SEC v. Kelly Kabilafkas, Tim Kabilafkas, Airborne Wireless Network, et al. — U.S. Securities and Exchange Commission Litigation Release No. 26242, dated February 7, 2025.
The SEC charged Airborne Wireless Network, its control person Kelly Kabilafkas, and his father Tim Kabilafkas with orchestrating a $45 million fraudulent scheme. They secretly gained control of Airborne, transferred millions of shares to themselves and associates, and then promoted the stock while selling their shares, defrauding investors. The SEC obtained summary judgment and a final judgment imposing significant disgorgement, interest, and penalties.
In Plain English
Imagine someone secretly took over a company and then tricked people into thinking it was super valuable. They then sold their own shares for a lot of money, while new investors lost theirs. This is what happened here, and the SEC stepped in to stop it and get money back for those who were hurt.
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
- Secretly Acquire a Shell Company In October 2015, Kelly Kabilafkas secretly bought all the shares of a public shell company called Ample-Tee, Inc., which would later become Airborne Wireless Network. He acquired both the control block of about 84.1 million shares and another 30 million shares that were supposedly issued to Thai shareholders but were actually nominees.
- Obscure Control Kabilafkas took steps to hide his control, including funneling the purchase funds through a charitable religious organization's bank account. He then installed Jack Edward Daniels as Airborne's nominal CEO and had Daniels file a Form 8-K falsely stating Daniels used his own personal funds to buy the controlling interest.
- Distribute Shares to Associates Kabilafkas arranged for millions of Airborne shares to be transferred into his name, his father Tim Kabilafkas's name, and the names of other associates. This was done by deceiving Airborne's transfer agent and several broker dealers.
- Deceive Transfer Agents and Brokers To get the shares into their brokerage accounts for sale, Kabilafkas and his associates deceived Airborne's transfer agent and multiple broker dealers. This allowed the shares, which were often restricted, to be transferred and cleared for public sale.
- Launch Promotional Campaign Kelly Kabilafkas, through Airborne and its CEO Daniels, spent millions of dollars on an advertising campaign. This campaign was designed to promote the company's stock, but it concealed the fact that Airborne was merely a vehicle for Kabilafkas's fraudulent scheme.
- Sell Shares to the Public During the promotional campaign, Kabilafkas and his associates sold their Airborne shares, reaping over $22 million in proceeds. These shares were acquired for a fraction of that amount, highlighting the profit from the fraudulent sales.
- Raise Funds from Investors Concurrently, Airborne raised approximately $22.8 million from unsuspecting investors through public and private offerings. This occurred while Airborne was making materially false and misleading statements about the company's prospects and operations.
- Total Scheme Proceeds In total, the fraudulent scheme raised nearly $45 million from investors and through the illicit sale of shares by the defendants.
The Enforcement Action
The SEC was granted summary judgment against Kelly Kabilafkas, Tim Kabilafkas, Airborne Wireless Network, and Jack Edward Daniels for engaging in a scheme to take undisclosed control of Airborne and conduct a 'pump and dump.' The Court also granted summary judgment for unjust enrichment against two relief defendant trusts controlled by the Kabilafkases. A final judgment imposed over $44 million in disgorgement and prejudgment interest, plus $21 million in civil penalties against Kelly Kabilafkas. Tim Kabilafkas and Airborne were assessed civil penalties of $460,928 and $1,152,314, respectively, and were ordered jointly and severally liable for disgorgement and interest. Permanent injunctions and a penny stock bar were imposed against Kelly and Tim Kabilafkas. The case against Daniels was stayed pending a parallel criminal action.
Named in this action: Kelly Kabilafkas, Tim Kabilafkas, Airborne Wireless Network, Tim Kabilafkas Revocable Trust, Magdaline Kabilafkas 1989 Trust.