s direction—for the primary purpose of procuring convertible debt
instruments for Verges that he could sell to the N ominees, who would then: (i) convert the debt
instruments to shares of the PSCs’ stock; (ii) sell/dump the shares into the market or to third
parties; and (iii) pay Verges kickbacks from their trading proceeds.  In a typical transaction, once
a PSC executed a consulting agreement with a Verges Company, Verges directed that PSC to
either execute a debt settlement with the Verges Company or issue a convertible promissory note
to the Verges Company.  Verges then assigned or sold portions of these debt instruments to the
Nominees, who in turn executed conversion notices enabling the holders to convert the debt
instruments to stock (which Verges granted at deep discounts under the terms of each debt
instrument).  The Nominees received unrestricted shares from the PSCs’ transfer agents and
either sold, or transferred those shares to third parties for sale, into the market.
27. For example, in January 2018, ALYI and SMEA2Z executed a consulting
agreement whereby ALYI agreed to pay $400,000 to SMEA2Z.  Verges controlled ALYI’s bank
accounts and had direct knowledge of ALYI’s financial condition.  When he executed the
consulting agreement, he knew that ALYI had no revenue and reported a  net loss of over
$700,000 for 2017.  On February 24, 2020, ALYI and SMEA2Z executed a Debt Settlement

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Agreement where SMEA2Z agreed to accept common shares of ALYI stock as payment for the
$400,000 owed under the consulting agreement.  On February 24, 2021, SMEA2Z and Blue Citi
executed a Securities Purchase Agreement that assigned SMEA2Z’s rights in the Debt
Settlement Agreement to Blue Citi.  On March 3, 2021, Blue Citi executed a notice of
conversion for 20 million shares of ALYI stock and was issued 20 million unrestricted ALYI
shares that same day.  On March 5, 2021, Blue Citi sold its ALYI shares to a third party.  Verges
and R. Malin had an agreement that Blue Citi would pay Verges a portion of Blue Citi’s trading
proceeds.  Bank records show that Blue Citi has paid SMEA2Z more than $12 million, some of
which may have included payment for this assignment and the balance a kickback from Blue
Citi’s sale of ALYI stock.
28. For a  second example, in April 2018, PURA and SMEA2Z executed a consulting
agreement whereby PURA agreed to pay $350,000 annually to SMEA2Z.  Verges controlled
PURA’s bank accounts, giving him direct knowledge of PURA’s financial condition.  As a
result, he knew that PURA could not afford to pay SMEA2Z’s consulting fee.  PURA issued a
$350,000 convertible promissory note to SMEA2Z the same day that it executed the consulting
services agreement.  On June 21, 2018, SMEA2Z assigned the entire note to one of the
Nominees for purported consideration of $350,000.  The Nominee executed notices of
conversion on July 15, 2020 and October 12, 2020 and, in turn, was issued 104 million
discounted shares of PURA stock.  This Nominee subsequently sold these shares on the OTC
market.  Bank records show that this particular Nominee has paid SMEA2Z at least $500,000,
some of which may have included payment for this assignment and the balance a kickback from
the sale of the stock.
29. For a  third example, in January 2019, ALYI and SMEA2Z executed a consulting

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agreement whereby ALYI agreed to pay $400,000 annually to SMEA2Z.  Verges controlled
ALYI’s bank accounts and had direct knowledge of ALYI’s financial condition.  When Verges
executed the agreement,  he knew that ALYI had reported revenue of $240,000 and a net loss of
over $600,000 for 2018, and thus could not afford to pay $400,000 to SMEA2Z.  On February
25, 2021, SMEA2Z executed a Debt Settlement Agreement, agreeing to accept common shares
of ALYI stock as payment for the $400,000 owed pursuant to the consulting agreement.
SMEA2Z assigned $200,000 of the Debt Settlement Agreement to one of the N ominees for
purported consideration of $200,000.  On March 1, 2021, the Nominee executed a notice of
conversion to convert the $200,000 interest in the Debt Settlement Agreement for 10 million
shares.  On March 17, 2021, ALYI issued 10 million discounted ALYI shares to the N ominee.
Transfer agent records show that these 10 million ALYI shares were transferred to an entity
associated with this Nominee on March 26, 2021, and the Nominee’s entity subsequently
transferred the shares to a foreign broker-dealer on March 29, 2021, for sale into the market.
Bank records show that this Nominee has paid SMEA2Z more than $1.3 million, some of which
may include payment for the assignment and the balance kickback payments.
C. The Malins and Tilton Knowingly Participated in Verges’s Scheme
1. The Malins used Blue Citi to Obtain and Sell Discounted PSC Shares
30. Blue Citi purchased interests in PSC convertible debt instruments and also
obtained interests in the PSC convertible debt instruments in exchange for Blue Citi’s purported
investments in the PSCs.  At the Malins’ direction, Blue Citi then exercised its conversion rights
and, at Verges’s direction, was issued discounted PSC stock.  Blue Citi then entered into stock
purchase agreements (“SPA”) to sell its shares to third parties, who, in turn, sold the shares in the
OTC markets using domestic and offshore brokers.  These third parties typically paid Blue Citi
for the PSC shares out of the proceeds from the ultimate sales of the PSC shares into the OTC

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markets.
31. As managing members of Blue Citi, the Malins controlled the company and used
it to participate in Verges’s fraud scheme to aid Verges in dumping PSC shares into the market.
In particular, Verges and R. Malin agreed that Blue Citi would obtain interests in the Verges
Companies’ debt instruments with the PSCs.  They also agreed that Verges would direct
issuances of the discounted stock to Blue Citi and that R. Malin would pay the Verges
Companies a portion of Blue Citi’s trading proceeds.  Both of the Malins executed notes,
agreements, and conversion notices in their capacities as “Managers” of Blue Citi to obtain PSC
shares.  L. Malin also directly corresponded with at least one of the PSCs’ transfer agents
regarding conversion and was included on multiple emails that Blue Citi’s attorney sent to the
transfer agents for Blue Citi to receive stock in the PSCs.
32. Beginning in at least May 2018, Verges directed the issuance of discounted
unrestricted shares of stock in the PSCs to Blue Citi in at least the following amounts:
PSC Shares Aggregate Conversion Price at Time of
Issuance
Aggregate Market Value at Time
of Issuance
ALYI 1,440,633,468 $3,677,914.40 $22,982,432.82
PJET 77,000,000 $385,000.00 $508,300.00
PURA 500,644,100 $1,770,645.00 $10,568,145.30
VAYK 505,870,000 $820,330.00 $12,152,780.00
WPUR 41,129,441 $173,000.00 $963,497.83
TOTAL 2,565,277,009 $6,826,889.40 $47,175,155.96

In total, Blue Citi received over 2.5 billion shares of stock in the PSCs that had a market value of
$47 million at the time of issuance, for a total discount of almost $41 million.
33. After the stock issuances, the Malins directed Blue Citi to sell its shares to third
parties who, in turn, would sell the shares into the market at a substantial profit.  Verges

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facilitated many of these transactions by directly corresponding with the PSCs’ transfer agents
using one of his aliases (as described below), and indirectly by instructing the PSCs’ figurehead
CEOs to approve share issuances to Blue Citi.
2. Tilton Worked for Verges and Used JDT to Obtain and Sell Discounted PSC
Shares
34. All PSCs published Disclosure Statements and Financial Reports pursuant to the
Pink Basic Disclosure Guidelines through a publicly available website maintained by OTC
Markets Group, Inc. (“OTC Markets”).  Verges hired Tilton as a consultant for ALYI, VAYK,
and PURA, and Tilton’s responsibilities primarily included assisting in preparing and publishing
these OTC Disclosure Statements on the OTC Markets’ publicly available website.  Similar to
Verges, Tilton executed consulting agreements with the three PSCs despite knowing, since he
was provided with and published their financial documents, that these PSCs could not afford to
pay his fee.  Consequently, Tilton accepted convertible notes as compensation with the goal of
converting the notes to stock, which he could then sell into the market via his entity, JDT.
35. Similar to his arrangement with Blue Citi, Verges directed stock issuances to JDT
at significantly discounted prices.  Beginning in at least December 2017, JDT received shares in
the PSCs as follows:
PSC Shares Sum of Conversion Price at Time of
Issuance
Sum of Market Value at Time of
Issuance
ALYI 859,388,610 $769,388.61 $29,112,474.47
PURA 140,649,581 $1,024,198.17 $3,550,863.62
VAYK 163,368,000 $163,368.00 $4,503,150.50
TOTAL 1,163,406,191 $1,956,954.78 $37,166,488.58

In total, JDT received over 1.1 billion shares of ALYI, VAYK, and PURA stock, with a market
value of over $37 million at the time of issuance, at a total discount of more than $35 million.

