Your last sentence is the crux of the whole matter. Were the shares issued to a bona fide purchaser? As of now we don’t know. I am not contesting the fact the market has allowed private placements with large discounts. But how likely would the person committing the illegitimate sale (you know who (kinda like Harry Potter)) be likely to find a legitimate purchaser who either wouldn’t do due dilligence or would ignore the due dilligence it found? In the instant case, with a cap on share issuance, a large discount, MDMN saying the transfers were illegal, and other factors we do not know at this time, IMO it may be difficult for a private placement party to claim they were a bona fide purchaser.
Also, just a quick review of the complaint you attached does not go to the sufficiency of discounted private placements deals. Genderme and its officers were guilty of properly purchasing pink sheet securities at a 30-50% discount, then illegally selling them into the open market. Not a single pink sheet company from which they purchased claimed the discounted sale as illegal and that issue did not have any bearing upon Genderme’s liability.
My point is that in this instance MDMN has said the transactions were illegitimate. Quoting the news release
"…On August 23, 2016, MEDINAH determined that there have been ongoing share issuance discrepancies with what was reported on MEDINAH’s 15c211s regarding the actual outstanding shares. Today we contacted the SEC and FINRA and are filing formal complaints regarding these discrepancies.
_The current 15c211 as filed on August 15, 2016, can no longer be relied upon. The Company will be filing corrected quarterly statements as soon as practicable. Although the investigation is not complete, it appears that the representative of Medinah Mining Chile was engaged in the sale and/or allocation of primary shares without the knowledge of past and present Directors and Officers of the Company. Additionally, it does not appear that these inappropriate transactions were for the financial benefit of MEDINAH. The Board is continuing its investigation and will not stop until satisfied that all important facts are known."
This fact changes the dynamic. With MDMN saying the transfers were illegitimate and not for the benefit of MDMN, the burden will shift to the private placement to prove they were the bona fide purchaser. The private purchaser will have to prove what it knew at the time to make its purchase legit. I am saying its the private purchaser’s burden, not MDMN’s, thus making it easier and more likely to successfully clawback the wrongfully sold shares or their true market value. MDMN would still have some liability to the private placement because it all happened under its watch, but the transactions may be voided. Further, if the private placement did not have the appropriate authority to sell the shares (if they did actually sell them), then they would be guilty just like Genderme.
It’s not a nice or easy process to go through, but I feel MDMN has a bit more leverage in this instance due to how the illegitimate shares were issued. Depending upon haw hard Auryn/Masglas/MDMN wants to go after any private placement, especially with the MDMN’s current share price, it may be more financially beneficial to the private placement to settle, especially if Auryn/Masglas/MDMN can use the settlement as ammunition against you know who.
On a side note, this potential leverage can be strengthen, IMO, by MDMN immediately switching attorneys in the Nevada court action and issuing discovery to co-defendant Les Price. I would love to see what his email account(s) hold since January 2016.