SEC Finally Finds a Gold Mining Scam to Prosecute

3 January 2013 | by Tim Wood

DENVER ( — A California music teacher turned pretend gold miner managed to pick the pockets of several hundred gullible investors to the tune of $16 million. Now Kenneth W. Carlton, president and CEO of Nekekim Corp. has settled with the Securities and Exchange Commission related to defrauding those investors who thought he controlled a $1.7bn prospect in Nevada.

The SEC’s complaint makes for head-shaking reading.

Carlton ran his scheme from 2001 through 2011, and attracted some 650 investors locally and abroad. He evidently missed his true calling as a salesman for something legitimate.

It is not only remarkable that Carlton persuaded so many people to invest so much in a phantom project, but that it took the SEC a decade to catch up with him. But then this is the SEC that missed Bernie Madoff, and, and, and…

The scam was entirely typical of the genre:

  1. Outrageously good assay results;
  2. a “complex” ore body;
  3. “unconventional” processing;
  4. claims of “proprietary” technology in the exclusive possession of the company; and
  5. disclosure was also selective when it was not false.

Carlton sold securities in Nekikim without registering them with the SEC. So there’s no reason to feel any sympathy for the investors who were taken in, especially those who were repeat buyers. They cannot have done any due diligence.

Carlton touted assay results from dodgy laboratories showing gold grading 3.967 ounces per ton. At that point the investors should have known the game was up - or at least encouraged him to take it public on the NYSE.

Furthermore, Nekekim claimed that it was going to ship its ore to the east coast for refining. Really…

The SEC offered the tiniest of wrist-slaps. Carlton agreed to a judgment requiring him to pay a $50,000 penalty and prohibiting him from selling securities for Nekekim or managing the company. That’s 0.3% of the financing he raised against a bogus project.

That looks like an incentive rather than a deterrent to other promoters who are plying their trade in all the usual OTC nooks and crannies. Perhaps the investors will still proceed with criminal cases given the evidence presented by the SEC.

© 2013, > Independent Natural Resources Investment Analysis

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