CEO Faked Audit to Sell Stock, Pocketed $5 Million!

SEC v. Xtreme Fighting Championships, Inc., Steve A. Smith, Jr. — U.S. Securities and Exchange Commission Litigation Release No. 26285, dated April 15, 2025.

The SEC charged Xtreme Fighting Championships, Inc. and its CEO, Steve A. Smith, Jr., with a fraudulent scheme to illegally sell unregistered stock. They allegedly hid their control of the stock by issuing it to entities they controlled and falsely claimed the company's financial statements were audited to bypass sales restrictions. The scheme generated over $5 million in illegal proceeds.

In Plain English

Imagine a company wanted to sell its shares, but it wasn't allowed to because it hadn't followed the proper rules. So, the CEO and a lawyer secretly moved the shares to other companies they controlled, making it look like they weren't in charge of them anymore. They also lied about the company's finances in a public report to make it seem like they could sell shares. This allowed them to sell millions of dollars worth of stock illegally.

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. Illegal Stock Control Steve A. Smith, Jr. and Xtreme Fighting Championships, Inc. allegedly controlled stock that was not registered with the SEC. To bypass legal limits on insider sales, they issued this stock to entities that they secretly controlled, creating a false appearance of unaffiliated ownership.
2. Hiding Control The defendants allegedly hid their control over the stock by transferring it to these purportedly independent entities. This was done to avoid scrutiny and legal restrictions that would apply if their direct control was known.
3. Circumventing Registration The stock sales were neither registered with the SEC nor exempt from registration requirements. This meant the sales were illegal from the outset, as the investing public was not provided with required disclosures.
4. False Financial Filing In April 2022, Smith and Xtreme Fighting allegedly filed an annual report that falsely stated the company's financial statements had been audited. This was done because the report was delinquent, which restricted stock sales in the over-the-counter market.
5. Publicizing Falsehoods Smith allegedly amplified the false financial filing by issuing two social media posts about it. This further misled investors and the market about the company's financial health and compliance status.
6. Generating Illegal Proceeds This fraudulent scheme allowed Xtreme Fighting and Smith to generate over $5 million in illegal proceeds. Xtreme Fighting itself received at least $436,000 from these illicit sales.

The Enforcement Action

On April 15, 2025, the SEC obtained final judgments by consent against Xtreme Fighting Championships, Inc. and its CEO, Steve A. Smith, Jr. The judgments permanently enjoin them from violating securities laws related to unregistered offerings, fraud, and deceptive practices. Xtreme Fighting and Smith must jointly and severally pay $436,000 in disgorgement plus $97,509 in prejudgment interest. Additionally, they face individual civil penalties of $436,000 for Xtreme Fighting and $236,451 for Smith. Smith is also subject to officer-and-director and penny stock bars, and a conduct-based injunction restricting his future securities activities.

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

Original SEC litigation release ↗ · Browse all cases