Around 2009, Kahlon heard the Sasons were havi

Around 2009, Kahlon heard the Sasons were having financial issues. He told the elder Sason he could help. “I said, ‘Bring your son here, I’ll teach him to make money,’?” says Kahlon, who by then was in the penny-stock business.

The market for penny stocks can be traced back to the scrum of brokers who used to trade shares that weren’t welcome on the New York Stock Exchange. A 1920 article in Munsey’s magazine called them “a close-packed mass of creatures apparently human” and described the auctioning of shares in a puppy.

Penny stocks exist so that, say, an oil wildcatter with a hunch he’s about to drill a gusher can raise the money he needs without the hassle of listing on an exchange. They feed a desire for a hot tip that could double or triple. It’s a disreputable corner of the market. Many listings are bogus. Most are, at best, just a guy with an idea, and often that idea is to raise some money so he can pay himself a fat salary. Other listings are real businesses that have been dropped from the big exchanges because they’re on the verge of failure.

Kahlon paid brokers to scour the market for penny stocks with high trading volume, then call the companies to see if they wanted to issue new stock. These struggling companies can’t sell new shares to the public the usual way, by enlisting a proper investment bank, because it’s too expensive and the offerings too tiny. But they can sell to private investors such as Kahlon. They gave him steep discounts, and he’d sell the shares into the public market right away, often doubling his money as everyone else’s shares were diluted. There are laws against doing this, but Kahlon thought he spotted an exception in Texas. He incorporated his company there, while operating from New York.

Kahlon says he showed Sason how to trade like him—and then cut off contact so that no one could accuse them of conspiring. “I’ll teach you the business, but the minute you open, we can’t talk anymore,” he said to Sason. “I don’t have any friends in this business.” Texas corporate records show Sason incorporated Magna Group in the state in 2010, using the same mail drop as Kahlon.

As Sichenzia is no doubt aware, Mr. Kahlon has been sued by the SEC for practicing the business model that he taught to Mr. Sason. A copy of the SEC’s complaint is attached as Exhibit A, demonstrating that Mr. Sason’s penny stock business is substantially identical to the scheme orchestrated by Mr. Sason’s mentor. Also attached, as Exhibit B, is the SEC’s summary judgment brief on the issue of liability; and Exhibit C is the Court’s order granting SEC’s motion for summary judgment as to liability. As set forth in Exhibit D, the SEC is currently seeking nearly $10 million in disgorgement, penalties, and interest from Mr. Kahlon. Additionally, the SEC is seeking to bar Mr. Kahlon from being involved in penny stocks.