SEC v. Old South Trading Co., LLC, Brendan H. Church, Edwin N. Church — U.S. Securities and Exchange Commission Litigation Release No. 26230, dated January 21, 2025.
The SEC charged Old South Trading Co., LLC, its owner Brendan Church, and his father Chuck Church for an unregistered securities offering that raised approximately $25.8 million. The funds were solicited for purchasing personal protective equipment during the pandemic. Investors lost over $11.6 million when the company stopped honoring redemptions and payments. Chuck Church was also charged for acting as an unregistered broker.
In Plain English
Imagine someone asked you to invest money to help buy masks during the pandemic. They promised to pay you back with interest. However, they never told you important details about how their business was doing, and it was actually losing a lot of money. When they couldn't pay people back, many investors lost their money. The SEC stepped in because the investment wasn't properly registered and the person helping sell it wasn't licensed.
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
- The Setup: Unregistered Notes for PPE From March 2020 to May 2022, Brendan Church, through his company Old South Trading Co., LLC, and with his father Chuck Church, offered and sold unregistered demand promissory notes. They raised approximately $25.8 million from about 100 investors, including unaccredited individuals found on social media.
- The Pitch: Pandemic PPE Investment The Churches solicited these investments with the stated purpose of purchasing personal protective equipment (PPE) during the COVID-19 pandemic. Investors were led to believe this was a viable and profitable venture.
- Lack of Disclosure The securities offering was never registered with the SEC, and no exemption from registration applied. This meant investors did not receive critical information about the company's financial health or risks, as would be required in a registration statement.
- Hidden Financial Woes Unbeknownst to investors, Old South was suffering from severe financial difficulties. This information was withheld, preventing investors from making fully informed decisions about their investments.
- The Collapse: Missed Payments and Redemptions In June 2022, Old South stopped making interest payments and honoring investor redemption requests. This failure led to significant losses for the investors.
- Investor Losses Mount As a direct result of Old South's inability to meet its obligations, at least 79 investors suffered losses totaling more than $11.6 million.
- Unregistered Broker Activity Chuck Church also acted as an unregistered broker. He received transaction-based compensation from Old South for soliciting investors, handling paperwork, and making investment recommendations, violating broker-dealer registration provisions.
- Bankruptcy Filing On May 18, 2023, Brendan Church filed for Chapter 11 bankruptcy protection in his individual capacity, listing the Old South note investors as creditors.
The Enforcement Action
The SEC charged Old South Trading Co., LLC, its owner Brendan Church, and his father Chuck Church for conducting an unregistered offering of securities. Chuck Church was also charged for acting as an unregistered broker. The SEC’s complaint seeks injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties.
Named in this action: Old South Trading Co., LLC, Brendan H. Church, Edwin N. Church.