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Between June 2018 and September 2022, JDT sold these shares of ALYI, VAYK, and PURA
stock and received proceeds of more than $16 million from the sales.  Tilton and JDT then paid
Verges, through the Verges Companies, at least $475,000.
D. Verges and Tilton Published Materially False and Misleading Disclosures
36. Verges directed the preparation of and approved the OTC Disclosure Statements
for ALYI, VAYK, and PURA.  At Verges’s direction, Tilton prepared the OTC Disclosure
Statements using information he received from Verges, Verges’s personal accountant (the
“Accountant”), and the PSCs’ transfer agents.  Verges directed Tilton to prepare OTC Disclosure
Statements that omitted information about promissory notes that the PSCs issued to the Verges
Companies and to the N ominees.  As one example, Verges directed Tilton to omit from PURA’s
March 2019 OTC Disclosure Statement a $350,000 convertible promissory note issued to
SMEA2Z in April 2018.  As another example, Verges directed Tilton to omit from ALYI’s OTC
Disclosure Statement a $1 million note issued to Blue Citi on April 8, 2021.  Verges directed
Tilton to hide this information, which concealed Verges’s control of, and transactions with, the
PSCs and resulted in materially misleading financials because ALYI failed to accurately disclose
its debt obligations.  Both Verges and Tilton knew that Verges controlled the PSCs, which
should have been disclosed in the OTC Disclosure Statements.
37. Verges also directed Tilton to prepare and publish OTC Disclosure Statements
that concealed the preparer of the OTC Financial Reports for ALYI, VAYK, and PURA.  As
examples, ALYI’s OTC Disclosure Statement for the periods ended March 31, 2022 and June
30, 2022 stated that ALYI’s OTC Financial Reports were prepared by ALYI’s CEO.  However,
Verges and Tilton knew that these statements were false and that the Accountant, not ALYI’s
CEO, prepared these financials.  Verges omitted the Accountant’s role because he is a felon and
was previously barred from appearing or practicing before the Commission.  Additionally, none

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of the aforementioned OTC Disclosure Statements (including those identified in paragraphs 35
and 37 above) disclosed Verges’s control over the PSCs.
E. Verges Used Aliases to Hide His Role in the Scheme
38. When conducting business on behalf of the PSCs, Verges used the alias “Mike
Murphy” from at least May 2018 through March 2020 and the alias “Tom Faye” from at least
December 2020 through May 2021.  Verges used these aliases to conceal his true identity and his
control of the PSCs.  As an example, in December 2020, Verges emailed VAYK’s transfer agent
using his alias “Faye” and posing as a VAYK employee to facilitate a transfer of shares from
Blue Citi to a third party.  In March 2021, Verges emailed ALYI’s transfer agent using his
“Murphy” alias to facilitate the issuance of 10 million ALYI shares to one of the N ominees.
Verges was an undisclosed control person of the PSCs, a fact that he should have disclosed to the
transfer agent.  Instead, Verges went to great lengths to conceal his control of the PSCs by using
these aliases in communications with the transfer agents.  By using the “Faye” and “Murphy”
aliases in these instances and others, Verges deceived the transfer agents and the investing
public.  Tilton knew that Verges used these aliases, and he was even included on emails with
both ALYI’s and VAYK’s transfer agents when Verges used the aliases.
F. Verges Used a Press Release Campaign to Manipulate the PSCs’ Trading Volume
and Spread Misinformation
1. Verges’s Press Release Campaign Artificially Increased the PSCs’ Trading
Volume
39. To allow the N ominees to dump shares into the market, Verges embarked on a
promotional campaign to generate investor interest and increase trading volume in the stocks of
the PSCs.  From at least September 2017 to August 2022, Verges posted more than 1,400 press

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releases to promote the PSCs on InvestorsHub (“iHub”).
1
  Verges posted the high volume of
releases on iHub to: (a) create and sustain investor interest in the PSCs; and (b) ultimately sustain
sufficient trading volume to allow the Nominees to dump their shares of stock in the PSCs into
the market.
40. As early as December 2014, Verges used his alias “Mike Murphy” to create an
account with iHub under the username “4Weed.”  Between September 2017 and August 2022,
Verges, using the alias 4Weed, uploaded over 1,400 press releases to iHub relating to the PSCs
during the following time periods as follows:
PSC Date Range Number of Press Releases
ALYI 9/12/17 – 8/9/22 512
PJET 10/12/17 – 8/12/22 87
PURA 12/11/17 – 8/11/22 762
VAYK 11/17/21 – 8/12/22 16
WPUR 12/17/21 – 8/16/22 42
 TOTAL 1419

Verges drafted, in whole or in part, the PSC press releases and had ultimate authority over their
content.  Verges paid iHub at least $1,395,800 from SMEA2Z’s bank account to post these press
releases.
41. Verges’s posting of these press releases caused artificial increases in the PSCs’
trading volume.
2. Verges’s Press Releases Contained Untrue Statements
42. Verges authored and posted at least four press releases that contained untrue
statements about ALYI.
43. On August 26, 2020, Verges posted a press release he authored that stated,

1
  iHub is an online research forum community that centers around penny stocks and also allows users to
upload press releases.

17

“[ALYI] has secured an initial $25 million investment commitment that is part of a $100 million
cryptocurrency offering organized by the investor, RevoltTOKEN (www.revolttoken.com).”
This statement was false and misleading because ALYI never secured a $25 million investment
commitment.  Also, Verges failed to disclose that he controlled RevoltTOKEN.
44. On August 27, 2020, Verges posted a press release he authored that stated, “ALYI
currently has already entered into an initial $20 million electric motorcycle order and an
additional letter of intent for a $30 million contract.”  This statement was false and misleading,
because there was no $20 million order and no interest that would lead to such an order at that
time.
45. On September 2, 2020, Verges posted a press release he authored that stated,
“ALYI has entered into a comprehensive funding agreement with RevoltTOKEN that includes
an existing $25 million first tranche investment commitment at $0.05 per share.  ALYI has
initiated a $2.5 million draw down on the first $25 million to begin construction on a 100-acre
facility in Africa.”  This statement was false and misleading because RevoltTOKEN never made
a $25 million commitment to ALYI and there was no $2.5 million draw down.  In fact, when the
press release was issued, RevoltTOKEN did not exist, had not been incorporated, and did not
even have a bank account.  Therefore, the $2.5 million draw down was impossible.
46. On April 16, 2021, Verges posted a press release he authored that stated, “[i]n
April 2021, Alternet Systems, Inc. executed multiple business agreements in conjunction with a
$1 million investment in Zoomcar, Inc. [...] To provide the funds for Alternet’s investment, the
Company issued a $1 million convertible note with a $0.10 conversion price.”  This statement
was false and misleading because the conversion price of the referenced note, which was issued
to Blue Citi, was not $0.10.  ALYI’s discount price on convertible notes was $0.001.  Blue Citi

18

ended up receiving stock pursuant to the note at a conversion price of $0.0032, enabling it to
obtain ALYI stock at a price 96.8% lower than what Verges represented to the public.
47. In conjunction with the press releases identified in paragraphs 42 through 46,
Verges directed ALYI to issue stock to the Nominees: (a) on the same day as the August 27,
2020 and September 2, 2020 press releases; (b) on the day following the August 26, 2020 press
release; and (c) four stock issuances before the April 16, 2021 press release.  As with the other
press releases that Verges posted, ALYI’s trading volume was markedly higher on the days
Verges posted the four press releases identified above.
G. Defendants Profited From the Scheme
48. Bank records show that from at least as early as January 2017, the Verges
Companies received at least $19,168,916.30 from Blue Citi, JDT, Tilton, and the Other
Nominees:

Funds Received By:

SMEA2Z West Cucharras 143 Partners

TOTAL
Funds Received From:

Blue Citi

$12,307,287.00 $50,000.00 $225,000.00

$12,582,287.00
JDT

$450,000.00

$450,000.00
Tilton

$25,000.00

$25,000.00
Other Nominees  $4,659,929.30 $560,000.00 $891,700.00  $6,111,629.30

TOTAL

$17,417,216.30 $635,000.00 $1,116,700.00

$19,168,916.30

49. Bank and trading records show that Blue Citi received at least $35,946,798.92 in
trading proceeds from selling the PSCs’ stock.  R. Malin received at least $11,877,763.24 from
Blue Citi between May 2018 and the present, and L. Malin received at least $533,750 from Blue
Citi during the same period.  Since December 2017, JDT received at least $16,522,750 in trading
proceeds from its sales of the PSCs’ stock.

19

V.
CLAIMS FOR RELIEF

FIRST CLAIM FOR RELIEF

Violations of the Antifraud Provisions of the Exchange Act
Section 10(b) and Rule 10b-5

Against All Defendants
50. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by
reference as if set forth verbatim in this Claim.
51. From at least June 2017 to June 2022, Defendants perpetrated a scheme to pump
and dump stock in the PSCs to unsuspecting public investors in the OTC markets.  Among other
things, Verges caused the PSCs to enter into sham consulting agreements with companies that he
controlled, and he then directed the companies to issue debt instruments to cover the fees that
they would otherwise be unable to pay.  In turn, Verges assigned those debt instruments to the
Nominees, including Blue Citi and JDT.  Verges then directed the PSCs to issue significantly
discounted unrestricted shares of stock to the Nominees in order to satisfy the PSCs’ bogus
debts.  The Nominees proceeded to offload the discounted shares into the OTC markets.  Blue
Citi and JDT alone received more than $52 million in proceeds.  The Nominees returned
approximately $19 million to Verges as kickbacks.
52. R. Malin, L. Malin, and Tilton played key active roles in the pump and dump
scheme.  R. Malin and L. Malin used Blue Citi to sell shares of the PSCs’ stocks it received,
through transactions with the Verges Companies and others, to third parties, who sold them into
the OTC markets.  Tilton owned JDT, another participant in the scheme, and transferred JDT’s
shares of the PSCs to third parties who sold them into the OTC markets.  Blue Citi and JDT both
paid the Verges Companies kickbacks out of the proceeds from their sales of the PSCs’ stocks.

20

53. Furthermore, to ensure that the Nominees could sell the PSCs’ shares into the
market, Verges inflated the PSCs’ trading volume by, directly or indirectly: (a) preparing and
posting OTC Disclosure Statements and Financial Reports that were materially misleading; and
(b) authoring and posting more than 1,400 press releases promoting the PSCs, including four
press releases that included untrue statements of material fact.
54. By engaging in the acts and conduct alleged herein, Defendants, directly or
indirectly, in connection with the purchase or sale of securities, by the use of any means or
instrumentality of interstate commerce, or of the mails or of any facility of any national securities
exchange, knowingly or with severe recklessness:
a. employed a device, scheme, or artifice to defraud; and/or
b. engaged  in  an act,  practice,  or  course  of  business  which  operated  or  would
operate as a fraud or deceit upon any person.
55. By engaging in the acts and conduct alleged herein, Verges, directly or indirectly,
in connection with the purchase or sale of securities, by the use of any means or instrumentality
of interstate commerce, or of the mails or of any facility of any national securities exchange,
knowingly or with severe recklessness made an untrue statement of material fact, or omitted to
state a material fact necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading.
56. By reason of the foregoing, Defendants violated, and unless restrained and
enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and
Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a), (c)].
57. In addition, Verges also violated, and unless restrained and enjoined will continue
to violate, Rule 10b-5(b) [17 C.F.R. § 240.10b-5(b)].

