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SEC charges California company and CEO with defrauding investors in Nevada gold mining

The Securities and Exchange Commission today filed fraud charges against a California-based mining company and its CEO who induced hundreds of investors to pour $16 million into a fruitless gold mining venture.

The SEC alleges that Nekekim Corporation and Kenneth Carlton defrauded investors with representations that a special “complex ore” found at Nekekim’s mine site in Nevada contained gold deposits worth at least $1.7 billion. Carlton highlighted test results produced by two small labs that used unconventional methods to test the ore for gold, but he withheld from investors other tests conducted by different firms that suggested the Nekekim mine site held little if any gold. The small labs’ reliability also had been called into doubt by geologists and a government study. Yet as Nekekim failed to produce any mining revenue, Carlton gave shareholders false hope that the company was close to perfecting the custom method it supposedly needed to extract gold from its special ore.

Carlton agreed to settle the SEC’s charges.

According to the SEC’s complaint filed in federal court in Fresno, Calif., Nekekim succeeded in attracting investors from 2001 to 2011 in such U.S. states as California, Florida, and New Jersey as well as foreign countries including Canada, Australia, and Singapore. Carlton falsely represented to investors that a “physicist” who in reality had no scientific training helped develop a confidential gold extraction technique licensed by Nekekim. Carlton also promoted a series of other supposedly promising extraction methods in frequent reports to shareholders. In one newsletter, he touted: “A NEW GOLD RECOVERY PROCESS IS SUCCESSFUL.” As each of these methods actually failed, Carlton’s reports grossly overstated Nekekim’s progress toward profitability while prompting shareholders to invest more money in the company.