SHOCKER! FIGHT PROMOTER FAKES AUDITS, RAISES $5 MILLION ILLEGALLY!

SEC v. Steve A. Smith, Jr., Xtreme Fighting Championships, Inc. — U.S. Securities and Exchange Commission Litigation Release No. 26188, dated December 10, 2024.

The SEC charged Xtreme Fighting Championships, Inc. (XFC) and its CEO, Steve A. Smith, Jr., for a fraudulent scheme to illegally sell unregistered stock. They allegedly hid their control over the stock, generating over $5 million in illicit proceeds, and XFC received at least $436,000. Smith also filed a false annual report to manipulate the stock's market status.

In Plain English

Imagine someone secretly owned a bunch of a company's stock, but pretended they didn't. They then sold this stock to people without following the rules for selling stock, making over $5 million. They also lied about the company's finances in official reports to make the stock seem more valuable and easier to sell. The SEC stepped in to stop this fraud.

Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.

How the Alleged Scheme Worked

1. Gaining Control and Initiating Scheme In January 2020, Steve A. Smith, Jr. acquired control of Xtreme Fighting Championships, Inc. (XFC) and became its CEO. He immediately began a fraudulent scheme to sell XFC stock.
2. Illegal Stock Sales Smith and XFC's in-house counsel, who has since died, controlled XFC stock. They sold this stock in transactions that were neither registered with the SEC nor exempt from registration, hiding their control to avoid insider sale limits.
3. Using Shell Entities To create a false appearance of legitimacy, Smith and the in-house counsel allegedly arranged for XFC to issue stock to entities they controlled, but which were purportedly unaffiliated. These entities then sold the stock on the public market.
4. Generating Illegal Proceeds This fraudulent scheme, running from January 2020 through at least April 2022, allegedly generated over $5 million in illegal proceeds. XFC itself received at least $436,000 from these sales.
5. Fabricating Audit for Market Listing In April 2022, XFC's annual report was delinquent, causing its stock to move to a more restricted part of the over-the-counter market. Despite warnings from XFC's auditing firm that financial statements were incomplete, Smith and XFC filed a Form 10-K falsely stating the financials were audited.
6. Misleading Social Media Posts To further the deception regarding the financial statements, Smith allegedly issued two social media posts falsely claiming that XFC's financial statements had been audited, despite the known deficiencies.

The Enforcement Action

The SEC filed charges against Xtreme Fighting Championships, Inc. and its CEO, Steve A. Smith, Jr., for allegedly engaging in a fraudulent scheme to illegally sell unregistered stock. The complaint alleges violations of antifraud and securities registration provisions. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties. Smith also faces bars from serving as an officer or director of a public company and participating in securities offerings.

Named in this action: Steve A. Smith, Jr., Xtreme Fighting Championships, Inc..

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