21

SECOND CLAIM FOR RELIEF

Aiding and Abetting Violations of the Antifraud Provisions of the Exchange Act
Section 10(b) and Rules 10b-5(a) and 10b-5(c)

Against Tilton, R. Malin, L. Malin, and Blue Citi

58. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by
reference as if set forth verbatim in this Claim.
59. R. Malin, L. Malin, and Tilton played key active roles in the pump and dump
scheme.  R. Malin and L. Malin used Blue Citi to sell shares of the PSCs’ stocks it received,
through transactions with the Verges Companies and others, to third parties, who sold them into
the OTC markets.  Tilton owned JDT, another participant in the scheme, and transferred JDT’s
shares of the PSCs to third parties who sold them into the OTC markets.  Blue Citi and JDT both
paid kickbacks to the Verges Companies out of the proceeds from their sales of the PSCs’ stocks.
60. In addition, as more fully discussed in paragraphs 34 and 36-37 above, Tilton, at
Verges’s direction, prepared and posted to a publicly available website the OTC Disclosure
Statements that concealed certain information such as the preparer of the Financial Reports for
ALYI, VAYK, and PURA.
61. By engaging in the acts and conduct alleged herein, Blue Citi, R. Malin, L. Malin,
and Tilton aided and abetted Verges’s violations of Section 10(b) of the Exchange Act and Rules
10b-5(a) and 10b-5(c) thereunder by knowingly or recklessly providing substantial assistance to
Verges who, directly or indirectly, singly or in concert with others, in the purchase and sale of a
security, by use of the means or instrumentalities of interstate commerce or by use of the mails
(i) employed a device, scheme, or artifice to defraud, and/or (ii) engaged in an act, practice, or
course of business which operated as a fraud or deceit upon purchasers, prospective purchasers,

22

and other persons.
62. By reason of the foregoing, Blue Citi, R. Malin, L. Malin, and Tilton, directly or
indirectly, aided and abetted, and unless enjoined will continue to aid and abet, violations of
Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and 10b-5(c) [17
C.F.R. §§ 240.10b-5(a) and 240.10b-5(c)] thereunder.

THIRD CLAIM FOR RELIEF

Violations of the Antifraud Provisions of the Securities Act
Securities Act Section 17(a)

Against All Defendants

63. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by
reference as if set forth verbatim in this Claim.
64. From at least June 2017 to June 2022, Defendants perpetrated a scheme to pump
and dump stock in the PSCs to unsuspecting public investors in the OTC markets.  Among other
things, Verges caused the PSCs to enter into sham consulting agreements with companies that he
controlled, and he then directed the companies to issue debt instruments to cover the fees that
they would otherwise be unable to pay.  In turn, Verges assigned those debt instruments to the
Nominees, including Blue Citi and JDT.  Verges then directed the PSCs to issue significantly
discounted unrestricted shares of stock to the Nominees in order to satisfy the PSCs’ bogus
debts.  The Nominees proceeded to offload the discounted shares into the OTC markets.  Blue
Citi and JDT alone received more than $52 million in proceeds.  The Nominees returned
approximately $19 million to Verges as kickbacks.
65. R. Malin, L. Malin, and Tilton played key active roles in the pump and dump
scheme.  R. Malin and L. Malin used Blue Citi to sell shares of the PSCs’ stocks it received,

23

through transactions with the Verges Companies and others, to third parties, who sold them into
the OTC markets.  Tilton owned JDT, another participant in the scheme, and transferred JDT’s
shares of the PSCs to third parties who sold them into the OTC markets.  Blue Citi and JDT both
paid kickbacks to the Verges Companies out of the proceeds from their sales of the PSCs’ stocks.
66. Furthermore, to ensure that the Nominees could sell the PSCs’ shares, Verges
inflated the PSCs’ trading volume by, directly or indirectly: (a) preparing and posting OTC
Disclosure Statements and Financial Reports that were materially misleading; and (b) authoring
and posting more than 1,400 press releases promoting the PSCs, including four press releases
that included untrue statements of material fact.
67. By engaging in the acts and conduct alleged herein, Defendants, directly or
indirectly, in the offer or sale of a security, by the use of any means or instruments of
transportation or communication in interstate commerce or by use of the mails, have:
a. knowingly or with severe recklessness employed a device, scheme, or
artifice to defraud; and/or
b. knowingly, recklessly, or negligently engaged in a transaction, practice, or
course of business which operated or would operate as a fraud or deceit
upon the purchaser.
68. In addition, by engaging in the acts and conduct alleged herein, Verges, directly
or indirectly, in the offer or sale of a security, by the use of any means or instruments of
transportation or communication in interstate commerce or by use of the mails, has knowingly,
recklessly, or negligently obtained money or property by means of an untrue statement of a
material fact or an omission to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.

24

69. By reason of the foregoing, Defendants have violated, and unless enjoined will
continue to violate, Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §§ 77q(a)(1), (3)].
70. In addition, Verges also violated, and unless restrained and enjoined will continue
to violate, Section 17(a)(2) of the Securities Act [15 U.S.C. § 77q(a)(2)].

FOURTH CLAIM FOR RELIEF

Aiding and Abetting Violations of the Antifraud Provisions of the Securities Act
Sections 17(a)(1) and (3)

Against Tilton, R. Malin, L. Malin, and Blue Citi

71. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by
reference as if set forth verbatim in this Claim.
72. R. Malin, L. Malin, and Tilton played key active roles in the pump and dump
scheme.  R. Malin and L. Malin used Blue Citi to sell shares of the PSCs’ stocks it received,
through transactions with the Verges Companies and others, to third parties, who sold them into
the OTC markets.  Tilton owned JDT, another participant in the scheme, and transferred JDT’s
shares of the PSCs to third parties who sold them into the OTC markets.  Blue Citi and JDT both
paid kickbacks to the Verges Companies out of the proceeds from their sales of the PSCs’ stocks.
73. In addition, as more fully discussed in paragraphs 34 and 36-37 above, Tilton, at
Verges’s direction, prepared and posted to a publicly available website the OTC Disclosure
Statements that concealed certain information such as the preparer of the Financial Reports for
ALYI, VAYK, and PURA.
74. By engaging in the acts and conduct alleged herein, Blue Citi, R. Malin, L. Malin,
and Tilton aided and abetted Verges’s violations of Section 17(a)(1) and (3) of the Securities Act
by knowingly or recklessly providing substantial assistance to Verges who, directly or indirectly,

25

singly or in concert with others, in the offer or sale of a security, by the use of any means or
instruments of transportation or communication in interstate commerce or by the use of the mails
(i) employed a device, scheme, or artifice to defraud, and/or (ii) engaged in a transaction,
practice, or course of business which operated as a fraud or deceit upon purchasers.
75. By reason of the foregoing, Blue Citi, R. Malin, L. Malin, and Tilton, directly or
indirectly, aided and abetted, and unless enjoined will continue to aid and abet, violations of
Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §§ 77q(a)(1) and (3)].

FIFTH CLAIM FOR RELIEF

Control Person Liability Under Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)] for
Blue Citi’s Violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules
10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a), (c)]

Against R. Malin and L. Malin

76. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by
reference as if set forth verbatim in this Claim.
77. By virtue of the foregoing, Blue Citi has violated Section 10(b) of the Exchange
Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a), (c)]
by directly or indirectly, in connection with the purchase or sale of securities, by the use of any
means or instrumentality of interstate commerce, or of the mails or of any facility of any national
securities exchange, knowingly or with severe recklessness employing a device, scheme, or
artifice to defraud; and/or engaging in an act, practice, or course of business which operated or
would operate as a fraud or deceit upon any person.
78. As Blue Citi’s Managing Members, R. Malin and L. Malin exercised control over
the general operations of Blue Citi and the specific activity upon which Blue Citi’s violations are

26

based.
79. By reason of the foregoing, R. Malin and L. Malin are liable as control persons
for Blue Citi’s violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules
10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a), (c)] pursuant to Section 20(a) of the
Exchange Act [15 U.S.C. § 78t(a)].

SIXTH CLAIM FOR RELEIF

Disgorgement

Against All Relief Defendants

80. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by
reference as if set forth verbatim in this Claim.
81. Relief Defendants SMEA2Z, 143 Partners, West C ucharras, and JDT, directly or
indirectly, received funds or benefitted from the use of funds, which are proceeds of the
securities law violations described herein.
82. Relief Defendants SMEA2Z, 143 Partners, West Cucharras, and JDT have no
legitimate claims to such funds received, or from which they otherwise benefitted from, directly
or indirectly.
83. The Commission is entitled to an order, pursuant to common law equitable
principles—such as disgorgement, unjust enrichment, and constructive trust—and pursuant to
Sections 21(d)(3), (5), and (7) of the Exchange Act [15 U.S.C. §§ 78u(d)(3), (5), (7)], requiring
Relief Defendants to disgorge all of the proceeds they received, either directly or indirectly, from
Defendants that they derived from the securities law violations described herein.
84. As a result of the conduct described above, Relief Defendants should disgorge

27

their ill-gotten gains, plus prejudgment interest thereon.

