Carsten Klein and Equity Acquisition Company Face Nearly $4 Million in SEC Sanctions

Carsten Klein (CRD #: 4633138), a broker formerly registered with Alexander Capital, was recently involved in an SEC action, according to his BrokerCheck record, accessed on May 23, 2023. Read on if you want to know more about his alleged conduct as a broker.

SEC Regulatory Action

On March 3, 2023, the Securities and Exchange Commission filed cease-and-desist proceedings against Carsten Klein and Equity Acquisition Company (EAC), alleging that the firm acted as a broker-dealer without being registered.

Alleged Unregistered Broker-Dealer Practices

According to the SEC, EAC allegedly engaged in the business of acquiring shares of private companies in the U.S. and selling them to U.S.-based and foreign funds.

These private companies were allegedly considering liquidity events such as mergers or initial public offerings (IPOs) and included 23andMe, Palantir, Pinterest, TopGolf, and Social Finance Inc.

The SEC alleged that either Carsten Klein or an associate would identify these companies, negotiate a purchase price, and conduct the acquisition of shares. These shares were allegedly typically purchased directly from the company and EAC would be listed on their capitalization table.

With some companies, EAC allegedly instead entered into a forward contract with the seller giving EAC the right to the shares after a liquidity event.

Carsten Klein allegedly negotiated the share quantity and price with funds interested in purchasing these shares and entered into a nomination agreement obligating EAC to transfer the shares to the funds following the liquidity event.

In total, the SEC alleged that EAC purchased more than 14 million shares in private companies and sold more than 13.4 million shares since 2019.

Carsten Klein’s Alleged Regulatory Violation

The SEC alleged that, by buying and selling securities as a principal, carrying a regular inventory of shares, and making a market in the price of shares by negotiating pricing, EAC transacted business as a broker-dealer.

Further, the SEC alleged that Carsten Klein violated Section 15(a)(1) of the Securities Exchange Act of 1934 through his role in these alleged business practices.

Securities Exchange Act of 1934

Section 15(a)(1) of the Securities Exchange Act of 1934 prohibits unregistered brokers and dealers from engaging in or inducing the purchase or sale of securities.

Sanctions

Carsten Klein and Equity Acquisition Company were ordered to cease and desist from violations of Section 15(a)(1) of the Securities Exchange Act of 1934. They were also subject to the following sanctions:

• $269,360 fine
• $3,363,526 disgorgement
• $284,550.18 penalty

Carsten Klein and Equity Acquisition Company were also obligated to comply with undisclosed undertakings.

Background Information

Carsten Klein has passed the following exams:

• Series 63 – Uniform Securities Agent State Law Examination
• Series 7 – General Securities Representative Examination
• Series 24 – General Securities Principal Examination

He previously worked for the following firms:

• Alexander Capital (CRD#:40077)
• Garden State Securities (CRD#:10083)
• The Concord Equity Group (CRD#:14569)
• J.P. Turner & Company (CRD#:43177)

Kurta Law Can Help

If you worked with Carsten Klein and you have concerns about your investments, please contact us today at 877-600-0098 or info@kurtalawfirm.com for a free consultation.

For over 20 years, Kurta Law has advocated on behalf of investors who want to recover their investment losses from brokers and brokerage firms. Kurta Law is a nationally recognized law firm and exclusively represents investors against brokers and brokerage firms on a contingency basis. This means that the firm only earns a fee if our securities attorneys recover money on your behalf.