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that the Court enter a judgment:
1. Permanently enjoining Verges from violating, directly or indirectly, Section 17(a)
of the Securities Act [15 U.S.C. § 77e] and Section 10(b) of the Exchange Act [15 U.S.C. §
78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5];
2. Permanently enjoining Tilton, R. Malin, L. Malin, and Blue Citi from violating,
directly or indirectly, Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §§ 77e(1), (3)]
and Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c)
thereunder [17 C.F.R. §§ 240.10b-5(a), (c)], and from aiding and abetting future violations of
Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §§ 77e(1), (3)] and Section 10(b) of
the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§
240.10b-5(a), (c)];
3. Permanently enjoining Verges, Tilton, R. Malin, L. Malin, and Blue Citi pursuant
to Section 20(g)(1) of the Securities Act [15 U.S.C. § 77t(g)(1)] and Section 21(d)(6)(A) of the
Exchange Act [15 U.S.C. § 78u(d)(6)(A)], from participating in an offering of penny stock,
including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading,
or inducing or attempting to induce the purchase or sale of any penny stock.  A penny stock is
any equity security that has a price of less than five dollars, except as provided in Rule 3a51-1
under the Exchange Act [17 C.F.R. § 240.3a51-1];
4. Permanently enjoining Verges, Tilton, R. Malin, and L. Malin, pursuant to
Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the Exchange

28

Act [15 U.S.C. § 78u(d)(2)], from serving as an officer or director of any issuer that has a class
of securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l], or that is
required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)];
5. Ordering Defendants and Relief Defendants to disgorge all ill-gotten gains they
received as a result of the conduct alleged herein, together with pre-judgment interest on those
amounts, pursuant to the Court’s equitable powers and Sections 21(d)(3), 21(d)(5), and 21(d)(7)
of the Exchange Act [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)];
6. Imposing civil penalties against Defendants pursuant to Section 20(d) of the
Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. §
78u(d)(3)] for violations of the federal securities laws as alleged herein;
7. Retaining jurisdiction of this action in accordance with the principles of equity
and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all
orders and decrees that may be entered, or to entertain any suitable application or motion for
additional relief within the jurisdiction of this Court; and
8. Granting such other and further relief as this Court may determine to be just and
necessary.

29

Dated:   September 26, 2023     Respectfully submitted,

/s/ Jason P. Reinsch
Jason P. Reinsch
Texas Bar No. 24040120
United States Securities and Exchange Commission
Fort Worth Regional Office
801 Cherry Street, Suite 1900
Fort Worth, Texas 76102
(817) 900-2601 (phone)
(817) 978-4927 (facsimile)
[email protected]

ATTORNEY FOR PLAINTIFF SECURITIES
AND EXCHANGE COMMISSION

1 
 

IN THE UNITED STATES DISTRICT COURT 
FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 
 
         
        § 
SECURITIES AND EXCHANGE COMMISSION, § 
        § 

Plaintiff,     § 
        § 
v.        § Case No.: 3:23:cv-02146 
        § 
PHILIP VERGES, JAMES D. TILTON, JR.,  § 
ROBERT F. MALIN, LINDA MALIN, and   § 
BLUE CITI, LLC,      § 
        § 
  Defendants,      § 
        § 
SMEA2Z, LLC, 143 PARTNERS LLC, WEST   § 
CUCHARRAS, LLC, and JDT TRADING, LLC,  § 
        § 

Relief Defendants.    § 
        § 
 

COMPLAINT 

 
Plaintiff Securities and Exchange Commission (the “Commission” or “Plaintiff”) files this 

Complaint against Defendants Philip Verges (“Verges”), James D. Tilton, Jr. (“Tilton”), Robert F. 

Malin (“R. Malin”), Linda Malin (“L. Malin”), and Blue Citi, LLC (“Blue Citi”) (collectively, 

“Defendants”), and Relief Defendants SMEA2Z, LLC (“SMEA2Z”), 143 Partners LLC (“143 

Partners”), West Cucharras, LLC (“West Cucharras”), and JDT Trading, LLC (“JDT”) 

(collectively, “Relief Defendants”), and alleges as follows: 

I. 
SUMMARY 

1. From at least June 2017 to June 2022, Defendants—led by Verges—perpetrated a 

scheme to pump and dump into the market more than $112 million of stock in certain penny 

stock companies.  Verges designed the scheme so that Blue Citi (owned by R. Malin and L. 

Case 3:23-cv-02146-D   Document 1   Filed 09/26/23    Page 1 of 29   PageID 1



2 
 

Malin), Tilton (in his individual capacity), JDT (owned by Tilton), and other accomplices that 

Verges nominated (the “Other Nominees”; collectively with Blue Citi, Tilton, and JDT, the 

“Nominees”) received heavily discounted shares in five penny stock companies:  Alternet 

Systems, Inc. (“ALYI”), Priority Aviation, Inc. (“PJET”), Puration, Inc. (“PURA”), 

Vaycaychella, Inc. (“VAYK”), and WaterPure International, Inc. (“WPUR”) (collectively, the 

“PSCs” and individually, a “PSC”).  The Nominees ultimately received at least 5.2 billion shares 

of stock in the PSCs at an 86.64% discount and then proceeded to dump those shares into the 

market.  Blue Citi, Tilton, and JDT alone generated more than $52 million in trading proceeds. 

2. Defendants carried out Verges’s scheme in multiple phases.  First, Verges 

obtained de facto control over the PSCs, which he concealed by installing figurehead CEOs for 

each PSC.  Verges then caused the PSCs to issue convertible promissory notes and debt 

settlements (together “debt instruments”) in exchange for, among other things, payments on 

sham consulting service contracts that Verges and his companies entered into with the PSCs.  

Next, Verges sold the debt instruments to the Nominees and then directed the PSCs to issue 

illicitly obtained and significantly discounted unrestricted shares of PSC stock to the Nominees 

to satisfy their conversions of their debt instruments.  R. Malin and L. Malin (collectively, the 

“Malins”) through Blue Citi, and Tilton, individually and through JDT, proceeded to offload the 

discounted shares and collectively received more than $52 million in trading proceeds.  Finally, 

the Malins, Tilton, and the Nominees kicked back a significant portion of those trading proceeds 

to Verges-controlled companies: SMEA2Z, 143 Partners, and West Cucharras (collectively, the 

“Verges Companies”).  As a result of the scheme, the Verges Companies received more than $19 

million from the Nominees, including at least $12.5 million from Blue Citi and $475,000 from 

Tilton and JDT. 

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3 
 

3. In order to effect the scheme, Verges needed to ensure that there was sufficient 

trading volume in the market for the Nominees to sell the PSCs shares.  Therefore, Verges 

directed Tilton to prepare and publish materially misleading OTC Disclosure Statements and 

Financial Reports that omitted or concealed the PSCs’ promissory notes, stock issuances to the 

Nominees, the PSCs’ true financial conditions, and Verges’s control of the PSCs.  Verges also 

authored and posted more than 1,400 press releases promoting the PSCs in an attempt to 

increase the trading volume in their stock.  The daily trading volume in each PSC was 

significantly higher on days when Verges posted press releases.  Furthermore, some ALYI press 

releases that Verges authored were false and misleading because, inter alia, they announced 

fictitious business partnerships between ALYI and companies controlled by Verges. 

4. By committing the acts alleged in this Complaint, Verges directly or indirectly 

engaged in, and unless restrained and enjoined by the Court will continue to engage in, acts, 

transactions, practices, and/or courses of business that violate the antifraud provisions of the 

federal securities laws; specifically, Section 17(a) of the Securities Act of 1933 (“Securities 

Act”) [15 U.S.C. § 77q(a)], and Section 10(b) of the Securities Exchange Act of 1934 

(“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

5. By committing the acts alleged in this Complaint, Tilton, R. Malin, L. Malin, and 

Blue Citi directly or indirectly engaged in, and unless restrained and enjoined by the Court will 

continue to engage in, acts, transactions, practices, and/or courses of business that violate (or aid 

and abet violations of) the antifraud provisions of the federal securities laws; specifically, 

Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §§ 77q(a)(1), (3)], and Section 10(b) of 

the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 

240.10b-5(a), (c)].  Furthermore, pursuant to Section 20(a) of the Exchange Act [15 U.S.C. § 

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78t(a)], the Malins are liable as control persons for Blue Citi’s violations of Section 10(b) of the 

Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-

5(a), (c)]. 

6. In the interest of protecting the public from any further fraudulent activity and 

harm, the Commission brings this action against Defendants seeking: (a) permanent injunctive 

relief; (b) disgorgement of ill-gotten gains; (c) accrued prejudgment interest on those ill-gotten 

gains; (d) civil penalties; and (e) all other equitable and ancillary relief to which the Court 

determines that the Commission is entitled.  The Commission also brings this action to recover 

the Relief Defendants’ ill-gotten gains along with prejudgment interest thereon. 

II. 
JURISDICTION AND VENUE 

7. The Commission brings this action under Section 20(b) of the Securities Act [15 

U.S.C. § 77t(b)] and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], seeking to 

permanently restrain and enjoin the Defendants from engaging in the acts and practices alleged 

herein. 

8. The Court has jurisdiction over this action under Sections 20(d) and 22(a) of the 

Securities Act [15 U.S.C. §§ 77t(d) and 77v(a)] and Sections 21(d), 21(e), and 27 of the 

Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].     

9. Venue is proper because the Dallas Division of the Northern District of Texas is 

where Verges resides and where a substantial part of the acts, omissions, transactions, practices, 

and/or courses of business giving rise to the claims occurred. 

10. Defendants, directly and indirectly, made use of the mails or of the means and 

instrumentalities of interstate commerce in connection with the acts, omissions, transactions, 

practices, and/or courses of business described in this complaint.  

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11. Defendants engaged in the acts, omissions, transactions, practices, and/or courses 

of business described in this complaint in connection with the offer, purchase, and/or sale of 

securities.        

III. 
DEFENDANTS AND RELIEF DEFENDANTS 

A. Defendants 

12. Verges, age 58, resides in Dallas, Texas.  Verges maintained undisclosed control 

over each of the five PSCs.  Verges is also the owner and control person of each of the Verges 

Companies.  As discussed below, at times, Verges used the aliases Tom Faye and Mike Murphy 

in furtherance of his scheme. 

13. Tilton, age 62, resides in Tampa, Florida.  Tilton owns and controls JDT, an entity 

that he has used to liquidate his stock holdings.  Tilton participated in Verges's scheme as 

discussed herein in his individual capacity and through JDT upon its formation in 2019.     

14. R. Malin, age 58, resides in San Juan, Puerto Rico and New York, New York.  R. 

Malin is a managing member and control person of Blue Citi.  In October 2010, the Commission 

obtained a final judgment against R. Malin for his role in a fraudulent “front running” scheme.  

See SEC v. A.B. Watley Group, Inc., et al., No. 1:06-cv-01274-ILG-SMG (E.D.N.Y. 2006).  The 

final judgment in that matter enjoined R. Malin from future violations of various federal 

securities laws and imposed an officer-and-director bar against him.  See id. at Final J. as to Def. 

Robert F. Malin [Dkt. No. 98] dated Oct. 5, 2010.  

15. L. Malin, age 62, resides in Southampton, New York and is R. Malin’s sister.  L. 

Malin is a managing member and control person of Blue Citi.  L. Malin has been licensed to 

practice law in the state of New York since 1987.   

16. Blue Citi is a New York limited liability company (“LLC”) founded in 2013 with 

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its principal place of business in New York, New York.  Blue Citi is primarily in the business of 

buying and selling convertible promissory notes of penny stock companies.  The Malins are 

managing members and control persons of Blue Citi. 

B. Relief Defendants 

17. SMEA2Z is a Wyoming LLC formed in 2018 with its principal place of business 

in Dallas, Texas.  SMEA2Z purportedly provides consulting services to microcap issuers.  

SMEA2Z was administratively dissolved on July 9, 2023, due to delinquent taxes.  Verges is the 

sole member, owner, and control person of SMEA2Z. 

18. 143 Partners is a Wyoming LLC formed in 2016 with its principal place of 

business in Dallas, Texas.  143 Partners purportedly provides consulting services regarding sales, 

marketing, and merger and acquisition fundraising, among other services, to microcap 

companies.  143 Partners was administratively dissolved on July 9, 2023, due to delinquent 

taxes.  Verges is the sole member, owner, and control person of 143 Partners. 

19. West Cucharras is a Wyoming LLC formed in 2017 with its principal place of 

business in Dallas, Texas.  West purportedly provides consulting services to companies related to 

purchasing distressed debt.  West was administratively dissolved on October 9, 2019, due to its 

failure to file a required annual report with the Wyoming Secretary of State.  Verges is the sole 

member, owner, and control person of West. 

20. JDT is a Wyoming LLC formed in 2019 with its principal place of business in 

Babcock Ranch, Florida.  JDT is the entity that Tilton used to liquidate the stock of penny stock 

companies, including, but not limited to, ALYI, PURA, and VAYK.  Tilton is the sole member, 

owner, and control person of JDT. 

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IV. 
STATEMENT OF FACTS 

A. Overview of Verges’s Scheme. 

21. Verges controlled all five PSCs, who by and large had no actual or substantial 

business operations, no employees, and little or no revenue.  He concealed his control of the 

PSCs by installing figurehead CEOs and purportedly providing “consulting services” to them 

through the Verges Companies.  These figurehead CEOs were mostly Verges’s trusted friends—

none of whom had any experience managing or running a publicly traded company.  From at 

least January 2017 through June 2022, Verges orchestrated a multi-faceted scheme to enrich 

himself by fraudulently directing the PSCs to issue free-trading shares of stock in the PSCs to 

Blue Citi, Tilton, JDT, and the Other Nominees.  At Verges’s direction, the Nominees 

subsequently sold the shares into the market or to other purchasers and then kicked back a 

portion of the trading proceeds to Verges.   

22. As part of the scheme, the Verges Companies obtained debt instruments issued by 

the PSCs as: (a) purported compensation on sham consulting agreements between the PSCs and 

the Verges Companies; and (b) reimbursements to the Verges Companies for purportedly 

fronting some of the PSCs’ expenses.  Verges then had the Nominees—particularly Blue Citi—

purchase interests in these debt instruments.  The Nominees also obtained these convertible debt 

instruments by purchasing them from third parties, exchanging them for consulting work, and 

exchanging them for purported investments in the PSCs.  Verges then allowed the Nominees to 

convert their interests in the convertible debt instruments to stock in the PSCs at prices far below 

market value.   

23. From at least June 2017 to June 2022, Verges directed the issuance of 

approximately 5.2 billion shares of stock in the PSCs to the Nominees at an aggregate conversion 

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price of approximately $15 million.  These shares had an aggregate market value of over $112 

million at the time of issuance.  Once the Nominees obtained stock in the PSCs, Verges 

facilitated transactions for the Nominees to transfer their shares to third parties for sale into the 

market.  Those open-market sales occurred at prices substantially higher than their acquisition 

costs, in part, because of the conversion discounts that Verges provided.  Verges also ensured 

that the Nominees could dump their shares into the market, and sustained market interest and 

trading volume in PSCs’ stocks, by posting more than 1,400 press releases that he drafted, 

including some that were false and misleading.  In return, Verges, through the Verges 

Companies, received more than $19 million in payments and kickbacks for his efforts. 

24. In addition, Verges surreptitiously executed the aforementioned debt instruments.  

Verges used Tilton to hide his control of the PSCs and his involvement in the promissory note 

conversions, and to simultaneously manipulate the market to increase the trading volume of the 

PSCs’ stocks.  At Verges’s direction and with his approval, Tilton drafted and published OTC 

Disclosure Statements that Tilton knew concealed: (1) Verges’s role in converting the notes and 

transferring the shares to the Nominees; (2) Verges’s use of the aliases “Mike Murphy” and 

“Tim Faye” in communications with transfer agents to facilitate the transfer of PSC stock to the 

Nominees; (3) Verges’s role in preparing portions of the PSCs’ OTC Financial Reports; and (4) 

the accurate number of outstanding PSC convertible promissory notes. 

25. The Nominees sold their PSC shares at a substantial profit.  Blue Citi, Tilton, and 

JDT alone received more than $52 million in trading proceeds from their sales of stock in the 

PSCs beginning in at least December 2017.  The Nominees paid Verges more than $19 million, 

which included payments for the initial debt instruments and kickbacks from the trading 

proceeds.      

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B. Verges Used Sham Consulting Agreements to Facilitate Issuances of PSC Stock to the 
Nominees and Scheme Participants 

26. Verges directed the PSCs—through the figurehead CEOs that he installed—to 

enter into sham consulting agreements with the Verges Companies for amounts that exceeded the 

yearly revenues that the PSCs earned (if any).  These were sham agreements because Verges 

knew that the PSCs could not afford to pay his companies’ purported consulting fees.  Moreover, 

by and large, the PSCs had no actual or substantial business operations, no employees beyond 

figurehead CEOs, and little or no revenue.  Verges and the PSCs’ CEOs executed these 

agreements—at Verges’s direction—for the primary purpose of procuring convertible debt 

instruments for Verges that he could sell to the Nominees, who would then: (i) convert the debt 

instruments to shares of the PSCs’ stock; (ii) sell/dump the shares into the market or to third 

parties; and (iii) pay Verges kickbacks from their trading proceeds.  In a typical transaction, once 

a PSC executed a consulting agreement with a Verges Company, Verges directed that PSC to 

either execute a debt settlement with the Verges Company or issue a convertible promissory note 

to the Verges Company.  Verges then assigned or sold portions of these debt instruments to the 

Nominees, who in turn executed conversion notices enabling the holders to convert the debt 

instruments to stock (which Verges granted at deep discounts under the terms of each debt 

instrument).  The Nominees received unrestricted shares from the PSCs’ transfer agents and 

either sold, or transferred those shares to third parties for sale, into the market. 

27. For example, in January 2018, ALYI and SMEA2Z executed a consulting 

agreement whereby ALYI agreed to pay $400,000 to SMEA2Z.  Verges controlled ALYI’s bank 

accounts and had direct knowledge of ALYI’s financial condition.  When he executed the 

consulting agreement, he knew that ALYI had no revenue and reported a net loss of over 

$700,000 for 2017.  On February 24, 2020, ALYI and SMEA2Z executed a Debt Settlement 

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Agreement where SMEA2Z agreed to accept common shares of ALYI stock as payment for the 

$400,000 owed under the consulting agreement.  On February 24, 2021, SMEA2Z and Blue Citi 

executed a Securities Purchase Agreement that assigned SMEA2Z’s rights in the Debt 

Settlement Agreement to Blue Citi.  On March 3, 2021, Blue Citi executed a notice of 

conversion for 20 million shares of ALYI stock and was issued 20 million unrestricted ALYI 

shares that same day.  On March 5, 2021, Blue Citi sold its ALYI shares to a third party.  Verges 

and R. Malin had an agreement that Blue Citi would pay Verges a portion of Blue Citi’s trading 

proceeds.  Bank records show that Blue Citi has paid SMEA2Z more than $12 million, some of 

which may have included payment for this assignment and the balance a kickback from Blue 

Citi’s sale of ALYI stock. 

28. For a second example, in April 2018, PURA and SMEA2Z executed a consulting 

agreement whereby PURA agreed to pay $350,000 annually to SMEA2Z.  Verges controlled 

PURA’s bank accounts, giving him direct knowledge of PURA’s financial condition.  As a 

result, he knew that PURA could not afford to pay SMEA2Z’s consulting fee.  PURA issued a 

$350,000 convertible promissory note to SMEA2Z the same day that it executed the consulting 

services agreement.  On June 21, 2018, SMEA2Z assigned the entire note to one of the 

Nominees for purported consideration of $350,000.  The Nominee executed notices of 

conversion on July 15, 2020 and October 12, 2020 and, in turn, was issued 104 million 

discounted shares of PURA stock.  This Nominee subsequently sold these shares on the OTC 

market.  Bank records show that this particular Nominee has paid SMEA2Z at least $500,000, 

some of which may have included payment for this assignment and the balance a kickback from 

the sale of the stock.     

29. For a third example, in January 2019, ALYI and SMEA2Z executed a consulting 

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agreement whereby ALYI agreed to pay $400,000 annually to SMEA2Z.  Verges controlled 

ALYI’s bank accounts and had direct knowledge of ALYI’s financial condition.  When Verges 

executed the agreement, he knew that ALYI had reported revenue of $240,000 and a net loss of 

over $600,000 for 2018, and thus could not afford to pay $400,000 to SMEA2Z.  On February 

25, 2021, SMEA2Z executed a Debt Settlement Agreement, agreeing to accept common shares 

of ALYI stock as payment for the $400,000 owed pursuant to the consulting agreement.  

SMEA2Z assigned $200,000 of the Debt Settlement Agreement to one of the Nominees for 

purported consideration of $200,000.  On March 1, 2021, the Nominee executed a notice of 

conversion to convert the $200,000 interest in the Debt Settlement Agreement for 10 million 

shares.  On March 17, 2021, ALYI issued 10 million discounted ALYI shares to the Nominee.  

Transfer agent records show that these 10 million ALYI shares were transferred to an entity 

associated with this Nominee on March 26, 2021, and the Nominee’s entity subsequently 

transferred the shares to a foreign broker-dealer on March 29, 2021, for sale into the market.  

Bank records show that this Nominee has paid SMEA2Z more than $1.3 million, some of which 

may include payment for the assignment and the balance kickback payments. 

C. The Malins and Tilton Knowingly Participated in Verges’s Scheme 

1. The Malins used Blue Citi to Obtain and Sell Discounted PSC Shares 

30. Blue Citi purchased interests in PSC convertible debt instruments and also 

obtained interests in the PSC convertible debt instruments in exchange for Blue Citi’s purported 

investments in the PSCs.  At the Malins’ direction, Blue Citi then exercised its conversion rights 

and, at Verges’s direction, was issued discounted PSC stock.  Blue Citi then entered into stock 

purchase agreements (“SPA”) to sell its shares to third parties, who, in turn, sold the shares in the 

OTC markets using domestic and offshore brokers.  These third parties typically paid Blue Citi 

for the PSC shares out of the proceeds from the ultimate sales of the PSC shares into the OTC 

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markets. 

31. As managing members of Blue Citi, the Malins controlled the company and used 

it to participate in Verges’s fraud scheme to aid Verges in dumping PSC shares into the market.  

In particular, Verges and R. Malin agreed that Blue Citi would obtain interests in the Verges 

Companies’ debt instruments with the PSCs.  They also agreed that Verges would direct 

issuances of the discounted stock to Blue Citi and that R. Malin would pay the Verges 

Companies a portion of Blue Citi’s trading proceeds.  Both of the Malins executed notes, 

agreements, and conversion notices in their capacities as “Managers” of Blue Citi to obtain PSC 

shares.  L. Malin also directly corresponded with at least one of the PSCs’ transfer agents 

regarding conversion and was included on multiple emails that Blue Citi’s attorney sent to the 

transfer agents for Blue Citi to receive stock in the PSCs.   

32. Beginning in at least May 2018, Verges directed the issuance of discounted 

unrestricted shares of stock in the PSCs to Blue Citi in at least the following amounts: 

PSC Shares Aggregate Conversion Price at Time of 
Issuance 

Aggregate Market Value at Time 
of Issuance 

ALYI 1,440,633,468 $3,677,914.40 $22,982,432.82 

PJET 77,000,000 $385,000.00 $508,300.00 

PURA 500,644,100 $1,770,645.00 $10,568,145.30 

VAYK 505,870,000 $820,330.00 $12,152,780.00 

WPUR 41,129,441 $173,000.00 $963,497.83 

TOTAL 2,565,277,009 $6,826,889.40 $47,175,155.96 

 

In total, Blue Citi received over 2.5 billion shares of stock in the PSCs that had a market value of 

$47 million at the time of issuance, for a total discount of almost $41 million.   

33. After the stock issuances, the Malins directed Blue Citi to sell its shares to third 

parties who, in turn, would sell the shares into the market at a substantial profit.  Verges 

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facilitated many of these transactions by directly corresponding with the PSCs’ transfer agents 

using one of his aliases (as described below), and indirectly by instructing the PSCs’ figurehead 

CEOs to approve share issuances to Blue Citi. 

2. Tilton Worked for Verges and Used JDT to Obtain and Sell Discounted PSC 
Shares 

34. All PSCs published Disclosure Statements and Financial Reports pursuant to the 

Pink Basic Disclosure Guidelines through a publicly available website maintained by OTC 

Markets Group, Inc. (“OTC Markets”).  Verges hired Tilton as a consultant for ALYI, VAYK, 

and PURA, and Tilton’s responsibilities primarily included assisting in preparing and publishing 

these OTC Disclosure Statements on the OTC Markets’ publicly available website.  Similar to 

Verges, Tilton executed consulting agreements with the three PSCs despite knowing, since he 

was provided with and published their financial documents, that these PSCs could not afford to 

pay his fee.  Consequently, Tilton accepted convertible notes as compensation with the goal of 

converting the notes to stock, which he could then sell into the market via his entity, JDT.     

35. Similar to his arrangement with Blue Citi, Verges directed stock issuances to JDT 

at significantly discounted prices.  Beginning in at least December 2017, JDT received shares in 

the PSCs as follows: 

PSC Shares Sum of Conversion Price at Time of 
Issuance 

Sum of Market Value at Time of 
Issuance 

ALYI 859,388,610 $769,388.61 $29,112,474.47 

PURA 140,649,581 $1,024,198.17 $3,550,863.62 

VAYK 163,368,000 $163,368.00 $4,503,150.50 

TOTAL 1,163,406,191 $1,956,954.78 $37,166,488.58 

 

In total, JDT received over 1.1 billion shares of ALYI, VAYK, and PURA stock, with a market 

value of over $37 million at the time of issuance, at a total discount of more than $35 million.  

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Between June 2018 and September 2022, JDT sold these shares of ALYI, VAYK, and PURA 

stock and received proceeds of more than $16 million from the sales.  Tilton and JDT then paid 

Verges, through the Verges Companies, at least $475,000. 

D. Verges and Tilton Published Materially False and Misleading Disclosures 

36. Verges directed the preparation of and approved the OTC Disclosure Statements 

for ALYI, VAYK, and PURA.  At Verges’s direction, Tilton prepared the OTC Disclosure 

Statements using information he received from Verges, Verges’s personal accountant (the 

“Accountant”), and the PSCs’ transfer agents.  Verges directed Tilton to prepare OTC Disclosure 

Statements that omitted information about promissory notes that the PSCs issued to the Verges 

Companies and to the Nominees.  As one example, Verges directed Tilton to omit from PURA’s 

March 2019 OTC Disclosure Statement a $350,000 convertible promissory note issued to 

SMEA2Z in April 2018.  As another example, Verges directed Tilton to omit from ALYI’s OTC 

Disclosure Statement a $1 million note issued to Blue Citi on April 8, 2021.  Verges directed 

Tilton to hide this information, which concealed Verges’s control of, and transactions with, the 

PSCs and resulted in materially misleading financials because ALYI failed to accurately disclose 

its debt obligations.  Both Verges and Tilton knew that Verges controlled the PSCs, which 

should have been disclosed in the OTC Disclosure Statements.   

37. Verges also directed Tilton to prepare and publish OTC Disclosure Statements 

that concealed the preparer of the OTC Financial Reports for ALYI, VAYK, and PURA.  As 

examples, ALYI’s OTC Disclosure Statement for the periods ended March 31, 2022 and June 

30, 2022 stated that ALYI’s OTC Financial Reports were prepared by ALYI’s CEO.  However, 

Verges and Tilton knew that these statements were false and that the Accountant, not ALYI’s 

CEO, prepared these financials.  Verges omitted the Accountant’s role because he is a felon and 

was previously barred from appearing or practicing before the Commission.  Additionally, none 

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of the aforementioned OTC Disclosure Statements (including those identified in paragraphs 35 

and 37 above) disclosed Verges’s control over the PSCs.   

E. Verges Used Aliases to Hide His Role in the Scheme 

38. When conducting business on behalf of the PSCs, Verges used the alias “Mike 

Murphy” from at least May 2018 through March 2020 and the alias “Tom Faye” from at least 

December 2020 through May 2021.  Verges used these aliases to conceal his true identity and his 

control of the PSCs.  As an example, in December 2020, Verges emailed VAYK’s transfer agent 

using his alias “Faye” and posing as a VAYK employee to facilitate a transfer of shares from 

Blue Citi to a third party.  In March 2021, Verges emailed ALYI’s transfer agent using his 

“Murphy” alias to facilitate the issuance of 10 million ALYI shares to one of the Nominees.  

Verges was an undisclosed control person of the PSCs, a fact that he should have disclosed to the 

transfer agent.  Instead, Verges went to great lengths to conceal his control of the PSCs by using 

these aliases in communications with the transfer agents.  By using the “Faye” and “Murphy” 

aliases in these instances and others, Verges deceived the transfer agents and the investing 

public.  Tilton knew that Verges used these aliases, and he was even included on emails with 

both ALYI’s and VAYK’s transfer agents when Verges used the aliases. 

F. Verges Used a Press Release Campaign to Manipulate the PSCs’ Trading Volume 
and Spread Misinformation 

1. Verges’s Press Release Campaign Artificially Increased the PSCs’ Trading 
Volume 

39. To allow the Nominees to dump shares into the market, Verges embarked on a 

promotional campaign to generate investor interest and increase trading volume in the stocks of 

the PSCs.  From at least September 2017 to August 2022, Verges posted more than 1,400 press 

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releases to promote the PSCs on InvestorsHub (“iHub”).1  Verges posted the high volume of 

releases on iHub to: (a) create and sustain investor interest in the PSCs; and (b) ultimately sustain 

sufficient trading volume to allow the Nominees to dump their shares of stock in the PSCs into 

the market.     

40. As early as December 2014, Verges used his alias “Mike Murphy” to create an 

account with iHub under the username “4Weed.”  Between September 2017 and August 2022, 

Verges, using the alias 4Weed, uploaded over 1,400 press releases to iHub relating to the PSCs 

during the following time periods as follows: 

PSC Date Range Number of Press Releases 
ALYI 9/12/17 – 8/9/22 512 
PJET 10/12/17 – 8/12/22 87 
PURA 12/11/17 – 8/11/22 762 
VAYK 11/17/21 – 8/12/22 16 
WPUR 12/17/21 – 8/16/22 42 

 TOTAL 1419 

 

Verges drafted, in whole or in part, the PSC press releases and had ultimate authority over their 

content.  Verges paid iHub at least $1,395,800 from SMEA2Z’s bank account to post these press 

releases. 

41. Verges’s posting of these press releases caused artificial increases in the PSCs’ 

trading volume. 

2. Verges’s Press Releases Contained Untrue Statements 

42. Verges authored and posted at least four press releases that contained untrue 

statements about ALYI. 

43. On August 26, 2020, Verges posted a press release he authored that stated, 

 
1  iHub is an online research forum community that centers around penny stocks and also allows users to 
upload press releases.   

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“[ALYI] has secured an initial $25 million investment commitment that is part of a $100 million 

cryptocurrency offering organized by the investor, RevoltTOKEN (www.revolttoken.com).”  

This statement was false and misleading because ALYI never secured a $25 million investment 

commitment.  Also, Verges failed to disclose that he controlled RevoltTOKEN. 

44. On August 27, 2020, Verges posted a press release he authored that stated, “ALYI 

currently has already entered into an initial $20 million electric motorcycle order and an 

additional letter of intent for a $30 million contract.”  This statement was false and misleading, 

because there was no $20 million order and no interest that would lead to such an order at that 

time. 

45. On September 2, 2020, Verges posted a press release he authored that stated, 

“ALYI has entered into a comprehensive funding agreement with RevoltTOKEN that includes 

an existing $25 million first tranche investment commitment at $0.05 per share.  ALYI has 

initiated a $2.5 million draw down on the first $25 million to begin construction on a 100-acre 

facility in Africa.”  This statement was false and misleading because RevoltTOKEN never made 

a $25 million commitment to ALYI and there was no $2.5 million draw down.  In fact, when the 

press release was issued, RevoltTOKEN did not exist, had not been incorporated, and did not 

even have a bank account.  Therefore, the $2.5 million draw down was impossible. 

46. On April 16, 2021, Verges posted a press release he authored that stated, “[i]n 

April 2021, Alternet Systems, Inc. executed multiple business agreements in conjunction with a 

$1 million investment in Zoomcar, Inc. […] To provide the funds for Alternet’s investment, the 

Company issued a $1 million convertible note with a $0.10 conversion price.”  This statement 

was false and misleading because the conversion price of the referenced note, which was issued 

to Blue Citi, was not $0.10.  ALYI’s discount price on convertible notes was $0.001.  Blue Citi 

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ended up receiving stock pursuant to the note at a conversion price of $0.0032, enabling it to 

obtain ALYI stock at a price 96.8% lower than what Verges represented to the public. 

47. In conjunction with the press releases identified in paragraphs 42 through 46, 

Verges directed ALYI to issue stock to the Nominees: (a) on the same day as the August 27, 

2020 and September 2, 2020 press releases; (b) on the day following the August 26, 2020 press 

release; and (c) four stock issuances before the April 16, 2021 press release.  As with the other 

press releases that Verges posted, ALYI’s trading volume was markedly higher on the days 

Verges posted the four press releases identified above. 

G. Defendants Profited From the Scheme 

48. Bank records show that from at least as early as January 2017, the Verges 

Companies received at least $19,168,916.30 from Blue Citi, JDT, Tilton, and the Other 

Nominees: 
  

Funds Received By: 
  

  
SMEA2Z West Cucharras 143 Partners 

 
TOTAL 

Funds Received From: 
      

Blue Citi 
 

$12,307,287.00 $50,000.00 $225,000.00 
 

$12,582,287.00 

JDT 
 

$450,000.00 
   

$450,000.00 

Tilton 
  

$25,000.00 
  

$25,000.00 

Other Nominees  $4,659,929.30 $560,000.00 $891,700.00  $6,111,629.30        
TOTAL 

 
$17,417,216.30 $635,000.00 $1,116,700.00 

 
$19,168,916.30 

 

49. Bank and trading records show that Blue Citi received at least $35,946,798.92 in 

trading proceeds from selling the PSCs’ stock.  R. Malin received at least $11,877,763.24 from 

Blue Citi between May 2018 and the present, and L. Malin received at least $533,750 from Blue 

Citi during the same period.  Since December 2017, JDT received at least $16,522,750 in trading 

proceeds from its sales of the PSCs’ stock. 

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V. 
CLAIMS FOR RELIEF 

 
FIRST CLAIM FOR RELIEF 

 
Violations of the Antifraud Provisions of the Exchange Act  

Section 10(b) and Rule 10b-5  
 

Against All Defendants 

50. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by 

reference as if set forth verbatim in this Claim. 

51. From at least June 2017 to June 2022, Defendants perpetrated a scheme to pump 

and dump stock in the PSCs to unsuspecting public investors in the OTC markets.  Among other 

things, Verges caused the PSCs to enter into sham consulting agreements with companies that he 

controlled, and he then directed the companies to issue debt instruments to cover the fees that 

they would otherwise be unable to pay.  In turn, Verges assigned those debt instruments to the 

Nominees, including Blue Citi and JDT.  Verges then directed the PSCs to issue significantly 

discounted unrestricted shares of stock to the Nominees in order to satisfy the PSCs’ bogus 

debts.  The Nominees proceeded to offload the discounted shares into the OTC markets.  Blue 

Citi and JDT alone received more than $52 million in proceeds.  The Nominees returned 

approximately $19 million to Verges as kickbacks. 

52. R. Malin, L. Malin, and Tilton played key active roles in the pump and dump 

scheme.  R. Malin and L. Malin used Blue Citi to sell shares of the PSCs’ stocks it received, 

through transactions with the Verges Companies and others, to third parties, who sold them into 

the OTC markets.  Tilton owned JDT, another participant in the scheme, and transferred JDT’s 

shares of the PSCs to third parties who sold them into the OTC markets.  Blue Citi and JDT both 

paid the Verges Companies kickbacks out of the proceeds from their sales of the PSCs’ stocks. 

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53. Furthermore, to ensure that the Nominees could sell the PSCs’ shares into the 

market, Verges inflated the PSCs’ trading volume by, directly or indirectly: (a) preparing and 

posting OTC Disclosure Statements and Financial Reports that were materially misleading; and 

(b) authoring and posting more than 1,400 press releases promoting the PSCs, including four 

press releases that included untrue statements of material fact.     

54. By engaging in the acts and conduct alleged herein, Defendants, directly or 

indirectly, in connection with the purchase or sale of securities, by the use of any means or 

instrumentality of interstate commerce, or of the mails or of any facility of any national securities 

exchange, knowingly or with severe recklessness: 

a. employed a device, scheme, or artifice to defraud; and/or 

b. engaged in an act, practice, or course of business which operated or would 

operate as a fraud or deceit upon any person. 

55. By engaging in the acts and conduct alleged herein, Verges, directly or indirectly, 

in connection with the purchase or sale of securities, by the use of any means or instrumentality 

of interstate commerce, or of the mails or of any facility of any national securities exchange, 

knowingly or with severe recklessness made an untrue statement of material fact, or omitted to 

state a material fact necessary in order to make the statements made, in light of the circumstances 

under which they were made, not misleading. 

56. By reason of the foregoing, Defendants violated, and unless restrained and 

enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and 

Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a), (c)].   

57. In addition, Verges also violated, and unless restrained and enjoined will continue 

to violate, Rule 10b-5(b) [17 C.F.R. § 240.10b-5(b)]. 

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SECOND CLAIM FOR RELIEF 
 

Aiding and Abetting Violations of the Antifraud Provisions of the Exchange Act  
Section 10(b) and Rules 10b-5(a) and 10b-5(c)  

 
Against Tilton, R. Malin, L. Malin, and Blue Citi 

 
58. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by 

reference as if set forth verbatim in this Claim. 

59. R. Malin, L. Malin, and Tilton played key active roles in the pump and dump 

scheme.  R. Malin and L. Malin used Blue Citi to sell shares of the PSCs’ stocks it received, 

through transactions with the Verges Companies and others, to third parties, who sold them into 

the OTC markets.  Tilton owned JDT, another participant in the scheme, and transferred JDT’s 

shares of the PSCs to third parties who sold them into the OTC markets.  Blue Citi and JDT both 

paid kickbacks to the Verges Companies out of the proceeds from their sales of the PSCs’ stocks. 

60. In addition, as more fully discussed in paragraphs 34 and 36-37 above, Tilton, at 

Verges’s direction, prepared and posted to a publicly available website the OTC Disclosure 

Statements that concealed certain information such as the preparer of the Financial Reports for 

ALYI, VAYK, and PURA.   

61. By engaging in the acts and conduct alleged herein, Blue Citi, R. Malin, L. Malin, 

and Tilton aided and abetted Verges’s violations of Section 10(b) of the Exchange Act and Rules 

10b-5(a) and 10b-5(c) thereunder by knowingly or recklessly providing substantial assistance to 

Verges who, directly or indirectly, singly or in concert with others, in the purchase and sale of a 

security, by use of the means or instrumentalities of interstate commerce or by use of the mails 

(i) employed a device, scheme, or artifice to defraud, and/or (ii) engaged in an act, practice, or 

course of business which operated as a fraud or deceit upon purchasers, prospective purchasers, 

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and other persons. 

62. By reason of the foregoing, Blue Citi, R. Malin, L. Malin, and Tilton, directly or 

indirectly, aided and abetted, and unless enjoined will continue to aid and abet, violations of 

Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and 10b-5(c) [17 

C.F.R. §§ 240.10b-5(a) and 240.10b-5(c)] thereunder.   

 

THIRD CLAIM FOR RELIEF 
 

Violations of the Antifraud Provisions of the Securities Act 
Securities Act Section 17(a)  

 
Against All Defendants 

 
63. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by 

reference as if set forth verbatim in this Claim. 

64. From at least June 2017 to June 2022, Defendants perpetrated a scheme to pump 

and dump stock in the PSCs to unsuspecting public investors in the OTC markets.  Among other 

things, Verges caused the PSCs to enter into sham consulting agreements with companies that he 

controlled, and he then directed the companies to issue debt instruments to cover the fees that 

they would otherwise be unable to pay.  In turn, Verges assigned those debt instruments to the 

Nominees, including Blue Citi and JDT.  Verges then directed the PSCs to issue significantly 

discounted unrestricted shares of stock to the Nominees in order to satisfy the PSCs’ bogus 

debts.  The Nominees proceeded to offload the discounted shares into the OTC markets.  Blue 

Citi and JDT alone received more than $52 million in proceeds.  The Nominees returned 

approximately $19 million to Verges as kickbacks. 

65. R. Malin, L. Malin, and Tilton played key active roles in the pump and dump 

scheme.  R. Malin and L. Malin used Blue Citi to sell shares of the PSCs’ stocks it received, 

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through transactions with the Verges Companies and others, to third parties, who sold them into 

the OTC markets.  Tilton owned JDT, another participant in the scheme, and transferred JDT’s 

shares of the PSCs to third parties who sold them into the OTC markets.  Blue Citi and JDT both 

paid kickbacks to the Verges Companies out of the proceeds from their sales of the PSCs’ stocks. 

66. Furthermore, to ensure that the Nominees could sell the PSCs’ shares, Verges 

inflated the PSCs’ trading volume by, directly or indirectly: (a) preparing and posting OTC 

Disclosure Statements and Financial Reports that were materially misleading; and (b) authoring 

and posting more than 1,400 press releases promoting the PSCs, including four press releases 

that included untrue statements of material fact.     

67. By engaging in the acts and conduct alleged herein, Defendants, directly or 

indirectly, in the offer or sale of a security, by the use of any means or instruments of 

transportation or communication in interstate commerce or by use of the mails, have: 

a. knowingly or with severe recklessness employed a device, scheme, or 

artifice to defraud; and/or 

b. knowingly, recklessly, or negligently engaged in a transaction, practice, or 

course of business which operated or would operate as a fraud or deceit 

upon the purchaser. 

68. In addition, by engaging in the acts and conduct alleged herein, Verges, directly 

or indirectly, in the offer or sale of a security, by the use of any means or instruments of 

transportation or communication in interstate commerce or by use of the mails, has knowingly, 

recklessly, or negligently obtained money or property by means of an untrue statement of a 

material fact or an omission to state a material fact necessary in order to make the statements 

made, in light of the circumstances under which they were made, not misleading. 

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69. By reason of the foregoing, Defendants have violated, and unless enjoined will 

continue to violate, Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §§ 77q(a)(1), (3)]. 

70. In addition, Verges also violated, and unless restrained and enjoined will continue 

to violate, Section 17(a)(2) of the Securities Act [15 U.S.C. § 77q(a)(2)]. 

 

FOURTH CLAIM FOR RELIEF 
 

Aiding and Abetting Violations of the Antifraud Provisions of the Securities Act  
Sections 17(a)(1) and (3)  

 
Against Tilton, R. Malin, L. Malin, and Blue Citi 

 
71. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by 

reference as if set forth verbatim in this Claim. 

72. R. Malin, L. Malin, and Tilton played key active roles in the pump and dump 

scheme.  R. Malin and L. Malin used Blue Citi to sell shares of the PSCs’ stocks it received, 

through transactions with the Verges Companies and others, to third parties, who sold them into 

the OTC markets.  Tilton owned JDT, another participant in the scheme, and transferred JDT’s 

shares of the PSCs to third parties who sold them into the OTC markets.  Blue Citi and JDT both 

paid kickbacks to the Verges Companies out of the proceeds from their sales of the PSCs’ stocks. 

73. In addition, as more fully discussed in paragraphs 34 and 36-37 above, Tilton, at 

Verges’s direction, prepared and posted to a publicly available website the OTC Disclosure 

Statements that concealed certain information such as the preparer of the Financial Reports for 

ALYI, VAYK, and PURA.   

74. By engaging in the acts and conduct alleged herein, Blue Citi, R. Malin, L. Malin, 

and Tilton aided and abetted Verges’s violations of Section 17(a)(1) and (3) of the Securities Act 

by knowingly or recklessly providing substantial assistance to Verges who, directly or indirectly, 

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singly or in concert with others, in the offer or sale of a security, by the use of any means or 

instruments of transportation or communication in interstate commerce or by the use of the mails 

(i) employed a device, scheme, or artifice to defraud, and/or (ii) engaged in a transaction, 

practice, or course of business which operated as a fraud or deceit upon purchasers. 

75. By reason of the foregoing, Blue Citi, R. Malin, L. Malin, and Tilton, directly or 

indirectly, aided and abetted, and unless enjoined will continue to aid and abet, violations of 

Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §§ 77q(a)(1) and (3)].   

 

FIFTH CLAIM FOR RELIEF 
 

Control Person Liability Under Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)] for 
Blue Citi’s Violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 

10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a), (c)] 
 

Against R. Malin and L. Malin 
 

76. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by 

reference as if set forth verbatim in this Claim. 

77. By virtue of the foregoing, Blue Citi has violated Section 10(b) of the Exchange 

Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a), (c)] 

by directly or indirectly, in connection with the purchase or sale of securities, by the use of any 

means or instrumentality of interstate commerce, or of the mails or of any facility of any national 

securities exchange, knowingly or with severe recklessness employing a device, scheme, or 

artifice to defraud; and/or engaging in an act, practice, or course of business which operated or 

would operate as a fraud or deceit upon any person. 

78. As Blue Citi’s Managing Members, R. Malin and L. Malin exercised control over 

the general operations of Blue Citi and the specific activity upon which Blue Citi’s violations are 

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based. 

79. By reason of the foregoing, R. Malin and L. Malin are liable as control persons 

for Blue Citi’s violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 

10b-5(a) and (c) thereunder [17 C.F.R. §§ 240.10b-5(a), (c)] pursuant to Section 20(a) of the 

Exchange Act [15 U.S.C. § 78t(a)]. 

 

SIXTH CLAIM FOR RELEIF 
 

Disgorgement 
  

Against All Relief Defendants 
 

80. Plaintiff re-alleges and incorporates paragraphs 1 through 49 of this Complaint by 

reference as if set forth verbatim in this Claim. 

81. Relief Defendants SMEA2Z, 143 Partners, West Cucharras, and JDT, directly or 

indirectly, received funds or benefitted from the use of funds, which are proceeds of the 

securities law violations described herein. 

82. Relief Defendants SMEA2Z, 143 Partners, West Cucharras, and JDT have no 

legitimate claims to such funds received, or from which they otherwise benefitted from, directly 

or indirectly. 

83. The Commission is entitled to an order, pursuant to common law equitable 

principles—such as disgorgement, unjust enrichment, and constructive trust—and pursuant to 

Sections 21(d)(3), (5), and (7) of the Exchange Act [15 U.S.C. §§ 78u(d)(3), (5), (7)], requiring 

Relief Defendants to disgorge all of the proceeds they received, either directly or indirectly, from 

Defendants that they derived from the securities law violations described herein. 

84. As a result of the conduct described above, Relief Defendants should disgorge 

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their ill-gotten gains, plus prejudgment interest thereon. 

 

PRAYER FOR RELIEF  
 

WHEREFORE, the Commission respectfully requests that the Court enter a judgment:  

1. Permanently enjoining Verges from violating, directly or indirectly, Section 17(a) 

of the Securities Act [15 U.S.C. § 77e] and Section 10(b) of the Exchange Act [15 U.S.C. § 

78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; 

2. Permanently enjoining Tilton, R. Malin, L. Malin, and Blue Citi from violating, 

directly or indirectly, Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §§ 77e(1), (3)] 

and Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) 

thereunder [17 C.F.R. §§ 240.10b-5(a), (c)], and from aiding and abetting future violations of 

Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. §§ 77e(1), (3)] and Section 10(b) of 

the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5(a) and (c) thereunder [17 C.F.R. §§ 

240.10b-5(a), (c)]; 

3. Permanently enjoining Verges, Tilton, R. Malin, L. Malin, and Blue Citi pursuant 

to Section 20(g)(1) of the Securities Act [15 U.S.C. § 77t(g)(1)] and Section 21(d)(6)(A) of the 

Exchange Act [15 U.S.C. § 78u(d)(6)(A)], from participating in an offering of penny stock, 

including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, 

or inducing or attempting to induce the purchase or sale of any penny stock.  A penny stock is 

any equity security that has a price of less than five dollars, except as provided in Rule 3a51-1 

under the Exchange Act [17 C.F.R. § 240.3a51-1]; 

4. Permanently enjoining Verges, Tilton, R. Malin, and L. Malin, pursuant to 

Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the Exchange 

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Act [15 U.S.C. § 78u(d)(2)], from serving as an officer or director of any issuer that has a class 

of securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l], or that is 

required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)]; 

5. Ordering Defendants and Relief Defendants to disgorge all ill-gotten gains they 

received as a result of the conduct alleged herein, together with pre-judgment interest on those 

amounts, pursuant to the Court’s equitable powers and Sections 21(d)(3), 21(d)(5), and 21(d)(7) 

of the Exchange Act [15 U.S.C. §§ 78u(d)(3), 78u(d)(5), and 78u(d)(7)];  

6. Imposing civil penalties against Defendants pursuant to Section 20(d) of the 

Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 

78u(d)(3)] for violations of the federal securities laws as alleged herein; 

7. Retaining jurisdiction of this action in accordance with the principles of equity 

and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all 

orders and decrees that may be entered, or to entertain any suitable application or motion for 

additional relief within the jurisdiction of this Court; and 

8. Granting such other and further relief as this Court may determine to be just and 

necessary. 

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Dated:  September 26, 2023   Respectfully submitted, 
        

/s/ Jason P. Reinsch    
Jason P. Reinsch 
Texas Bar No. 24040120 
United States Securities and Exchange Commission 
Fort Worth Regional Office 
801 Cherry Street, Suite 1900 
Fort Worth, Texas 76102 
(817) 900-2601 (phone) 
(817) 978-4927 (facsimile) 
[email protected] 
 
ATTORNEY FOR PLAINTIFF SECURITIES 
AND EXCHANGE COMMISSION 

 

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